Hidden champions of the twenty-first century: Success strategies of unknown world market leaders

Hidden Champions of the Twenty-First Century: Success Strategies of Unknown World Market Leaders

Volumn , Issue , 2009, Pages 1-402

  Simon, Hermann ^a  

^a Simon Kucher and Partners   (Germany)

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EID: 84892251412     PISSN: None     EISSN: None     Source Type: Book    
DOI: 10.1007/978-0-387-98147-5     Document Type: Book

References (466)

1. Jim Collins, Good to Great: Why Some Companies Make the Leap. . . and Others Don't, New York: Harper Collins 2001;
2. see also James C. Collins and Jerry I. Portas, Built to Last: Successful Habits of Visionary Companies, New York: Random House 1994.
3. Exchange rate: $1 = YEN 115
4. Exchange rate: $1 = CHF 1.1987 (average for 2007)
5. Fortune, February 5, 2007, p. 26.
6. Fortune, July 23, 2007, p. F-9.
7. Since the Chinese population is 17 times larger than the German population, China will overtake Germany when its per capita exports reach 6% of the German figure.
8. For the conversion of Euro into US Dollars, we use the average rate for 2007 of $1.37 per EUR for all years between 1995 and 2007. This rate is practically identical to the average rate of our base year 1995 of $1.36 per EUR. In case the reader would like to carry out calculations with the relevant $-rates for individual years, we list the average annual exchange rates for the years between 1995 and 2007: 1995 1.3641 1996 1.3007 1997 1.1274 1998 1.1118 1999 1.0658 2000 0.9236 2001 0.8956 2002 0.9456 2003 1.1312 2004 1.2439 2005 1.2441 2006 1.2556 2007 1.3705
9. Fortune, July 21, 2008, p. F-18.
10. With the Fortune 500 of 2008, the average asset-revenue-ratio was at 1.00; Fortune, May 18, 2009, p. F-32.
11. Institut der Deutschen Wirtschaft, Cologne, March 2008.
12. Fortune, July 21, 2008, p. F-15;
13. and Fortune, May 18, 2009, p. F-32.
14. Stephen Jay Gould, The Structure of Evolutionary Theory, New York: Belknap Press 2002.
15. This should definitely be true relative to their weaker competitors.
16. In the same time 37% of the large corporations listed on the DAX index (the Dow Jones of Germany) have disappeared from that group.
17. Theodore Levitt, Editorial, Harvard Business Review, November-December 1988, p. 9.
18. VDI News, March 2, 2007, p. 9.
19. The correlation coefficients are extremely low (with revenues 1995: -0.133; with revenues 2005: -0.041) and at the 10% level insignificant.
20. The 500 largest family-run enterprises have increased their employee numbers by 10% in Germany over the same period. See the study of the Bonn Institut für Mittelstandsforschung 2007, Frankfurter Allgemeine Zeitung, May 8, 2007, p. 12.
21. It is important to note that the statement in this sentence and the preceding sentence is not a contradiction, because "on average 4.3 times the size" contains no weighting.
22. This is the EUR1 billion threshold, the equivalent of $1.37 million.
23. VDI-News, September 5, 2008.
24. See Hermann Simon, Goodwill und Marketingstrategie, Wiesbaden: Gabler 1985.
25. Frankfurter Allgemeine Zeitung, September 4, 2008, p. 16.
26. VDI News, 23 September 2005.
27. Peter F. Drucker, " Management and the World's Work," Harvard Business Review, 66, September 1988, p. 76.
28. "Simon-Kucher is world leader in giving advice to companies on how to price their products." Business Week, January 26, 2004
29. "Simon-Kucher is the world's leading pricing consultancy." The Economist, 2005
30. "Simon-Kucher is the leading price consultancy in the world." Eric Mitchell, President Professional Pricing Society, 2003.
31. See Henry Mintzberg, Die Strategische Planung: Aufstieg, Niedergang und Neubestimmung, Munich-Vienna: Hanser 1995
32. and Henry Mintzberg and James A. Waters, "Of Strategies, Deliberate and Emergent," Strategic Management Journal, 1985, p. 257-272.
33. See Steffen Kinkel and Oliver Som, Strukturen und Treiber des Innovationserfolges im deutschen Maschinenbau, Karlsruhe: Fraunhofer-Institut für System- und Innovationsforschung ISI, No. 41, May 2007, p. 3.
34. Hermann Simon, Frank Bilstein, Frank Luby,Manage for Profit, Not forMarket Share: A Guide to Higher Profitability in Highly Contested Markets, Boston: Harvard Business School Press 2006.
35. See Hermann Simon, Hidden Champions, Boston: Harvard Business School Press 1996, p. 25.
36. Hermann Simon, Frank Bilstein, Frank Luby, Manage for Profit, Not forMarket Share: A Guide to Higher Profitability in Highly Contested Markets, Boston: Harvard Business School Press 2006, p. 8-13.
37. See Robert D. Buzzell and Bradley T. Gale, The PIMS Principles: Linking Strategy to Performance, New York: Free Press 1987.
38. See in particular the following reader: Paul W. Farris and Michael J. Moore (Eds.), The Profit Impact ofMarket Strategy: Restrospect and Prospects, Cambridge (UK): Cambridge University Press 2003;
39. and Richard Miniter, The Myth of Market Share: Why Market Share Is the Fool's Gold of Business, London: Crown 2002.
40. Shortly afterwards Bentley was acquired by Volkswagen.
41. Derek F. Abell, Defining the Business: The Starting Point of Strategic Planning, Englewood Cliffs (NJ): Prentice Hall, 1980.
42. See Hermann Simon, Hidden Champions, Boston: Harvard Business School Press, p. 42, in order to avoid outlier effects, we use the median here as with the new figures.
43. See Theodore Levitt, "Marketing Myopia," Harvard Business Review, July-August 1960, p. 45-56.
44. VDI News, January 26, 2007, p. 20.
45. Netstal belongs to the MPM Group (Mannesmann Plastics Machinery), which is overall world market leader for plastic injection molding machines with numerous brands like Krauss-Maffei, Demag Ergotech, Netstal, Billion. Some of these subsidiaries are in turn world market leaders in their segments. Engel in Austria and Arburg in Germany are also leaders in some segments.
46. Fortune, April 2, 2007, p. 19.
47. Bosch Rexroth also offers comprehensive solutions for industrial automation, but hydraulics is the core business.
48. Frankfurter Allgemeine Zeitung, March 5, 2007, p. 18.
49. INTES (Eds), Familienunternehmen heute: Jahrbuch 2007, Bonn, 2007.
50. See C. K. Prahalad, G.Hamel, "The Core Competence of the Corporation," Harvard Business Review, May-June 1990, p. 79-91;
51. Gary Hamel, C. K. Prahalad: Competing for the Future, Boston: Harvard Business School Press, 1994.
52. See Hermann Simon, Frank Bilstein, Frank Luby, Manage for Profit, Not for Market Share, Boston: Harvard Business School Press, 2006.
53. Frankfurter Allgemeine Zeitung, January 30, 2007, p. 15.
54. See Peter Brors, Michael Freitag and Dietmar Student, "Die Quittung von Daimler", Manager Magazin, April 2007, p. 34-48. This article estimates the sum of the losses resulting from failed diversification and acquisitions at Daimler to be at least $billion.
55. However, not everything went smoothly at Körber. In 2003, a plant of the subsidiary Topack had to be closed due to lack of market success.
56. "Kundennähe auf fünf Kontinenten: Weltmarktfü hrerschaft in strategisch bedeutsamen Nischen", Unternehmer-Magazin, September 2006, p. 28.
57. VDI News, December 22, 2006, p. 12.
58. "What's Next," Fortune, February 5, 2007, p. 26.
59. "Kundennähe auf fünf Kontinenten: Weltmarktfü hrerschaft in strategisch bedeutsamen Nischen", Unternehmer-Magazin, September 2006, p. 28.
60. "Born global" describes markets or products that are global from the outset. Global standards, "effortless" dissemination, e.g., through the Internet, or massive deployment of capital, drive the fastest possible worldwide penetration of the product. Recent examples areMicrosoft, Google,Wikipedia or the Apple iPod and the iPhone. John Naisbitt says about iPod: "Apple's iPod has become the world's most successful global product." John Naisbitt, Mind-Set !, New York: Harper Collins, 2006. Dylan Jones, editor of the magazine, GQ, commented, "The iPod is fundamentally international, a machine that is truly pan-global." By spring 2007, 100 million iPods had been sold worldwide. Hidden champions' products are seldom born global, because they need explanation, require the establishment of distribution and service systems, and financial and human resources are limited.
61. See US Today, October 2, 2007, p. 5B
62. Biotechnology also has a good chance of becoming the megatrend of future decades. Today, we are not yet able to identify the megatrend of the next 50 years. Half a century ago, few would have identified information technology as the megatrend up until 2000.
63. Sum of the exports of all countries divided by the world's population. Source: Our own calculations.
64. See Carl Haub, Dynamik der Weltbevölkerung 2002, Berlin Institute for World Population and Global Development, Berlin 2002.
65. Year 2000: world population 6.057 billion, therefore exports 985×6.057 billion=$5,966 billion, for 2007 $13,619 billion according to the same calculation.
66. Exports between the three countries have not been deducted. For this reason, the calculation is somewhat speculative, because the stated export quota may also contain exports from other countries and not just those from the home market. We have no detailed information on this.
67. Kenichi Ohmae, Triad Power: The Coming Shape of Global Competition, New York: The Free Press 1995.
68. Think: act content, Erfolgreich in Japan, 2006.
69. VDI News, September 26, 2008, p. 14.
70. Frankfurter Allgemeine Zeitung, February 6, 2007, p. 16.
71. Frankfurter Allgemeine Zeitung, February 6, 2007, p. 16.
72. Luis Miotti and Frédérique Sachwald, Commerce mondial: le retour de la "vieille économie"? Paris: Institut Français des Rélations Internationales 2006.
73. General-Anzeiger Bonn, February 2, 2007, p. 21
74. Frankfurter Allgemeine Zeitung, February 6, 2007, p. 16.
75. For a very informative comparison of the two countries: see Wolfgang Klenner, China und Indien: Zwei Entwicklungswege und ihre Synergieeffekte, Orientierungen zur Wirtschafts- und Gesellschaftspolitik (Ludwig-Erhard- Stiftung), Vol. 1, 2007, p. 67-72.
76. See Frankfurter Allgemeine Zeitung, May 3, 2007, p. 11.
77. See Wolfgang Klenner, China und Indien: Zwei Entwicklungswege und ihre Synergieeffekte, Orientierungen zur Wirtschafts- und Gesellschaftspolitik (Ludwig-Erhard-Stiftung), Volume 1, 2007, p. 67-72.
78. For my first comments on this: see Hermann Simon, Markterfolg in Japan, Wiesbaden: Gabler-Verlag 1985.
79. Fortune, June 27, 2005, p. 50
80. European Commission, Europeans and their Languages, Brussels: Special Eurobarometer 2006, p. 13.
81. European Commission, Europeans and their Languages, Brussels: Special Eurobarometer 2006, p. 13.
82. Elisabeth Dostert, "Chinesisch in Schwaben: Die Ausbilder von Albstadt," Süddeutsche Zeitung, April 21, 2007.
83. See Thomas Friedman, The World Is Flat, New York: Farrar, Strauss, and Giroux 2005.
84. See Steven Brakman and Charles van Marrewijk, It's a Big World After All, CESifo Working Paper No. 1964, April 2007.
85. Personal e-Mail dated March 28, 2007.
86. There are cases, like the big champion Würth, where more than half of all employees work in the field. Würth's competitor Berner even has 4,200 of a total of 6,500 employees in the sales force. The same applies to direct sales companies like Bofrost. Service-intensive companies also have a high proportion of employees with direct customer contact. The service division of Demag Cranes has 1,612 employees, 28.4% of the entire workforce of Demag Cranes. Services contribute 18.4% of Demag Cranes' revenues and this percentage is to be increased in the future.
87. Flabeg is an abbreviation for the German word " Flachglasbearbeitungsgesellschaft," meaning flat glass processing company. The company produces automobile mirrors in Germany, Brazil, UK, US, and China. Flabeg also has a leading market position in solar mirrors. The company is the only supplier of curved solar mirrors worldwide.
88. SeeFrankfurter Allgemeine Zeitung, February 10, 2007, p. 16
89. Thomas J. Peters and Robert H. Waterman, In Search of Excellence: Lessons from America's Best-Run Companies, New York: Harper & Row 1982.
90. Edward F. McQuarrie, The Customer Visit: A Tool to Build Customer Focus, San Francisco: Sage Publications 1993.
91. See HakanHakansson and Jan Johanson (eds.), Business Network Learning, Kildington, UK: Elsevier 2001;
92. Mats Forsgren and Jan Johanson (eds.), Managing Networks in International Business, Langhorne, PA: Gordon & Breach 1994.
93. SeeFortune, April 2, 2007, p. 19.
94. SeeNeue Zürcher Zeitung, February 5, 2007, p. 7.
95. Günther Schuh, Thomas Friedli, Michael A. Kurr, Reengineering ist einfach nicht tot zu kriegen, Munich: Hanser 2006.
96. See Institut der Deutschen Wirtschaft, Forschung und Innovation, Panel Report 2/2006, Cologne: IdW-Verlag. See also Oliver Koppel, Das Innovationsverhalten der technikaffinen Branchen, Opinion for the VDI, Cologne: IdW-Verlag, April 2006.
97. See Steffen Kinkel and Oliver Som, Strukturen und Treiber des Innovationserfolges im deutschen Maschinenbau, Karlsruhe: Fraunhofer-Institut für System- und Innovationsforschung ISI, No. 41, May 2007.
98. Barry Jaruzelski, Kevin Dehoff, Rakesh Bordia, "Money Isn't Everything," Booz Allen Hamilton, Strategy + Business, Winter 2005, p. 54 ff.
99. See Frankfurter Allgemeine Zeitung, December 2, 1994, p. 15.
100. See VDI News, February 16, 2007, p. 6.
101. Oliver Koppel, Das Innovationsverhalten der technikaffinen Branchen, Cologne: IdWVerlag, April 2006.
102. See Annual Report 2005 of the German Patent and Trademark Office,Munich 2006. Four of the largest 6 German patent applicants are also among the 12 largest patent applicants worldwide. In a typical year, Siemens has the highest number of patents worldwide.
103. Oliver Koppel, Das Innovationsverhalten der technikaffinen Branchen, Cologne: IdWVerlag, April 2006, p. 22.
104. Oliver Koppel, Das Innovationsverhalten der technikaffinen Branchen, Cologne: IdWVerlag, April 2006.
105. See Institut der Deutschen Wirtschaft, Forschung und Innovation, Panel Report 2/2006, Cologne: IdW-Verlag. A study by Wirtschaftswoche magazine came to similar conclusions, see Wirtschaftswoche, March 26, 2007, p. 94.
106. For a many-faceted description of competence-oriented strategies, see Robert Zaugg (ed.), Handbuch Kompetenzmanagement: Durch Kompetenz nachhaltig Werte schaffen. Bern: 2006.
107. See Barry Johnson, Polarity Management: Identifying and Managing Unsolvable Problems, Amherst, MA: HRD Press 1992.
108. In 1957, NSU owned the largest motorcycle factory in the world, but the market in Europe collapsed. Automobiles replaced motorbikes as the primary means of transport.
109. See Frankfurter Allgemeine Zeitung, January 27, 2007, p. C3.
110. See VDI News, January 26, 2007, p. 20.
111. Barry Jaruzelski, Kevin Dehoff, Rakesh Bordia, "Money Isn't Everything," Booz Allen Hamilton, Strategy + Business, Winter 2005, p. 54 ff.
112. Thomas Ramge, Klingt gut!, brand eins, 7/2006.
113. Barry Jaruzelski, Kevin Dehoff, Rakesh Bordia, "Money Isn't Everything," Booz Allen Hamilton, Strategy + Business, Winter 2005, p. 54 ff.
114. Eric von Hippel, The Sources of Innovation, New York: Oxford University Press 1994;
115. see also Stephan Thomke and Eric von Hippel, "Customers as Innovators: A New Way to Create Value," Harvard Business Review, April 2002, p. 74-81.
116. See Harvard Business Review, November-December 1994, p. 177.
117. Thomas Ramge, Klingt gut!, brand eins, 7/2006.
118. We use the median here to avoid outlier effects.
119. The statistical criteria for this estimate are: R Square = 0.175, t-statistic =6.59, error probability less than 0.1%. The data for the markets Germany, Europe and world were pooled for the estimate. This is based on the hypothesis that the relation between the number of competitors and the market share of the market leader is the same across markets. The elasticity estimated for the individual markets and the theoretical considerations support this hypothesis. The individual markets display the following elasticities: world market -0.30, European market -0.25, German market -0.32. The determination coefficient R Square was highest for the pooled estimate.
120. See Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance, New York: The Free Press 1985.
121. See Hermann Simon, Frank Bilstein, Frank Luby, Manage for Profit, Not for Market Share: A Guide to Greater Profits in Highly Contested Markets, Boston: Harvard Business School Press 2006.
122. See Michael Porter, The Competitive Advantage of Nations, London: Macmillan 1990.
123. See Michael Porter, The Competitive Advantage of Nations, London: Macmillan 1990.
124. SeeKenichiOhmae, The Mind of the Strategist, New York: McGraw Hill 1982.
125. For this and other principles of the management of strategic competitive advantages, see Hermann Simon, Strategy for Competition, New Delhi: Leads Press 2008.
126. See Theodore Levitt, The Marketing Imagination, New York: Free Press 1983.
127. See Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance, New York: The Free Press 1985.
128. See VDI News, March 30, 2007, p. 19.
129. The Aachen Institute of Technology (RWTH) is one of Germany's elite universities and is considered a globally leading research and education center for mechanical engineering.
130. VDI News, March 30, 2007, p. 19.
131. Exchange rate: $1 = 115 Yen.
132. Mahajan, Vijay and Kamini Banga, The 86% Solution: How to Succeed in the Biggest Market Opportunity of the Twenty-first Century, Philadelphia: Wharton School 2006.
133. See Michael Porter, The Competitive Advantage of Nations, London: Macmillan 1990.
134. This CEO told me that he strictly followed the hidden champion strategy outlined in the 1996 book.
135. See Hermann Simon, Frank Bilstein, Frank Luby, Manage for Profit, Not for Market Share: A Guide to Greater Profits in Highly Contested Markets, Boston: Harvard Business School Press 2006.
136. See Quek Swee Lip, Business Warfare: Management for Market Conquest, Lewes: Temple House Books 1995.
137. See Barrie G. James, Business Wargames , Turnbridge Wells: Kent 1984.
138. See Corstjens, Judith and Corstjens, Marcel, Store Wars: The Battle for Mindspace and Shelfspace, Chichester: Wiley 1999.
139. See Jay Conrad Levinson, Guerilla Marketing, New York: Houghton Mifflin 2007.
140. See Robert F. Lanzilotti, "Pricing Objectives in Large Corporations," American Economic Review 1958, p. 921-940.
141. See J. Scott Armstrong und Kesten C. Green, "Competitor-Oriented Objectives: The Myth of Market Share," International Journal of Business, 2007, p. 411-415.
142. SeeW. Chan Kim and Renée Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Boston: Harvard Business School Press 2005.
143. Hermut Kormann, Long-Term Customer Relationships: Defying the Myth that Only Competition-Oriented Strategies Work, Frankfurt: VDMA 2005.
144. Hans-Jürgen Warnecke, Die fraktale Fabrik, Heidelberg-New York: Springer 1992.
145. According to one source the equity ratios for German midsize companies is 8%, and for Austrian midsize companies 16%. Ernst & Young quotes 18% for German and 33% for Austrian companies. Dun & Bradstreet specifies equity ratios for midsize companies in Germany of between 10.8% (construction industry) and 28.7% (chemical industry). Schauer et al. quote 19% for Austrian companies. See Andreas Georgi, "Notwendigkeit und Instrumente eines ganzheitlichen Risikomanagements für Mittelständler, Gewerbetreibende und Freiberufler," Zeitschrift für Betriebswirtschaft, January 2007, pp. 7-18;
146. Ernst & Young, Wege zum Wachstum, Stuttgart 2005;
147. Dun & Bradstreet, Konkrete Orientierungshilfen für Unternehmen, Düsseldorf, July 2005;
148. Reinbert Schauer, Norbert Kailer and Birgit Feldbauer-Durstmüller (Eds.), Mittelständische Unternehmen, Linz: Trauner Verlag 2005.
149. See Stefan Orthsiefen, "Eigenkapitalbasis deutlich gestärkt," VDI News, May 18, 2007, p. 27.
150. Return on capital employed before tax/ROCE), see also Fig. 1.3.
151. BDI Forum Familienunternehmen, "Familienunternehmen im Zeitalter der Globalisierung," Berlin, September 21/22, 2006.
152. Here, we refer to the all-time highs before October 2008.
153. By "one" market, we mean the market defined by content. If a product is sold to the same target group in several countries, this would therefore be considered "one" market.
154. ERA-Elektrotechnik was taken over in 2005 by the American company Technitrol and has since belonged to its Pulse Division, with its global headquarters in San Diego. Part of the former company stayed with Erich Aichele and now carries the name Aichele Group. A company in this group, Era-Contact, is one of the world's leading manufacturers of railroad couplings.
155. The number of bilateral relationships between the parties is calculated by n(n-1)/2.
156. IBG is the abbreviation for Industrie-Beteiligungs-Gesellschaft, headquartered in Cologne.
157. Wertschöpfung am Bruttoproduktionsort 2004, German Federal Statistics Office. 11 Personal communication, April 2007.
158. Bayerisch-Schwäbische Wirtschaft, 1/2008, p. 95.
159. VDI News, April 13, 2007, p. 35.
160. The Lorenz brand was introduced after the split-up of the Bahlsen Group. The salty snack business was taken over by Lorenz Bahlsen. The sweet snacks business is run by his brother Werner Bahlsen under the Bahlsen brand. Both companies are today independent of one another. A third part of the former Bahlsen Group continues in the Nordeck Group that likewise operates in snacks and in biotechnology.
161. The strategic alliances specified by name here are all operated in the form of joint ventures, Siemens holding a share of 50% or less (Areva 34%, Voith Siemens 35%).
162. See Michael Porter, The Competitive Advantage of Nations, London: Macmillan 1990.
163. See for example B.G. Dybe and Hans Joachim Kujath, Hoffnungsträger Wirtschaftscluster: Unternehmensnetzwerke und regionale Innovationssysteme, Berlin: edition sigma 2000.
164. Rainer Kämpf et al., Industrieparkkonzepte, Stuttgart: EBZ-Beratungszentrum 2003.
165. It may be that without the new jobs abroad, more jobs would have been created at home.
166. John Naisbitt, Mind Set! Reset Your Thinking and See the Future, New York: Harper Collins 2006.
167. In the United States separations rates are reported on a monthly basis, see US Department of Labor www.dol.gov, www.bls.gov. Separations are terminations of employment that occur at any time during the course of the month. Over the years, the separations rates are at about 3% per month. We calculated the annual separations rate not by multiplying 3% by 12, but raising (1.0-0.03)=0.97 to the twelfth power, yielding an annual rate of 30.6%
168. See Fortune, April 2, 2007, p. 19.
169. Happiness is always on the other side of the river.
170. See Cyril Northcote Parkinson, Parkinson's Law: Or the Pursuit of Progress, 1957. The law says that work expands to fill the time available for it, or in another version: employees make work for each other to fill the time.
171. See Günter Rommel, Felix Brück, Raimund Diederichs and Rolf-Dieter Kempis, Simplicity Wins, Boston: Harvard Business School Press 1995.
172. VDI News, March 16, 2007.
173. Bayerisch-Schwaebische Wirtschaft, 1/2008, p. 95.
174. Bayerisch-Schwaebische Wirtschaft, 1/2008, p. 95.
175. Deutsches Institut für Betriebswirtschaft (DIB), Ideenmanagement/BVW in Deutschland, DIB-Report 2005, Frankfurt, April 2006.
176. Süddeutsche Zeitung, April 21, 2007.
177. Hermut Kormann, "Gibt es so etwas wie typisch mittelständische Strategien?," Discussion Paper No. 54, University of Leipzig, Economics Faculty, November 2006.
178. See James C. Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies, New York: Harper Collins 1994.
179. Focus Money, 37/2008, p. 10.
180. See Thomas J. Peters and Robert H.Waterman, Jr., In Search of Excellence, New York: Harper & Row 1982.
181. In 2009, only one of the 30 German DAX companies, Siemens, had a woman as an executive board member, and there was only one woman executive board member in the 100 largest companies. Of the American Fortune 500 in 2008, 15, or 3%, had female CEOs, Fortune, May 18, 2009.
182. "Steiff button in the ear."
183. DAX (Deutscher Aktien-Index), index of 30 largest public corporations in Germany, similar to the Dow Jones Index in the US.
184. "Stallgeruch" (stable smell) is a quality ascribed to someone you recognize as coming from the same stable. There is no real English equivalent.
185. Süddeutsche Zeitung, April 21, 2007.
186. D. B.Wallace and H. E. Gruber (eds.), Creative People at Work: Twelve Cognitive Case Studies, New York: Oxford University Press 1989, p. 35.
187. See Fortune, April 2, 2007, p. 19.
188. My late friend Peter Drucker, the most famous management thinker of our era, was enthusiastic about the hidden champions. I often discussed my ideas, findings and conclusions with him. From his early years in Austria and Germany he was well familiar with the environment and the history of the hidden champions. He truly understood these world market leaders and was always interested in their development. But we missed the last opportunity to share my ideas for the present book. We had made an appointment for November 12, 2005 at his home in Claremont, California. When I called to confirm the evening before, I was informed by Doris Drucker, his wife for nearly 70 years, that he had passed away that morning. I owe Peter Drucker many ideas and helpful suggestions for this book.
189. Peter F. Drucker, Adventures of a Bystander, New York: Harper Collins 1978, p. 255.
190. See Gerhard Neumann, Herman the German: Just Lucky I Guess, New York: Author House 2004. A biography of Gerhard Neumann is available on Wikipedia.
191. The Lockheed F-104 Starfighter was a single-engined, high-performance, supersonic aircraft. A total of 2,578 F-104s were built, 914 of which were F-104G models for the German Air Force. The Starfighter was powered by the General Electric J79 engine, a creation of Gerhard Neumann. For their part in designing the J79, Gerhard Neumann and GE Aircraft Engines were jointly awarded the highly prestigious Collier Trophy. Clarence Johnson also received the Collier Trophy for designing the Starfighter.
192. Lee Smith, "Stamina: Who has it. Why you need it. How you get it.," Fortune, November 28, 1994, p. 71.
193. Warren Bennis, Why Leaders Can't Lead, San Francisco: Jossey-Bass 1989.
194. Deutsche Bank (Ed.), Geschäfte mit Geschwistern, Frankfurt, June 2006.
195. I often discussed this topic with Dr. Dieter Vogel, former chairman of the executive board of ThyssenKrupp, who is now a private equity investor. He considers the participation of top management to be a key factor in the success of private equity investors.
196. Mannesmann was one of the largest industrial corporations in Germany. It probably gave rise to the biggest number of hidden champions in history. In the 1990s Mannesmann began to diversify very successfully into mobile telecommunications. After a heated battle it was taken over by the British telecom giant Vodafone in 2000-to date the largest corporate merger ever, with a value of $172 billion at current rates. Mannesmann was subsequently broken up and all manufacturing-related operations were sold off. Many current hidden champions emerged from this spinoff.
197. See the instructive book by Phil Rosenzweig, The Halo Effect . . . and the Eight Other Business Delusions That Deceive Managers, New York: Free Press 2007.
198. Carl von Clausewitz, On War, York: Oxford University Press 2007 (German original published in 1832)
199. ROI = return on investment. Alternatively, ROCE = return on capital employed, defined as profit before tax divided by total assets.
200. The question was "Please state the average ROI (i.e., total return on investment before tax, for the last ten years in percent)."
201. The question was "What percentage of revenues do you spend as a long-term average on research and development?"
202. See Arie de Geus, "Planning as Learning", Harvard Business Review, March-April 1988, p. 70-75.
203. SeeW. Chan Kim/RenéeMauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Boston: Harvard Business School Press 2005.
204. For a more detailed description of the competition map, see Hermann Simon, Frank Bilstein and Frank Luby, Manage for Profit, Not for Market Share, Boston: Harvard Business School Press 2006, p. 33-38.
205. To explain the difference between absolute and comparative advantage, we use the relative market share (company's own market share divided by market share of the strongest competitor). Let us assume that a company is the market leader in all segments. Then it has an absolute advantage everywhere and its relative market share is always larger than 1. There can nevertheless be large differences between the relative market shares. In segment A, it may be 2.5; in segment B only 1.1. In this case, the company obviously has a "comparative advantage" in segment A when compared to segment B. If the company had to choose one segment and all other things were equal, the decision would be in favor of A.
206. Reference is made to specialist literature, e.g., Hermann Simon, Frank Bilstein and Frank Luby,Manage for Profit, Not forMarket Share, Boston:Harvard Business School Press 2006;
207. Or Hermann Simon and Robert J. Dolan, Power Pricing, New York: The Free Press 1996.
208. The Transrapid is a magnetically levitated (maglev) train that has no wheels but is propelled by magnetic forces and reaches speeds of up to 280 miles (450 kilometers) per hour. The Hamburg-Berlin route was not built due to opposition from the Green Party. The first Transrapid line opened in Shanghai on December 31, 2002 and has been operating smoothly since then. The maximum speed of the Shanghai Transrapid is 432 kilometers per hour (268 miles per hour).
209. A basis point is 1/100 of 1%, so 200 basis points equal 2 percentage points.
210. "Structure follows strategy" was coined in 1962 by the late Alfred Chandler, then professor of business history at the Harvard Business School. Chandler showed in four case studies (DuPont, GeneralMotors, StandardOil and Sears Roebuck) that the need to restructure emerged from strategy shifts driven by new technologies and market changes.
211. Hermann Simon, Strategy for Competition, New Delhi: Leads Press 2008.
212. This sentence originates from Richard von Coudenhove-Kalergi (1894-1972), the founder of the Pan-Europe Movement.
213. I can only think of two management books spontaneously with titles featuring the word will. Marvin Bower, The Will to Lead, Boston: Harvard Business School Press 1997;
214. And the same author, TheWill toManage, New York:McGraw-Hill 1966.Marvin Bower (1903-2003) was one of the founders of McKinsey and decisively shaped the firm after the early death of James McKinsey
215. (for more detail, see: Elizabeth Haas Edersheim: McKinsey's Marvin Bower, Vision, Leadership, and the Creation of Management Consulting, Hoboken, NJ: John Wiley & Sons 2004). If we enter the words "will" and "management" at amazon.com/de, no books appear that cover what we mean here.
216. See also John Naisbitt, Mind Set!, New York: Harper Collins 2005.
217. Double Nobel prize winners are Marie Curie (1867-1934; Nobel prizes in Physics in 1903 and Nobel prize in Chemistry in 1911) and Linus Pauling (1901-1994; Nobel prizes in Chemistry in 1954 and Nobel Peace Prize in 1962).
218. This is the message of the book: W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, Boston: Harvard Business School Press 2005.
219. As a reminder: The relative market share is the company's own market share divided by that of the strongest competitor. In 1995, it averaged 1.56, in 2005 it was 2.34 for the hidden champions.
220. This aspect is clearly pointed out by Hermut Kormann, CEO of Voith. See Hermut Kormann, Long-Term Customer Relationships: Defying theMyth that Only Competition-Oriented Strategies Work, Frankfurt: VDMA 2005.
221. See Hermut Kormann, "Gibt es so etwas wie typisch mittelständische Strategien," Discussion Paper No. 54, University of Leipzig, Faculty of Economics & Business, November 2006.
222. Helmut Maucher, Management-Brevier: Ein Leitfaden für unternehmerischen Erfolg, Frankfurt: Campus-Verlag 2007. This book contains a wealth of timeless maxims that are fundamentally common sense but are frequently neglected in management practice. Helmut Maucher was CEO of Nestlé from 1981 to 1997.
223. I tend toward a slightly different view. Even if midsize entrepreneurs are not more intelligent than others, the difference may be that they are more committed to their mission (or "obsessed", as we said in Chapter 10).
224. Hermut Kormann, Gibt es so etwas wie typisch mittelständische Strategien, Discussion Paper No. 54, University of Leipzig, Faculty of Economics & Business, November 2006, p. 1.
225. See Paul R. Lawrence and Jay W. Lorsch, Organization and Environment: Managing Differentiation and Integration, Homewood (Ill.): Richard D. Irwin 1977, Revised Edition published by Harvard Business School Press 1986.
226. See Barry Johnson, Polarity Management: Identifying and Managing Unsolvable Problems, Amherst, Mass.: HRD Press 1992.
227. See Frankfurter Allgemeine Zeitung, March 6, 2007, p. 20.
228. Private investors can acquire shares in a company directly. However, this method has little practical relevance for most private investors, so we do not discuss this any further here.
229. See Fortune, July 21, 2008, figures are for the financial year 2007.
230. On the situation in France, see: "Pourquoi les PME francaises ont du mal à grandir," Le Monde, March 6, 2007, Business, p. 2-3.
231. See Theodore Levitt, "The Globalization of Markets," Harvard Business Review, May-June 1983, pp. 92-102. The term "globalization" first came into existence in 1944; in 1981 it started to become commonly used. Only after Levitt's article was the term widely used in the business mainstream.
232. See Hermann Simon, "Lessons from Germany's Midsize Giants," Harvard Business Review, March-April 1992, pp. 115-123.
233. Hermann Simon, Hidden Champions: Lessons from 500 of the World's Best Unknown Companies, Boston: Harvard Business School Press 1996.
234. Jim Collins, Good to Great: Why Some Companies Make the Leap. . . and Others Don't, New York: Harper Collins 2001;
235. see also James C. Collins and Jerry I. Portas, Built to Last: Successful Habits of Visionary Companies, New York: Random House 1994.
236. Exchange rate: $1 = YEN 115
237. Exchange rate: $1 = CHF 1.1987 (average for 2007)
238. Fortune, February 5, 2007, p. 26.
239. Fortune, July 23, 2007, p. F-9.
240. Since the Chinese population is 17 times larger than the German population, China will overtake Germany when its per capita exports reach 6% of the German figure.
241. For the conversion of Euro into US Dollars, we use the average rate for 2007 of $1.37 per EUR for all years between 1995 and 2007. This rate is practically identical to the average rate of our base year 1995 of $1.36 per EUR. In case the reader would like to carry out calculations with the relevant $-rates for individual years, we list the average annual exchange rates for the years between 1995 and 2007: 1995 1.3641 1996 1.3007 1997 1.1274 1998 1.1118 1999 1.0658 2000 0.9236 2001 0.8956 2002 0.9456 2003 1.1312 2004 1.2439 2005 1.2441 2006 1.2556 2007 1.3705
242. Fortune, July 21, 2008, p. F-18.
243. With the Fortune 500 of 2008, the average asset-revenue-ratio was at 1.00; Fortune, May 18, 2009, p. F-32.
244. Institut der Deutschen Wirtschaft, Cologne, March 2008.
245. Fortune, July 21, 2008, p. F-15;
246. and Fortune, May 18, 2009, p. F-32.
247. Stephen Jay Gould, The Structure of Evolutionary Theory, New York: Belknap Press 2002.
248. This should definitely be true relative to their weaker competitors.
249. In the same time 37% of the large corporations listed on the DAX index (the Dow Jones of Germany) have disappeared from that group.
250. Theodore Levitt, Editorial, Harvard Business Review, November-December 1988, p. 9.
251. VDI News, March 2, 2007, p. 9.
252. The correlation coefficients are extremely low (with revenues 1995: -0.133; with revenues 2005: -0.041) and at the 10% level insignificant.
253. The 500 largest family-run enterprises have increased their employee numbers by 10% in Germany over the same period. See the study of the Bonn Institut für Mittelstandsforschung 2007, Frankfurter Allgemeine Zeitung, May 8, 2007, p. 12.
254. It is important to note that the statement in this sentence and the preceding sentence is not a contradiction, because "on average 4.3 times the size" contains no weighting.
255. This is the EUR1 billion threshold, the equivalent of $1.37 million.
256. VDI-News, September 5, 2008.
257. See Hermann Simon, Goodwill und Marketingstrategie, Wiesbaden: Gabler 1985.
258. Frankfurter Allgemeine Zeitung, September 4, 2008, p. 16.
259. VDI News, 23 September 2005.
260. Peter F. Drucker, " Management and the World's Work," Harvard Business Review, 66, September 1988, p. 76.
261. "Simon-Kucher is world leader in giving advice to companies on how to price their products." Business Week, January 26, 2004
262. "Simon-Kucher is the world's leading pricing consultancy." The Economist, 2005
263. "Simon-Kucher is the leading price consultancy in the world." Eric Mitchell, President Professional Pricing Society, 2003.
264. See Henry Mintzberg, Die Strategische Planung: Aufstieg, Niedergang und Neubestimmung, Munich-Vienna: Hanser 1995
265. and Henry Mintzberg and James A. Waters, "Of Strategies, Deliberate and Emergent," Strategic Management Journal, 1985, p. 257-272.
266. See Steffen Kinkel and Oliver Som, Strukturen und Treiber des Innovationserfolges im deutschen Maschinenbau, Karlsruhe: Fraunhofer-Institut für System- und Innovationsforschung ISI, No. 41, May 2007, p. 3.
267. Hermann Simon, Frank Bilstein, Frank Luby,Manage for Profit, Not forMarket Share: A Guide to Higher Profitability in Highly Contested Markets, Boston: Harvard Business School Press 2006.
268. See Hermann Simon, Hidden Champions, Boston: Harvard Business School Press 1996, p. 25.
269. Hermann Simon, Frank Bilstein, Frank Luby, Manage for Profit, Not forMarket Share: A Guide to Higher Profitability in Highly Contested Markets, Boston: Harvard Business School Press 2006, p. 8-13.
270. See Robert D. Buzzell and Bradley T. Gale, The PIMS Principles: Linking Strategy to Performance, New York: Free Press 1987.
271. See in particular the following reader: Paul W. Farris and Michael J. Moore (Eds.), The Profit Impact ofMarket Strategy: Restrospect and Prospects, Cambridge (UK): Cambridge University Press 2003;
272. and Richard Miniter, The Myth of Market Share: Why Market Share Is the Fool's Gold of Business, London: Crown 2002.
273. Shortly afterwards Bentley was acquired by Volkswagen.
274. Derek F. Abell, Defining the Business: The Starting Point of Strategic Planning, Englewood Cliffs (NJ): Prentice Hall, 1980.
275. See Hermann Simon, Hidden Champions, Boston: Harvard Business School Press, p. 42, in order to avoid outlier effects, we use the median here as with the new figures.
276. See Theodore Levitt, "Marketing Myopia," Harvard Business Review, July-August 1960, p. 45-56.
277. VDI News, January 26, 2007, p. 20.
278. Netstal belongs to the MPM Group (Mannesmann Plastics Machinery), which is overall world market leader for plastic injection molding machines with numerous brands like Krauss-Maffei, Demag Ergotech, Netstal, Billion. Some of these subsidiaries are in turn world market leaders in their segments. Engel in Austria and Arburg in Germany are also leaders in some segments.
279. Fortune, April 2, 2007, p. 19.
280. Bosch Rexroth also offers comprehensive solutions for industrial automation, but hydraulics is the core business.
281. Frankfurter Allgemeine Zeitung, March 5, 2007, p. 18.
282. INTES (Eds), Familienunternehmen heute: Jahrbuch 2007, Bonn, 2007.
283. See C. K. Prahalad, G.Hamel, "The Core Competence of the Corporation," Harvard Business Review, May-June 1990, p. 79-91;
284. Gary Hamel, C. K. Prahalad: Competing for the Future, Boston: Harvard Business School Press, 1994.
285. See Hermann Simon, Frank Bilstein, Frank Luby, Manage for Profit, Not for Market Share, Boston: Harvard Business School Press, 2006.
286. Frankfurter Allgemeine Zeitung, January 30, 2007, p. 15.
287. See Peter Brors, Michael Freitag and Dietmar Student, "Die Quittung von Daimler", Manager Magazin, April 2007, p. 34-48. This article estimates the sum of the losses resulting from failed diversification and acquisitions at Daimler to be at least $billion.
288. However, not everything went smoothly at Körber. In 2003, a plant of the subsidiary Topack had to be closed due to lack of market success.
289. "Kundennähe auf fünf Kontinenten: Weltmarktfü hrerschaft in strategisch bedeutsamen Nischen", Unternehmer-Magazin, September 2006, p. 28.
290. VDI News, December 22, 2006, p. 12.
291. "What's Next," Fortune, February 5, 2007, p. 26.
292. "Kundennähe auf fünf Kontinenten: Weltmarktfü hrerschaft in strategisch bedeutsamen Nischen", Unternehmer-Magazin, September 2006, p. 28.
293. "Born global" describes markets or products that are global from the outset. Global standards, "effortless" dissemination, e.g., through the Internet, or massive deployment of capital, drive the fastest possible worldwide penetration of the product. Recent examples areMicrosoft, Google,Wikipedia or the Apple iPod and the iPhone. John Naisbitt says about iPod: "Apple's iPod has become the world's most successful global product." John Naisbitt, Mind-Set !, New York: Harper Collins, 2006. Dylan Jones, editor of the magazine, GQ, commented, "The iPod is fundamentally international, a machine that is truly pan-global." By spring 2007, 100 million iPods had been sold worldwide. Hidden champions' products are seldom born global, because they need explanation, require the establishment of distribution and service systems, and financial and human resources are limited.
294. See US Today, October 2, 2007, p. 5B
295. Biotechnology also has a good chance of becoming the megatrend of future decades. Today, we are not yet able to identify the megatrend of the next 50 years. Half a century ago, few would have identified information technology as the megatrend up until 2000.
296. Sum of the exports of all countries divided by the world's population. Source: Our own calculations.
297. See Carl Haub, Dynamik der Weltbevölkerung 2002, Berlin Institute for World Population and Global Development, Berlin 2002.
298. Year 2000: world population 6.057 billion, therefore exports 985×6.057 billion=$5,966 billion, for 2007 $13,619 billion according to the same calculation.
299. Exports between the three countries have not been deducted. For this reason, the calculation is somewhat speculative, because the stated export quota may also contain exports from other countries and not just those from the home market. We have no detailed information on this.
300. Kenichi Ohmae, Triad Power: The Coming Shape of Global Competition, New York: The Free Press 1995.
301. Think: act content, Erfolgreich in Japan, 2006.
302. VDI News, September 26, 2008, p. 14.
303. Frankfurter Allgemeine Zeitung, February 6, 2007, p. 16.
304. Frankfurter Allgemeine Zeitung, February 6, 2007, p. 16.
305. Luis Miotti and Frédérique Sachwald, Commerce mondial: le retour de la "vieille économie"? Paris: Institut Français des Rélations Internationales 2006.
306. General-Anzeiger Bonn, February 2, 2007, p. 21
307. Frankfurter Allgemeine Zeitung, February 6, 2007, p. 16.
308. For a very informative comparison of the two countries: see Wolfgang Klenner, China und Indien: Zwei Entwicklungswege und ihre Synergieeffekte, Orientierungen zur Wirtschafts- und Gesellschaftspolitik (Ludwig-Erhard- Stiftung), Vol. 1, 2007, p. 67-72.
309. See Frankfurter Allgemeine Zeitung, May 3, 2007, p. 11.
310. See Wolfgang Klenner, China und Indien: Zwei Entwicklungswege und ihre Synergieeffekte, Orientierungen zur Wirtschafts- und Gesellschaftspolitik (Ludwig-Erhard-Stiftung), Volume 1, 2007, p. 67-72.
311. For my first comments on this: see Hermann Simon, Markterfolg in Japan, Wiesbaden: Gabler-Verlag 1985.
312. Fortune, June 27, 2005, p. 50
313. European Commission, Europeans and their Languages, Brussels: Special Eurobarometer 2006, p. 13.
314. European Commission, Europeans and their Languages, Brussels: Special Eurobarometer 2006, p. 13.
315. Elisabeth Dostert, "Chinesisch in Schwaben: Die Ausbilder von Albstadt," Süddeutsche Zeitung, April 21, 2007.
316. See Thomas Friedman, The World Is Flat, New York: Farrar, Strauss, and Giroux 2005.
317. See Steven Brakman and Charles van Marrewijk, It's a Big World After All, CESifo Working Paper No. 1964, April 2007.
318. Personal e-Mail dated March 28, 2007.
319. There are cases, like the big champion Würth, where more than half of all employees work in the field. Würth's competitor Berner even has 4,200 of a total of 6,500 employees in the sales force. The same applies to direct sales companies like Bofrost. Service-intensive companies also have a high proportion of employees with direct customer contact. The service division of Demag Cranes has 1,612 employees, 28.4% of the entire workforce of Demag Cranes. Services contribute 18.4% of Demag Cranes' revenues and this percentage is to be increased in the future.
320. Flabeg is an abbreviation for the German word " Flachglasbearbeitungsgesellschaft," meaning flat glass processing company. The company produces automobile mirrors in Germany, Brazil, UK, US, and China. Flabeg also has a leading market position in solar mirrors. The company is the only supplier of curved solar mirrors worldwide.
321. SeeFrankfurter Allgemeine Zeitung, February 10, 2007, p. 16
322. Thomas J. Peters and Robert H. Waterman, In Search of Excellence: Lessons from America's Best-Run Companies, New York: Harper & Row 1982.
323. Edward F. McQuarrie, The Customer Visit: A Tool to Build Customer Focus, San Francisco: Sage Publications 1993.
324. See HakanHakansson and Jan Johanson (eds.), Business Network Learning, Kildington, UK: Elsevier 2001;
325. Mats Forsgren and Jan Johanson (eds.), Managing Networks in International Business, Langhorne, PA: Gordon & Breach 1994.
326. SeeFortune, April 2, 2007, p. 19.
327. SeeNeue Zürcher Zeitung, February 5, 2007, p. 7.
328. Günther Schuh, Thomas Friedli, Michael A. Kurr, Reengineering ist einfach nicht tot zu kriegen, Munich: Hanser 2006.
329. See Institut der Deutschen Wirtschaft, Forschung und Innovation, Panel Report 2/2006, Cologne: IdW-Verlag. See also Oliver Koppel, Das Innovationsverhalten der technikaffinen Branchen, Opinion for the VDI, Cologne: IdW-Verlag, April 2006.
330. See Steffen Kinkel and Oliver Som, Strukturen und Treiber des Innovationserfolges im deutschen Maschinenbau, Karlsruhe: Fraunhofer-Institut für System- und Innovationsforschung ISI, No. 41, May 2007.
331. Barry Jaruzelski, Kevin Dehoff, Rakesh Bordia, "Money Isn't Everything," Booz Allen Hamilton, Strategy + Business, Winter 2005, p. 54 ff.
332. See Frankfurter Allgemeine Zeitung, December 2, 1994, p. 15.
333. See VDI News, February 16, 2007, p. 6.
334. Oliver Koppel, Das Innovationsverhalten der technikaffinen Branchen, Cologne: IdWVerlag, April 2006.
335. See Annual Report 2005 of the German Patent and Trademark Office,Munich 2006. Four of the largest 6 German patent applicants are also among the 12 largest patent applicants worldwide. In a typical year, Siemens has the highest number of patents worldwide.
336. Oliver Koppel, Das Innovationsverhalten der technikaffinen Branchen, Cologne: IdWVerlag, April 2006, p. 22.
337. Oliver Koppel, Das Innovationsverhalten der technikaffinen Branchen, Cologne: IdWVerlag, April 2006.
338. See Institut der Deutschen Wirtschaft, Forschung und Innovation, Panel Report 2/2006, Cologne: IdW-Verlag. A study by Wirtschaftswoche magazine came to similar conclusions, see Wirtschaftswoche, March 26, 2007, p. 94.
339. For a many-faceted description of competence-oriented strategies, see Robert Zaugg (ed.), Handbuch Kompetenzmanagement: Durch Kompetenz nachhaltig Werte schaffen. Bern: 2006.
340. See Barry Johnson, Polarity Management: Identifying and Managing Unsolvable Problems, Amherst, MA: HRD Press 1992.
341. In 1957, NSU owned the largest motorcycle factory in the world, but the market in Europe collapsed. Automobiles replaced motorbikes as the primary means of transport.
342. See Frankfurter Allgemeine Zeitung, January 27, 2007, p. C3.
343. See VDI News, January 26, 2007, p. 20.
344. Barry Jaruzelski, Kevin Dehoff, Rakesh Bordia, "Money Isn't Everything," Booz Allen Hamilton, Strategy + Business, Winter 2005, p. 54 ff.
345. Thomas Ramge, Klingt gut!, brand eins, 7/2006.
346. Barry Jaruzelski, Kevin Dehoff, Rakesh Bordia, "Money Isn't Everything," Booz Allen Hamilton, Strategy + Business, Winter 2005, p. 54 ff.
347. Eric von Hippel, The Sources of Innovation, New York: Oxford University Press 1994;
348. see also Stephan Thomke and Eric von Hippel, "Customers as Innovators: A New Way to Create Value," Harvard Business Review, April 2002, p. 74-81.
349. See Harvard Business Review, November-December 1994, p. 177.
350. Thomas Ramge, Klingt gut!, brand eins, 7/2006.
351. We use the median here to avoid outlier effects.
352. The statistical criteria for this estimate are: R Square = 0.175, t-statistic =6.59, error probability less than 0.1%. The data for the markets Germany, Europe and world were pooled for the estimate. This is based on the hypothesis that the relation between the number of competitors and the market share of the market leader is the same across markets. The elasticity estimated for the individual markets and the theoretical considerations support this hypothesis. The individual markets display the following elasticities: world market -0.30, European market -0.25, German market -0.32. The determination coefficient R Square was highest for the pooled estimate.
353. See Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance, New York: The Free Press 1985.
354. See Hermann Simon, Frank Bilstein, Frank Luby, Manage for Profit, Not for Market Share: A Guide to Greater Profits in Highly Contested Markets, Boston: Harvard Business School Press 2006.
355. See Michael Porter, The Competitive Advantage of Nations, London: Macmillan 1990.
356. See Michael Porter, The Competitive Advantage of Nations, London: Macmillan 1990.
357. SeeKenichiOhmae, The Mind of the Strategist, New York: McGraw Hill 1982.
358. For this and other principles of the management of strategic competitive advantages, see Hermann Simon, Strategy for Competition, New Delhi: Leads Press 2008.
359. See Theodore Levitt, The Marketing Imagination, New York: Free Press 1983.
360. See Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance, New York: The Free Press 1985.
361. See VDI News, March 30, 2007, p. 19.
362. The Aachen Institute of Technology (RWTH) is one of Germany's elite universities and is considered a globally leading research and education center for mechanical engineering.
363. VDI News, March 30, 2007, p. 19.
364. Exchange rate: $1 = 115 Yen.
365. Mahajan, Vijay and Kamini Banga, The 86% Solution: How to Succeed in the Biggest Market Opportunity of the Twenty-first Century, Philadelphia: Wharton School 2006.
366. See Michael Porter, The Competitive Advantage of Nations, London: Macmillan 1990.
367. This CEO told me that he strictly followed the hidden champion strategy outlined in the 1996 book.
368. See Hermann Simon, Frank Bilstein, Frank Luby, Manage for Profit, Not for Market Share: A Guide to Greater Profits in Highly Contested Markets, Boston: Harvard Business School Press 2006.
369. See Quek Swee Lip, Business Warfare: Management for Market Conquest, Lewes: Temple House Books 1995.
370. See Barrie G. James, Business Wargames , Turnbridge Wells: Kent 1984.
371. See Corstjens, Judith and Corstjens, Marcel, Store Wars: The Battle for Mindspace and Shelfspace, Chichester: Wiley 1999.
372. See Jay Conrad Levinson, Guerilla Marketing, New York: Houghton Mifflin 2007.
373. See Robert F. Lanzilotti, "Pricing Objectives in Large Corporations," American Economic Review 1958, p. 921-940.
374. See J. Scott Armstrong und Kesten C. Green, "Competitor-Oriented Objectives: The Myth of Market Share," International Journal of Business, 2007, p. 411-415.
375. SeeW. Chan Kim and Renée Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Boston: Harvard Business School Press 2005.
376. Hermut Kormann, Long-Term Customer Relationships: Defying the Myth that Only Competition-Oriented Strategies Work, Frankfurt: VDMA 2005.
377. Hans-Jürgen Warnecke, Die fraktale Fabrik, Heidelberg-New York: Springer 1992.
378. According to one source the equity ratios for German midsize companies is 8%, and for Austrian midsize companies 16%. Ernst & Young quotes 18% for German and 33% for Austrian companies. Dun & Bradstreet specifies equity ratios for midsize companies in Germany of between 10.8% (construction industry) and 28.7% (chemical industry). Schauer et al. quote 19% for Austrian companies. See Andreas Georgi, "Notwendigkeit und Instrumente eines ganzheitlichen Risikomanagements für Mittelständler, Gewerbetreibende und Freiberufler," Zeitschrift für Betriebswirtschaft, January 2007, pp. 7-18;
379. Ernst & Young, Wege zum Wachstum, Stuttgart 2005;
380. Dun & Bradstreet, Konkrete Orientierungshilfen für Unternehmen, Düsseldorf, July 2005;
381. Reinbert Schauer, Norbert Kailer and Birgit Feldbauer-Durstmüller (Eds.), Mittelständische Unternehmen, Linz: Trauner Verlag 2005.
382. See Stefan Orthsiefen, "Eigenkapitalbasis deutlich gestärkt," VDI News, May 18, 2007, p. 27.
383. Return on capital employed before tax/ROCE), see also Fig. 1.3.
384. BDI Forum Familienunternehmen, "Familienunternehmen im Zeitalter der Globalisierung," Berlin, September 21/22, 2006.
385. Here, we refer to the all-time highs before October 2008.
386. By "one" market, we mean the market defined by content. If a product is sold to the same target group in several countries, this would therefore be considered "one" market.
387. ERA-Elektrotechnik was taken over in 2005 by the American company Technitrol and has since belonged to its Pulse Division, with its global headquarters in San Diego. Part of the former company stayed with Erich Aichele and now carries the name Aichele Group. A company in this group, Era-Contact, is one of the world's leading manufacturers of railroad couplings.
388. The number of bilateral relationships between the parties is calculated by n(n-1)/2.
389. IBG is the abbreviation for Industrie-Beteiligungs-Gesellschaft, headquartered in Cologne.
390. Wertschöpfung am Bruttoproduktionsort 2004, German Federal Statistics Office. 11 Personal communication, April 2007.
391. Bayerisch-Schwäbische Wirtschaft, 1/2008, p. 95.
392. VDI News, April 13, 2007, p. 35.
393. The Lorenz brand was introduced after the split-up of the Bahlsen Group. The salty snack business was taken over by Lorenz Bahlsen. The sweet snacks business is run by his brother Werner Bahlsen under the Bahlsen brand. Both companies are today independent of one another. A third part of the former Bahlsen Group continues in the Nordeck Group that likewise operates in snacks and in biotechnology.
394. The strategic alliances specified by name here are all operated in the form of joint ventures, Siemens holding a share of 50% or less (Areva 34%, Voith Siemens 35%).
395. See Michael Porter, The Competitive Advantage of Nations, London: Macmillan 1990.
396. See for example B.G. Dybe and Hans Joachim Kujath, Hoffnungsträger Wirtschaftscluster: Unternehmensnetzwerke und regionale Innovationssysteme, Berlin: edition sigma 2000.
397. Rainer Kämpf et al., Industrieparkkonzepte, Stuttgart: EBZ-Beratungszentrum 2003.
398. It may be that without the new jobs abroad, more jobs would have been created at home.
399. John Naisbitt, Mind Set! Reset Your Thinking and See the Future, New York: Harper Collins 2006.
400. In the United States separations rates are reported on a monthly basis, see US Department of Labor www.dol.gov, www.bls.gov. Separations are terminations of employment that occur at any time during the course of the month. Over the years, the separations rates are at about 3% per month. We calculated the annual separations rate not by multiplying 3% by 12, but raising (1.0-0.03)=0.97 to the twelfth power, yielding an annual rate of 30.6%
401. See Fortune, April 2, 2007, p. 19.
402. Happiness is always on the other side of the river.
403. See Cyril Northcote Parkinson, Parkinson's Law: Or the Pursuit of Progress, 1957. The law says that work expands to fill the time available for it, or in another version: employees make work for each other to fill the time.
404. See Günter Rommel, Felix Brück, Raimund Diederichs and Rolf-Dieter Kempis, Simplicity Wins, Boston: Harvard Business School Press 1995.
405. VDI News, March 16, 2007.
406. Bayerisch-Schwaebische Wirtschaft, 1/2008, p. 95.
407. Bayerisch-Schwaebische Wirtschaft, 1/2008, p. 95.
408. Deutsches Institut für Betriebswirtschaft (DIB), Ideenmanagement/BVW in Deutschland, DIB-Report 2005, Frankfurt, April 2006.
409. Süddeutsche Zeitung, April 21, 2007.
410. Hermut Kormann, "Gibt es so etwas wie typisch mittelständische Strategien?," Discussion Paper No. 54, University of Leipzig, Economics Faculty, November 2006.
411. See James C. Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies, New York: Harper Collins 1994.
412. Focus Money, 37/2008, p. 10.
413. See Thomas J. Peters and Robert H.Waterman, Jr., In Search of Excellence, New York: Harper & Row 1982.
414. In 2009, only one of the 30 German DAX companies, Siemens, had a woman as an executive board member, and there was only one woman executive board member in the 100 largest companies. Of the American Fortune 500 in 2008, 15, or 3%, had female CEOs, Fortune, May 18, 2009.
415. "Steiff button in the ear."
416. DAX (Deutscher Aktien-Index), index of 30 largest public corporations in Germany, similar to the Dow Jones Index in the US.
417. "Stallgeruch" (stable smell) is a quality ascribed to someone you recognize as coming from the same stable. There is no real English equivalent.
418. Süddeutsche Zeitung, April 21, 2007.
419. D. B.Wallace and H. E. Gruber (eds.), Creative People at Work: Twelve Cognitive Case Studies, New York: Oxford University Press 1989, p. 35.
420. See Fortune, April 2, 2007, p. 19.
421. My late friend Peter Drucker, the most famous management thinker of our era, was enthusiastic about the hidden champions. I often discussed my ideas, findings and conclusions with him. From his early years in Austria and Germany he was well familiar with the environment and the history of the hidden champions. He truly understood these world market leaders and was always interested in their development. But we missed the last opportunity to share my ideas for the present book. We had made an appointment for November 12, 2005 at his home in Claremont, California. When I called to confirm the evening before, I was informed by Doris Drucker, his wife for nearly 70 years, that he had passed away that morning. I owe Peter Drucker many ideas and helpful suggestions for this book.
422. Peter F. Drucker, Adventures of a Bystander, New York: Harper Collins 1978, p. 255.
423. See Gerhard Neumann, Herman the German: Just Lucky I Guess, New York: Author House 2004. A biography of Gerhard Neumann is available on Wikipedia.
424. The Lockheed F-104 Starfighter was a single-engined, high-performance, supersonic aircraft. A total of 2,578 F-104s were built, 914 of which were F-104G models for the German Air Force. The Starfighter was powered by the General Electric J79 engine, a creation of Gerhard Neumann. For their part in designing the J79, Gerhard Neumann and GE Aircraft Engines were jointly awarded the highly prestigious Collier Trophy. Clarence Johnson also received the Collier Trophy for designing the Starfighter.
425. Lee Smith, "Stamina: Who has it. Why you need it. How you get it.," Fortune, November 28, 1994, p. 71.
426. Warren Bennis, Why Leaders Can't Lead, San Francisco: Jossey-Bass 1989.
427. Deutsche Bank (Ed.), Geschäfte mit Geschwistern, Frankfurt, June 2006.
428. I often discussed this topic with Dr. Dieter Vogel, former chairman of the executive board of ThyssenKrupp, who is now a private equity investor. He considers the participation of top management to be a key factor in the success of private equity investors.
429. Mannesmann was one of the largest industrial corporations in Germany. It probably gave rise to the biggest number of hidden champions in history. In the 1990s Mannesmann began to diversify very successfully into mobile telecommunications. After a heated battle it was taken over by the British telecom giant Vodafone in 2000-to date the largest corporate merger ever, with a value of $172 billion at current rates. Mannesmann was subsequently broken up and all manufacturing-related operations were sold off. Many current hidden champions emerged from this spinoff.
430. See the instructive book by Phil Rosenzweig, The Halo Effect . . . and the Eight Other Business Delusions That Deceive Managers, New York: Free Press 2007.
431. Carl von Clausewitz, On War, York: Oxford University Press 2007 (German original published in 1832)
432. ROI = return on investment. Alternatively, ROCE = return on capital employed, defined as profit before tax divided by total assets.
433. The question was "Please state the average ROI (i.e., total return on investment before tax, for the last ten years in percent)."
434. The question was "What percentage of revenues do you spend as a long-term average on research and development?"
435. See Arie de Geus, "Planning as Learning", Harvard Business Review, March-April 1988, p. 70-75.
436. SeeW. Chan Kim/RenéeMauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Boston: Harvard Business School Press 2005.
437. For a more detailed description of the competition map, see Hermann Simon, Frank Bilstein and Frank Luby, Manage for Profit, Not for Market Share, Boston: Harvard Business School Press 2006, p. 33-38.
438. To explain the difference between absolute and comparative advantage, we use the relative market share (company's own market share divided by market share of the strongest competitor). Let us assume that a company is the market leader in all segments. Then it has an absolute advantage everywhere and its relative market share is always larger than 1. There can nevertheless be large differences between the relative market shares. In segment A, it may be 2.5; in segment B only 1.1. In this case, the company obviously has a "comparative advantage" in segment A when compared to segment B. If the company had to choose one segment and all other things were equal, the decision would be in favor of A.
439. Reference is made to specialist literature, e.g., Hermann Simon, Frank Bilstein and Frank Luby,Manage for Profit, Not forMarket Share, Boston:Harvard Business School Press 2006;
440. Or Hermann Simon and Robert J. Dolan, Power Pricing, New York: The Free Press 1996.
441. The Transrapid is a magnetically levitated (maglev) train that has no wheels but is propelled by magnetic forces and reaches speeds of up to 280 miles (450 kilometers) per hour. The Hamburg-Berlin route was not built due to opposition from the Green Party. The first Transrapid line opened in Shanghai on December 31, 2002 and has been operating smoothly since then. The maximum speed of the Shanghai Transrapid is 432 kilometers per hour (268 miles per hour).
442. A basis point is 1/100 of 1%, so 200 basis points equal 2 percentage points.
443. "Structure follows strategy" was coined in 1962 by the late Alfred Chandler, then professor of business history at the Harvard Business School. Chandler showed in four case studies (DuPont, GeneralMotors, StandardOil and Sears Roebuck) that the need to restructure emerged from strategy shifts driven by new technologies and market changes.
444. Hermann Simon, Strategy for Competition, New Delhi: Leads Press 2008.
445. This sentence originates from Richard von Coudenhove-Kalergi (1894-1972), the founder of the Pan-Europe Movement.
446. I can only think of two management books spontaneously with titles featuring the word will. Marvin Bower, The Will to Lead, Boston: Harvard Business School Press 1997;
447. And the same author, TheWill toManage, New York:McGraw-Hill 1966.Marvin Bower (1903-2003) was one of the founders of McKinsey and decisively shaped the firm after the early death of James McKinsey
448. (for more detail, see: Elizabeth Haas Edersheim: McKinsey's Marvin Bower, Vision, Leadership, and the Creation of Management Consulting, Hoboken, NJ: John Wiley & Sons 2004). If we enter the words "will" and "management" at amazon.com/de, no books appear that cover what we mean here.
449. See also John Naisbitt, Mind Set!, New York: Harper Collins 2005.
450. Double Nobel prize winners are Marie Curie (1867-1934; Nobel prizes in Physics in 1903 and Nobel prize in Chemistry in 1911) and Linus Pauling (1901-1994; Nobel prizes in Chemistry in 1954 and Nobel Peace Prize in 1962).
451. This is the message of the book: W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, Boston: Harvard Business School Press 2005.
452. As a reminder: The relative market share is the company's own market share divided by that of the strongest competitor. In 1995, it averaged 1.56, in 2005 it was 2.34 for the hidden champions.
453. This aspect is clearly pointed out by Hermut Kormann, CEO of Voith. See Hermut Kormann, Long-Term Customer Relationships: Defying theMyth that Only Competition-Oriented Strategies Work, Frankfurt: VDMA 2005.
454. See Hermut Kormann, "Gibt es so etwas wie typisch mittelständische Strategien," Discussion Paper No. 54, University of Leipzig, Faculty of Economics & Business, November 2006.
455. Helmut Maucher, Management-Brevier: Ein Leitfaden für unternehmerischen Erfolg, Frankfurt: Campus-Verlag 2007. This book contains a wealth of timeless maxims that are fundamentally common sense but are frequently neglected in management practice. Helmut Maucher was CEO of Nestlé from 1981 to 1997.
456. I tend toward a slightly different view. Even if midsize entrepreneurs are not more intelligent than others, the difference may be that they are more committed to their mission (or "obsessed", as we said in Chapter 10).
457. Hermut Kormann, Gibt es so etwas wie typisch mittelständische Strategien, Discussion Paper No. 54, University of Leipzig, Faculty of Economics & Business, November 2006, p. 1.
458. See Paul R. Lawrence and Jay W. Lorsch, Organization and Environment: Managing Differentiation and Integration, Homewood (Ill.): Richard D. Irwin 1977, Revised Edition published by Harvard Business School Press 1986.
459. See Barry Johnson, Polarity Management: Identifying and Managing Unsolvable Problems, Amherst, Mass.: HRD Press 1992.
460. See Frankfurter Allgemeine Zeitung, March 6, 2007, p. 20.
461. Private investors can acquire shares in a company directly. However, this method has little practical relevance for most private investors, so we do not discuss this any further here.
462. See Fortune, July 21, 2008, figures are for the financial year 2007.
463. On the situation in France, see: "Pourquoi les PME francaises ont du mal à grandir," Le Monde, March 6, 2007, Business, p. 2-3.
464. See Theodore Levitt, "The Globalization of Markets," Harvard Business Review, May-June 1983, pp. 92-102. The term "globalization" first came into existence in 1944; in 1981 it started to become commonly used. Only after Levitt's article was the term widely used in the business mainstream.
465. See Hermann Simon, "Lessons from Germany's Midsize Giants," Harvard Business Review, March-April 1992, pp. 115-123.
466. Hermann Simon, Hidden Champions: Lessons from 500 of the World's Best Unknown Companies, Boston: Harvard Business School Press 1996.