Page 110 - MYM 2015

global economy, to create high quality jobs and to ourish. Globalia abounds in opportunities. How many separate markets are there in the world? Nobody knows the exact number. Let’s assume the number is 10000. Fortune Global 500 rms only operate in 100 or 200 of these markets while the remaining 98 percent are small or niche markets. Each of them offers the chance for a small or mid-sized rm to become a global market leader. And there is a fundamental difference
to the world of the past. With the Internet, modern telecommunications, air transport and seamless global logistics it is possible for small and mid-sized rms to do business on a worldwide scale.
Hidden Champions
The late Ted Levitt, at the time marketing professor
at the Harvard Business School, asked me back in 1986 (and as we see not much has changed since then) why Germany is so successful in exports. I started researching this phenomenon and came to the conclusion that this is due to the Hidden Champions. What is a Hidden Champion? It’s a company which
is one of the top three in its global market, has less than $5 billion in revenue, and is little known in the public. A revenue of $5 billion may seem large, but it is less than one quarter of the revenue of the smallest Fortune Global 500 company.16 Since then I have been collecting names and today my list contains 2734 Hidden Champions from all over the world. Figure 6 shows the number of Hidden Champions by country.
they are based in. But why are there so many Hidden Champions in Germany and what can other, especially emerging countries learn from them?
The Power of Innovation
It’s true that few German companies are innovation champions in sectors such as information technology, the Internet or biotechnology. The leaders in these elds are often from the US, occasionally from
Japan, and sometimes from China. The Chinese telecommunications equipment maker Huawei, for example, has applied for more patents than any other company in recent years. However, a look at the number of patents granted by the European Patent Of ce (EPO) casts a different light on Germany’s innovativeness. Of course this indicator does not
cover all aspects of innovativeness, but the results are striking. Figure 7 shows the number of patents granted by the EPO to applicants from selected countries in the ten years from 2003-2012.
Country
Number of European Patents 2003-2012
Germany
Japan
Austria
France
USA
Italy
United Kingdom Korea
Spain
Portugal
Greece
Russia 462
1 590 847 749 674 427 357 337 197 79 23 23 3
130 032
108 418
6366
44 363
134 306
21 636
20 893
9 859
3 649
249
244
European Patents per million inhabitants
Country Number of Hidden Champions
Germany USA Japan Austria Switzerland Italy France China United Kingdom Sweden Netherlands Poland South Korea Denmark Belgium Canada Russia Finland Norway Spain Brazil Australia
1 307
220 116
110 76
75 68
67 49
29 27 23
19 19 16
14 14 13 11 11 10
366
Total number worldwide: 2734
Figure 6: Hidden Champions by country
The explanation of Germany’s continuing export success lies in its Hidden Champions. Germany has more of these mid-sized world market leaders than any other country. On a per capita base Switzerland and Austria are similar, with around 15 Hidden Champions per million population. But we see from figure 6 that there are Hidden Champions all over the world. My experience from visits to hundreds
of them is that their cultures and strategies are remarkably similar, independent of the country
Figure 7: Patents issued by the European Patent Of ce in 2003- 2102, by country of origin
Germany is clearly leading. The differences between European countries are huge. Germany has more
than twice as many patents per million inhabitants
as France, four times as many as Italy, and ve times as many as the UK. We also see that the Southern European countries Spain, Portugal and Greece are underperforming in terms of innovation. Russia is the weakest country in this comparison. Although the topic of innovation covers much more than the number of patents, this statistic is nevertheless a strong indicator of the future industrial potential of a country. To excel in Globalia innovation is indispensable.
These are some of the important foundations on which the emergence and prevalence of Hidden Champions in Germany is based. Another factor is the vocational training system which is unique in the world. Germany probably has the best qualified manual workers in the world.
16 In the Global 500 list 2014 Raytheon, number 500, had a revenue of $23.7 billion (“Global 500,” 2014).
110 I October 2015