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Four things you can learn from Bavaria’s hidden champions
Bavaria is home to the headquarters of many so called “hidden champions”. These companies, serving global markets primarily in specialised niches, are a phenomenon typical for the South of Germany. Given that the “Mittelstand” (German word for medium sized companies) is Bavaria’s strong economic backbone it comes as no surprise that these companies significantly contribute to the region’s diverse economic landscape and international business success.
Hidden champions have been the focus of many studies that try to unravel the secrets of their success. Here, we reveal four things any company can learn from these agile market leaders.
The term “hidden champions” was coined by German professor Hermann Simon and characterizes companies as follows:
- First, second or third in the global market; or number one on the company's continent as determined by market share
- Revenue below $5 billion
- Low level of public awareness
1. Cross-innovate around your core-competency
Hidden champions are world market leaders due to their core competency in one specific field. But they don’t stop there, applying their specialised knowledge to other business sectors or models.
- For example, Wuerzburg-based va-Q-tec offers high-performance thermal insulation components for various products such as refrigerators. The company extended its business into the international temperature-controlled logistics market with its global TempChain network. As a consequence, va-Q-tec is effectively reinventing itself – from component manufacturer to logistics service provider – in response to insight into clients’ needs and new market potential.
2. Take a longer-term view
Many hidden champions are run by passionate and successful entrepreneurs. Much of their success is attributed to the fact that they never rest on their laurels but think boldly ahead into the future. They take a long-term perspective with a strategic focus not just on the next few fiscal periods, but one that is guided by an enduring vision.
- Kelheim Fibres, for example, the world’s leading manufacturer of speciality viscose fibres situated in Lower Bavaria, uses an open, innovative approach to new business growth. Their concept is based on three pillars: tracking megatrends, developing products in cooperation with customers and working proactively in innovation networks. At the heart of this approach is identifying customers’ “unmet needs” early, translating them into fibre solutions and thus creating new markets.
3. Treat talent as your core asset
World-class innovation requires first and foremost people who will make it happen. Hidden champions understood this long before the “war for talent” was in full swing - offering not just benefits, but also opportunities for growth and fostering a culture of respect.
- DELO, for instance, is a leading manufacturer of specialty customised adhesives and equipment systems for applications in high-tech industries such as automotive, electronics and optoelectronics. Based in Bavaria’s Ammersee region, the company invests about 7% of staffing costs in education and training. The result: “Customers trust us because of our technical expertise and integrity.”
Learn more about from the experts.
4. Think glocal
Hidden champions are by definition global market leaders, serving not only the local market but the world. Most of these companies remain closely connected to the communities in their home region, taking pride in their heritage and values. At the same time, they position themselves as truly global players. This “glocal” approach is one reason why hidden champions consistently perform at a high level. In many cases, local best practices are exported to new markets and vice versa.
- A case in point is Neutraubling-based Krones, a market leader in process and filling technology and packaging machines for the food and beverage industry. It exported its successful, decades-old German apprenticeship model to Kenya. For some time now, the company has been relying on young, locally-trained technicians.
To provide the best possible qualification following the German apprenticeship model, Krones is now helping to construct a vocational school in Nairobi. It will provide trainees the opportunity to learn both theory and practice to become versatile, excellently trained specialists with broad basic knowledge.
Curious to meet more Bavarian companies and their unique success stories? Download our white paper on cross-industry innovation, to discover exciting case studies and learn how cross-industry innovation made in Bavaria is helping these companies gain ground on world markets.