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Smaller but highly successful companies, concealed behind a curtain of inconspicuousness, invisibility and sometimes secrecy are called Hidden Champions. According to a definition by Hermann Simon, who claims to be the founder of this concept, a company must meet three criteria to be listed as a Hidden Champion[1]:

  • Number one, two or three in the global market, or number one on its continent, determined by market share.
  • Revenue below $4 billion
  • Low level of public awareness.

Contents

Discovering the Hidden Champions

The first book about Hidden Champions was Hermann Simon's Die heimlichen Gewinner : die Erfolgsstrategien unbekannter Weltmarktführer[2]. In this book the question is discussed of how Germany, a relatively small European country, has for many years sustained the position of number one exporter in the world. Germany's few giant, highly visible corporations like Volkswagen, Siemens, BASF, BOSCH and others are not substantially different from organisations like Ford, GE, DuPont, or Visteon. Germany's export strength is clearly not wholly determined by these companies so there must be a large number of mid size firms who are strong exporters. These smaller companies are however normally known only in their own area, by customers and suppliers, but not to the wider public or business community. Where these companies are very successful on the international markets, they are Hidden Champions.

It was believed at first that such companies were mainly only to be found in German speaking countries. Searching for them there was quite successful. Herman Simon concentrated detailed research on 500 of them and established a framework to describe them. With this framework in hand it was also found that Hidden Champions are everywhere around the world, but they are the most frequent in German speaking countries.

The framework was also able to identify the main differences and traits common to Hidden Champions. Simon declares the common traits as the success factors of these companies.

Hidden Champions' success factors

Hidden Champions are small and medium enterprises (SME). Most of them produce inconspicuous products, but in the market for these products they are ranked top in the world. Often, but not always, they are family owned. They export most of thier products, and so contibute significantly to the current account of their countries, and are more successful than the average.

The idea of market leadership means more than counting market share. Leaders as employees need a "Inner Flame" to become, and to remain, the number one. Hidden Champions normally work in small niche markets. For these markets they design unique products, which are produced with a high real net output ratio. They have to accept the risk of being a single product manufacturer. They divide between "good" and "bad" market share. The good is earned by performance and a solid foundation, the bad from price aggression and discounting.

One result of working with unique products in small niche markets is quite often the need to deal on the global market, just to be able to work on an economic scale. For this reason, Hidden Champions feel a strong need to work abroad early in their company's development. Hidden Champions also operate extremely close to their customers, and their customers' needs are an important driver for their innovations. On the other hand, customers of Hidden Champions depend on their products and they cannot easily change their source. This often makes for a high level of co-dependence between the producer and the customer, a result of the one product risk.

A lot of the Hidden Champions established their main product as an innovation and were able to keep this single position in the market, or were at least able to keep a leading position. Their markets are mostly oligopoly with intensive competition.

Competitive advantages of Hidden Champions are rarely because of Cost leadership, more because of quality, Total Cost of Ownership, high performance, and consultation close to the customer. They "earn" their market leadership through performance and not through price aggression. Their high real net output ratio is often achieved by working with proprietary processes which make it hard for competitors to imitate their products. On the other hand management tasks like finance are often outsourced.

It also seems to be evident, to maintain market leadership, to do business on your own and not to work in cooperation. Even sales in countries abroad are often organized from the parent company base. This keeps significant know-how inside, and allows attracting highly qualified staff even for a small company.

The corporate culture of hidden champions is distinctive. Their values are conservative: hard work, strict selection, intolerance of underperformance, low sickness rates and high employee loyalty — and most are based in smaller towns.

Leadership style is authoritarian on strategic issues but participative on operations level. The leaders identify themselves with the company, are focussed on their products, and stay for a long time, much longer than is normal in large public corporations.

A serious problem for Hidden Champions, as it is for SMEs in general, is to attract international professionals. Hidden Champions need people who happy to live in a country location, who are attracted by the job content, and who do not care much for a formal and prescribed career path. In Germany the concept of Hidden Champions is known to some extent and Hidden Champions there are able to utilise this label to recruit staff.

Lessons which can be learned by Hidden Champions

Hidden Champions are elitist companies that other small and medium sized companies (SME) in particular can learn from. Much business is local, and it can be a goal to become the number one on such a local market. They teach that brilliantly good management means doing small things better than the competitors instead of managing only one great thing. Simplicity in processes and organizational structures is another lesson. Investors may find determined, clearly focussed, continuously successful companies.

List of selected hidden champions

This companies, selected by Herman Simon 2009, to give an idea, what hidden champions are[3]

See also

Sources

  1. ^ Simon, Hermann: Hidden Champions of the 21st Century : Success Strategies of unknown World Market Leaders. London: Springer, 2009.- ISBN 978-0-387-98147-5. P. 15.
  2. ^ Simon, Hermann: Die heimlichen Gewinner : die Erfolgsstrategien unbekannter Weltmarktführer. Frankfurt a. M.: Campus, 1996. - ISBN 3-593-35460-8. English: Simon, Hermann: Hidden champions : lessons from 500 of the world's best unknown companies. Boston (Mass.): Harvard Business School Press, 1996.- ISBN 0-87584-652-1.
  3. ^ Simon, Hermann: Hidden Champions of the 21st Century : Success Strategies of unknown World Market Leaders. London: Springer, 2009.- ISBN 978-0-387-98147-5. P. 2-13.
  4. ^ BrainLAB in German Wikipedia
  5. ^ DELO in German Wikipedia
  6. ^ Heraeus in German Wikipedia
  7. ^ The Jamba! GmbH (German for Ltd.) is since 2009 Fox Mobile Distribution GmbH, no longer independend, and belongs to Rupert Murdochs News Corporation. Jamba! becomes only a label. Jamba! got into the list because nearly nobody knows, that is the world market leader.
  8. ^ Austrian Jungbunzlauer in German Wikipedia
  9. ^ Swiss Lantal Textiles in German Wikipedia
  10. ^ Omicron NanoTechnology in German Wikipedia
  11. ^ Sachtler in German Wikipedia
  12. ^ W.E.T. in German Wikipedia
  13. ^ Webaso in Geran Wikipedia

Literature

  • Simon, Hermann: Hidden Champions of the 21st Century : Success Strategies of unknown World Market Leaders. London: Springer, 2009.- ISBN 978-0-387-98147-5.
  • Simon, Hermann: Hidden champions : lessons from 500 of the world's best unknown companies. Boston (Mass.): Harvard Business School Press, 1996.- ISBN 0-87584-652-1.
  • Fryges, Helmut: Hidden champions : how young and small technology oriented firms can attain high export sales ratios. Mannheim : Zentrum für Europ. Wirtschaftsforschung, 2006.
  • Simon, Hermann: Lehren der Hidden Champions des 21. Jahrhunderts. In: Weissman, Arnold: Erfolgreich mit den Großen des Managements. Frankfurt a. M.: Campus, 2008.- ISBN 3593386348. S. 109-147.
  • Venohr, Bernd; Meyer, Klaus E.: The German Miracle Keeps Running : How Germany’s Hidden Champions Stay Ahead in the Global Economy Berlin: Working Paper No. 30, Institute of Management Berlin, Berlin School of Economics, 2007.
  • Voeth, Markus ; Herbst, Uta ; Barisch, Sina: Hidden Champion Region Stuttgart : Ergebnisse einer empirischen Untersuchung. Stuttgart : Förderverein für Marketing an der Universität Hohenheim, 2008.
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