Passive Income and the Hedgehog Concept

One of my favorite business books of all time is Good to Great by Jim Collins. One of the most common themes in the great businesses Collins studied is summarized in what he termed the “Hedgehog Concept.”

The Hedgehog Concept

The Hedgehog Concept is the intersection between three essential questions that you must answer with your blog or business:
1. What can you be best in the world at?
2. What are you passionate about?
3. What drives your economic engine?

If you are able to clearly articulate an answer to these three questions and take action to follow them with all that you do, you will see long-term results.

The first two are written about often in passive income spheres.

What am I passionate about?

Jonathan and Bob (Christian Personal Finance) started a blog called Blogging Your Passion, which focuses on this very topic.

James Clear over at Passive Panda has a nice article titled, “How to find your passion (the secret you need to hear)“…you gotta love that headline.

And, of course, the king of passive income, Pat Flynn, writes about the concept often: “3 Questions You Should Ask Yourself to Find that Passionate and Profitable Idea.”

What can I be best in the world at?

In the blogosphere it is tough to think of other websites as “competitors.” The key question in my mind is “what is your unique selling proposition?” Seth Godin called this the Purple Cow.

Corbett Barr’s articles on USP from are the best around right now. Read and apply his “Ultimate Guide to Finding Your Unique Selling Proposition” to your website or idea. If you cannot see a significant characteristic that sets you apart from all the other websites in your niche, then think twice before moving forward. You may not have a Hedgehog Concept.

Finding your passion and recognizing your skills and potential compared to the competition are essential when you are trying to find a niche for your website. But how does the economic engine apply to blogs (and more importantly passive income)?

What drives my economic engine?

(and how do I make sure this driver reflects passive income?)

Fill in the blank: The key measurement of my monetary success is: profit per __________.

For businesses, here are some examples of economic engine drivers:

  • profit per customer
  • profit per product/service
  • profit per employee

For bloggers, economic drivers include:

  • profit per unique visitor
  • profit per subscriber
  • profit per customer
  • profit per post (or podcast episode, video, email, etc.)
  • profit per product/service

Passive Income and the Hedgehog Concept

Passive income is raging in popularity among bloggers in every niche. Why? Blogging takes time and people are looking for the best way to put in the smallest amount of work with the biggest amount of results.

The idea is that you can create content, products, and systems online that will generate income while you sleep.

How does this figure in to the Hedgehog Concept?

In general, this is my experience of time/action:

  •  1-5 minutes: respond to a tweet, G+ comment, comment on Facebook
  • 10-15 minutes: answer an email
  • 1-2 hours: blog post
  • 1-2 hours: newsletter email
  • 1-2 hours: create and optimize a landing page
  • 30-40 hours: create a free opt-in product (ebook, ecourse)
  • 30-40 hours: create a paid product

Mileage may vary, but the concept is key: do the work that takes the least amount of time for the biggest result.

In other words: profit per hour.

It sounds like a job doesn’t it? If I get paid a salary at work, why would I spend my time focusing what I am getting paid per hour?

With passive income, we increase our profit per hour through the work that we do. We can control the amount of time we spend and we can do amazing work that results in higher income. It is very different from a job.

The key, though, is that you control the amount of money you make per hour of work based on your ability to do work that produces the greatest amount of profit.

Passive Income Case Study

I love Benny Hsu’s story. He was recently featured on Smart Passive Income for his enormous success with the Photo 365 iPhone App (which I love).

Benny has a blog in the personal development niche–a niche that many bloggers struggle to monetize. Inspired by Pat Flynn, Benny stopped doing all of the typical “make money online” strategies like niche sites and PPC campaigns and focused on something unique.

I love his realization: “When I didn’t see money coming in, or lots of traffic, I thought to myself, ‘See I knew I couldn’t do it. This was a waste of my time.'”

You can read Benny’s full reflection here: My $4,739 Weekend and 11 Lessons To Help You

I’m not sure if Benny measures his economic success as profit per hour, but if he compared the number of hours he spent trying to make money online the typical way, it would pale in comparison to the creation of his app.

Go find what you love, identify how you can be the best in the world, and develop passive income by producing the highest amount of profit per hour of work.