Corporate CPR Episode 48: The Hidden Champions Market

July 20, 2022

On today’s show, we discuss the hidden champions market, what their success looks like, what makes them successful, and how you can apply those learnings to your organization.

Hermann Simon is the Founder and Honorary Chairman of Simon-Kucher & Partners, today the world’s leading price consultancy with 41 offices and 1600 employees.  From 1995 to 2009 he served as the CEO and is the firm’s Honorary Chairman today.  

He is an expert in strategy, marketing, and pricing, and the only German in the “Thinkers50 Hall of Fame” of the most influential management thinkers in the world. In German-speaking countries he has been continuously voted the most influential living management thinker. The magazine Cicero ranks him in the top 100 of the 500 most important intellectuals.

Professor Simon has published over 40 books in 30 languages, including world bestsellers on Hidden Champions and price management. His most recent book is True Profit! No Company Ever Went Broke from Turning a Profit. His new book Hidden Champions in the Chinese Century: Ascent and Transformation will be published this spring.

Simon holds honorary doctorates from IEDC Business School of Bled (Slovenia), from the University of Siegen (Germany) and from Kozminski University Warsaw (Poland). He is a honorary professor at the University of International Business and Economics in Beijing. In China, the “Hermann Simon Business School” is named after him.

Key Takeaways:

What is a Hidden Champion?

A Hidden Champion is a company that is one of the top three in its world market, has a revenue of less than 5 billion Euros, and is not known in the general public. They make up a large part of the economy.

How is it possible that they are hidden? Why don’t they come out and be globally known?

It’s often part of their culture. They don’t want to attract the attention of their competitors. Often, they are suppliers contributing to complex products made by other more visible companies.

What is the blueprint for success for these companies?

The strategy is built on three pillars.

  • Ambition to be the best – Analyze what you are really good at.
  • Focus – Stay away from diversification. Focus on what you can do the best.
  • Globalization – Expand regionally, and then internationally.

How do these companies remain focused?

They choose to either focus on a certain product or focus on their particular customer base.

How can companies evaluate an opportunity to know whether it is a distraction or something to pursue?

The biggest strength is closeness to the customer and understanding the needs of the customer. Be very good at integrating technology and customer needs. If you apply this integration, you are likely to be successful. Customers will always have needs, but the methods of meeting them will change with new technologies. 

Globalization can be challenging. How are the hidden champions successful at globalization?

Above all it is a people challenge. There are always issues with bureaucracy, customs, restrictions, regulations, etc. However, the real bottleneck is people. Technology has improved the ability to globalize, but it is still a long-term process. You need people that speak the language where you are entering, and you can only start a couple new locations at a time. You’ll want to plan for some failure along the way. It will take decades to truly build a good global network. 

How does a company decide where to go if trying to globalize?

It will depend on your strategy and your people. Do you have people who can and are willing to go to certain places?  One strategy is to hire graduates from universities in the country you are entering and have them come to your home office for a year to become familiar with your culture and techniques before joining others to start an office in their home country. You want to hire, train, and retain these valuable employees. It requires a lot of patience to globalize.

What are the main things that cause champions to fail?

  • Many are family companies that don’t manage succession well. 
  • Technological breakthroughs come which they can’t keep up with.

What is it about Germany that fosters so many of these types of organizations?

  • Historically, because Germany was made up of 23 monarchies and 2 republics, a businessman had to become international very quickly because of the proximity of the neighboring regions. It became “normal” to think internationally. 
  • The German vocational training system has young people work as apprentices in a company three days per week and attend vocational training two days per week. This fosters a great balance between practice and theory, creating worker competence.

How does price play into the competitiveness and success of these hidden champions?

The most important aspect of pricing is the value to customer. A successful company will better understand the value the customer perceives, how it can it be delivered, how it can be created through innovation, and retained. 

Recent books by Hermann Simon
Many Worlds, One Life
Hidden Champions in the Chinese Century

Contact Hermann Simon

Website: https://hermannsimon.com
Email: hermann.simon@simon-kucher.com
Linkedin: https://www.linkedin.com/in/simonhermann/
Twitter: https://twitter.com/hermannsimon
Facebook: https://www.facebook.com/hermann.simon.50

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