BUSINESS: The Ultimate Resource

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MANAGEMENT LIBRARY
Hidden Champions
Hermann Simon Why Read It?
Most business success stories concentrate on large companies. Hermann Simon took a deliberately different approach, setting out to find businesses whose names almost nobody knows, but who for decades have been leaders in their markets worldwide. They exist all over the world, but Simon shows that, no matter what their location or national origins, the same principles lead to success and market leadership. For a refreshingly different take on what makes a world-beater and a celebration of the virtues of small and medium-sized businesses, this is the book to read.

Getting Started
Market leadership is a goal that is within the reach of small and middle-sized businesses. This is shown by the example of the hidden champions, firms who hold up to 90% of world market shares and dominate their own markets worldwide. Instead of taking their cue from the giants of business, firms such as Haribo, Krones, Webasto, Brita, or Stihl prefer to shun publicity and go their own way. They thus avoid the disadvantages of big business syndrome, like bureaucracy, remoteness from customers, inflexibility, and excessive division of labor. Simon analyzes the strategies of these companies and comes up with general recommendations for companies of any size.

Contribution
1. Who are the Hidden Champions? The unknown world market leaders are, says Simon, small and middle-sized businesses that rule world markets with low-profile products. The vast majority of them are run as family businesses. They make an important contribution to the balance of payments in their respective countries, have high export shares, and are extremely good at surviving. 2. Market Leadership Market leadership, Simon argues, is more than market share. It requires psychological predominance, the ambition to become number one.

Bloomsbury Publishing Plc 2003

BUSINESS: The Ultimate Resource

January 2004 Upgrade 16

3. The Market Hidden champions define their market narrowly. As Simon describes them, they create market niches and develop unique products that define their own markets, accepting the risks of putting all their eggs in one basket. 4. The World Narrow specialization is combined with global marketing. As market positions are distributed early on, it is, according to Simon, extremely important to be the first supplier to future markets. 5. Customers Closeness to customers is the key factor in a market leadership strategy. Because of the distinctiveness of the products made by Simons hidden market leaders, their customers cannot easily find substitutes for them. Conversely, however, specialization creates a high degree of customer dependency in these companies. 6. Innovation Innovation is one of the foundations of market leadership. Simon shows how many hidden champions introduced completely new products and were then able to transfer their position as pioneers into long-lasting supremacy. 7. Competition The hidden leaders usually operate, says Simon, in oligopolistic markets where there is intensive competition. The competitive advantages lie more in differentiation than in cost advantages. 8. Partners Leadership means not delegating the activities on which a companys dominant role is founded. It is better, in Simons view, to retain a broad spectrum of core competences than to outsource, so that core know-how is protected and highly qualified staff are kept on board. 9. Employees The culture in companies, according to Simon, should be team-oriented, dedicated to performance, and intolerant of idlers and malingerers. Acceptance of such a culture is the basis for motivation and the identification of staff with the company. 10. Managers Managers should be people with energy, will power, drive, and authority. They should, Simon suggests, be brought into the company while they are still young. Continuity is

Bloomsbury Publishing Plc 2003

BUSINESS: The Ultimate Resource

January 2004 Upgrade 16

important. The average period in office for leaders among the hidden champions is over 20 years.

11. Lessons The hidden champions, Simon insists, are not prodigies, but they do form an elite among firms. Anyone can learn from them. Small and medium-sized businesses can recognize that many markets are by nature local or regional and that it is possible to become number one in them. Investors can realize that these businesses have clearly defined aims, are ambitious and well focused, and preserve continuity.

Context
Simons interest in small and medium-sized companies was aroused in 1986 when he met Theodore Levitt, a professor at the Harvard Business School, for an exchange of views on German success in exports. They agreed that this success could not be put down primarily to large German companies, because these did not differ significantly from their international competitors. They concluded, therefore, that there must be a group of companies, which were hardly known, but which occupied world leadership positions in their respective markets. Because these companies frequently prefer to retain a low profile, Simon called them the hidden champions. Hermann Simon has extensive experience as a business consultant in Europe, the United States, and Asia, which enables him to approach business management questions from the perspective of a practitioner. Hidden Champions also has good academic credentials: Simons practical insights are informed by his work as a professor of economics. His findings often contradict established management doctrine. This book has been published in 15 languages and has had a good reception not only from the general and trade press, but in the wider business community.

For More Information

Simon, Hermann. Hidden Champions: Lesson from 500 of the Worlds Best Unknown Companies. Cambridge, MA: Harvard Business School Press, 1996.

Bloomsbury Publishing Plc 2003