Warsaw, November 17, 2008
Hidden Champions of the 21st CenturySuccess Strategies of Unknown World Market Leaders
Prof. Dr. Hermann SimonWarsaw OfficeWołoska 9, 02-583 WarszawaTel +48 22 330 57 00 Fax +48 22 330 57 01 e-mail: [email protected]: www.simon-kucher.com
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Who is No. 1 in Exports?
China
USA
Japan
Germany
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Exports in 2007 (Billion US-$)
67110
136138139
257322
379442431
454502
546678
11481220
1354
Hungary
Turkey
Norway
Poland
Australia
Spain
Belgium
Korea
United Kingdom
Canada
Netherlands
Italy
France
Japan
USA
China
Germany
Source: 2008 CIA World Factbook
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What Is a Hidden Champion?
Top 3 in the world or no. 1 on its continent
Revenue below $4 billion
Not well known in general public
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Hidden ChampionsDeloBaaderBrainlabLantalCEAGBritaTetraBelfor
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Polish Hidden Champions
Company Main RevenueProduct (PLN million/
year)
FAKRO Roof windows 600
Famur Mining equipment 909
Psiloc Smartphone applications ?
Atlas Adhesive mortars for tiles 560
DGS Closures for glass containers ?
Nowy Styl Chairs 900
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Hidden Champions Worldwide
Russia2005
Japan1998
Germany1997
Italy2001/2007
Brazil2003
Netherlands1997
Taiwan1996
Spain1997
Poland1999
USA1996/2009
Turkey1999
France1998
China1997/ 2000/
2005
Korea1997
India2006
Serbia2007
Egypt2008
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The Book
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Key Facts of the Last Ten Years
1 million new jobs
Annual growth of almost 10% p.a., revenue 2.5 times larger than 10 years ago
More than 200 new $-billionaires
Sharp increase of world market share
Massive wave of innovation
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Hidden Champions and Crises
30% have survived serious crises
Hidden champions profit from crises
Markets are redistributed in difficult, not in easy times
Punctuated development
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Why are they successful?
How do they differ from large firms?
What can young entrepreneurslearn from them?
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Extremely ambitious goals:
Market Leadership
Growth
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Chemetall
“The goal of Chemetall is the
worldwide technology and marketing leadership
in profitable niches of specialty chemicals.”
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3B Scientific
“We want to become
and stay no. 1 in the world.”
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Karl Mayer
“We don’t want our world market share
to drop below 70%.”
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Market Share of Hidden Champions
Relative market share
Absolute market share
1.56
10 years ago
2.3433.0%30.2%World
TodayToday10 years ago
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GrowthFrom Hidden Champion to Big Champion
FreseniusSAP
Wuerth
0
2000
4000
6000
8000
10000
12000
14000
16000
1995 2007
Rev
enue
s in
USD
mill
ion
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GrowthMid-sized Hidden Champions
Cronimet
Leoni
Enercon
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1995 2007
Rev
enue
s in
USD
mill
ion
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GrowthSmall Hidden Champions
Bartec
Rational
Brainlab
0
50
100
150
200
250
300
350
400
1995 2007
Rev
enue
s in
USD
mill
ion
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Lesson 1
Success always begins with ambitious goals. The
Hidden Champions of the 21st century go for
growth and market leadership. This is the fuel that
drives them forward. Young entrepreneurs: Be very
ambitious!
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Focus and Depth
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Uhlmann
“We always had one customer and will only
have one customer in the future: the
pharmaceutical industry –
we only do one thing, but we do it right.”
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Flexi Bogdahn
“We will do only one thing,
but we do it better than anyone else.”
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Deep Instead of Broad: A Focused StrategyThe Case of Winterhalter
Dishwashersfor
Hospitals
Dishwashersfor
Schools
Dishwashersfor Hotels/
Restaurants
Dishwashers
WaterConditioners
Detergents
Service
Dishwashersfor
Companies
Dishwashersfor
Organisations
Broad
Deep
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Deep Value Chain
No outsourcing of core competencies
Strong outsourcing of non-core activities
Own machine shops
Very secretive in R&D
Avoidance of strategic alliances
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Comments on Outsourcing
“We produce all parts ourselves, based on the qualitystandards we define.” Wanzl
“At Kaldewei we make everything ourselves.” Kaldewei
“We can best fulfill the extremely high requirements for quality and precision in-house.” Heidelberg
“As many parts as possible are self-produced, all of which takes place in a small region with down-to-earth people.” Miele
“We make our own tools. We can only deliver top quality if zero tolerance begins with these tools.” Weidmueller
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Lesson 2
Only focus and depth lead to world class. By
focussing on a narrow customer segment the
Hidden Champions can offer superior value. High
vertical integration and a deep value chain create
unique products customers cannot do without.
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Globalization
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- Specialization in product und know-how -
Global Selling and Marketing
The Hidden Champions Strategy
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Globalization Has Only Just Begun
1900 1950 1980 2000 2005 2010 2020
6 23437
1543
World export per capita (US-$)
985
2000
3000
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Globlization Multiplies Market Size
100
370
1135
Germany Europe World
Inde
x
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Founding year of subsidiaries
Num
berof subsidiariesGlobalization: Kaercher
High pressure water cleanersA R G 44IN D 43
U KR 42THA 41
S K 40R O 39
R U S 38KOR 37
IR L 36TR 35
D u b a i 34MA L 33
TA IW 32VR C 31
I ( C IP ) 30MEX 29S GP 28
I ( C ET) 27P L 26C S 25H 24
HK 23GR 22
N Z 21U S A ( A KM) 20
J P N 19E 18
C D N 17A U S 16
ZA 15D K 14S F 13N 12
N L 11U S A 10
S 9B 8
U K 7B R A 6
I 5C H 4
A 3F 2
11962 1964 1966 1974 1975 1978 1982 1983 1984 1985 1987 1988 1989 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2002 2003 2004 2005 2006 2008
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Future Attractiveness of Emerging Markets
13%
21%
34%
35%
48%
73%
Brazil
Asia (rest)
Eastern Europe(without Russia)
India
Russia
China
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Lesson 3
The Hidden Champions combine specialization in
product and know-how with global selling and
marketing. Globalization is the growth booster for
them. They serve the target markets through their
own subsidiaries.
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Innovation
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R&D as % Indexof revenue
German firms with R&D 3.0% 100
Booz (Global Top 1000 in R&D) 4.2% 120
Hidden champions 5.9% 169
1/3 of hidden champions > 9% 257
R&D Intensity
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Patents per Cost per patent1,000 employees in 1,000 $
Patent-intensivelarge corporations 5.8 3,717
Hidden champions 30.6 725
Patents
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Enercon Wind Turbines
Extremely innovative
Founded in 1984
More than 10000 employees, 3 billion € revenue
42% of all patents worldwide
Price 20% higher than competition
Superb service
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Driving Forces of InnovationLarge corporations Hidden Champions
market technology market &technology
market technology market &technology
19
31
50
65
14
21%
%
%
%
%
%
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Innovation Process
Role of top-management
Heads more important than budgets
Cooperation between functions
Co-development with customers
Continuous improvements rather thanbreakthrough innovations
Speed
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Lesson 4
The Hidden Champions are in a phase of massive
innovations. The effectiveness of their R&D-
activities beats that of large companies by a factor of
5. Their innovation processes are fundamentally
different. Their innovativeness is both market- and
technology-driven.
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Closeness to Customer
Marketing Professionalism
Value and Price
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Market-Related Strengths
36,4%
84,1%
88,7%closeness-to-customer
image
professional marketing 36.4%
84.1%
88.7%
Five times as many employees (25-50%) have regular customer contacts compared to large companies (5-10%).
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Closeness to Top Customers
Close to most demanding customers
Grohmann Engineering: Top 30 customers worldwide as target group, most important customer is Intel
Top customers as drivers of performance and innovation
Follow top customers everywhere
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Value and Pricing
Strategies are value-driven, not price-driven
Price premium 10-15%
Avoidance of price wars
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Competitive Avantages of the Hidden Champions
Competitive performance
Importance
weaker strongerthan the strongest competitor
Product quality
Price
Economy
Closeness-to-Customer
Systems Integration
Advice
Service
Punctuality
Flexibility
Advertising
Distribution
Cooperationwith suppliers
Made in Germany
Patents
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Attributes with Strongest Increase in Importance
Attribute Increase in percentage pointslast ten years
Advice +10
Systems integration +8
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Closeness to Competition
Head-on fight with strongest competitors
Fitness through tough competition
Often global top competitors in one location
Actively seek performance-oriented competition
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Competing with the “Neighbor”Product Competitors Location Remarks
Product Competitors Place Country RemarksShopping carts Wanzl Leipheim Germany Global No. 1
Siegel Jettingen Strong competitorOrthopedic implants Zimmer Warsaw Indiana, USA Globale No. 1
DePuy Warsaw All three are leadersBiomet Warsaw
Private Planes Cessna Wichita Kansas, USA Cessna global No. 1Hawker Beechcraft Wichita others leadingLearjet Wichita
Sparkling wine Freixenet Sant Sadurni d'Anoia Spain Global No. 1Codorniu Sant Sadurni d'Anoia Global No. 2
Strong competitionEyewear Luxottica Agordo Italy Global No. 1
Safilo Padua Global No. 2Very similar strategies
Assembly products Würth Künzelsau Germany Global No. 1Berner Künzelsau Global No. 2
Aromas/perfumes Givaudan Vervier Switzerland Global No. 1Firmenich Geneva Global No. 2/3
Interface technology Phoenix Contact All in the region of Germany Global No. 1, all threeHarting East Westphalia global leadersWeidmüller
Golf equipment Callaway Carlsbad California, USA Both fight for globalTaylorMade Carlsbad market leadership
Wind energy Vestas Randers Denmark Global No. 1Enercon Aurich Northern Global No. 3, techological
Germany leader
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Lesson 5Closeness to customer is the greatest strength of the Hidden Champions – even ahead of technology. The Hidden Champions hold strong competitive posititions. Advice and systems integration are new advantages which create higher barriers to entry. They closely compete with their best competitors. Entrepreneurial clusters foster the emergence of Hidden Champions.
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Employees
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Employees
“More work than heads”
High performance cultures
High qualification
Early on sharp selection/later on “zero” turnover
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Higher Qualification
10 years ago Today
University graduates (%)
8.5%
19.1%
In the last ten years, the share of university graduates has more thandoubled.
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Turnover Rates
2,7%
5,3%
7,3%
8,8%
9,0%
15,0%
Austria
Switzerland
Daimler
Hidden champions
Germany
Source: Hernstein-Institut/US Department of Labor
9.0%
8.8%
7.3%
5.3%
2.7%
USA 30.6%
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Lesson 6
The Hidden Champions have “more work than
heads” and high performance cultures. Early
selection on the job is sharp. Turnover and
sickness rates are extremely low.
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Ownership and Leadership
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Ownership and Leadership
Ownership/management Ten years Today Changeago (in %) (in %) (in %-points)
Family-owned 76 66 -10
- thereof with family management 82 78 -4
- therof with other management 18 22 +4
Corporations 21 16 -5
Stock exchange 2 10 +8
Private equity - 8 +8
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Key Financial Indicators
Return on Capital Emplyed (ROCE) 13.6%
Equity Ratio 41.9%
Self-financing dominates
Capital markets increasingly important
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Leaders
Identity of mission and being
Leadership
- authoritarian in the principles
- participative, flexible in the details
Young into power
More women in top positions
Very high continuity (average CEO tenure is 20 years)
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Lesson 7
The secret of the success of the Hidden
Champions lies in their leaders. The leadership is
authoritarian in the principles, but flexible in the
details. Continuity is very high. Young CEOs and
women play a more important role than in large
companies.
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The Three Circles of the Hidden Champions
Focus
Leader-ship with ambitious
goals
Closeness to customer
Com
petitive advantagesG
loba
l or
ient
atio
n
Dept
h
DecentralizaitonHigh
performance employees
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The Ultimate Lesson
The “Hidden Champions of the 21st Century” go their own ways
– more decisively and successfully than ever.
Maybe this is the most important lesson…
from the teachings of management gurus,from modern management fads,from large corporations
They do most things differently…
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Lessons for PolandThe success of Poland in globalization will depend heavily on mid-sized companiesAdmiration not only for large firms, but also for midsized companies requiredNeeded: Young entrepreneurs with high ambitionsThe technical competencies are there, marketing and globalization must be addedThe role of large corporations: help start-ups, spin-offs etc.Poland is in a good starting position, geostrategically ideal
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To conclude….
… a personal
Hidden Champions Story
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Simon - Kucher & Partners
Worldwide Strategy & Marketing Consultants
Focus: Revenue-driven Profit Growth
Core Competency: Pricing
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Best Consultancies in "Marketing & Sales" in Germany Germany’s most prestigious business magazine ranks Simon-Kucher as the leading consultant in "Marketing & Sales", ahead of Boston and McKinsey.
Competence Ranking "Marketing & Sales"Competence Ranking "Marketing & Sales"
manager-magazin 08/2007
Roland Berger5
Bain & Company4
McKinsey & Company3
Boston Consulting Group2
Simon-Kucher & Partners1
Score*ConsultancyRank
* Maximum 500; Source: manager-magazin August 2007/IMB (Institute for Management & Consulting); Survey of 264 Top Managers
370
346
344
338
401
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World Leader in Price Consulting
“Simon-Kucher is world leader in giving advice to companies on how to price their products.”
Business Week
“Simon-Kucher is the worlds’ leading pricing consultancy.”The Economist
“In pricing you offer something nobody else does.”Professor Peter Drucker
“No one knows more about pricing than Simon-Kucher.”Professor Philip Kotler
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Employees and RevenueRevenue in 2007: US-$ 120 million
3 4 5 9 16 20 20 24 30 40 51 60 82 99125 134
160205
261311
379
485
235
169
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
11/200
8
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Comparison Boston Consulting vs. Simon-KucherAfter 23 years Simon-Kucher is larger than the Boston Consulting group was after 23 years.
331308
SKP (1985-2007)
BCG (1963-1985)
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Global Presence
Germany,Bonn
Switzerland, Zurich
France,Paris
Italy,Milan
Spain,Madrid
USA,San Francisco
Germany,Munich
Japan,Tokyo
Poland,Warsaw
Germany,Frankfurt
USA,New York
Germany,Cologne
USA,Boston
England,London
Austria,Vienna
Luxem-bourg
Russia,Moscow
Netherlands,Amsterdam
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SKP in Poland
Consumergoods
Media
EnergyFinancial services
Telecommunication
Transporta-tion /logisticsPharmacy
Retail
Others
Industrial goods
Constructionmaterials
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The Most Influential Management Thinkersin German-Speaking Countries 2005-2007
Source: www.managementdenker.de, Internet Surveys, n = 1 195, 2005 – 2007
1. Peter F. Drucker † 31.8%
2.
3.
4.
Hermann Simon
5.
Fredmund Malik
12.2%
10.7%
6.3%Michael E. Porter
5.1%Philip Kotler
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Hermann Simon
Professor Simon has published over 30 books in 22 languages, including the worldwide bestseller Hidden Champions (1996, cover story of BusinessWeek in January 2004) and Power Pricing (1997), as well as Strategy for Competition (2003) and Think! (2004). Manage for Profit, Not for Market Share (2006) takes a critical look at the widespread focus on volume and market share and calls for a conscious shift of focus towards profit. His book Hidden Champions of the 21st Century, Success Strategies of Unknown World Market Leaders will appear in February 2009. It investigates the strategies of little known world and European market leaders in German-speaking countries. In October 2008 his new textbook Preismanagement appeared in German. Simon was and is a member of the editorial boards of numerous business journals, including the International Journal of Research in Marketing, Management Science, Recherche et Applications en Marketing, DécisionsMarketing, European Management Journal as well as several German journals. Since 1988 he has regularly written a column for the business monthly Manager Magazin. As a board member of numerous foundations and corporations, Professor Simon has gained substantial experience in corporate governance. From 1984 to 1986 he was the president of the European Marketing Academy (EMAC).A native of Germany, he studied economics and business administration at the universities of Bonn and Cologne. He received his diploma (1973) and his doctorate (1976) from the University of Bonn.
Hermann Simon is chairman of Simon-Kucher & Partners Strategy & Marketing Consultants with offices in Amsterdam, Bonn, Boston, Cologne, Frankfurt, London, Luxembourg, Madrid, Milan, Moscow, Munich, New York, Paris, San Francisco, Tokyo, Vienna, Warsaw and Zurich. Simon is an expert in strategy, marketing and pricing. He has an extensive global range of clients. In the German language area he was voted the most influential management thinker after the late Peter Drucker.Before committing himself entirely to management consulting, Simon was a professor of business administration and marketing at the Universities of Mainz (1989-1995) and Bielefeld (1979-1989). He was also a visiting professor at various international universities: Harvard Business School, Stanford, London Business School, INSEAD, Keio University in Tokyo and the Massachusetts Institute of Technology.
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