Differences between the Hidden Champions in Germany and Slovenia
There are some small yet significant differences between the hidden champions in Germany and Slovenia. The most obvious difference is the size – Slovenia’s hidden champions are much smaller than their German counterparts.
All elements described in the article “The Hidden Champions of Slovenia” are also valid for the companies Hermann Simon described. Still, there are some small yet significant differences between the hidden champions in Germany and Slovenia. The most obvious difference is the size – Slovenia’s hidden champions are much smaller than their German counterparts. To be precise – the latter have on average seven times bigger revenues than Slovenia’s global leaders.
Yet it is quite likely that this size difference is dependent on a second obvious difference – over one third of Germany’s hidden champions were founded before World War I. Their Slovenian counterparts are much younger: only one was founded in 1937, just before the Second World War, with all others formed after 1945. The strategy that led the companies to fast growth and global leadership is often even younger. This age difference explains the difference in size and also their somewhat weaker market shares. While they may be in leading positions and well ahead of their competitors, yet only a few of them have market shares above 50 percent – a figure not unusual with their German counterparts. Apart from “market owners” which completely control their respective niches, Kolektor has the highest relative market share. Its relative market share ratio on the global commutator market is 2.25 – meaning that Kolektor’s share is 2.25 times bigger than that of the closest competitor. Yet even Kolektor controls “only” 20 percent of the global market. Alpina controls approximately one third of world’s ski cross country ski boots market. The shares of the others are even smaller.
Another key difference is the ownership. Two thirds of Germany’s hidden champions are family-owned. Seven out of 16 Slovenian leaders are owned and led by their founder entrepreneurs. The rest of the firms were privatized after 1991. A striking share of the companies is now owned or co-owned by their employees. In others ownership is diverse and often quite dispersed. These companies often had to undergo a thorough restructuring. Alpina and Domel, for example, had to reduce their number of employees in the process, while the rest of the companies managed to create new jobs.
Typically companies owned by their employees or entrepreneurs show better financial results than the rest. But as far as ownership is concerned there are a few special cases. One is Ydria – the producer of electric motors for fans in home appliances. This leader in its niche is owned by Germany’s Ebm Papst Landshut group, a company with 1 billion Euros of revenues which is itself a hidden champion and the world’s leading producer of fans. In fact, the group is number one in diverse areas of specialized fans and blowers.
Forestry equipment maker Tajfun provides another interesting story. The company was started by an entrepreneur Jože Špan back in 1967. Yugoslav socialism tolerated entrepreneurs up to a certain point, but Špan’s operation soon became too successful and the company was nationalized. Luckily Špan was left as a general manager, and in the early nineties the company was denationalized again. It’s led now by a second Špan generation and growing quite successfully.
Family ownership is an important element in the long-term success of Germany’s hidden champions. On the other hand unstable ownership can undermine a company’s market position and jeopardize its future prospects. A clear case is provided by Slovenian ski maker Elan, a former hidden champion which has lost its position.
Elan used to be a leading ski producer and introduced a number of revolutionary technologies. Modern carving skis, for example, were invented and introduced by Elan. In the seventies and eighties Elan skies were used by some of the world’s top alpine skiers, for example Ingemar Stenmark, who still holds the record number of World Cup wins. Not long ago Elan was also one of the two brands dominating ski jumping championships. Just a few years ago every seventh pair of skis sold around the globe was produced in the small Slovenian village of Begunje. The company was driven by innovation and a “passion to create the best engineered ski equipment.” But its undoubted engineering know-how and passion wasn’t matched by an equal level of management and marketing skills. With changing and unstable ownership on one side and financial troubles and accumulated management mistakes from the past on the other, putting the company back on a winning track was probably an impossible mission. The majority owner of Elan is now the state-run fund KAD. While Elan is still among the top six ski producers, with a 9 percent share of the global market, a significant percentage of the skis it produces are sold under other brand names – in effect, Elan’s competitors. The future of Elan remains unclear – with the prospect of a return to its glory days seemingly ever more remote.
Elan was a case of a transition which went wrong. Companies like Trimo, Hidria and Kolektor were lucky enough to quickly achieve stable and clear ownership structures and to be led by first class managers with strong visions and skill-sets. Even though in some cases the foundations of their successes were set in socialist times, the position of Slovenia’s hidden champions is to a large degree the result of developments since 1990. The case of Germany’s hidden champions clearly indicates that it takes some time to build a global leading position. 20 years is a short period.
Accordingly, a number of the companies in our survey described their position as “one of the closest followers to the leader.” These companies have in almost all cases at least an equal level of product quality and technological know-how as the market leader. Their focus is often to a large degree European rather than global. On the other hand they are driven by clear vision and strong ambition. All these elements indicate potential hidden champions (see the sidebar “Companies to Watch”).
We can assume that Slovenia’s hidden champions will play an increasingly important role in the country’s economy. Moreover, as it’s not very likely that the next Sony or Volkswagen will emerge from Slovenia, the hidden champion strategy could well be the best suited for Slovenian companies. Similar firms are found everywhere, yet according to Hermann Simon they are truly typical for the German-speaking world and Scandinavia. Allow us to add: and for Slovenia as well, a country which can boast one hidden champion per 125,000 people – a ratio slightly better than that of neighboring Austria. And actually this doesn’t contradict Simon’s claim: for almost a millennium Slovenia was part of the Habsburg Empire, and it was heavily influenced by the culture of its German neighbors. On the other hand Slovenians fiercely defended their own culture and language and resisted efforts to become Germanized. The result is an unusual set of characteristics often typical of Slovenians: resilient, stubborn and driven by perfectionist impulses.
These characteristics, of course, can provide fertile ground for future hidden champions. To some extent Slovenia itself resembles a hidden champion: it’s certainly small, there’s no doubt about that. It’s also “hidden”: to counter some popular misconceptions in the rest of the world, no, the capital is not Bratislava and Slovenia isn’t part of Russia, either, nor was it ever in the USSR. And there is already one non-business area where Slovenia has become a hidden champion as a nation – in sports. In the last three Olympic games Slovenia was among the top three medal winners measured in terms of it population (meaning, the number of medals per 1 million). The characteristics that make top athletes are quite close to those necessary for business success. Sixteen top global niche players may not be enough to make Slovenia a hidden champion of global trade, but it’s an excellent start.