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Mumbai, May 11, 2010
Hidden Champions of the 21st Century
Role Models of Strategy and Leadership beyond the Crisis
Prof. Dr. Dr. h.c. Hermann Simon
Bonn OfficeHaydnstrasse 36, D-53115 Bonn, GermanyPhone +49/228/9843-115, Fax +49/228/9843-380e-mail: [email protected]: www.simon-kucher.com
Indo-German Chamber of Commerce/PricewaterhouseCoopers
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Source:CIA World Fact Book
Exports in 2009 (billion US-$, est.)
135
151155159162
181198216
224296299
351
355369
398
457516
9951187
1194
133Sweden
Poland
Thailand
India
Brazil
Australia
Saudi Arabia
Taiwan
Spain
Mexico
Russia
Canada
United Kingdom
South Korea
Italy
Netherland
France
Japan
USA
Germany
China
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Exports 2000-2009 (US-$ billion)
Source: WTO Trade Statistics
1.428
762
438
593
1.220
972
1.194
1.463
1.322
1.109
971
910
752
1.187
1.377
1.037
1.148
904
819
725
994
400
600
800
1.000
1.200
1.400
1.600
2003 2004 2005 2006 2007 2008 2009
in billion US-$
Germany
China
USA
Year
Germany
China
USA
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What Is a Hidden Champion?
Top 3 in the world or no. 1 on its continent
Revenue below $3 billion
Not well known in general public
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Hidden Champions
Delo
Baader
Brainlab
Lantal
Brita
Tetra
Belfor
Essel Propack
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Hidden Champions Worldwide
Russia2005
Japan
1998
Italy2001/2007
Brazil2003
Spain1997
Turkey1999
France1998
January 26, 2004
India2009
Serbia2007
Egypt2008
Korea1997/2008
China1997/2000/2005/2009
Taiwan1996/2004
USA1996/2009
Germany1997/2007
Netherlands
1997/2009
Poland1999/2009
Lithuania2009
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Key Facts of the Last Ten Years
1 million new jobs
Annual growth of 10% p.a., revenue 2.5 times larger than 10 years ago
More than 100 new €-billionaires
Sharp increase of world market share
Massive wave of innovation
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Why are they successful?
How do they differ from large firms?
What can we 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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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
SAPFresenius
Wuerth
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1995 2008
Rev
enu
es
in U
SD
mil
lion
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GrowthMid-sized Hidden Champions
CronimetClaasEnercon
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1995 2008
Rev
enu
es
in U
SD
mil
lion
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GrowthSmall Hidden Champions
BrainlabBartec
Rational
0
100
200
300
400
500
600
1995 2008
Rev
enu
es
in U
SD
mil
lion
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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.
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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
“We will do only one thing,
but we do it better than anyone
else.”
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Deep Instead of Broad: A Focused Strategy
The Case of Winterhalter
Dishwashers for
Hospitals
Dishwashers for
Schools
Dishwashers for Hotels/
Restaurants
Dishwashers
WaterConditioners
Detergents
Service
Dishwashers for
Companies
Dishwashersfor
Organisations
Deep
Broad
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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 quality standards 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
The Hidden Champions see the market definition as
a part of their strategy. In defining their markets
narrowly they observe both customers’ needs and
technology. They define their markets rather deep
than broad and are highly focussed.
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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 2008
6 23
437
World exports per capita (US-$)
985
2150
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Globalization: Kaercher
Founding year of subsidiaries
Num
ber of subsidiaries
61 subsidiaries since 1962
World leader in high pressure water cleaners
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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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From Transatlantica to Eurasia
Region Revenue share Revenue share Change10 years ago (%) today (in %) (%)
Western Europe 61.9 50.6 -18.3
USA 14.9 17.5 +17.4
Asia 10.1 16.9 +67.3
Eastern Europe 3.6 8.1 +125.0
Rest 9.5 6.9 -27.4
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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. They are in a process of trans-
forming from Transatlantic to Eurasian companies.
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Innovation
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R&D Intensity
R&D as % Indexof revenue
Industrial firms with R&D 3.0% 100
Booz (Global Top 1000 in R&D) 4.2% 120
Hidden champions 6.0% 200
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Patents
Patents per Cost per patent1,000 employees in 1,000 $
Patent-intensivelarge corporations 5.8 3,717
Hidden champions 30.6 725
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Driving Forces of Innovation
Large corporations Hidden Champions
market technology market &technology
market technology market &technology
50%
31%
19%
65%
14%
21%
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Innovation: Enercon
Founded in 1984
Revenue: $5 billion
42% of all patents worldwide
Prices:
20% higher than
competition
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Enercon: E-Ship
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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
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 Advantages of the Hidden Champions
Competitive performance
Importance
weaker stronger than the strongest competitor
Product quality
Price
Economy
Closeness-to-customer
Systems integration
Advice
Service
Punctuality
Flexibility
Advertising
Distribution
Cooperation with
suppliers
Made in Germany
Patents
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Attributes with Strongest Increase in Importance
Attribute Increase in percentagepoints last ten years
Advice +10
Systems integration +8
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Lesson 5
Closeness 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.
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Employees
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Employees
“More work than heads”
High performance cultures
High qualification
Low 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 than doubled.
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Turnover Rates
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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Lesson 6
The Hidden Champions have “more work than
heads” and high performance cultures. Employee
qualification is top. Turnover and sickness rates
are extremely low.
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Leadership
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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
Co
mp
etitive ad
vantag
esG
lob
al
ori
enta
tio
n
Dep
th
Innovation
High 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.
They are true role models of strategy and leadership
beyond the crisis.
from the teachings of management gurus, from modern management fads, from large corporations
They do most things differently…
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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
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
Germany’s most prestigious business magazine ranks Simon-Kucher as the leading consultant in "Marketing & Sales", ahead of Boston and McKinsey.
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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
“No firm has spearheaded the professionalization of pricing more than Simon-Kucher & Partners.”
William Poundstone (Priceless, Hill and Wang, 2010)
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Employees and Revenue
3 4 5 7 13 18 19 22 27 35 46 5671
90112
130147
165187
248
283
354
436 446
220
1985 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06 '07 '08 '09
Revenue in 2009: $128 million
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Comparison Boston Consulting vs. Simon-Kucher
Boston Consulting
Group
Simon-Kucher
364
Jahr
1987 (Gründung
1963)
Jahr
2009
372
After 25 years Simon-Kucher is larger than the Boston Consulting group was after 25 years.
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Global Presence
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
Russia,Moscow
Denmark,Copenhagen
Netherlands, Amsterdam
France,Paris
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The New Books
(0H01X021)- 64 -
Lessons for India India is very strong in big globally active companies
India’s export performance is still lacking
Biggest internationalization and job creation potential lies in mid-sized firms
India is quite advanced in mental internationalization
Government support is a necessary, not a sufficient condition
Foundation of everything lies in entrepreneurship
Social respect for founders and small companies crucial
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The Most Influential Management Thinkersin German-Speaking Countries 2005-2009
1. Peter F. Drucker † 38.6%
2. Hermann Simon 14.3%
3. Fredmund Malik 13.6%
4. Michael E. Porter 6.7%
Source: www.managementdenker.de, Internet Surveys, n = 2069 2005 –2009
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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 (May 2009) investigates the strategies of little known world and European market leaders in German-speaking countries. His most recent book Beat the Crisis – 33 Quick Solutions for Your Company has just been published in the US. In only six months it has appeared in 13 countries (Germany, USA, China, Korea, Russia, Spain, Italy, Brazil, Bulgaria, Czech Republic, Slovenia and the Netherlands). 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, Décisions Marketing, 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. Simon holds an honorary doctorate from IECD Business School of Bled, Slovenia.
Hermann Simon is chairman of Simon-Kucher & Partners Strategy & Marketing Consultants with offices in Amsterdam, Bonn, Boston, Brussels, 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. From April 1995 to May 2009 he was chairman and CEO of Simon-Kucher & Partners.