Family Firms and Hidden Champions - HHL Alumni … · Family Firms and Hidden Champions...

HHL Alumni Homecoming 2010HHL Alumni Homecoming 2010

Family Firms and Hidden Champions„State-of-the-Art“ presentation - October 16, 2010

Prof. Dr. Torsten WulfDr. Stephan Stubner

HHL – Leipzig Graduate School of Management

Family Firms and Hidden Champions

Agenda

1. Introduction to the Chair

2. Economic relevance of Family Firms

3. Research on Family Firms

4. The „Hidden Champions“„ p

The Chair of Strategic Management and Organization also covers the Center for Scenario Planning and Entrepreneurshipcovers the Center for Scenario Planning and Entrepreneurship

Prof. Dr. Torsten Wulf

Team overview

Chairholder

Dr. Stephan StubnerAssistant ProfessorEntrepreneurship Program

Dipl.-Medienwiss. Kati RolederTeam assistant and Ph.D. candidate

Dipl -Kfr Jutta Miksche Dipl -Kfm W Henning BlarrDipl. Kfr. Jutta MikscheResearch associate Ph.D. candidate

Dipl. Kfm. W. Henning BlarrResearch associatePh.D. candidateMBA Program Management

Philip Meißner, MBAResearch associatePh D candidate

Christian Brands, M.Sc.Research associatePh D candidate

3

Ph.D. candidateCenter for Scenario Planning

Ph.D. candidateCenter for Scenario Planning

Teaching is one of our three main activities

Activity fields

Research

ChairSMO

TeachingGoal:High quality education of „Strategists of tomorrow“ based on an integration of theory and practice

4

and practice

Selected results:„Best visiting professor 2005“, „Best visiting professor 2006“, „Best professor 2007“, „Best professor 2008“, „Best professor 2009“, „Best junior faculty 2009“

Main goal of our teaching concept is to prepare students for future leadership positionsfuture leadership positions

Teaching concept

Scientific Approach

Teaching Objectives

Teaching Concept

• Business administra-tion regarded as an application-oriented social science

• Making participantsfamiliar with basictheories, conceptsand frameworks of

• Holistic and cross-functional perspective (generalmanagement perspective)

social science

• Practical problems of companies as the starting point for

and frameworks ofstrategic management

• Conveying appli-cation-oriented

• Strong practical orientation through e.g. the use of case studies, role plays and projects

g presearch and teaching

• Positivistic approachin research andt hi

knowledge on thebasis of clear theo-retical concepts

A l i f k

• Focus on skills that are relevant in practice:

- Knowledge and application- Team work

C i titeaching • Applying frameworks to practical problems

- Communication- Plausible argumentation

5

Our strategy course offerings aim to comprehensively cover the knowledge and skills of a „strategist“knowledge and skills of a „strategist

Course offerings of the Chair in the M.Sc. Program (status Feb 2010)

Strategy Analysis &

StrategyImplemen- Foun-

At corpo

Analysis & Formulation

Implementation

Corporate

dations

At corpo-rate level

CorporateStrategy

ManagementStrategic

Seminar onResearchMethods

Strategies

At busi-

Management of Organi-

zations

gManage-

ment

B i

+Strategies for Growth

Problem-solving and CommuniAt busi-

ness levelBusiness Strategy

Communi-cation

6

In Entrepreneurship, we focus on building up competencies for Entrepreneurs along the company lifecycleEntrepreneurs along the company lifecycle

Course offerings of the Chair in the M.Sc. Program (status Feb 2010)

GrowthStartup Expansion

Id ti F il fi

Challenges &Courses

KeyChallenges

Idea generation, opportunity eval-

uation, Starting up

Professionalization, Innovation

Family vs. firm management, Succession

Introduction Entrepreneurship

Entrepr. Finance & Marketing

Innovation Management

Family Business

Business plan

7

development

Guest lecturers and guest presenters regularly ensure the practice orientation of our curriculumpractice orientation of our curriculum

Selected guest lecturers and presenters

Guest Lecturers Guest Presentations

Prof. Dr. Burkhard SchwenkerCEO

Thomas Becher, General Manager, TomTom Work GmbHCEO

Roland Berger Strategy Consultants

Course: Strategies for Growth

TomTom Work GmbH(Course: Foundations in Management)

Dr. Marcus Kuhnert, Head of Corporate Strategy, Henkel KGaA

Prof. Dr. Harald HungenbergChair of ManagementUniversity Erlangen-Nuremberg

Course: Strategies for Growth gy,(Kurs: Corporate Strategy)

Jörg Staeglich, Partner, Roland Berger Strategy Consultantsy g g

Course: Managing Global Corporations (MBA)

Dr Remigiusz Smolinski

(Course: Corporate Strategy)

Matthias Wimmer, Vice President, Credit Suisse(C M t f O i ti )Dr. Remigiusz Smolinski

ManagerEbay Deutschland GmbH

(Course: Management of Organizations)

Felix Ludwig, Martin Luers, Projectleader, Siemens Management Consulting (Course: Strategic Management/Business

8

8

Course: Negotiation(Course: Strategic Management/Business Strategy)

We also integrate a high caliber network of lecturers in the entrepreneurship program and the MBA we integrateentrepreneurship program and the MBA we integrate

Selected lecturers and presenters

Guest Lecturers Guest Presentations

Christian StrengerAdvisory board

Dr. Tillmann Blaschke, former COO, PC Ware AGAdvisory board

DWS Investment GmbH

Course: Corporate Governance

PC Ware AG(Course: Human Resource Management)

Wolfgang Seybold, Managing Partner, Earlybird Venture Capital

Arshad AhmadAssociate ProfessorJohn Molson School of Business,

y p(Course: Entrepreneurship)

Rolf Schrömgens, Founder and MD, Trivago GmbH; „RedHerring Top 100“

Concordia University

Course: Appl. Corporate Finance

(Course: Entrepreneurial Marketing)

Joachim von Massow, Founder and MD, SunCoal Ind.; „WiWo Gründer des Jahres“(C St t C F i )D J h M i (Course: Start-up Career Fair)

Markus Eichinger, Founder and COO, Amiando, „Innovationstreiber des Jahres“(Course: Entrepreneurship)

Dr. Johannes MeierMember of the boardBertelsmann Stiftung

Course: Leadership Experience

9

(Course: Entrepreneurship)Course: Leadership Experience

With our service activities we support the further development of HHLof HHL

Activity fields

G lResearch Goal:Support the growth strategy of HHL to become a Top 10 Business School in Europe

Selected results:Entrepreneurship-ProgramCenter for Scenario PlanningMBA-ProgrammeHHL Executive

ChairSMO

Teaching

1

We are active in a variety of fields to support HHL

Service activities

AcademicAcademicDirector

Master Thesis

Managing

CustomersManaging

Inter-• DOUGLAS Holding Academic

directorMBA-

Program

Directorfor

HHL ExecutivetrainingsBusiness Fundamentals

Managing

Investors

Customers

Employees

&

Processes

New

Ventures

& Growth

Managing

Society

Managing

Projects

Inter-

national

Experience • Domo Caproleuna

• DKB AG trainings

P

Leadership Skills

International Challenges

• Siemens

E t hi R dt bl

External Pre-

ProgramInternat.Entrepre-neurship

Application oriented research

and teaching

• Entrepreneurship Roundtables

• Open Businessplan-Seminar

• HHL EntrepreneurshipPre-sentationof HHL Discussion of practical

phenomena

Practice• HHL - Entrepreneurship Newsletter

• LecturesCenter for Scenario Planning

1

• Field projectsPlanning

The entrepreneurship program has a nationwide reputation

Module of the entrepreneurship program and selected results

Modules energizeeach other…

…leading to a successful entrepreneurship engine

Networking

Selected successes:• Over 100 companies

founded since 1990sO 2 00 k lEducation • Over 2.500 work places created (June 2010)

• Regularly 10+ guest speakers/yr in lecturesspeakers/yr in lectures

• Multiple awards for HHL entrepreneurs:

• Founder of the yearF d h i

Coaching

• Founder champion• Red Herring Top 100• Venture Lounge• Weconomy

12

Weconomy• Gründerchampion• etc.

In the Center for Scenario Planning we work on improving approaches to strategic planningapproaches to strategic planning

The activities of the Center focus on four different areas

• Research: We conduct research in scenario planning and further refine the methods and tools.

• Teaching: We teach executive education seminars, PhD courses and student lectures in scenario planning.

C lti W d t i t di f• Consulting: We conducts scenario studies for companies, political leaders and other institutions. We set up Scenario planning structures and processes.

Chair for Strategic Managementp

• Networking: We hold workshops and conferences to encourage a dialogue between theory and practice and bring together scenario experts, think

Chair for Strategic Management and Organization,Prof. Dr. Torsten WulfProf. Dr. Burkhard Schwenker

1

tanks, academics and practitioners from all over the world.

Our fulltime MBA is one of the most international …

Origin of MBA students (M10)

11 Ca. 70% international students

67

international students from 14 countries

111111111112

SerbiaRussiaPolandPhilippinesLibanonChinaChileBelgiumColumbiaUSA Turkey Uganda UkraineGermany India

1

… and one of the internationally most acclaimed MBA programs in GermanyGermany

Ranking America Economía 2009

1

Our research supports service and teaching activities

Activity fields

Goals:Research contributions that combine

Research

Research contributions that combine „Rigor and relevance“, i.e. that address practical problems with scientific methods

Selected resultsSelected results9 conference contributions in 200911 working papers and one book published in 2009External funding of several hundred thousand € in 2009

ChairSMO

hundred thousand € in 2009

Teaching

1

In our research we concentrate on three important aspects of “Corporate Strategy and Governance”Corporate Strategy and Governance

Research focus

CorporateT M t S i

pGovernance &Leadership

Top-Management-Succession

op

ics

C t

sear

ch t

o

Strategic decisionMaking and

scenario planningStrategy and governance

Corporate Strategy• Diversification• Growth• Leadership

Re governance

in family firms and SME

• Leadership

Family Firms Public firms

1

Overlaps allow for synergies between research topics

In our research efforts we cooperate with partners and contribute to the international scientific community

Overview cooperation partners

contribute to the international scientific community

1

In 2009 we published our research in various outlets

C f t ib ti P bli ti

Conference contributions and publications

Working papers and chapters:• Executive succession and firm performance –

Conference contributions Publications

Liverpool, 11.- 14.5., Presentation

the role of position-specific skills• Insider vs. Outsider Succession and its Perfor-

mance Consequences from an Institutional PerspectivePerformance Impact of CEO Strategy Fit

Nürnberg, 3.- 6.6., Presentation

• Performance Impact of CEO-Strategy-Fit –Relevance of Distinguishing Capability Sets

• The Performance Impact of CEO-Strategy-Fit over Time

• Executive succession research revisitedLimassol 24 27 6

Babson Park, 3.- 6.6.Accepted paper

• Executive succession research revisited • HHL-RBSC Approach to scenario-based

strategic planning• Wie sich Familienunternehmen krisenfest

ausrichten können: Organisationale

Limassol, 24.-27.6.Accepted paper

Chicago, 7.- 12.8., 2 t ti

gAmbidexterität als Lösungsoption

• Erfolgreich bleiben in der Krise• …

2 presentations

Leipzig, 29.- 30.10., 3 presentations Edited works:

Handbook of Legal Forms in Europe

3 presentations

Family Business

Agenda

1. Introduction to the chair




Some of today`s family firms have been in businessfor almost 1500 yearsfor almost 1500 years

Foundation dates of selected family firms

Kongō GumiKongō GumiJapanese construction company

A 17th century scroll C d i WiA 17 century scroll allows tracing 40 generations back to the company's start

Codorniu WinerySpanish wine company

Today the world'sThe company went into liquidation in January 2006

Today the world s largest producer of bottle-fermented sparkling wine

578

Marchesi AntinoriItalian wine company

1385 1551 1748

Villeroy & BochGerman manufacturer

year

Italian wine company

Today Marchese PieroAntinori is director of the company assisted by

German manufacturer of ceramics

Source: O´Hara, Mandel ; http://www.familybusinessmagazine.com/worldsoldest.html

company, assisted by his three daughters

Family Business | 21

Many of the publicly listed companies in Germany are also family firmsfamily firms

Family firms in the C-DAX

600Family business

Other

450

500

550

600 Other

223

248 247259

248 247 248 247 246 246300

350

400

450

194

223

150

200

250

300

300 308

50

100

150252

100193

300

198225238269308

224 215

01998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Center for Entrepreneurial and Financial Studies (CEFS) , 2009 Family Business | 22

The German TOP 500 family firms in 2008 employed 4,3 million people and had revenues of more than 910 billion Europeople and had revenues of more than 910 billion Euro

TOP 10 family firms in Germany (2008)

# C E l R ( Mi €)# Company Employees Revenues ( Mio €)

1 290.000 68.000

2 170 000 54 0002 170.000 54.000

3 282.754 45.127

4 92 500 38 0004 92.500 38.000

5 100.000 30.000

6 49.143 26.372

7 167.447 24.170

8 86.244 19.357

9 106.083 16.118

10 12.830 15.914

Source: Stiftung Familienunternehmen, 2009 Family Business | 23

Most of the 500 biggest family firms are active in the manufacturing industrymanufacturing industry

Family business industries

309

38

105

309

117

310Manufacturing

Retail

8

14

38

15

23Economic Services

Transport

2

9

8

7

9Construction

Other Services

5

6

2

5

5Finance

Hotel & Restaurant

1

3

5

3

4Healtscare

Mining

Source: Institut für Mittelstandsforschung, 2009

12Agriculture TOP 500 (Empoyees)

TOP 500 (Revenues)


Especially in economic turbulent times, family firms show their importance for the employment in Germany,importance for the employment in Germany,

Employment (in mio) TOP 500 family firms vs. DAX firms between 2006-2008

-5%

2 1

2,3

2,2 +4%

1,9

2,0

2,1

1,7

1 6

1,8

Every 10th G i

1,5

1,4

1,6 German is working for a

TOP 500 family firm

1,1

1,3

1,2

Family firms

Non family-firms

Source: Stiftung Familienunternehmen, 2009

,

200820072006Family Business | 25

y

The 500 biggest family firms in Germany mainly stem from the western and southern part of the countrywestern and southern part of the country

Family firms in Germany

Source: Stiftung Familienunternehmen, 2010Note: Bubble size = revenue


In Germany, like in most economies, family businesses are the most common form of business organizationmost common form of business organization

Importance of family businesses in Germany

Family controlled Family run

7% 7%

Share of all active

Family controlled Family run

93% 91%

Share of all active German companies

54%

46%50%50%

Share of German employmentp y

49%51%

46%

54%Share of GDP

Source: Stiftung Familienunternehmen, 2009

Family business

Other


Family Business

Agenda





Academic research on family business started with a dissertation at the Indiana University in 1952dissertation at the Indiana University in 1952

Research on family business

Phase 11950 - 1960

Phase 21970

Phase 3Late 1970 - 1980

Phase 4Late 1980 till now

• First publications on family business

• Publication of more articles as well as books

• Development of a braod field of topics by

• Final establishment of the researchfamily business,

mostly based on the personal experience of the author

well as books by researcher groups, as well as practitioneers

topics by diverse expert groups

of the research field

• First publication of the Familyp

• Special focus on the topic succession“

of the „Family Business Review“ in 1988

„succession • Development of national and international networks as

ell aswell as institutions

Source: Gersick et al., 1997 Family Business | 29

Most research questions on family firms address the differences to non-family firms in different dimensionsto non-family firms in different dimensions

Exemplary research topics

Succession

Perform-anceLongevity

L iC h i LearningCohesion

Corporate Governance

FamilyGovernance

Source: EBS European Family Business Center

Few studies focus on merely replicating traditional research on FBs


Recent research also focuses on the underlying reasons for the differences to non-family firmsdifferences to non-family firms

“10 Wittener Thesen”

… differentDefining factor is family influence

…differentDefining factor is family influence

Family Businesses are ….

… differentDefining factor is family influence

…long term oriented

Stick to proofed systems and behaviorsfamily influence

… more successful

Relevance

family influence

…more successful

Because they have the support of a family

family influence

…reluctant to outside Relevance

orientedsystems and behaviors

Try to solve problems internally

FamilyBusiness

successful

… different Relevance

successful support of a family

…more at risk

Because they have the support of a family

advise

… differentRelevance

internally

…familialBuild emotional ties also with employeesBusiness


risk support of a family

…(poten-tially) more

Mostly no short-term profit orientation


also with employees

…entre-preneuial

Live entrepreneurial values


intelligentprofit orientation

…financially different

Reluctant to rely on outside capital or debt


preneuialvalues

…durableSucceed in long-term survivaldifferent outside capital or debt survival

Source: Groth (2006) Family Business | 31

Succession is an important topic for family firms as they usually do not have a lot of experience with it

Key differences Family Business and non-Family Business succession

do not have a lot of experience with it

Family Business Non-Family Business

Preference for Public awarenessSuccession

Source availability Preference for offsprings then outsiders

Public awareness attracts internals and externals

F Generation to Rite of passage i eFrequency „Generation to Generation“

Rite of passage, i.e. age limitation is set

O i ti Rather unplanned in SophisticatedOrganization Rather unplanned in most cases

Sophisticated planning process

ChallengesDifficulty to transfer Short term bias

Challenges family based resources


Source: Dussault

56% of Family Businesses do not have a family successor

Reasons for succession problems

S i i G R f f il iSuccession in Germany Reasons for non-family succession

ff & f

21% For Sale

31%

19%

1. Different training & profession

2. Family has no children

44%

56%17% Ext. Mgmt.

18%

16%

3. Economic & regulatory situation

4. Offspring not interested10%

8%

Employees

Closure

OutsiderTo family members

8%

8%

5. Offspring’s lack of ability

6 Other reasonsy

To outsider8%6. Other reasons


Source: IfM-Bonn 2007

Three economic theories try to explain the differencesbetween family and non-family firmsbetween family and non family firms

Theoretical approaches (selection)

Principal-Agent-Theory1 Principal-Agent-Theory1

Economic theoriesexplaining differencesof family firms

Stewardship Theory2

Reseource-based View3


All economic theories try to explain the advantages of a family firm by using different assumptions and explanationsfirm by using different assumptions and explanations

Economic theories explaining family business

Stewardship TheoryPrincipal Agent Theory

H i

Resource-based view

Assumptions

Hypothesis

Homo oeconomicusEgoistic behaviour

Altruism of familyCollectivistic behavior

The unity of ownership The agent acts always

Performance of FB s based on its resources

“Familiness” leads toyp The unity of ownership and control reduces the transaction costs

Hence family firms are

The agent acts always according to the common welfare

Family member act

Familiness leads to different allocation, use and sustainability of resources

Hence, family firms are the most efficient way of corporate governance

Family member act altruistic and thus there is no need for extrinsic control systems, what reduces transaction

Especially long-term orientation as a important difference to non-family firms

Criticism If family splits the shares conflicts will

reduces transaction costs

…

non family firms

…oocur


Systems theory offers an additional theoretical explanation

Theoretical foundation

Non-FB FBNon-FB FB

OWNERSHIPShareholders

Meeting/Council

Advisory

BUSINESS

Advisory Board

Family Council

Top Management

FamilyEmployee Council

• “Family” dimension requires additional governance needs

• Each overlap among the dimensions needs to be managed

• Each of the three dimensions requires particular governance mechanism and purpose

Source: Keynon-Rouvinez and Ward 2005; Davis 2007 | 36

Also our chair is active in family firm research

Selected research topics at the Chair

Basic questions Key results

-Impact of the crisis-Measures/ counter-RelatedRelated

Impact of thei i

Family firms less affected

Stay put on their strategic focus

q y

measures of family firms

dversificationdversificationcrisis onfamily firms

Stay put on their strategic focus

Even plan to grow in the crisis

S i l i

- Succession challenges- Succession process- Success factors

RelateddversificationRelateddversificationSuccession planning

Succession complex issue

Reluctance of owner-manager most important

Impact of family on

“fair process” likely solution

Traditional strategy theory hardly -Impact of family on strategy

-Success factors in family firms

RelateddversificationConcept of fitIn family firms

gy y ytransferrable

Family-related factors more influential on success


Family Business

Agenda





A lot of family businesses are “Hidden Champions“ standing out especially because of their successespecially because of their success

Definition of “Hidden Champions“

8.8% growth p.a. in

the last 10Top 3 in the world or No.1 in Europe

the last 10 years

Less than 3 billion €business volume

Low public awarenessLow public awareness level

Source: Simon, 2007 Family Business | 39

Success of Hidden Champions is based on well-tried principles

Factors of success

• “Soft diversification”R th

Soft diversification• Customer proximity• Innovative strength

Rather narrow market definition

The Hidden Champions‘

success

• Organization• Leadership/Management• Internationalization

Consequent global market penetration


Hidden Champions carefully enter into new markets

“Soft diversification” at Claas

Traditional business:Crop techniques

“Soft diversification”:Tractor production

• Buyout of Renault‘s tractord ti

• Number 1 in Europeproduction

• Major growth• Global market leader in

technologies

Source: Claas, 2009 Family Business | 41

You only become and stay global market leader if you enlist the top customers as purchaserstop customers as purchasers

Factors driving sales success – Example Semikron, Voith

Customer proximity

89%

Image 84%

The “Hidden Champions’” staff has five times (25-

50%) more t t t

36%Marketing

customer contact than staff in big

business

36%Marketing

“I d ll k li t i th ld d I h i it d h f th“I do personally know every client in the world and I have visited each of them. Our success on the domestic market is due to our technical excellence and our particularly close customer contact.”

“W d t t l l ‘ t li T li t li t“We do not control our employees‘ traveling expenses. Traveling to our clients always pays off.“

Source: Simon, 2007; Hausmann, 2008 Family Business | 42

Many Hidden Champions have managed to increase their leadership in technologies by investing continuously in R&Dleadership in technologies by investing continuously in R&D

Patent situation of mid-sized global market leaders

Company Major product EmployeesNumber of

patents

Number of patents per

100 lemployees

Fastening systems

2.350 5.500 234

Ground missiles

211 100 47

Chains 904 350 35

Camera tripods 130 40 31Camera tripods 130 40 31

Conglomerate 417.000 48.000 ~ 11

Source: Pohl, 2003 Family Business | 43


Factors of success

• “Soft diversification”Soft diversification• Customer proximity• Innovative strength



success




A high degree of vertical integration and the protection of core competencies make it difficult to copy Hidden Championscompetencies make it difficult to copy Hidden Champions

Details of organizationFunctional

organization, noManagement

organization, no outsourcing of

core competences

Research & Development Production Service &

Distributionp

High R&Ddepth to

High production depth to

Consequent decentralization

d tprotect know-how

depth to preserve the

quality

and customer centricity

“Over the years we have been investing in new technologies in order to stay ahead of the competition. More than 80% of the machines Chupa Chup uses have been developed internally and they are jealously

d d i t th titi ”guarded against the competition.”


Outstanding personalities are often leading the Hidden Champions, fighting adamantly for core valuesChampions, fighting adamantly for core values

Characteristics of the management

Energy Extremely CommandingEntity of Energy source and inspirator

Extremely high

continuity

Commanding-democratic leadership

Entity of person and

task

Foundation Product Company age

Number of managers

Tenure

1920 Wine gum 89 2 44 51920 Wine gum 89 2 44.5

1926 Motor saws 83 2 41.5


Hidden Champions are often fast in internationalization to beclose to their customers in narrow marketsclose to their customers in narrow markets

Internationalization – Example Kärcher

Specialization in product and know-how

4140know how

Global marketing by subsidiary companies in

33

28subsidiary companies in important target markets

2016

Investment in future markets7

Change from a transatlantic to a Eurasian concern 1990 20001995 2005 20081980 1985

“Kärcher products are offered in more than 190 countries on all continents bythan 190 countries on all continents by 41 subsidiary companies.”

Source: Simon, 2007; Kärcher, 2009 Family Business | 47


Factors of success

• “Soft diversification”Soft diversification• Customer proximity• Innovative strength



success




HHL Alumni Homecoming 2010HHL Alumni Homecoming 2010

Family Firms and Hidden Champions„State-of-the-Art“ presentation - October 16, 2010

Prof. Dr. Torsten WulfDr. Stephan Stubner

HHL – Leipzig Graduate School of Management

Family Firms and Hidden Champions - HHL Alumni … · Family Firms and Hidden Champions...

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