“Hidden Champions”
by
Hermann Simon
Guest Author: Jan Neumann
“Why are some companies more successful than others?” This is the question that virtually every manager and management consultant tries to answer during his life-time engagement in business. One great way to look at the issue is to investigate the so-called ‘Hidden Champions’ – and Professor Hermann Simon has published his results in two very fine books.
Jan Neumann, a management consultant with IBM and MBA candidate at I-IMC, has read them and drawn up an executive summary of the key findings. Inspired by the ingenuity and the strategic thoroughness of some of the described companies, he consented to have his text published on this weblog:
Jan Neumann, a management consultant with IBM and MBA candidate at I-IMC, has read them and drawn up an executive summary of the key findings. Inspired by the ingenuity and the strategic thoroughness of some of the described companies, he consented to have his text published on this weblog:
____________________________________________________
1. Introduction and Definition
Hidden Champions (HC) are companies, which are relatively unknown - but nevertheless well positioned on their markets and extremely successful.
Normally they have less than 500 employees and a turnover smaller than € 0.75 bn. Due to quantitative characteristics, they belong to the category small and medium size companies (SME). However they are leaders in their markets means No. 1 or 2 worldwide.
Normally they have less than 500 employees and a turnover smaller than € 0.75 bn. Due to quantitative characteristics, they belong to the category small and medium size companies (SME). However they are leaders in their markets means No. 1 or 2 worldwide.
2. Strategy and Success Factors
In his extensive studies Prof. Dr. Hermann Simon found out the following success factors:
- Striving for market leadership
- Concentration on core competencies
- Combination of worldwide marketing and specialization in products and know-how
- Extremely close relationship to their customers
- Constant innovation and improvement of their products and processes
- Market and technology driven
- Extensive competitive advantage in terms of product quality and services
- Confidence in own strengths
- Identification and motivation of employees (fluctuation 2.7%, average in Germany 7.3%)
- Continuity in leadership (average tenure of more than 20 years)
3. Status of Hidden Champions
So far, HC hide themselves behind corporate veils, invisibility, and even secrecy; trying to avoid attracting public attention. Only some practitioners, journalists, or scientists know their names and products.
However, in terms of macroeconomics they take a very strong position. Even in difficult economic phases they are able to create jobs. They can be described as follows:
- Competitive strategy based on differentiation
- Highly focused
- Create their own markets
- Narrow product focus
- Constantly innovative
- Export oriented
- Flexible
- Long-term orientation
- Team based corporate culture
- Family-owned
4. Future Challenges for Hidden Champions
Even if they have been established a strong market position, HC are faced with a number of future challenges:
- Succession strategy for founders
- Enhancement of strategic flexibility, due to over-specialization
- Adaption of business model to market changes
- Openness to practicable management instruments
5. Conclusion
HC produced many success stories, thus providing positive outliers and hopefully valuable lessons for management practice. With some simplification, their management model can be summarized along three key aspects:
- Family ownership and cooperative corporate cultures combined with outside professional management.
- Global market dominance through positioning in niche markets, and thus exploiting and enhancing resources and capabilities on a global scale.
- Continuous endeavour to raise operational effectiveness of all major processes and functions.
HC follow a clear and focused strategy of differentiation. As specialists they can prove superior performance results in comparison to generalists. Prof. Simon states, they offer a very good price-performance-ratio, are reliable, offer outstanding quality and services, and strive for long-term strategies as well as customer relationships.
Beside small things, where HC outperform large scale companies, they set value on humanity, mutual trust and respect.
Beside small things, where HC outperform large scale companies, they set value on humanity, mutual trust and respect.
“Hidden Champions go their own way.”
“Essentially, their only secret success formula
is common sense.”
is common sense.”
”So simple, but so difficult to achieve!
This is the ultimate lesson.”
This is the ultimate lesson.”
© Jan Neumann
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Hermann Simon
"Hidden Champions: Lessons from 500 of the World's Best Unknown Companies" (English)
Harvard Business School Press (May 1996)
ISBN-10: 0875846521
Hermann Simon
"Hidden Champions des 21. Jahrhunderts" (Deutsch)
Campus Verlag (September 2007)
ISBN-10: 3593383802
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