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Hidden Champions

Hidden Champions

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Smaller but highly successful companies, concealed behind a curtain of inconspicuousness, invisibility and sometimes secrecy are called Hidden Champions. The name Hidden Champion was coined by Theodore Levitt
Theodore Levitt
Theodore Levitt was an American economist and professor at Harvard Business School. He was also editor of the Harvard Business Review and an editor who was especially noted for increasing the Review's circulation and for popularizing the term globalization...

, who used it first in a discussion with Hermann Simon
Hermann Simon
Prof. Dr. Dr. h.c. Hermann Simon is a German author and business leader. He is chairman of Simon-Kucher & Partners, Strategy & Marketing Consultants. Simon is an expert in strategy, marketing and pricing. An ongoing online survey vote him the most influential management thinker after the late...

. Simon later on was the first to use this name as a title of a publication in a scientific German management journal. According to his definition a company must meet three criteria to be listed as a Hidden Champion:
  • 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.

Discovering the Hidden Champions



The first English book about Hidden Champions was Hermann Simon's Hidden champions : lessons from 500 of the world's best unknown companies. 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
Volkswagen
Volkswagen is a German automobile manufacturer and is the original and biggest-selling marque of the Volkswagen Group, which now also owns the Audi, Bentley, Bugatti, Lamborghini, SEAT, and Škoda marques and the truck manufacturer Scania.Volkswagen means "people's car" in German, where it is...

, Siemens
Siemens
Siemens may refer toSiemens, a German family name carried by generations of telecommunications industrialists, including:* Werner von Siemens , inventor, founder of Siemens AG...

, BASF
BASF
BASF SE is the largest chemical company in the world and is headquartered in Germany. BASF originally stood for Badische Anilin- und Soda-Fabrik . Today, the four letters are a registered trademark and the company is listed on the Frankfurt Stock Exchange, London Stock Exchange, and Zurich Stock...

, BOSCH
Bosch
Bosch is a popular surname in Catalan and Dutch; it means forest. It may refer to:Buildings:*Huis ten Bosch, an official palace of the Dutch Royal Family in The Hague, Netherlands*Bosch Palace, the official residence of the U.S...

 and others are not substantially different from organisations like Ford, GE
Gê are the people who spoke Ge languages of the northern South American Caribbean coast and Brazil. In Brazil the Gê were found in Rio de Janeiro, Minas Gerais, Bahia, Piaui, Mato Grosso, Goias, Tocantins, Maranhão, and as far south as Paraguay....

, DuPont
DuPont
E. I. du Pont de Nemours and Company , commonly referred to as DuPont, is an American chemical company that was founded in July 1802 as a gunpowder mill by Eleuthère Irénée du Pont. DuPont was the world's third largest chemical company based on market capitalization and ninth based on revenue in 2009...

, or Visteon
Visteon
Visteon is one of the world's largest suppliers of automotive parts. The company formed in 1997 and spun off from the Ford Motor Company in 2000. In 2005, Visteon moved to new headquarters in Van Buren Township, Michigan...

. 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 their products, and so contribute 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 an "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
Oligopoly
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...

 with intensive competition.

Competitive advantages of Hidden Champions are rarely because of Cost leadership
Cost leadership
Cost leadership is a concept developed by Michael Porter, used in business strategy. It describes a way to establish the competitive advantage. Cost leadership, in basic words, means the lowest cost of operation in the industry...

, more because of quality, Total Cost of Ownership
Total cost of ownership
Total cost of ownership is a financial estimate whose purpose is to help consumers and enterprise managers determine direct and indirect costs of a product or system...

, 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 are happy to live in a remote location, who are attracted by 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. Also large companies may find some interesting lessons about international management. Hidden Champions 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 list of companies, selected by Herman Simon 2009, gives an idea of what hidden champions are:
  • 3B Scientific (anatomical teaching aids)
  • Amorim (company) (cork products)
  • ARRI
    Arri
    -History:Arri was founded in Munich, Germany as Arnold & Richter Cine Technik in 1917, named after founders August Arnold and Robert Richter. They produce professional motion picture equipment, digital and film cameras and cinematic lighting equipment...

     (cinema cameras)
  • Belfor
    Belfor
    BELFOR is a property restoration firm active in 30 countries with 4,600 employees. They assist in property restoration caused by fire, water, and storm damage.-Company Profile:...

     (removal of fire and water damages)
  • Beluga Shipping
    Beluga Shipping
    Beluga Shipping is the name of a German project and heavy-lift shipping company in the Hanseatic city of Bremen.- History :Beluga Shipping was founded in December 1995 in Bremen, initially as a mere cargo operator. In 1998 the first own vessel of the company was acquired, the multipurpose...

     (heavy-lift shipping company)
  • Bobcat Company (farm and construction equipment)
  • BrainLAB (instrument-positioning system for surgeons)
  • CEAG FRIWO (charging devices for cell phones)
  • De La Rue
    De La Rue
    De La Rue plc is a British security printing, papermaking and cash handling systems company headquartered in Basingstoke, Hampshire. It also has a factory on the Team Valley Trading Estate, Gateshead, and other facilities at Loughton, Essex and Bathford, Somerset...

     (security printing, papermaking and cash handling systems)
  • DELO Industrie Klebstoffe (adhesives for chip cards)
  • Embraer
    Embraer
    Embraer S.A. is a Brazilian aerospace conglomerate that produces commercial, military, and executive aircraft and provides aeronautical services....

     (regional jets)
  • Dickson Constant (technical textiles for blinds, truck sheeting etc.)
  • Enercon
    Enercon
    Enercon GmbH, based in Aurich, Germany, is the fourth-largest wind turbine manufacturer in the world and has been the market leader in Germany since the mid-nineties. Enercon has production facilities in Germany , Sweden, Brazil, India, Canada, Turkey and Portugal...

     (wind turbines)
  • Essel Propack
    Essel Group
    Essel Group is a media conglomerate company headed by Subhash Chandra based in Mumbai, Maharashtra .The companies under the group are:*Media** Zee Entertainment Enterprises** Zee News** DNA *Technology** Dish TV...

     (tubes for toothpaste)
  • EOS GmbH
    EOS (company)
    EOS GmbH, or EOS, Electro Optical Systems, is a major manufacturer of SLS and DMLS laser sintering systems, based in Krailling, Germany. Its revenues exceed 60 million Euros, and employs 300 people worldwide...

    , (rapid prototyping
    Rapid prototyping
    Rapid prototyping is the automatic construction of physical objects using additive manufacturing technology. The first techniques for rapid prototyping became available in the late 1980s and were used to produce models and prototype parts. Today, they are used for a much wider range of applications...

     systems)
  • Josef Gartner GmbH (facades for skyscrapers)
  • Gallagher Group Limited
    Gallagher Group Limited
    The Gallagher Group is a company focused on the animal management systems and security system markets, and is based in Hamilton, New Zealand. Established in 1938, the Group continues to be owned by the Gallagher family, and has a network of distribution channels in more than 130 countries.The...

     (electric fencing, livestock, weighing equipment)
  • Hans Gerriets (single manufacturer of large stage curtains)
  • Hamamatsu Photonics (optical sensors including photomultiplier tubes)
  • Heraeus
    Heraeus
    Heraeus Holding GmbH is an engineering group based in Hanau, Germany. Its core areas of business are precious metals, special metals, dental materials, medical technology, quartz glass, sensors and specialised light sources...

     Electro-Nite (measurement, monitoring and control of molten metal processes)
  • Höganäs AB
    Höganäs AB
    Hoganas AB is a Swedish multinational which is the world's largest producer of powdered metals.-History:The company was founded in 1797 as a coal mine by Count Eric Ruuth. It also made refractory and salt glazed ceramics...

     (powdered metals)
  • International SOS
    International SOS
    International SOS provides integrated medical, clinical, and security services to organisations with international operations. Services include planning and preventative programs, in-country expertise, and emergency response. It has 9,000 employees, led by 1,100 full-time physicians and 200...

     (medical assistance, health-care, security and risk management services)
  • Jamba!
    Jamba!
    Jamba! is a premium-rate monthly SMS mobile phone content provider, based in Berlin, Germany. In China and the company's English-speaking markets—currently Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States—the company operates under the name...

    /Jamster (cell phone ring tones)
  • Austrian Jungbunzlauer (Sodium acetate
    Sodium acetate
    Sodium acetate, CH3COONa, also abbreviated NaOAc, also sodium ethanoate, is the sodium salt of acetic acid. This colourless salt has a wide range of uses.-Industrial:...

    )
  • Klais Orgelbau (large organs)
  • Swiss Lantal Textiles (cabins for passenger aircraft)
  • McIlhenny Company (Tabasco sauce
    Tabasco sauce
    Tabasco sauce is the brand name for a hot sauce produced by US-based McIlhenny Company of Avery Island, Louisiana. Tabasco sauce is made from tabasco peppers , vinegar, and salt, and aged in white oak barrels for three years. It has a hot, spicy flavor...

    )
  • Molex
    Molex
    Molex is a leading global supplier of electronic interconnectors. Molex sells over 100,000 products, including everything from electrical and fiber optic interconnect solutions to switches and application tooling....

     (electronic components, including electrical and fiber optic)
  • NetJets
    NetJets
    NetJets, a subsidiary of Berkshire Hathaway, offers fractional ownership and rental of private business jets.-History:NetJets Inc., formerly Executive Jet Aviation, was founded in 1964 as one of the first private business jet charter and aircraft management companies...

     (fractional ownership
    Fractional Ownership
    In business, fractional ownership is a percentage share of an expensive asset. Shares are sold to individual owners. A fractional owner enjoys priorities and privileges, such as reduced rates, priority access on holidays and income sharing. Typically, a company manages the asset on behalf of the...

     and rental of private business jets)
  • Nissha Printing (small touch panels)
  • Nivarox
    Nivarox
    Nivarox is a Swiss company formed by a merger in 1984 between Nivarox SA and Fabriques d'Assortiments Réunis . It is currently owned by the Swatch Group. Nivarox is also the trade name of the metallic alloy from which its products are fabricated...

     (regulating mechanism inside wristwatches)
  • Rud. Baader (supplier of fish processing systems)
  • Omicron NanoTechnology (scanning probe and tunnel-grid microscopes)
  • Orica
    Orica
    Orica is a multinational corporation that manufactures various chemical products. It is the largest supplier of mining explosives in the world. -History:...

     (industrial explosives)
  • PLANSEE
    PLANSEE
    The PLANSEE Group is a world leading manufacturer of powder metallurgical products based in Reutte, Tirol, Austria.The factory was situated in the current place because of its proximity to Plansee, from which cheap hydroelectrity could be obtained, which was important in many of the processes...

     (high performance materials)
  • PERI GmbH
    PERI GmbH
    With a turnover of 825 million euros in 2010, the German company is one of the largest manufacturers and suppliers of formwork and scaffolding systems worldwide. The company's headquarter is located in Weißenhorn, Germany...

     (formwork and scaffolding)
  • Petzl
    Petzl
    Petzl is a world leading manufacturer of climbing gear, caving gear, work-at-height equipment, and headlamps based in Crolles , France. The company was created by the cave explorer Fernand Petzl in the mid-1970s...

     (climbing gear, caving gear, work-at-height equipment)
  • Q-Cells
    Q-Cells
    Q-Cells is a manufacturer of photovoltaic cells, established in 1999. Its core business is the development, production and marketing of crystalline silicon photovoltaic cells....

     (solar energy, solar cells)
  • Sachtler
    Sachtler
    Sachtler is a manufacturer of film and video camera support products and reporter lighting equipment. The company was founded in 1958 and was integrated in Great Britain’s Vitec Group plc. in 1995.-Company founder:...

     (tripods for movie cameras)
  • SAES Getters (Getter
    Getter
    A getter is a deposit of reactive material that is deliberately placed inside a vacuum system, for the purpose of completing and maintaining the vacuum. When gas molecules strike the getter material, they combine with it chemically or by adsorption...

     producer)
  • Sappi
    Sappi
    Sappi Limited is a global pulp and paper company group.Sappi is a producer of coated fine paper and chemical cellulose. The company conducts its business through three business units: Sappi Fine Paper, Sappi Forest Products and Sappi Trading....

     (coated fine paper)
  • SGS, Société Générale de Surveillance
    Société Générale de Surveillance
    SGS S.A. provides inspection, verification, testing and certification services. With more than 67,000 employees, SGS operates of over 1,250 offices and laboratories around the world....

     (inspection, verification, testing and certification services)
  • Tandberg
    Tandberg
    This article is about the video-conferencing vendor, a Cisco company. Other companies with the same name such as Tandberg Television or Tandberg Data for data storage: see here and here...

     and Polycom
    Polycom
    Polycom is a multinational corporation with approximately 3,200 employees worldwide and an annual revenue of approximately $1.2 billion in 2010. The company manufactures and sells telepresence and voice communications solutions.-Company History 1990:...

     (videoconferencing
    Videoconferencing
    Videoconferencing is the conduct of a videoconference by a set of telecommunication technologies which allow two or more locations to interact via two-way video and audio transmissions simultaneously...

     systems)
  • O.C. Tanner (company)
    O.C. Tanner (company)
    O.C. Tanner Co., named after founder Obert C. Tanner, is a human resource consulting and services company that designs and helps implement employee recognition programs for clients in the U.S., Canada, and Europe...

     (employee recognition programs)
  • Technogym
    Technogym
    Technogym is a manufacturer of fitness equipment based in Cesena, Italy.It was founded in 1983 by Nerio Alessandri and now it is a world leader in the wellness and fitness fields.-History:...

     (fitness equipment)
  • Tetra (company) (aquarium and pond supplies)
  • ULVAC Technologies, (vacuum technology)
  • Universo S.A. (wristwatch hands)
  • W.E.T. in German (car seats heating)
  • Webasto (remote-controlled heaters for cars)
  • Zimmer Holdings
    Zimmer Holdings
    -History:Zimmer was founded in 1927 and is headquartered in Warsaw, Indiana, where it is part of the medical devices business cluster there.-Products:...

    , DePuy
    DePuy
    DePuy is a franchise of orthopaedic and neuroscience companies. Acquired by Johnson & Johnson in 1998, its companies form part of the Johnson & Johnson Medical Devices & Diagnostics group...

    , Biomet
    Biomet
    Biomet, Inc. is one of the world leading medical device manufacturer located in the Warsaw, Indiana business cluster. The company specializes in reconstructive products for hips, knees and shoulders, fixation devices, orthopedic support devices, dental implants, spinal implants and operating room...

    , and Stryker Corporation (all implants, and located in the area of Warsaw, Indiana
    Warsaw, Indiana
    Warsaw is a city in and the county seat of Kosciusko County, Indiana, United States. Cradled among Winona Lake, Pike Lake, Hidden Lake and Center Lake, Warsaw is nicknamed "Lake City," though other cities in the surrounding area are also referred to by that nickname...

    )

Books and papers

  • 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: [ftp://ftp.zew.de/pub/zew-docs/dp/dp06045.pdf Hidden champions : how young and small technology oriented firms can attain high export sales ratios]. Mannheim : Zentrum für Europ. Wirtschaftsforschung, 2006.
  • Hanna, Rosemary: Hidden champions of the B. C. forest industry : are small firms at the cutting edge of value chain innovation? Ottawa : Library and Archives Canada, 2007. - ISBN 9780494168790.
  • Merrilees, Bill; Blackburn, Jillian; Tiessen, James; Lindman, Martti: Hidden (SME) Champions : The Role of Innovation and Strategy. In: Chetty, Sylvia (Ed.); Collins, Brett (Ed.): Proceedings of the Australian and New Zealand Marketing Academy Conference 1-5 December 2001. Auckland: College of Business, Massey University: 2001.
  • Neubauer, Regina: Business models in the area of logistics : in search of hidden champions, their business principles and common industry misperceptions. Wiesbaden: Gabler, 2010. - ISBN 978-3-8349-2526-8
  • Simon, Hermann: Lehren der Hidden Champions des 21. Jahrhunderts. In: Weissman, Arnold: Erfolgreich mit den Großen des Managements. Frankfurt a. M.: Campus, 2008.- ISBN 3-593-38634-8. S. 109-147.
  • Voeth, Markus ; Herbst, Uta ; Barisch, Sina: Hidden Champion Region Stuttgart : Ergebnisse einer empirischen Untersuchung. Stuttgart : Förderverein für Marketing an der Universität Hohenheim, 2008.
  • Witt, Alessa: Internationalisation of hidden champions : market entry and timing strategies with international management and business ethics cases. Hamburg: Management Laboratory, 2010. - ISBN 978-3-9812162-4-0
  • Venohr, Bernd; Meyer, Klaus: 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.
  • Venohr, Bernd; Meyer, Klaus: Uncommon common sense Business Strategy Review, Volume 20, issue 1, Spring 2009, p. 39-43

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