Germany exported over $1.38 worth of goods in 2013, making it the 3rd largest export economy in the world. For a relatively small country, this is quite a feat and one that is primarily down to a large collection of relatively unknown market leaders — companies known as “hidden champions.”
What is a Hidden Champion?
The term “hidden champion” was coined back in 1996 by German Author Hermann Simon. It refers to relatively unknown but highly successful companies that are ranked in the top 3 in the world, on their continent, or in their industry. An example of this is DELO, the industrial adhesive company from southern Germany. They are relatively concealed in terms of the public eye but over 50% of mobile phones and 80% of the smart cards in the world are held together by DELO adhesives. These businesses alone make up approximately 25% of all German exports. Therefore, even though they hide behind their curtain of inconspicuousness, they are a major contributor to the country’s economy.
In the last 10 years the German hidden champions have increased their market share and in turn created over one million jobs. So, what makes these companies so successful? How can such unknown quantities compete in, or even lead, such competitive markets? There are 3 key attributes that explain their success.
- Ambitious targets – Hidden champions set extremely ambitious goals regarding market leadership and growth. In the past decade, they have achieved 10% growth rates and almost 200 billionaires (in terms of US Dollars) have emerged from this group.
- Globalizing fast – When a target market is as narrow as it is, there is a limited consumer base in the country of origin. One way hidden champions get around this is by globalizing at a very young age. This allows them to open up their products and demonstrate their competitive advantage to international markets.
- Extremely narrow markets – The biggest key to the hidden champions’ success is the specific focus placed upon a very niche industry. One example of this is Flexi, the world’s leading manufacturer of retractable dog’s leashes, who were quoted as saying, “we will do only one thing, but we will do it better than anyone else.” This kind of simplicity and direction has led to them having approximately 70% of the global market share in dog’s retractable leashes. Such a strict focus in any industry allows a development of a core competency that can beat your competitors. The German dishwashing systems manufacturer, Winterhalter, demonstrated this when they found that in most of their sub-markets such as hospitals and canteens, they had a market share of just 3-5%. They readjusted their focus by exclusively catering to restaurants and hotels, which led to a company name change, and in turn resulted in them becoming a leader in their industry.
With the increasing levels of globalization in recent years, the world has seen an extreme rise in the number of hidden champions and the impact they are having on their respective industries. The hidden champions of the 21st century do not follow conventional management and business techniques. And with the combination of strong leadership and ambitious goals, they achieve unrivalled success and show no signs of slowing down.