Hidden Champions of the 21st Century Success Strategies of Unknown World Market Leaders German-Japanese Business Forum Hannover Messe 2009

Dr. Markus B. Hofer Hannover, April 22, 2009

Cologne Office Gustav-Heinemann-Ufer 56 50968 Cologne, Germany Tel: +49 221 36794-300, Fax: +49 221 36794-398 E-Mail: [email protected] Internet: www.simon-kucher.com

Do You Know these Companies?

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These Companies are Among the Most Successful in the World. They are Hidden Champions


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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Already in the Mid of the 1990s Prof. Hermann Simon Analyzed their Secrets….

Germany 1997

Taiwan 1996

Turkey 1999

France 1998

Brazil 2003

Netherlands 1997

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Japan 1998

USA 1996

January 26, 2004

Italy 2001/2007

India 2006

Poland 1999

Germany 2007

Spain 1997

Russia 2005

Korea 1997

China 1997/ 2000/ 2005 -4-

…and New Lessons are Collected

HERMANN SIMON

HERMANN SIMON

Hidden Champions of the 21st Century Success Strategies Strategies of of Success Unknown World World Market Market Leaders Leaders Unknown

New York, 2009

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Japanese edition, 2009

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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 (06DE9009_06_X03_HC Hannover Messe)

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Why are they successful? How do they differ from large firms? What can we learn from them – especially from a Japanese - German perspective?

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Typical Comments


"Our goal is to become No. 1 and to stay there."
"We want to be the best in our market - worldwide."
"Market leadership, nothing else."
"In our market, we set the standards."

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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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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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Typical Comments


"We are a specialist."
"We focus on our competencies."
"We want to be big in small markets."
"The market definition is a part of our strategy."

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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 for Companies

Dishwashers for Organisations

Dishwashers Broad Water Conditioners

Detergents

D e e p

Service

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The Hidden Champions Strategy

- Specialization in product und know-how -

Global Selling and Marketing

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Globalization: Kaercher ARG IND

High pressure water cleaners

UKR THA SK RO RUS KOR TR Dubai MAL TAIW VRC I (CIP) MEX SGP I (CET) PL CS H

HK GR NZ USA (AKM) JPN E CDN AUS ZA DK SF N NL USA S B UK BRA I CH A F 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

Number of subsidiaries

37 36 35 34 33 32 31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1

IRL

1962

44 43 42 41 40 39 38

2008

Founding year of subsidiaries (06DE9009_06_X03_HC Hannover Messe)

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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. The Hidden Champions combine specialization in product and know-how with global selling and marketing. Globalization is the growth booster for them. (06DE9009_06_X03_HC Hannover Messe)

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The Role of Innovation R&D as % of revenue

Index

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

Patents per 1,000 employees

Cost per patent in 1,000 $

Patent-intensive large corporations

5.8

3,717

Hidden champions

30.6

725

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Driving Forces of Innovation

Large corporations

Hidden Champions 65 %

50%

31% 19 %

21 % 14%

market

technology

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market & technology

market

technology

market & technology - 17 -

Value and Pricing


Strategies are value-driven, not price-driven


Price premium 10-15%


Avoidance of price wars

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Lesson 3

The Hidden Champions are in a phase of massive innovations. Their innovativeness is both marketand technology-driven. Closeness to customer is the greatest strength of the Hidden Champions – even ahead of technology. The Hidden Champions hold strong competitive positions. Advice and systems integration are new advantages which create higher barriers to entry. They closely compete with their best competitors. (06DE9009_06_X03_HC Hannover Messe)

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Lesson 4

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. 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. (06DE9009_06_X03_HC Hannover Messe)

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Lessons for Japan


Hidden Champions can play an important role for decentralization/deconcentration of an economy
Admiration not only for large firms, but also for midsized companies required
Dependence of midsized companies on large companies should be reduced.
Active role of large corporations: help start-ups, spin-offs etc.
Needed: Entrepreneurs with high ambitions and focus (06DE9009_06_X03_HC Hannover Messe)

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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 do most things differently…
from the teachings of management gurus,
from modern management fads,
from large corporations Maybe this is the most important lesson… (06DE9009_06_X03_HC Hannover Messe)

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Profile of Simon-Kucher & Partners Simon-Kucher & Partners is a global strategy and marketing consultancy. Employees: 485 Revenue: €98.7 million (2008) Average growth: 25%

USA, Boston

France, Paris

UK, London

Luxembourg, Luxembourg

Germany, Bonn/Cologne/Frankfurt/Munich The Netherlands, Amsterdam

USA, New York USA, San Francisco

Poland, Warsaw

Spain, Madrid Switzerland, Zurich

Italy, Milan

Russia, Moscow

Japan, Tokyo

Austria, Vienna

Our approach: Honesty, excellence, creativity, and speed! Strategy/Organization
Competitive strategy
Growth strategy
Portfolio strategies
Corporate organization
Internationalization/ globalization

Sales
Sales strategy
Sales organization and management
Sales force effectiveness
Price implementation
Channel management

Marketing/Pricing
Market segmentation and positioning
Brand management
Price implementation
Price optimization
Pricing process

Efficiency improvement
Sales efficiency
Marketing efficiency
Marketing controlling
Brand portfolio optimization

Implementation support

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Dr. Markus B. Hofer Markus B. Hofer, Ph.D., is a partner at Simon-Kucher & Partners Strategy & Marketing Consultants GmbH in Cologne.

Partner Cologne Office Gustav-HeinemannUfer 56 50968 Köln Germany Tel.: +49 221 36 794-300 Fax: +49 221 36 794-398

He studied industrial engineering and business administration at the University of Karlsruhe where he received his Master´s degree in 1999. During his studies in the United States he attended Louisiana State University in Baton Rouge, LA. He completed his Ph.D. studies at the University of Dortmund. At Simon-Kucher & Partners, Dr. Hofer specializes in the development of corporate/growth strategies and organizations as well as in marketing, sales and pricing. His consulting work focuses on automotive and commercial vehicle manufacturers, automotive suppliers, component retailers, and manufacturers of plants, machinery and components. Additionally, he has conducted projects in the service sector, the chemical industry, the aviation industry and the financial service sector in numerous European and non-European countries. He has published various articles and books on diverse marketing and strategy topics, most notably in the automotive industry. He is a frequent speaker at conferences and seminars.

e-mail: markus.hofer@ simon-kucher.com (06DE9009_06_X03_HC Hannover Messe)

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Thank you very much for your attention!

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