Champion Hidden

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Prague, May 9, 2012

Prof. Dr. Dres. h.c. Hermann Simon

Hidden Champions

Vanguard for Globalia

Bonn OfficeHaydnstrae 36, 53115 Bonn, GermanyPhone +49/228/9843-115, Fax +49/228/9843-380

E-mail: [email protected]

Internet: www.simon-kucher.com

www.hermannsimon.com

University of Economics Prague


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Exports 2011

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147

197

298

331

336

495499

509

559

578

801

1 511

1 543

1 897

0 500 1000 1500 2000

Czech Republic

Poland

India

Spain

Mexico

UKRussia

Italy

South Korea

France

Japan

USA

Germany

China

Billion US-$Country

Source: CIA World Factbook (estimates)


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Per Capita Exports

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13 964

5 159

7 165

11 408

8 399

7 9848 784

18 863

2 992

6 258

3 490

4 859

246

1 415

0 5000 10000 15000 20000

Czech Republic

Poland

Spain

South Korea

Italy

UKFrance

Germany

Mexico

Japan

Russia

USA

India

China

Per capita exports 2011 in US-$Country

Source: Calculations based on data from CIA World Factbook (estimates)


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Per Capita Exports

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5 060

-3 559

-1 499

2 763

- 167

- 573253

10 439

-5 226

-1 854

-4 522

-2 020

- 572

1 479

-8000 -3000 2000 7000 12000

Czech Republic

Poland

Spain

South Korea

Italy

UKFrance

Germany

Mexico

Japan

Russia

USA

India

China

Deviation from empirical norm 2011 in US-$Country

Source: Calculations based on data from CIA World Factbook (estimates)


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The Origin of the Hidden Champions-Idea

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Ted Levitts question from 1986:

Why is Germany so successful in exports?

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Is it due to large corporations?

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Do Large Companies Explain Export Performance?

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USA 133Japan 68

China 61

France 35

Germany 34UK 30

Korea 14

Italy 10

Spain 9India 8

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Fortune Global 500 Corporations:

Source: Fortune, July 25, 2011


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Do Large Companies Explain Export Performance?

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USA (133)

Japan (68)

Korea (14)

Italy (10)

Spain (9)

China (61)

India (8)

0

200

400

600

800

1 000

1 200

1 400

1 600

0 50 100 150

Germany (34)

France (35)

UK (30)

Fortune Global 500 Corporations

Exports in US-$ billion

R2= 0.4838

number of large companiesexplains less than half of the

variance in exports


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Contribution of the Mid-sized Sector

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China:

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Germany:

68% of Chinese exports come fromcompanies with less than 2000employees (Economist, Sept. 5, 2009)

ca. 70% of exports come fromMittelstand companies


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What Is a Hidden Champion?

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Top 3 in the world or no. 1 on its continent

Revenue below5 billion

Not well known in general public

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Hidden Champions by Country

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Number of Hidden ChampionsCountry

44777

910111113141416191923

2729

4967687576

110128

220

366500

Hungary

Czech Republic

Israel

SloveniaLuxembourg

Turkey

Australia

Brazil

Spain

Norway

Finland

Russia

Canada

Belgium

DenmarkKorea

Poland

Netherlands

Sweden

United Kingdom

China

France

Italy

Switzerland

AustriaJapan

USA

Germany 1307366

Total number worldwide: 2746


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Hidden Champions per Million Inhabitants

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Number of Hidden ChampionsCountry

0,10,10,10,10,20,40,40,50,50,50,70,91,11,11,21,2

1,71,71,8

2,72,8

3,43,5

5,413,7

14,4

15,616,0

China

Brazil

Russia

TurkeySpain

Czech Republic

Hungary

Australia

Canada

Korea

Poland

Israel

United Kingkom

France

USAItaly

Netherlands

Japan

Belgium

Finland

Norway

Denmark

Slovenia

Sweden

LuxembourgSwitzerland

Austria

Germany


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Key Facts

1 million new jobs in ten years

Annual growth of 10%, revenue 4 times largerthan 1995

More than 150 new-billionaires

Sharp increase of world market share

Massive wave of innovation

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Hidden Champions

Delo

Baader

Brainlab

Neumann Invers

Tetra

Belfor

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Hidden Champions from Czech Republic

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Company Product

Contipro Hyaluronan

2N TelekomunikaceTelecommunications

equipment

Elephant Orchestra Empty web domains

PixmacStock agency in

selling/buying images


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Hidden Champions Worldwide

January 26, 2004


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Lesson 1

Excellent export performance is driven by mid-sized

firms rather than by large corporations. Countries

seem well advised to build their global competitive-

ness on strong mid-sized companies of the Hidden

Champion type.

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Why are they successful?

How good are they

in marketing and strategy?

What can CEE countries

learn 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.

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3B Scientific

We want to become

and stay no. 1 in the world.

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Deep Leadership: Sick

We lead by anticipating our customers

expectations. Leadership means becoming

the benchmark for others. We set the

standards on the world market.


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Market Share of Hidden Champions

Relativemarket share

Absolutemarket share

1.6

10 years ago

2.333%30%World

TodayToday10 years ago

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G th


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GrowthFrom Hidden Champion to Big Champion

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Fresenius

SAP

WrthSchaeffler

0

5 000

10 000

15 000

20 000

25 000

1995 2010

Reve

nuesin$millions

G th


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GrowthSmall Hidden Champions

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Rational

Igus

BrainlabBartec

0

100

200

300

400

500

1995 2010

L 2


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Lesson 2

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.

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Focus and Depth

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Flexi


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Flexi

We only focus

on one thing,

but we do it better

than anyone else.

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Deep Value Chain


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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


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Comments on Outsourcing

We produce all parts ourselves, based on the qualitystandards we define. Wanzl

As many parts as possible are self-prod uced, al l of whic h

takes place in a small region w ith 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 3


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Lesson 3

Only focus and depth lead to world class. The

Hidden Champions focus on narrow markets and are

deep rather than broad. They tend to do things

themselves and refrain from outsourcing core

competencies.

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Globalization

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The Hidden Champions Strategy


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- Specialization in Product and Know-how -

Global Selling and Marketing

The Hidden Champions Strategy

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Accelerating Globalization


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Accelerating Globalization

Exports per capita in US-$

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6 23

437

985

2160

1900 1950 1980 2000 2010

Globalization: Kaercher


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Globalization: Kaercher

Founding year of subsidiaries

Numberof

subsidiaries

World leader in high pressure water cleaners

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WOMA 75LVEEKTCIN

KAZ 70MUN

RINCB

FSSCMDLT

ARKUE

KC DEKC GR 60KSDROSK

LEUCOUNIFLEX

KFIUA

CERAT Leas

K Financ 50

THKRUKFT

C-TechKNA MXCEN

KRCN

cwTR 40

DKIE

AENZ

MYTWK ALV

K Leas.

DECET 30

CIPSEAMXPLHUCZ

HKGR

cpAKHI 20

JPES

CAKBGZA

AUSFI

NONL

SE 10AKI

BEGB

BRIT

CHAT

FRAKW 1

1 93 5 1 9 62 1 96 4 1 9 66 1 97 4 1 9 75 1 97 8 1 9 82 1 98 3 1 9 84 1 98 5 1 9 88 1 99 0 1 9 91 1 99 2 1 9 93 1 99 4 1 9 95 1 99 6 1 9 97 1 99 8 1 9 99 2 00 2 2 00 4 2 00 5 2 00 6 2 00 7 2 00 8 2 00 9 2 0 10 2 01 1

Lesson 4


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Lesson 4

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. They heavily invest into the

markets of the future.

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Innovation

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Innovation: EOS E-Manufacturing/3D Printing


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Innovation: EOS E Manufacturing/3D Printing

Innovation: Enercon E-Ship


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Innovation: Enercon E Ship


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Innovation: Schott Concentrated Solar Power


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Innovation: Schott Concentrated Solar Power

R&D Intensity


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y

3.0%

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Normal firms* Global Top 1000** Hidden Champions

3.6%

6.0%

*IDW study, ** Booz study on R&D

Patents


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Largecorporations

HiddenChampions

6

31

Largecorporations

HiddenChampions

$3.717 m

$0.725 m

Patents per 1000 employees Cost per patent

European Patents 2010


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0,1

0,4

1,2

1,5

1,5

2,7

3,4

4,38,4

29,6

37,5

69,5

102,4

154,1

161,4

254,0

312,7Switzerland 2389

Luxembourg 130

Sweden 1467

Germany 12553

Netherlands 1725

France 4536

Italy 2287

United Kingdom 1857

Spain 393

Portugal 29

Griechenland 16

Country Patents Patents per million inhabitants

Czech Republic 45

Hungary 34

Bulgaria 3

Romania 3

Slowakia 8

Poland 45

Driving Forces of Innovation


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Large corporations Hidden Champions

Market Technology Market &technology

Market Technology Market &technology

50%

31%

19%

65%

14%

21%

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Lesson 5


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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 innovations are both market- and

technology-driven.

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Customers and Competition

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Market-related Strengths


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36,4%

84,1%

88,7%Closeness-to-

customer

Image

Professional

marketing

Five times as many employees (25-50%) have regular customer contactscompared to large companies (5-10%).

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Closeness to Top Customers


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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


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Hidden Champion strategies are value-driven, not

price-driven.

Hidden Champions command price premiums.

Big opportunities in new ultra-low price segment.

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Competitive Advantages of the Hidden Champions


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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 inGermany

Patents

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Ease of use

Lesson 6


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Closeness to customer is the greatest strength of

the Hidden Champions even ahead of

technology. Their strategies are value-oriented,

not price-oriented. The Hidden Champions hold

strong competitive positions. Advice and systems

integration are new advantages which create

higher barriers to entry.

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Employees and Leaders

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Employees


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More work than heads

High performance cultures

High qualification

Low turnover

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Vocational Training


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Pillar of German competitiveness

Highly qualified workers

Combination of practice and theory

Vocational schools

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Higher QualificationIn the last ten years the share of university graduates has more than


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10 years ago Today

Universitygraduates (%)

8,5%

19,1%

In the last ten years, the share of university graduates has more thandoubled.

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Employee Turnover Rates


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2,7%

5,3%

7,3%

8,8%

9,0%

15,0%

Austria

Switzerland

Daimler

Hidden

champions

Germany

9.0%

8.8%

7.3%

5.3%

2.7%

USA 30.6%

Source: Hernstein-Institute/US Department of Labor

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Leaders


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70% of Hidden Champions are family-owned

Identity of mission and being

Leadership

- authoritarian in the principles

- participative, flexible in the details CEOs come young into power

Very high continuity

(average CEO tenure 20 years,large corporations 5.1 years)

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Lesson 7


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The Hidden Champions have more work than

heads and high performance cultures. Employee

qualification is top. Turnover and sickness rates

are extremely low. Total identification and

continuity of the leaders are the foundations for

long-term success.

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Lessons for CEE Countries

CEE t i h ld f t id i d i t


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CEE countries should foster mid-sized companies topromote internationalization and job creation.

Ambition, focus and global selling are the strategicpillars of Hidden Champions.

Avoid diversification if you aspire to become world class.

Closeness to customers and customer-driven innovationform the core of Hidden Champion marketing.

A countrys natural advantages should be transformed

into competitive advantages in the market place.

Government support is necessary, but not sufficient.Entrepreneurship is indispensable

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To conclude.

a personal

Hidden Champions Story

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Simon - Kucher & Partners


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Worldwide Strategy & Marketing Consultants

Focus: Revenue-driven Profit Growth

Core Competency: Pricing

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Best Consultancies in "Marketing and Sales"In 2007 and 2011 top managers ranked Simon-Kucher as best consultancy in


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In 2007 and 2011, top managers ranked Simon-Kucher as best consultancy inmarketing and sales before Boston und McKinsey.

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Rank Consultancy Score*

1 Simon-Kucher & Partners

2 Boston Consulting Group

3 McKinsey & Company

4 Bain & Company

5 Roland Berger

Competence-Ranking "Marketing and Sales"

08/2007 und 08/2011

395

379

359

347

342

*Average for 2007 and 2011, maximum score 500;

Source: manager magazin August 2007&2011/IMB, Survey among German top managers

World Leader in Price Consulting


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Simon-Kucher is wo rld leader in giving adv ice

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

No firm has spearheaded the professionalization of pricing

mo re than Simon -Kuc her & Partners.William Poundstone (Priceless, Hill and Wang, 2010)

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Employees and RevenueRevenue 2011:121 million


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3 4 5 7 1318 19 22 27

35 4656

7190

112130

147165

187220248

283

354

436446

500

585

632

-60

40

140

240

340

440

540

640

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

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Global Presence


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Germany,Bonn

Switzerland,Zurich

England,London

Italy,Milan

Spain,Madrid

USA,San Francisco

GermanyMunich

Japan,Tokyo

Poland,Warsaw

Germany,Frankfurt

USA,New York

Germany,Cologne

USA,Boston

Luxem-bourg

AustriaVienna

Belgium,Brussels

USA,Miami

Denmark,Copenhagen

Netherlands,Amsterdam

France,Paris

China,

Beijing

Singa-pore

Australia,Sydney

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Czech Books


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Management ThinkersThe most influential management thinkers in German-speaking

t i 2010 2011


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countries 2010-2011

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Source: Frankfurter Allgemeine Zeitung, Feb 6, 2012, p. 31 www.managementdenker.de, Internet Survey, n=804

1. Peter F. Drucker 40.1%

2. Hermann Simon 22.5%

3. Fredmund Malik 14.6%

4. Michael E. Porter 7.5%

Hermann SimonHermann Simon is chairman of Simon-Kucher & Partners Strategy & Marketing Consultants withoffices in Amsterdam Beijing Bonn Boston Brussels Cologne Copenhagen Frankfurt


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Professor Simon has published over 30 books in 25 languages, including the worldwide bestsellers Hidden Champion s(Boston 1996, cover story of BusinessWeekin 2004) and Power Pr ic ing(New York 1997), as well as Manage for Prof it ,Not for Market Share(Boston 2006). His book Hidden Champions of the 21st Century, Success Strategies of Unkn own

World Market Leaders(New York 2009) investigates the strategies of little known market leaders. Beat the Crisis (NewYork 2010) provides companies with practical advice against the crisis and for a quick recovery.

Simon was and is a member of the editorial boards of numerous business journals, including the International Journalof Research in Marketing, Management Science, Recherche et Applications en Marketing, Dcisions Marketing,European Management Journal as well as several German journals. Since 1988 regularly writes columns for thebusiness monthly Manager Magazin. As a board member of numerous foundations and corporations, Professor Simonhas gained substantial experience in corporate governance. From 1984 to 1986 he was the president of the EuropeanMarketing Academy (EMAC). Simon is co-sponsor of the first Special Purpose Acquisition Company (SPAC) listed onthe German Stock Exchange in Frankfurt, which acquired Exceet Group S.E. in July 2011.

A native of Germany, he studied economics and business administration at the universities of Bonn and Cologne. Hereceived his diploma (1973) and his doctorate (1976) from the University of Bonn. Simon holds honorary doctoratesfrom IEDC Business School of Bled, Slovenia, and from the University of Siegen, Germany. He is a honorary professorat the University of International Business and Economics in Beijing.

offices in Amsterdam, Beijing, Bonn, Boston, Brussels, Cologne, Copenhagen, Frankfurt,London, Luxembourg, Madrid, Miami, Milan, Munich, New York, Paris, San Francisco, Singapore,Sydney, Tokyo, Vienna, Warsaw and Zurich. Simon is an expert in strategy, marketing andpricing. He has an extensive global range of clients. In the German language area he was votedthe most influential management thinker after the late Peter Drucker.

Before committing himself entirely to management consulting, Simon was a professor ofbusiness administration and marketing at the Universities of Mainz (1989-1995) and Bielefeld(1979-1989). He was also a visiting professor at Harvard Business School, Stanford, LondonBusiness School, INSEAD, Keio University in Tokyo and the Massachusetts Institute ofTechnology. From 1995 to 2009 he was CEO of Simon-Kucher & Partners.

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