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Hermann Simon Hidden Champions Buy this title or join our Management Literature Club and have a chance to GET IT FREE! |
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Business Nugget by Robert Morris What can be learned from 500 German companies, most of which you have probably never heard of? Actually, a great deal. The book is Hidden Champions, the author is Hermann Simon, and the publisher is Harvard Business School Press. According to its author, “This book reveals the secrets of success of the best of the best unknown companies.” They are unknown, for the most part, because that’s the way they want it. They “relish their obscurity. They shy away from publicity, some through explicit policies of not dealing with the press -- or, by the way, with academic researchers!” such as the author. Simon selected them according to three criteria: They must be #1 or #2 in a world market or in their European market; they must be small-to-midsize; and they must have low public visibility. In certain respects, these companies and their CEOs resemble individuals whom Stanley & Danko discuss in The Millionaire Next Door. Specifically, they are:
In Chapter 10, Simon observes, “If I had to choose one common, outstanding characteristic strength of the hidden champions, it would be the leaders, or more specifically, the incessant drive and energy of those leaders.” There is virtually no turnover in these companies. The average tenure of a CEO is 26 years. What separates “hidden champions” from their competitors is their primary goal is market leadership -- nothing else. They consider market leadership as a long-term rather than a short-term concept. Once they have selected a narrowly-defined target market, they stick to it. For generations. They are (in Simon’s term) “super nichists.” Their knowledge of foreign languages and cultures as well as their internationalization are prerequisites of their business success. World maps are the favorite wall decorations in their offices. They have a STRONG preference for direct access to foreign markets and customers -- they do not want third parties to come between them and their customers. A sale to a new customer is only the starting point to develop a long-term relationship. They build such relationships on economics and rationality, not emotion and friendship. Trust and mutual respect have paramount importance. Closeness with a customer is thus achieved with performance and interaction. With regard to innovation, “hidden champions” tend to focus on improving customers’ processes to help them to reduce costs, increase speed, and improve quality. “Saving labor costs is a strong driver of innovation.” Hence the importance of superior technological competence. “Hidden champions” are ferocious but honorable competitors. One CEO, Paul Binhold, speaks for many others when explaining that his company’s motto is “to checkmate the Japanese in Japan.” Simon also quotes William Tell, the Swiss national hero in Friedrich von Schiller’s drama: “The strong person is most powerful alone.” The “hidden champions” tend to have “a strong, idiosyncratic corporate culture” which helps to explain their reluctance to engage in strategic alliances. However, according to Simon, the primary reasons for “going it alone” are (a) to maintain control of quality of performance and (b) to avoid any intermediary between them and their customers. It may seem a paradox that “hidden champions” have such strong leadership while place great importance on teamwork. In fact, such leadership protects and preserves the non-negotiable core values of the corporate culture. Teamwork effectively converts those values into superior customer service. Interestingly, “hidden champions” give little (if any) thought to “customer delight.” Their objective is to have their companies become and then remain indispensable to each customer. Let others be content with an occasional “WOW!” In Chapter 11, the final chapter, Simon carefully reviews various “lessons” which can be learned from “hidden champions.” He categorizes them as follows: Lessons for Large Corporations, Lessons for Champion Corporations, Lessons for Diversified Corporations, Lessons for Small Companies, Lessons for Investors, and General Qualitative Lessons. He concludes: “The hidden champions go their own ways. Their procedures are quite different from those of other companies and of modern management teaching. Essentially, their only secret success formula is common sense. So simple, but so difficult to achieve! This is the ultimate lesson.” Order Hidden Champions here. Find the full list of Robert Morris's Business Nuggets featured by Eastbook.com here.
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