Role Models of Strategy and Leadership beyond the Crisis
Indo-German Chamber of Commerce/
PricewaterhouseCoopers
Prof. Dr. Dr. h.c. Hermann Simon
Mumbai, May 11, 2010
Bonn Office
Haydnstrasse 36, D-53115 Bonn, Germany
Phone +49/228/9843-115, Fax +49/228/9843-380 e-mail: hermann.simon@simon-kucher.com
Internet: www.simon-kucher.com

Exports in 2009 (billion US-$, est.)
China
Germany
USA
Japan
France
Netherland
Italy
South Korea
United Kingdom
Canada
Russia
Mexico
398
369
355
299
296
351
457
516
Spain
Taiwan
Saudi Arabia
Australia
Brazil
India
Thailand
Poland
Source:
CIA World Fact Book
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Sweden
198
181
162
159
155
151
224
216
135
133
995
1194
1187
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Exports 2000-2009 (US-$ billion) in billion US-$
1.600
1.400
1.200
1.000
910
Germany
752
800
819
USA
725
600
593
400
Source: WTO Trade Statistics
(0H01X021)
China
2003
438
2004
971
904
762
1.109
1.037
972
1.322
1.220
1.148
1.463
1.428
1.377
2005 2006 2007 2008
1.194
China
1.187
Germany
994 USA
2009
Year
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What Is a Hidden Champion?
 Top 3 in the world or no. 1 on its continent
 Revenue below $3 billion
 Not well known in general public
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Hidden Champions
 Delo
 Baader
 Brainlab
 Lantal
 Brita
 Tetra
 Belfor
 Essel Propack
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Hidden Champions Worldwide
Germany
1997/2007
Taiwan
1996/2004
USA
1996/2009
India
2009
Russia
2005
Turkey
1999
France
1998
Japan
1998
January 26, 2004
Poland
1999/2009
Korea
1997/2008
Brazil
2003
(0H01X021)
Netherlands
1997/2009
Serbia
2007
Lithuania
2009
Egypt
2008
Italy
2001/2007
Spain
1997
China
1997/2000/
2005/2009
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Key Facts of the Last Ten Years
 1 million new jobs
 Annual growth of 10% p.a., revenue 2.5 times larger than 10 years ago
 More than 100 new €-billionaires
 Sharp increase of world market share
 Massive wave of innovation
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(0H01X021)
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(0H01X021)
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Chemetall
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3B Scientific
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Karl Mayer
(0H01X021)
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Market Share of Hidden Champions
World
Absolute market share
10 years ago Today
Relative market share
10 years ago Today
30.2% 33.0% 1.56
2.34
(0H01X021)
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Growth
From Hidden Champion to Big Champion
20000
18000
Fresenius
SAP
16000
14000
Wuerth
12000
10000
8000
6000
4000
2000
0
1995 2008
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Growth
Mid-sized Hidden Champions
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
1995
(0H01X021)
2008
Cronimet
Claas
Enercon
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Growth
Small Hidden Champions
600
500
400
300
200
100
0
1995
(0H01X021)
Rational
Bartec
Brainlab
2008
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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
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Flexi
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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
Broad
Dishwashers
Water
Conditioners
Detergents
D e e p
Service
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Deep Value Chain
 No outsourcing of core competencies
 Strong outsourcing of non-core activities
 Own machine shops
 Very secretive in R&D
 Avoidance of strategic alliances
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Comments on Outsourcing
 “We produce all parts ourselves, based on the quality standards we define.”
 “At Kaldewei we make everything ourselves.”
Wanzl
Kaldewei
 “We can best fulfill the extremely high requirements for quality and precision inhouse.” Heidelberg
 “As many parts as possible are self-produced, all of which takes place in a small region with down-toearth people.” Miele
 “We make our own tools. We can only deliver top quality if zero tolerance begins with these tools.” Weidmueller
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Lesson 2
The Hidden Champions see the market definition as a part of their strategy. In defining their markets narrowly they observe both customers’ needs and technology. They define their markets rather deep than broad and are highly focussed.
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The Hidden Champions Strategy
- Specialization in product und know-how -
Global Selling and Marketing
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Globalization Has Only Just Begun
World exports per capita (US-$)
2150
985
6
(0H01X021)
1900
23
1950
437
1980 2000 2008
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Globalization: Kaercher
World leader in high pressure water cleaners
61 subsidiaries since 1962
(0H01X021)
Founding year of subsidiaries
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Future Attractiveness of Emerging Markets
73% China
Russia
India
Eastern Europe
(without Russia)
Asia (rest)
Brazil 13%
21%
35%
34%
48%
(0H01X021)
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From Transatlantica to Eurasia
Region
Western Europe
USA
Asia
Eastern Europe
Rest
Revenue share Revenue share Change
10 years ago (%) today (in %) (%)
61.9
14.9
50.6
17.5
-18.3
+17.4
10.1
3.6
9.5
16.9
8.1
6.9
+67.3
+125.0
-27.4
(0H01X021)
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Lesson 3
The Hidden Champions combine specialization in product and know-how with global selling and marketing. Globalization is the growth booster for them. They serve the target markets through their own subsidiaries. They are in a process of transforming from Transatlantic to Eurasian companies.
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(0H01X021)
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R&D Intensity
Industrial firms with R&D
Booz (Global Top 1000 in R&D)
Hidden champions
R&D as % Index of revenue
3.0% 100
4.2%
6.0%
120
200
(0H01X021)
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Patents
Patent-intensive large corporations
Hidden champions
Patents per
1,000 employees
Cost per patent in 1,000 $
5.8
30.6
3,717
725
(0H01X021)
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Driving Forces of Innovation
Large corporations Hidden Champions
65%
50%
31%
19%
21%
14%
(0H01X021) market technology market & technology market technology market & technology
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Innovation: Enercon
 Founded in 1984
 Revenue: $5 billion
 42% of all patents worldwide
 Prices:
20% higher than competition
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Enercon: E-Ship
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Lesson 4
The Hidden Champions are in a phase of massive innovations.
The effectiveness of their R&Dactivities beats that of large companies by a factor of
5. Their innovation processes are fundamentally different. Their innovativeness is both market- and technology-driven.
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Market-related Strengths
Five times as many employees (25-50%) have regular customer contacts compared to large companies (5-10%).
closeness-tocustomer
88.7% image
84.1% professional marketing
36.4%
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Closeness to Top Customers
 Close to most demanding customers
 Grohmann Engineering: Top 30 customers worldwide as target group, most important customer is Intel
 Top customers as drivers of performance and innovation
 Follow top customers everywhere
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Value and Pricing
 Strategies are value-driven, not price-driven
 Price premium 10-15%
 Avoidance of price wars
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Competitive Advantages of the Hidden Champions
Importance
Price
Product quality
Economy
Punctuality
Flexibility
Advice
Closeness-to-customer
Service
Systems integration
Distribution
Made in
Germany
Cooperation with suppliers
Patents
Advertising weaker stronger than the strongest competitor
Competitive performance
(0H01X021)
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Attributes with Strongest Increase in Importance
Attribute
Advice
Systems integration
Increase in percentage points last ten years
+10
+8
(0H01X021)
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Lesson 5
Closeness to customer is the greatest strength of the Hidden Champions – even ahead of technology. The Hidden Champions hold strong competitive posititions.
Advice and systems integration are new advantages which create higher barriers to entry. They closely compete with their best competitors.
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Employees
 “More work than heads”
 High performance cultures
 High qualification
 Low turnover
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Higher Qualification
In the last ten years, the share of university graduates has more than doubled.
University graduates (%) 19.1%
8.5%
10 years ago Today
(0H01X021)
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Turnover Rates
USA
Austria
Switzerland
Germany
Daimler
Hidden champions
Source: Hernstein-Institute/US Department of Labor
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Lesson 6
The Hidden Champions have “more work than heads” and high performance cultures. Employee qualification is top. Turnover and sickness rates are extremely low.
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Leaders
 Identity of mission and being
 Leadership
authoritarian in the principles
participative, flexible in the details
 Young into power
 More women in top positions
 Very high continuity
(average CEO tenure is 20 years)
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Lesson 7
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.
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The Three Circles of the Hidden Champions
Focus
Leadership with ambitious goals
High performance employees
Closeness to customer
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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
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They are true role models of strategy and leadership beyond the crisis.
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Simon - Kucher & Partners
 Worldwide Strategy & Marketing Consultants
 Focus: Revenue-driven Profit Growth
(0H01X021)
 Core Competency: Pricing
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Best Consultancies in "Marketing & Sales" in Germany
Germany’s most prestigious business magazine ranks Simon-Kucher as the leading consultant in "Marketing & Sales", ahead of Boston and McKinsey.
Rank
1
2
3
4
Competence Ranking "Marketing & Sales"
Score* Consultancy
Simon-Kucher & Partners
Boston Consulting Group 370
McKinsey & Company
Bain & Company
346
344
401
5 Roland Berger 338 manager-magazin 08/2007
* Maximum 500;
Source: manager-magazin August 2007/IMB (Institute for Management & Consulting); Survey of 264 Top Managers
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World Leader in Price Consulting
“Simon-Kucher is world leader in giving advice to companies on how to price their products.”
Business Week
“Simon-Kucher is the worlds’ leading pricing consultancy.”
The Economist
“In pricing you offer something nobody else does.”
Professor Peter Drucker
“No one knows more about pricing than Simon-Kucher.”
Professor Philip Kotler
“No firm has spearheaded the professionalization of pricing more than SimonKucher & Partners.”
William Poundstone (Priceless, Hill and Wang, 2010)
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Employees and Revenue
Revenue in 2009: $128 million
436 446
354
3 4 5 7
13 18 19 22
27 35
46 56
71
90
112
130
147
165
187
220
248
283
1985 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06 '07 '08 '09
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Comparison Boston Consulting vs. Simon-Kucher
After 25 years Simon-Kucher is larger than the Boston Consulting group was after 25 years.
372
364
Jahr
1987
(Gründung
1963)
Jahr
2009
Boston
Consulting
Group
Simon-
Kucher
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Global Presence
Luxembourg
England,
London
Belgium,
Brussels
Netherlands,
Amsterdam
Denmark,
Copenhagen
Germany,
Bonn
Germany,
Frankfurt
Germany
Munich
Germany,
Cologne
Russia,
Moscow
Poland,
Warsaw
Japan,
Tokyo
USA,
San Francisco
USA,
Boston
USA,
New York
France,
Paris
Spain,
Madrid
Switzerland,
Zurich
Italy,
Milan
Austria
Vienna
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The New Books
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Lessons for India
 India is very strong in big globally active companies
 India’s export performance is still lacking
 Biggest internationalization and job creation potential lies in mid-sized firms
 India is quite advanced in mental internationalization
 Government support is a necessary, not a sufficient condition
 Foundation of everything lies in entrepreneurship
 Social respect for founders and small companies crucial
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The Most Influential Management Thinkers in German-Speaking Countries 2005-2009
1.
Peter F. Drucker †
2.
Hermann Simon
3.
Fredmund Malik
4.
Michael E. Porter
38.6%
14.3%
13.6%
6.7%
Source: www.managementdenker.de, Internet Surveys, n = 2069 2005 –2009
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Hermann Simon
Hermann Simon is chairman of Simon-Kucher & Partners Strategy & Marketing Consultants with offices in Amsterdam, Bonn, Boston, Brussels, Cologne, Frankfurt, London, Luxembourg, Madrid,
Milan, Moscow, Munich, New York, Paris, San Francisco, Tokyo, Vienna, Warsaw and Zurich. Simon is an expert in strategy, marketing and pricing. He has an extensive global range of clients. In the
German language area he was voted the most influential management thinker after the late Peter
Drucker.
Before committing himself entirely to management consulting, Simon was a professor of business administration and marketing at the Universities of Mainz (1989-1995) and Bielefeld (1979-1989). He was also a visiting professor at various international universities: Harvard Business School,
Stanford, London Business School, INSEAD, Keio University in Tokyo and the Massachusetts
Institute of Technology. From April 1995 to May 2009 he was chairman and CEO of Simon-Kucher &
Partners.
Professor Simon has published over 30 books in 22 languages, including the worldwide bestseller Hidden Champions (1996, cover story of BusinessWeek in January 2004) and Power Pricing (1997), as well as Strategy for Competition (2003) and
Think! (2004). Manage for Profit, Not for Market Share (2006) takes a critical look at the widespread focus on volume and market share and calls for a conscious shift of focus towards profit. His book Hidden Champions of the 21st Century,
Success Strategies of Unknown World Market Leaders (May 2009) investigates the strategies of little known world and
European market leaders in German-speaking countries. His most recent book Beat the Crisis
– 33 Quick Solutions for Your
Company has just been published in the US. In only six months it has appeared in 13 countries (Germany, USA, China,
Korea, Russia, Spain, Italy, Brazil, Bulgaria, Czech Republic, Slovenia and the Netherlands).
Simon was and is a member of the editorial boards of numerous business journals, including the International Journal of
Research in Marketing, Management Science, Recherche et Applications en Marketing, Décisions Marketing, European
Management Journal as well as several German journals. Since 1988 he has regularly written a column for the business monthly Manager Magazin. As a board member of numerous foundations and corporations, Professor Simon has gained substantial experience in corporate governance. From 1984 to 1986 he was the president of the European Marketing
Academy (EMAC).
A native of Germany, he studied economics and business administration at the universities of Bonn and Cologne. He received his diploma (1973) and his doctorate (1976) from the University of Bonn. Simon holds an honorary doctorate from
IECD Business School of Bled, Slovenia.
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