In Germany, small and medium-sized enterprises (SMEs) have been fundamental to the economy, contributing significantly to employment and exports. In this context, the concept of “hidden champions” emerged, coined by the German economist Hermann Simon in the 1990s. These hidden champions are highly specialized medium-sized companies that dominate specific market niches internationally.

Features of hidden champions:

• They are often family-owned, with a strong presence of the founding family in management and shareholding.
• They tend to be long-lived, focusing on long-term goals rather than maximizing short-term profits.
• They have a corporate culture that values ​​hard work and puts the customer at the center of their processes.
• They maintain a low level of debt and are financially sound.
• They focus on innovation and exports, and retain talent, which gives them a high level of competitiveness in their sector.
• Its public profile is discreet, since its products and services are not intended for mass consumption.

The four pillars of a hidden champion

1.   Customer-centricity : Putting the customer at the heart of the business model. Learning everything about them allows you to offer unique and tailored products, increasing customer loyalty and dependence. A close relationship with the customer throughout the entire operational process is key.
2.   Culture of Innovation : Foster a culture of exploration and continuous improvement. Employees should feel empowered to question the norm and explore the unknown. It is crucial to eliminate the fear of failure and recognize perseverance and collaboration. The accumulation of incremental improvements and the consolidation of a culture of innovation are fundamental.
3.   Agility : Adopt an authoritative leadership style in strategy, but a participative one in operations. Structures and processes should be simple to avoid bureaucracy. Agility is based on clear objectives, objective measurement of success, and fluid communication. Celebrating both successes and lessons learned from mistakes is essential.
4.   Searching for and identifying new opportunities and trends : Identifying new needs or applications that stimulate market expansion. Maintaining close contact with all stakeholders in the sector allows for the rapid detection of trends and changes in habits and needs, facilitating adaptation to new realities.

Becoming a hidden champion is within reach of any organization, and fundamentally, there are two paths:

1. Identifying and seizing a specific opportunity : Analyzing the market to identify opportunities that align with the company’s value proposition. This involves expanding both the markets accessed and the range of services and products offered, always striving to differentiate oneself from the competition. For example, considering solutions that address multiple needs, such as making a bus accessible to both wheelchair users and blind people.
2. Focusing on the differentiated value proposition : This path is followed by organizations that initially relied on volume and have gradually phased out their least profitable activities until they are left with their core differentiating essence. This process of narrowing down to the essence can be conscious and planned, but it is generally the result of small decisions accumulated over time.

It’s important to emphasize that predictive logic, based solely on accumulated data, cannot, on its own, create a hidden champion. This logic is useful for managing known and repetitive tasks, but not for exploring unknown situations or for innovation.

Consistent Leadership:

To forge the aforementioned pillars, hidden champions require very strong values ​​that define their leadership style:

• Authenticity : The leaders of these companies act with consistency between what they think, say, do and feel, and are aligned with the purpose of the company.
• Determination and fearlessness : They must be flexible, resilient, persevering and able to inspire the organization.
• Delegation and trust : They convey trust by delegating tasks, assuming that success comes from experimenting and learning from unexpected results.
• Commitment to mission and vision : This commitment is more pronounced than in other types of companies, with leaders remaining in their positions for decades.

Organizations must shift their mindset and how they view and analyze the world when making decisions. Incorporating interactive logic allows them to uncover the organization’s “talents” and leverage them to differentiate themselves. Hidden champions are like individuals in whom three circumstances have converged: the opportunity to test a specific talent, the will to do so, and the perseverance to transform that talent into exceptional mastery.