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Changsha, October 10, 2009
Hidden Champions of the 21st Century Strategy and Leadership Beyond the Crisis
Prof. Dr. Hermann Simon
Bonn OfficeHaydnstrasse 36, D-53115 Bonn, GermanyTel. ++49/228/9843-115, Fax ++49/228/9843-380e-mail: [email protected]: www.simon-kucher.com
9H01X043- 2 -
Who is No. 1 in Exports?
China
USA
Japan
Germany
9H01X043- 3 -
Exports in 2008 (Billion US-$)
Source: 2009 CIA World Factbook
293
373
458
462
469
538
566
630
777
1377
1429
1463
Spain
Belgium
Korea
Canada
United Kingdom
Netherlands
Italy
France
Japan
USA
China
Germany
9H01X043- 4 -
Exports 2000-2008 (US-$ billion)
1.428
762
438
593
1.220
972
1.463
1.322
1.109
971
910
752
1.377
1.037
1.148
904
819
725
400
600
800
1.000
1.200
1.400
1.600
2003 2004 2005 2006 2007 2008
Source: WTO Trade Statistics
in billion US-$
Germany
China
USA
Year
9H01X043- 5 -
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
9H01X043- 6 -
Hidden Champions
Delo
Baader
Brainlab
Lantal
Brita
Tetra
Belfor
9H01X043- 7 -
Hidden Champions from China China International Marine Containers: 46% of global market for standard containers
BYD Battery: 72% of global market for mobile phone batteries
Shanghai Zhenhua Port Machinery: 35% of global market for harbor cranes
Galanz: Microwave ovens
Tender: Electric switches
St. Allen: Nail clippers
9H01X043- 8 -
China: World Market Shares
9H01X043- 9 -
Hidden Champions Worldwide
Russia2005
Japan
1998
Germany1997
Italy2001/2007
Brazil2003
Netherlands
1997
Spain1997
Poland1999
Turkey1999
France1998
January 26, 2004
India2006
Serbia2007
Egypt2008
Korea1997/2008
China1997/2000/2005/2009
Taiwan1996/2004
USA1996/2009
9H01X043- 10 -
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
9H01X043- 11 -
Hidden Champions and Crises
30% have survived serious crises
Hidden champions profit from crises
Markets are redistributed in difficult, not in easy times
Solid financing is crucial
9H01X043- 12 -
Why are they successful?
How do they differ from large firms?
What can we learn from them?
9H01X043- 13 -
Extremely ambitious goals:
Market Leadership
Growth
9H01X043- 14 -
Chemetall
“The goal of Chemetall
is the worldwide
technology and marketing leadership.”
9H01X043- 15 -
3B Scientific
“We want to become
and stay no. 1 in the world.”
9H01X043- 16 -
Karl Mayer
“We don’t want our world market share
to drop below 70%.”
9H01X043- 17 -
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
9H01X043- 18 -
GrowthFrom Hidden Champion to Big Champion
Fresenius
SAP
Wuerth
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1995 2008
Rev
enu
es in
US
D m
illio
n
9H01X043- 19 -
GrowthMid-sized Hidden Champions
CronimetClaasEnercon
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1995 2008
Rev
enu
es in
US
D m
illio
n
9H01X043- 20 -
GrowthSmall Hidden Champions
Rational
Brainlab
Bartec
0
100
200
300
400
500
600
1995 2008
Rev
enu
es in
US
D m
illio
n
9H01X043- 21 -
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.
9H01X043- 22 -
Focus and Depth
9H01X043- 23 -
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.”
9H01X043- 24 -
Flexi
“We will do only one thing,
but we do it better than anyone else.”
9H01X043- 25 -
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
Broad
Deep
9H01X043- 26 -
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
9H01X043- 27 -
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
9H01X043- 28 -
Lesson 2
Only focus and concentration lead to world class.
The Hidden Champions see the market definition as
part of their strategy. They are highly focussed and
deep rather than broad.
9H01X043- 29 -
Globalization
9H01X043- 30 -
- Specialization in product und know-how -
Global Selling and Marketing
The Hidden Champions Strategy
9H01X043- 31 -
Globalization Has Only Just Begun
1900 1950 1980 2000 2007
6 23
437
World exports per capita (US-$)
985
2150
9H01X043- 32 -
Globlization Multiplies Market Size
100
370
1135
Germany Europe World
Ind
ex
9H01X043- 33 -
Founding year of subsidiaries
Num
ber of subsidiaries
Globalization: KaercherWorld leader in high pressure water cleaners
61 subsidiaries since 1962
9H01X043- 34 -
Future Attractiveness of Emerging Markets
13%
21%
34%
35%
48%
73%
Brazil
Asia (rest)
Eastern Europe(without Russia)
India
Russia
China
9H01X043- 35 -
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
9H01X043- 36 -
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.
9H01X043- 37 -
Innovation
9H01X043- 38 -
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
R&D intensity
9H01X043- 39 -
Patents per Cost per patent1,000 employees in 1,000 $
Patent-intensivelarge corporations 5.8 3,717
Hidden champions 30.6 725
Patents
9H01X043- 40 -
Enercon Wind Turbines
Extremely innovative
Founded in 1984
More than 11000 employees, $4 billion revenue
42% of all patents worldwide
Price 20% higher than competition
Superb service
9H01X043- 41 -
Driving Forces of InnovationLarge corporations Hidden Champions
market technology market &technology
market technology market &technology
19
31
50
65
14
21%
%
%
%
%
%
9H01X043- 42 -
Innovation Process
Role of top-management
Brains more important than budgets
Cooperation between functions
Co-development with customers
Continuous improvements rather than breakthrough innovations
Speed
9H01X043- 43 -
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.
9H01X043- 44 -
Closeness to Customer
Marketing Professionalism
Value and Price
9H01X043- 45 -
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%).
9H01X043- 46 -
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
9H01X043- 47 -
Value and Pricing
Strategies are value-driven, not price-driven
Price premium 10-15%
Avoidance of price wars
9H01X043- 48 -
End of 2005 Porsche introduced the all
new coupé Cayman S
The Cayman S is technologically based on
the roadster Boxster S
Price position Cayman S?
Porsche Cayman (1)
9H01X043- 49 -
Porsche Cayman (2): Convertible more expensive
3.2%38 400 €37 200 €Chrysler Crossfire
4.2%43 150 €41 400 €BMW 330Ci
7.0%42 700 €39 900 €Audi TT
7.3%39 050 €36 400 €Nissan 350Z
12.3%61 850 €55 100 €MB CLK 500
12.9%69 800 €61 800 €BMW 630i
13.8%86 949 €76 410 €Porsche 911 Carrera
ConvertibleConvertibleCoupé
DifferencePrices in the German market (incl. VAT)
9H01X043- 50 -
Porsche Cayman
Price recommendation SKPPrice recommendation SKP Success factors:Success factors:
Think out of the box!
Innovation and
creativity
Know and quantify
the value drivers!
Precondition: Differentiation from Boxster S More power: + 15 hp Different product name Specific positioning
76 741 €
52 265 €
58 500 €
911
Boxster SCayman S
9H01X043- 51 -
Value Pricing Miele
Ca. 20% above the Market
Global brand and presence
Motto “Always better”
“Our products are made to last 20 years.”
9H01X043- 52 -
150
100
050 100 150
Performance (Index)
Pri
ce-C
ost
(In
dex
)
120
120
150
100
050 100 150
Performance (Index)
Pri
ce-C
ost
(In
dex
)120
120
Past Future
75
Premium Old
Standard Old
Premium New
Standard New
Widening the Competitive Scope
9H01X043- 53 -
5,1%
3,8%
Pricing Process Industrial Suppliers
Hidden championsHidden champions Less successful suppliers
Less successful suppliers
Price cut demanded by
automotive manufacturers
Actual price cut achieved
Source: Simon-Kucher & Partners project, 56 large suppliers
4,7%
1,4%
Hidden champions preserve 2.4 percentage points more!!
9H01X043- 54 -
Communication
“We never talk about price.”
“We set the standards – and the price. The others follow.”
“Of course we cannot avoid prices wars. But we communicate value, value, value – then price.”
9H01X043- 55 -
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
9H01X043- 56 -
Attributes with Strongest Increase in Importance
Attribute Increase in percentage pointslast ten years
Advice +10
Systems integration +8
9H01X043- 57 -
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
9H01X043- 58 -
Competing with the “Neighbor”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
9H01X043- 59 -
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.
9H01X043- 60 -
Ownership and Financing
9H01X043- 61 -
Ownership and Leadership
Ownership/management Ten years Today Change ago (in %) (in %) (in %-points)
Family-owned 76 66 -10
- thereof with family management 82 78 -4
- thereof with non-family management 18 22 +4
Corporations 21 16 -5
Publicly listed 2 10 +8
Private equity - 8 +8
9H01X043- 62 -
Key Financial Indicators
Return on Capital Emplyed (ROCE) 13.6%
Equity Ratio 41.9%
Self-financing dominates
Capital markets increasingly important
9H01X043- 63 -
Financing of the Hidden Champions
Past Future
Self-financing 78.6% 77.8%
Traditional bank loans 61.6% 44.0%
Private equity 15.3% 9.7%
Capital markets 12.8% 29.6%
9H01X043- 64 -
Lesson 6
The financing of the Hidden Champions is very
solid. The ownership is long-term oriented and
capital markets do not play a big role. Rather, the
Hidden Champions rely on self-financing. They are
conservative in financial matters.
9H01X043- 65 -
Employees
9H01X043- 66 -
Employees
“More work than heads”
High performance cultures
High qualification
Low turnover
9H01X043- 67 -
Vocational Training
Pillar of German competitiveness
Highly qualified workers
Combination of practice and theory
Vocational schools
9H01X043- 68 -
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.
9H01X043- 69 -
Turnover Rates
2,7%
5,3%
7,3%
8,8%
9,0%
15,0%
Austria
Switzerland
Daimler
Hidden champions
Germany
Source: Hernstein-Institute/US Department of Labor
9.0%
8.8%
7.3%
5.3%
2.7%
USA 30.6%
9H01X043- 70 -
Lesson 7
The Hidden Champions have “more work than
heads” and high performance cultures. Employee
qualification is top. Turnover and sickness rates
are extremely low.
9H01X043- 71 -
Leadership
9H01X043- 72 -
How Important is Leadership?
45%
28% 27%
Entrepreneurship/ strength of leadership
Professional, market-oriented
management
Qualified, loyal employees
9H01X043- 73 -
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)
9H01X043- 74 -
Lesson 8
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.
9H01X043- 75 -
Lessons for China
The success of China in globalization will depend heavily on mid-sized companies
Admiration not only for large firms, but also for midsized companies required
Needed: Young entrepreneurs with global ambitions
Active role of large corporations: help start-ups, spin-offs etc
9H01X043- 76 -
The Three Circles of the Hidden Champions
Focus
Leader-ship with ambitious
goals
Closeness to customer
Co
mp
etitive ad
vantag
es
Glo
bal
o
rien
tati
on
Dep
th
DecentralizaitonHigh
performance employees
9H01X043- 77 -
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…
9H01X043- 78 -
To conclude….
… a personal
Hidden Champions Story
9H01X043- 79 -
Simon - Kucher & Partners
Worldwide Strategy & Marketing Consultants
Focus: Revenue-driven Profit Growth
Core Competency: Pricing
9H01X043- 80 -
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
9H01X043- 81 -
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
9H01X043- 82 -
Employees and RevenueRevenue in 2008: US-$ 140 million
3 4 5 9 16 20 20 24 30 40 51 6082
99125 134
160 169
205
261
305
403
486
235
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
9H01X043- 83 -
Simon-Kucher after 24 years: larger than BCGNumber of Consultants after 24 years
331
398
Year
1986 (Founding
1963)
Year
2008
Boston Consulting
Group
Simon-Kucher
9H01X043- 84 -
Global Presence
Germany,Bonn
Switzerland,
Zurich
France,Paris
Italy,Milan
Spain,Madrid
USA,San Francisco
GermanyMunich
Japan,Tokyo
Poland,Warsaw
Germany,Frankfurt
USA,New York
GermanyCologne
USA,Boston
England,London
AustriaVienna
Luxem-bourg
Russia,Moscow
Netherlands,Amsterdam
Brussels,Belgium
China,Hong Kong
(2010)
9H01X043- 85 -
The New Books
9H01X043- 86 -
The Most Influential Management Thinkersin German-Speaking Countries 2005-2008
1. Peter F. Drucker † 37.2%
2. Hermann Simon 14.6%
3. Fredmund Malik 13.1%
4. Michael E. Porter 6.8%
5. Philip Kotler 4.9%
Source: www.managementdenker.de, Internet Surveys, n = 1782, 2005 –2008
9H01X043- 87 -
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 May 2009. It investigates the strategies of little known world and European market leaders in German-speaking countries. This summer his most recent book Beat the Crisis – 33 Quick Solutions for Your Company will be published in the US. Numerous international adaptations are underway (China, Korea, Italy, Brazil, Russia, Spain).
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.
Hermann Simon is chairman emeritus 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.