Lessons from “Hidden Champions”

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By Jerry Cahn

What can we learn from 500 smaller companies who tend to dominate their industries, but purposely keep themselves off people’s radar, so as not to give away too many of their secrets? The answer is a lot – if you have the pleasure to read “Hidden Champions of the Twenty-First Century: The Success Strategies of Unknown World Market Leaders†by Hermann Simon.

While most researchers on leadership and organizational excellence often focus on large companies, such as public companies well known to the public, Simon identified low-profile European companies that dominate markets by developing sustainable competitive advantages and relishing their obscurity! Most of the companies he studied were number one or two in its European market, had sales revenues below $1Billion, and had low public visibility and awareness. (Since I work with Vistage companies – generally private companies under $1Billion in sales, you can understand why I appreciated the opportunity to learn more about this group!)

Simon’s research identified nine (9) specific characteristics of these companies. They generally:

  • Set clear and ambitious goals, the most important of which was to be the best in the market and therefore its leader.
  • Define the market narrowly – with a specific focus on both customer needs and technology. Creating a clearly focused market definition on which they could concentrate, and from which they could avoid distractions, was core to their strategy.
  • Combine the narrow focus with a global orientation for sales and marketing. Deal as directly as possible with customers.
  • Be close to customers both in performance and interaction. Make sure all functions have direct customer contact; adopt a value-driven strategy; and pay closest attention to the most demanding customers
  • Strive for continuous innovation in both product and process. Innovation is both technology- and customer-driven. Equal attention is paid to internal resources and competencies and external opportunities.
  • Create clear-cut Competitive Advantages (CAs) in both product and services. Defend the company’s CAs ferociously
  • Rely on your own strengths. Keep core competencies in the company while outsourcing non-core activities. Cooperation is a last resort, rather than a first choice.
  • Select employees rigorously, then retain them for the long-term. Community directly to motivate people and use their creativity to its full potential. Try to always have more work than people.
  • Practice leadership that is authoritarian in the fundamentals and participative in the details. Pay utmost attention to selecting leaders who have (a) a unity of person and purpose, (b) energy and perseverance and (c) the ability to inspire others.

Simon’s conclusion is that these companies go their own way – using “common sense†rather than the latest management teachings to guide them – and that he believes is what makes them so special.

How many of the characteristics would also apply to your company? Should you be adopting some of them? Think about and then share your thoughts!