In today’s fast-paced world, businesses are expected to constantly innovate and evolve to remain relevant. However, not all companies aim to be the next unicorn or multibillion-dollar corporation. Some prefer to stay small, nimble, and focus on their core competencies. These companies are often referred to as “hidden champions” – a term coined by German management consultant Hermann Simon.
What are Hidden Champions?
Hidden champions are companies that dominate their respective niches, but are largely unknown to the general public. These companies are typically small to medium-sized enterprises (SMEs), with annual revenues of less than €5 billion. However, they are leaders in their specific markets, with a market share of at least 60% in their niche. These companies are often family-owned and operate in niche markets that are not attractive to larger corporations.
Characteristics of Hidden Champions
Hidden champions share several characteristics that set them apart from other businesses. Firstly, they are highly specialized and focus on one or a few products or services. They have a deep understanding of their customer’s needs and are able to provide tailored solutions that meet those needs. They also have a strong customer focus and prioritize long-term relationships over short-term gains.
Secondly, hidden champions are highly innovative and invest heavily in research and development (R&D). They are constantly looking for ways to improve their products or services and stay ahead of the competition. They also have a strong culture of learning and encourage their employees to be curious and creative.
Finally, hidden champions have a strong international orientation and are active in exporting their products or services. They have a deep understanding of foreign markets and are able to adapt their products or services to meet local needs.
How do Hidden Champions Operate?
Hidden champions operate differently from other businesses in several ways. They have a decentralized organizational structure, which allows for quick decision-making and a high degree of autonomy for employees. They also have a flat hierarchy and promote a culture of openness and collaboration.
A certain long-term focus is also needed and not being driven by short-term financial goals. They reinvest a large portion of their profits back into R&D and employee development, rather than paying out dividends to shareholders.
Hidden champions also have a strong sense of purpose and are guided by a set of values that prioritize innovation, quality, and customer satisfaction over profit.
Advantages of being a Hidden Champion
Hidden champions have several advantages over other businesses. One of their primary strengths is their ability to operate in niche markets that are unattractive to larger corporations. This allows them to focus on their core competencies and become leaders in their respective fields.
Another benefit of hidden champions is their tendency towards family ownership. This ownership structure provides stability and a long-term focus, free from the pressures of short-term financial goals or public shareholders, which can impede innovation and hinder growth.
Hidden champions also tend to have highly engaged and loyal employees. Their decentralized organizational structure and collaborative culture empower employees and create a strong sense of investment in the company’s success. This leads to higher levels of productivity, lower turnover rates, and a more engaged workforce.
Examples of Hidden Champions Around the World
There are many hidden champions around the world, operating in a diverse range of industries. Here are some examples:
- Würth Group: A German company that specializes in the production and distribution of fasteners and assembly materials. With over 400 companies in 80 countries, it is the world leader in its niche.
- DMG Mori: A Japanese-German company that produces machine tools for milling, turning, and grinding. It has a market share of over 40% in the high-end machine tool market.
- Fagor Ederlan Group: A Spanish company that produces automotive components, such as engine blocks and cylinder heads. It is the world leader in the production of cylinder heads for diesel engines.
- Miele: A German company that produces high-end household appliances, such as washing machines and vacuum cleaners. It has a reputation for quality and innovation, and a loyal customer base.
- Novo Nordisk: A Danish company that specializes in the production of insulin and other diabetes treatments. It is the world leader in its niche, with a market share of over 50%.
Lessons Learned from Hidden Champions
Hidden champions provide valuable lessons for other businesses looking to succeed in their respective markets. Here are some key takeaways:
- Focus on your core competencies and become a leader in your niche.
- Prioritize innovation and invest in R&D to stay ahead of the competition.
- Build a culture of learning and empower your employees to be creative and curious.
- Develop long-term relationships with customers and prioritize their needs over short-term gains.
- Have a strong sense of purpose and prioritize values such as innovation, quality, and customer satisfaction over profit.
Challenges Faced by Hidden Champions
Despite their success, hidden champions face several challenges:
They are vulnerable to disruptions in their niche markets. Any changes in customer needs or new technologies can threaten their dominance and require quick adaptation.
They face the challenge of talent retention. As they become more successful and attract more attention, their employees may be poached by larger corporations offering higher salaries and better benefits.
They also may struggle to access capital for growth and expansion. As they are often family-owned, they may not have access to public markets or the resources to take on debt.
Strategies for Emerging Hidden Champions
For businesses looking to become hidden champions, there are several strategies to consider:
- Find a niche market that is underserved or overlooked by larger corporations.
- Focus on innovation and invest heavily in R&D to develop a competitive advantage.
- Build a culture of learning and empowerment to foster employee engagement and creativity.
- Develop a strong brand and reputation for quality and innovation.
- Seek out international markets and develop a deep understanding of local cultures and customer needs.
Key Takeaways
Hidden champions are companies that dominate their respective niches, but are largely unknown to the general public. They are highly specialized, innovative, and customer-focused, with a strong international orientation. Hidden champions operate differently from other businesses, with a decentralized organizational structure, a long-term focus, and a strong sense of purpose.
Examples of hidden champions include companies such as Würth Group, DMG Mori, Fagor Ederlan Group, Miele, and Novo Nordisk. Lessons learned from hidden champions include focusing on core competencies, prioritizing innovation, empowering employees, developing long-term relationships with customers, and prioritizing values over profit.
Challenges faced by hidden champions include market disruptions, talent retention, and limited access to capital. Strategies for emerging hidden champions include finding underserved markets, investing in R&D, building a strong brand, and seeking out international markets.
Conclusion
Hidden champions are the unsung heroes of the business world – small, specialized companies that dominate their respective niches. They provide valuable lessons for other businesses, including the importance of focusing on core competencies, prioritizing innovation, and developing a strong sense of purpose.
While hidden champions may face challenges such as market disruptions and talent retention, they also have several advantages, including the ability to operate in niche markets and prioritize long-term relationships with customers. By understanding the strategies and characteristics of hidden champions, businesses can learn from their success and strive to become the next secret business leader.
List of hidden champions
- Guala Closures: An Italian company that produces closures for wine and spirits. It has a market share of over 30% and operates in over 100 countries.
- Gerresheimer: A German company that produces pharmaceutical packaging, such as vials, ampoules, and syringes. It has a market share of over 50% in certain segments.
- Hilti: A Liechtenstein-based company that produces construction equipment, such as power tools and anchors. It has a market share of over 50% in its niche.
- Medline Industries: An American company that produces medical supplies, such as gloves, gowns, and masks. It has a market share of over 20% in the US.
- Sika: A Swiss company that produces construction chemicals, such as adhesives and sealants. It has a market share of over 10% globally.
- Anton Paar: An Austrian company that produces analytical instruments, such as viscometers and rheometers. It has a market share of over 50% in some segments.
- New Flyer Industries: A Canadian company that produces buses for public transportation. It has a market share of over 50% in North America.
- Endress+Hauser: A Swiss company that produces process automation equipment, such as sensors and transmitters. It has a market share of over 10% globally.
- Daikin Industries: A Japanese company that produces air conditioning systems. It has a market share of over 10% globally.
- EBM Papst: A German company that produces electric motors and fans. It has a market share of over 50% in some segments.
