Hidden champions are relatively small but highly successful companies that are concealed behind a curtain of inconspicuousness, invisibility, and sometimes secrecy. The term was coined by Hermann Simon. He first used the term as a title of a publication in a scientific German management journal, describing the small, highly specialized world-market leaders in Germany. According to his definition, a company must meet three criteria to be considered a hidden champion: * Number one, two, or three in the global market, or number one on the company's continent, determined by market share *

Revenue In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive rev ...

below $5 billion * Low level of public awareness

Discovering hidden champions

The first English book about the subject was Hermann Simon's ''Hidden champions: lessons from 500 of the world's best unknown companies''. The book explores how Germany was able to consistently be (at the time) the number one exporter in the world. While Germany has global corporations like

Volkswagen Volkswagen (),English: , . abbreviated as VW (), is a German motor vehicle manufacturer headquartered in Wolfsburg, Lower Saxony, Germany. Founded in 1937 by the German Labour Front under the Nazi Party and revived into a global brand post ...

, Siemens,

BASF BASF SE () is a German multinational chemical company and the largest chemical producer in the world. Its headquarters is located in Ludwigshafen, Germany. The BASF Group comprises subsidiaries and joint ventures in more than 80 countries ...

and Bosch, these organisations are not substantially different from organisations like Ford, GE, DuPont or Visteon. Simon postulates that Germany's strong exports are supported by a large number of midsize firms. These smaller companies are normally known only in their market by their customers and suppliers, and are relatively unknown to the wider public. When these companies are very successful on the international markets they are hidden champions. Simon conducted detailed research on 500 such companies and established a framework to describe them. The framework was also able to identify the main differences and traits common to hidden champions. With this framework in hand it was found that there are hidden champions everywhere around the world, but they are most frequently found in German speaking countries.

Success factors

Most of the hidden champions produce inconspicuous products. In the market for these products they are the top producer in the world. Often, but not always, these companies are family owned. They export most of their products, and so contribute significantly to the current account of their countries, and are more successful than the average. The idea of market leadership means more than counting market share. Leaders as employees need an "inner flame" to become, and to remain, the number one. Hidden champions normally work in niche markets. For these markets they design unique products, which are produced with a high

real net output ratio The Real Net Output Ratio (or Vertical Range of Manufacture) describes in a value chain A value chain is a progression of activities that a firm operating in a specific industry performs in order to deliver a valuable product (i.e., good and/o ...

. They have to accept the risk of being a single product manufacturer. They divide between "good" and "bad" market share. The good is earned by performance and a solid foundation, the bad from price aggression and discounting. One result of working with unique products in niche markets is quite often the need to deal on the global market in order to achieve

economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables a ...

. For this reason, hidden champions feel a strong need to work abroad early in their company's development. Hidden champions also operate extremely close to their customers, and their customers' needs are an important driver for their innovations. On the other hand, customers of hidden champions depend on their products and they cannot easily change their source. This often makes for a high level of co-dependence between the producer and the customer, a result of the one product risk. A lot of the hidden champions established their main product as an innovation and were able to keep this single position in the market, or were at least able to keep a leading position. Their markets are mostly oligopolistic with intense competition. Competitive advantages of hidden champions are rarely because of cost leadership, more because of quality,

total cost of ownership Total cost of ownership (TCO) is a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or service. It is a management accounting concept that can be used in full cost accounting or even ecolo ...

, high performance, and consultation close to the customer. They "earn" their market leadership through performance and not through price aggression. Their high real net output ratio is often achieved by working with proprietary processes which make it hard for competitors to imitate their products. On the other hand, management tasks like finance are often outsourced. It also seems to be evident that to maintain market leadership hidden champions do business on their own, rather than depend on working in cooperation with others. Even sales in countries abroad are often organized from the parent company base. This keeps significant know-how inside, and helps recruit highly qualified staff at a small company. The corporate culture of hidden champions is distinctive. Their values are conservative: hard work, strict selection, intolerance of underperformance, low sickness rates and high employee loyalty — and most are based in smaller towns. Leadership style is authoritarian on strategic issues but participative on operations level. The leaders identify themselves with the company, are focused on their products, and stay for a long time, much longer than is normal in large public corporations. A serious problem for hidden champions, as it is for SMEs in general, is to attract international professionals. Hidden champions need people who are happy to live in a remote location, who are attracted by job content, and who do not care much for a formal and prescribed career path. In Germany the concept of ''hidden champion'' is known to some extent, and therefore hidden champions there are able to utilise this label to recruit staff. In 2011, the first "Hidden Champions Day" was organized by the student initiative bdvb e.V. at the

University of Mannheim The University of Mannheim (German: ''Universität Mannheim''), abbreviated UMA, is a public research university in Mannheim, Baden-Württemberg, Germany. Founded in 1967, the university has its origins in the ''Palatine Academy of Sciences'', ...

in order to promote the advantages and opportunities of working for a SME.

Lessons to be learned from hidden champions

Hidden champions provide a best practice example. While a lot of business is local, it can be a goal to become the number one on such a local market. Also large companies may find some interesting lessons about international management. Hidden champions teach that exceptional management means doing small things better than the competitors instead of managing only one great thing. Simplicity in processes and organizational structures is another lesson. Investors may find determined, clearly focused, continuously successful companies. The idea and adaptation of hidden champions was implemented in a fund called Hidden Champions Fund, founded in Singapore by 8I Holdings Ltd.

List of selected hidden champions

This list of companies selected by Hermann Simon in 2009 gives an idea of what hidden champions are: *

3B Scientific 3B or 3-B may refer to: * Third baseman * Triple (baseball) * 3B Computers, a range of computers produced by AT&T during the 1980s * 3B Junior Stardust Planet (formerly known as 3B Junior) is a department of the third section of the Japanese enter ...

(anatomical teaching aids) * ARCITECTA (data management platform) *

ARRI The Arri Group () is a German manufacturer of motion picture film equipment. Based in Munich, the company was founded in 1917. It produces professional motion picture cameras, lenses, lighting and post-production equipment. Hermann Simon menti ...

(cinema cameras) * Belfor (removal of fire and water damages) * Beluga Shipping ( heavy-lift shipping company; insolvent) *

Bobcat Company Bobcat Company is an American-based manufacturer of farm and construction equipment. Its American headquarters is in West Fargo, North Dakota, formerly in Gwinner, North Dakota. Its European headquarters moved in 2017 from Waterloo, Belgium, to ...

(farm and construction equipment) * Brainlab (medical software and hardware) * Corticeira Amorim (cork products) *

De La Rue De La Rue plc (, ) is a British company headquartered in Basingstoke, England, that designs and produces banknotes, secure polymer substrate and banknote security features (including security holograms, security threads and security print ...

(security printing, papermaking and cash handling systems) * DELO Industrie Klebstoffe (adhesives for chip cards) *

Embraer Embraer S.A. () is a Brazilian multinational aerospace manufacturer that produces commercial, military, executive and agricultural aircraft, and provides aeronautical services. It was founded in 1969 in São José dos Campos, São Paulo, whe ...

(regional jets) *

Dickson Constant Dickson may refer to: People *Dickson (given name) *Dickson (surname) Places In Australia: * Dickson, Australian Capital Territory in Canberra * Dickson College in Canberra * Dickson Centre, Australian Capital Territory in Canberra *Division of D ...

(technical textiles for blinds, truck sheeting etc.) * Enercon (wind turbines) * EOS GmbH (

rapid prototyping Rapid prototyping is a group of techniques used to quickly fabricate a scale model of a physical part or assembly using three-dimensional computer aided design ( CAD) data. Construction of the part or assembly is usually done using 3D print ...

systems) * Essel Propack (tubes for toothpaste) * Friwo Gerätebau GmbH (charging devices, power supplies, led drivers, battery packs) * Josef Gartner GmbH (facades for skyscrapers, subsidiary of Permasteelisa) * Gallagher Group Limited (electric fencing, livestock, weighing equipment) * Hans Gerriets (single manufacturer of large stage curtains) * Hamamatsu Photonics (optical sensors including photomultiplier tubes) * Heraeus Electro-Nite (measurement, monitoring and control of molten metal processes) * HiFi-Tuning (developing, engineering of finest fuses, out of pure silver and gold) *

Höganäs AB Höganäs AB is a Swedish multinational based in Höganäs. It is the world's largest producer of powdered metals. It develops and markets powders for customers in metallurgical industries. The company's portfolio of products and services inclu ...

(

powdered metals Powder metallurgy (PM) is a term covering a wide range of ways in which materials or components are made from metal powders. PM processes can reduce or eliminate the need for subtractive processes in manufacturing, lowering material losses and r ...

) * International SOS (medical assistance, health-care, security and risk management services) * Jamba!/Jamster (cell phone ring tones) * Austrian Jungbunzlauer (

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) * Klais Orgelbau (large organs) * Swiss Lantal Textiles (cabins for passenger aircraft) *

McIlhenny Company McIlhenny or McElhenny is an Irish surname commonly found in Donegal and Derry. They are a Sept of the Cenel Eogain race, son of Niall high king of Ireland. In Gaelic the name translates "servant of Saint Canice". Notable people with the surname in ...

(

Tabasco sauce Tabasco is an American brand of hot sauce made from vinegar, tabasco peppers ('' Capsicum frutescens'' var. ''tabasco''), and salt. It is produced by McIlhenny Company of Avery Island in south Louisiana, having been created over 150 years ag ...

) *

Molex Molex LLC is a manufacturer of electronic, electrical, and fiber optic connectivity systems. Molex offers over 100,000 products across a variety of industries, including data communications, medical, industrial, automotive and consumer electroni ...

(electronic components, including electrical and

fiber optic An optical fiber, or optical fibre in Commonwealth English, is a flexible, transparency and translucency, transparent fiber made by Drawing (manufacturing), drawing glass (silica) or plastic to a diameter slightly thicker than that of a Hair ...

) *

NetJets NetJets Inc. is an American company that sells fractional ownership shares in private business jets. Founded as Executive Jet Airways in 1964, it was later renamed Executive Jet Aviation. NetJets became the first private business jet chart ...

( fractional ownership and

rental Renting, also known as hiring or letting, is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for ...

of private business jets) * Nissha Printing (small touch panels) * Nivarox (regulating mechanism inside wristwatches) * Nordischer Maschinenbau Rud. Baader (supplier of fish processing systems) * Omicron NanoTechnology (scanning probe and tunnel-grid microscopes) * Orica (industrial

explosives An explosive (or explosive material) is a reactive substance that contains a great amount of potential energy that can produce an explosion if released suddenly, usually accompanied by the production of light, heat, sound, and pressure. An expl ...

) * PERI GmbH (formwork and scaffolding) * Petzl (climbing gear, caving gear, work-at-height equipment) * Phoenix Contact (terminal blocks, connectors, interface solutions, industrial automation) * PLANSEE (high performance materials) * Q-Cells (solar energy, solar cells) * Radiall (electronic interconnect components) * Sachtler (tripods for movie cameras) *

SAES Getters SAES Getters S.p.A. is an Italian joint stock company, established in 1940. It is the parent company of the SAES industrial group, which focusses its business on the production of components and systems in advanced materials patented by the same c ...

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Getter A getter is a deposit of reactive material that is placed inside a vacuum system to complete and maintain the vacuum. When gas molecules strike the getter material, they combine with it chemically or by . Thus the getter removes small amounts of ...

producer) * Sappi (coated fine paper) * Schwank (industrial heating) * SGS, Société Générale de Surveillance (inspection, verification, testing and certification services) * Tandberg and Polycom (

videoconferencing Videotelephony, also known as videoconferencing and video teleconferencing, is the two-way or multipoint reception and transmission of audio and video signals by people in different locations for real time communication.McGraw-Hill Concise Encyc ...

systems) * O.C. Tanner ( employee recognition programs) * Technogym (fitness equipment) *

Tetra Terrestrial Trunked Radio (TETRA; formerly known as Trans-European Trunked Radio), a European standard for a trunked radio system, is a professional mobile radio and two-way transceiver specification. TETRA was specifically designed for use by ...

(aquarium and pond supplies) * ULVAC Technologies (vacuum technology) * Universo S.A. (wristwatch hands) * W.E.T. (car seat heating) *

Webasto Webasto SE is a company based in Stockdorf, Germany which makes sunroofs, electric-car chargers and air-conditioning systems. Holger Engelmann is the CEO of the company. History Coronavirus outbreak Webasto owns 11 locations in China, inc ...

(remote-controlled heaters for cars) * Worldwide.energy (green energy) *

Zimmer Holdings Zimmer Biomet is a publicly traded medical device company. It was founded in 1927 to produce aluminum splints. The firm is headquartered in Warsaw, Indiana, where it is part of the medical devices business cluster. In 2001, Zimmer was spun off f ...

DePuy DePuy Synthes () is a franchise of orthopaedic and neurosurgery companies. Acquired by Johnson & Johnson in 1998, its companies form part of the Johnson & Johnson Medical Devices group. DePuy develops and markets products under the Codman, DePu ...

, Biomet, and Stryker Corporation (all implants, and located in the area of

Warsaw, Indiana Warsaw is a city in and the county seat of Kosciusko County, Indiana, United States. Warsaw has a population of 13,559 as of the 2010 U.S. Census. Warsaw also borders a smaller town, Winona Lake. Etymology Warsaw, named after the capital of P ...

)

References

External links

Whiteboard: guest article by Prof. Hermann Simon on the 13 management principles behind Hidden Champions, Dec. 2012

Whiteboard: guest article by Prof. Hermann Simon on the socio-economic factors that shaped the 'Hidden Champions', Jan. 2013
*The Korea Times

* ttps://web.archive.org/web/20110326135955/http://sciblogs.co.nz/stick/tag/hidden-champions/ High cost Germany shows how to succeed in exporting 11-01-31
Benchmarking and Hidden Champion to promote local development : Tools description and their application
Types of business entity