Vienna, November 19, 2009

Hidden Champions of the 21st Century

Role Models of Druckerian Leadership

Prof. Dr. Hermann Simon

1st Global Peter Drucker Forum

Vienna Office

Rotenturmstr. 16-18/301, A-1010 Vienna

Tel. +43/1/512 29 79-0, Fax +43/1/512 29 79-99

e-mail: hermann.simon@simon-kucher.com

Internet: www.simon-kucher.com

(9H01X057)

- 2 -

What is “Druckerian Leadership”?

Leadership based on concrete values:

Closeness to customer

Loyalty of employer and employee

Long-term orientation/continuity

Clear vision/purpose

Creation of new value: Innovation

Exemplary conduct of leaders

(9H01X057)

- 3 -

Where do we find these values?

In large corporations?

In small/mid-sized companies?

(9H01X057)

- 4 -

• China

• USA

• Japan

Who is no. 1 in exports?

(9H01X057)

- 5 -

Exports in 2008 (billion US-$)

Source: 2009 CIA World Factbook

109

146

163

190

458

462

469

471

538

566

630

777

1377

1429

1463

Hungary

Czech Republic

Austria

Poland

Korea

Canada

United Kingdom

Russia

Netherlands

Italy

France

Japan

USA

China

Germany

(9H01X057)

- 6 -

Exports 2000-2008 (US-$ billion)

1.428

762

438

593

1.220

972

1.463

1.322

1.109

971

910

752

1.377

1.037

1.148

904

819

725

400

600

800

1.000

1.200

1.400

1.600

2003 2004 2005 2006 2007 2008

Source: WTO Trade Statistics

in billion US-$

Germany

China

USA

Year

(9H01X057)

- 7 -

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

(9H01X057)

- 8 -

Hidden Champions

Delo

Baader

Brainlab

Lantal

Jungbunzlauer

Tetra

Belfor

(9H01X057)

- 9 -

Key facts of 1200 Hidden Champions

1 million new jobs in last ten years

Annual growth of 10% p.a., revenue 2.5 times

larger than 10 years ago

More than 100 new €-revenue billionaires

Sharp increase of world market share

Massive wave of innovation

(9H01X057)

- 10 -

Why are the Hidden Champions successful?

How do they differ from large firms?

What can we learn from them?

(9H01X057)

- 11 -

Goals

Peter Drucker:

“Every enterprise requires simple, clear and

unifying objectives. The goals have to be clear,

public and often reaffirmed to provide a common

vision. What we really mean by this is the

commitment throughout an enterprise to common

objectives and common values. Management‟s job

is to think through, set and exemplify those

objectives, values and goals.”

Source: Peter F. Drucker, Management and the World’s Work, Harvard Business Review, 66, September 1988, p. 76.

(9H01X057)

- 12 -

Chemetall

“The goal of Chemetall is the worldwide

technology and marketing leadership.”

(9H01X057)

- 13 -

3B Scientific

“We want to become

and stay no. 1 in the world.”

(9H01X057)

- 14 -

Market share of Hidden Champions

Relative

market share

Absolute

market share

1.56

10 years ago

2.3433.0%30.2%World

TodayToday10 years ago

(9H01X057)

- 15 -

GrowthMid-sized Hidden Champions

CronimetClaasEnercon

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1995 2008

Re

ve

nu

es

in

US

D m

illio

n

(9H01X057)

- 16 -

GrowthSmall Hidden Champions

Rational

Brainlab

Bartec

0

100

200

300

400

500

600

1995 2008

Re

ve

nu

es

in

US

D m

illio

n

(9H01X057)

- 17 -

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.

(9H01X057)

- 18 -

Focus and depth

Peter Drucker:

“To know one‟s strengths, to know how to improve

them, and to know what one cannot do.”

“The single-minded ones are the only true

achievers. They carry out a „mission‟. Whenever

anything is being accomplished, it is being done

by a monomaniac with a mission.”

(9H01X057)

- 19 -

Uhlmann

“We always had one customer and will only

have one customer in the future: the

pharmaceutical industry –

we only do one thing, but we do it right.”

(9H01X057)

- 20 -

Flexi

“We will do only one thing,

but we do it better than anyone else”

(9H01X057)

- 21 -

Deep instead of broad: A focused strategy

The case of Winterhalter

Dishwashers

for

Hospitals

Dishwashers

for

Schools

Dishwashers

for Hotels/

Restaurants

Dishwashers

WaterConditioners

Detergents

Service

Dishwashers

for

Companies

Dishwashers

for

Organisations

Broad

D

e

e

p

(9H01X057)

- 22 -

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

(9H01X057)

- 23 -

Lesson 2

Only focus and concentration lead to world class.

The Hidden Champions see the market definition as

part of their strategy. They are highly focused and

deep rather than broad.

(9H01X057)

- 24 -

Globalization

Peter Drucker:

“Every institution in the knowledge society has to

be globally competitive.”

“There is only one economic unit, the world.”

(9H01X057)

- 25 -

- Specialization in product und know-how -

Global selling and marketing

The Hidden Champions strategy

(9H01X057)

- 26 -

Globalization has only just begun

1900 1950 1980 2000 2007

6 23

437

Word exports per capita (US-$)

985

2150

(9H01X057)

- 27 -

Founding year of subsidiaries

Nu

mb

er o

f su

bsid

iarie

s

Globalization: KaercherWorld leader in high pressure water cleaners

61 subsidiaries since 1962

(9H01X057)

- 28 -

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.

(9H01X057)

- 29 -

Marketing and innovation

Peter Drucker:

“Business has only two functions: Marketing and

innovation.”

(9H01X057)

- 30 -

Innovation

Peter Drucker:

“If innovation does not aim at leadership from the

beginning, it is unlikely to be innovative enough.”

(9H01X057)

- 31 -

R&D as % Index

of revenue

Industrial firms with R&D 3.0% 100

Booz (Global Top 1000 in R&D) 4.2% 120

Hidden champions 6.0% 200

R&D intensity

(9H01X057)

- 32 -

Patents per Cost per patent

1,000 employees in 1,000 $

Patent-intensive

large corporations 5.8 3,717

Hidden champions 30.6 725

Patents

(9H01X057)

- 33 -

Driving forces of innovation

Large corporations Hidden Champions

market technology market &

technology

market technology market &

technology

19

31

50

65

14

21%

%

%

%

%

%

(9H01X057)

- 34 -

Marketing/closeness to customer

Peter Drucker:

“Marketing is the whole business seen from the

customer‟s point of view.”

(9H01X057)

- 35 -

Marketing/closeness to customer

Closeness to customer is seen as the greatest

strength (88.7%)

Five times as many employees (25-50%) have

regular customer contacts compared to large

companies (5-10%)

(9H01X057)

- 36 -

Value and pricing

Strategies are value-driven, not price-driven

Price premium 10-15%

Avoidance of price wars

(9H01X057)

- 37 -

Competitive advantages

Peter Drucker:

“Any institution has to measure itself against the

standards set by each industry‟s leaders anyplace

in the world.”

(9H01X057)

- 38 -

Competitive advantages of the Hidden Champions

Competitive performance

Importance

weaker strongerthan the strongest competitor

Product quality

Price

Economy

Closeness-to-Customer

Systems Integration

Advice

Service

Punctuality

Flexibility

Advertising

Distribution

Cooperation with suppliers

Made in Germany

Patents

(9H01X057)

- 39 -

Lesson 4

The Hidden Champions are highly innovative and

very close to their customers. They hold strong

competitive positions. They deliver true value to

their customers.

(9H01X057)

- 40 -

Family businesses

Peter Drucker:

“The majority of businesses everywhere are

family-controlled and family-managed.”

70% of the Hidden Chmapions are family-owned.

(9H01X057)

- 41 -

On profit

“A company behaves socially responsible if it

makes profit.”

Heinz Dürr

German Hidden Champion-entrepreneur

Return on equity: 13.6%

Equity ratio: 41.9%

(9H01X057)

- 42 -

Employees

Peter Drucker:

“The basic task of management is to make people

productive.”

(9H01X057)

- 43 -

Employees

“More work than heads”

High performance cultures

High qualification

Low turnover

(9H01X057)

- 44 -

Higher qualification

10 years ago Today

University

graduates (%)

8.5%

19.1%

In the last ten years, the share of university graduates has more than

doubled.

(9H01X057)

- 45 -

Turnover rates

2,7%

5,3%

7,3%

8,8%

9,0%

15,0%

Austria

Switzerland

Daimler

Hidden

champions

Germany

Source: Hernstein-Institut/US Department of Labor

9.0%

8.8%

7.3%

5.3%

2.7%

USA 30.6%

(9H01X057)

- 46 -

Leaders

Identity of mission and being

Leadership

- authoritarian in the principles

- participative, flexible in the details

Young into power

More women in top positions

High continuity (average CEO tenure 20 years)

(9H01X057)

- 47 -

Lesson 5

The ultimate secret of the Hidden Champions‟

success lies in their leaders. They lead

authoritarian in the principles, but flexible in the

details. Young CEOs and women play a more

important role than in large companies. Continuity

is very high.

(9H01X057)

- 48 -

The three circles of the Hidden Champions

Focus

Leader-

ship with

ambitious

goals

Closeness to

customer

Co

mp

etitiv

e

ad

van

tag

es

Glo

bal

ori

en

tati

on

High performance employees

(9H01X057)

- 49 -

The ultimate lesson

The “Hidden Champions of the 21st Century”

go their own ways

– more decisively and successfully than ever.

They are true role models of leadership in

the best sense Peter Drucker had in mind.

More on hermannsimon.com

(9H01X057)

- 50 -

The new book