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Management

Hidden Champions
Down Under
Seven lessons on how to become a
hidden champion
Chris Petzoldt

SIMON KUCHER & PARTNERS


Strategy & Marketing Consultants

www.simon-kucher.com
M any world market leaders around the world
are virtually unknown to the public. Even less
is known about their strategies. What is the secret
to their success and uniqueness? Professor
Hermann Simon founder of the strategy and
marketing consultancy Simon-Kucher & Partners -
has been researching and dissecting these so called
"Hidden Champions" and their strategies for over
20 years. Simons list of mid-sized, little-known
world market leaders contains about 2000 entries,
1200 of those are from Germany. While Germany's
huge export success is heavily backed by these
mid-sized world market leaders, there are also
Hidden Champions in Australia.

Do you know Australian companies like Orica, Aristocrat


Leisure Ltd, CHEP, CSL, Nufarm or ANCA?

Hidden Champions
In fact these companies are Hidden Champions:

Orica is world market leader in explosives for


mines and quarries. Orica offers its innovative and
comprehensive blasting services in over 50
countries.
Aristocrat Leisure Limited is one of the largest
manufacturers of slot machines in the world. So
when you are gambling in front of a one-armed
bandit, chances are high that it comes from this
relatively small Australian company.
CHEP - owned by Brambles Ltd - is the world's
largest pallet and container pooling services
business. Its customers include some of the world's
largest consumer goods manufacturers and
retailers.
CSL is the world's largest producer of blood plasma
derivatives through its division CSL Plasma. You can
probably find their products in almost any hospital.
Nufarm is global leader in the manufacture and
marketing of phenoxies, a class of herbicides that
control and eradicate weeds.
ANCA is market leader in computer numerical
control (CNC) grinding machines and CNC systems.

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ANCA's focus on technology and innovation was
already honoured by 25 industry awards,
recognizing its engineering excellence and export
achievements.

Why are these companies so successful? What are they


doing differently from large corporations? The answer:
Almost everything! What can we learn from them? Here
are the most important lessons from which large as well
as small companies can benefit:

7 important lessons
1. Extremely Ambitious Targets
You dont become a world market leader by chance, but
by setting very ambitious targets and pursuing them with
never-ending perseverance. The targets of hidden
champions are aimed at growth and market leadership.
These companies have grown rapidly in the last decade,
nearly tripling their size. Across all Hidden Champions
market shares have skyrocketed. Ten years ago they were
on average 56% larger than their strongest competitor
worldwide today they are more than double this
amount.

2. Focus and Depth


You can only become world-class through focus and
concentration. The hidden champions define their markets
narrowly and work deep into the value chain. Their
vertical integration is 50%; the average industrial
company is at 29%.

3. Globalisation
Focus makes a market small, but globalization makes it
large. The hidden champions have their own subsidiaries
in all critical markets around the globe and practice direct
customer relationship management. They invest
continuously in markets of the future, like the CRI (China-
Russia-India) triad.

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4. Innovation
Hidden champions invest nearly twice as much revenue in
R&D as other companies. On average, patent intensity is
up to five times higher for the hidden champions. About
two-thirds of the hidden champions consider market and
technology to be equally important driving forces; only
19% of large corporations achieve this balance.

5. Closeness to Customers and


Competitive Advantages
While only 5-10% of employees in large corporations have
regular and frequent contact with customers, about 25-
50% of hidden champion employees can say the same.
Closeness to customers is the biggest strength of mid-
sized companies, even more so than innovation. Product
quality and service are two of their outstanding
competitive advantages. Hidden champions have created
new competitive advantages in the form of advice and
systems integration. These are hard for competitors to
imitate, as they are not found in products, but in the
minds of their employees.

6. Loyalty and Highly-Qualified


Employees
The employee turnover rate of hidden champions is far
below industry averages (about 2.7% p.a. in Germany vs.
7.3% on avg). This figure is much more important than
the average sickness rates, because every lost employee
also means lost skills and knowledge. Hidden champions
have greatly increased the number of highly qualified
employees over the last ten years. Better qualifications are
the foundation of their superiority.

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7. Strong Leadership
At the head of hidden champion companies are strong
personalities who identify themselves completely with the
company. On average, CEOs of hidden champions remain
at the top for > 10 years. CEOs of stock market listed
companies, in contrast, average < 5 years. Younger
executives and women are also more present than in large
corporations.

Hidden Lesson
In summary, the hidden champions follow their own path
and do so with more decisiveness and success than ever
before. They do nearly everything different: they deviate
from management fads; they pay little heed to what other
large corporations are doing or what management gurus
proclaim. In essence, they apply common sense so
simple, and yet so difficult when it comes to
implementation. And this is perhaps the most important
lesson.

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Chris Petzoldt is the Managing Director of Simon-Kucher & Partners
Strategy & Marketing Consultants Australia - a world-market leading
consultancy in marketing and pricing across industries. He has more
than 11 years of consulting experience and conducted more than 60
projects on revenue management and pricing across the globe.

Sydney office
Level 40, Northpoint Tower, 100 Miller Street, North Sydney
NSW 2060, Australia
Tel: +61 2 9931 6802, Fax: +61 2 9931 6888
E-Mail: Chris.Petzoldt@Simon-Kucher.com
www.simon-kucher.com

SIMON KUCHER & PARTNERS


Strategy & Marketing Consultants

Simon-Kucher & Partners is a global consulting firm with


625 professionals in 25 offices worldwide focusing on
Smart Profit Growth. Founded in 1985, the company has
over 25 years of experience providing strategy and
marketing consulting, and is regarded as the worlds
leading pricing advisor and thought leader.

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