29 January, 2012

Hidden Champions of the 21st Century

A recent New York Times article  examined why Apple has its iPhones made in China.  The article deservedly attracted a lot on attention for its insights on China's supply chain advantages in manufacturing (far more significant than simple cheap labour) and the USA's continuing shortages of engineering skills at all levels. Unfortunately, the main reactions I've heard can be summed up as defeatist:
  • the West has lost the "war" in manufacturing, and
  • anyone thinking of investing in Western manufacturing is crazy. 
Both reactions are wrong.  While it certainly makes sense for some manufacturers to have Chinese operations, it does not mean that Western manufacturing should throw in the towel.  For an alternative and far more upbeat view, I recommend you read Hidden Champions of the Twenty-First Century: The Success Strategies of Unknown World Market Leaders by Hermann Simon.

Simon was a noted academic and today heads an international consulting business.  He first brought attention to the "Hidden Champions" - mid-size firms with global leadership positions - with a 1992 article in the Harvard Business Review, followed in 1996 with a best-selling book Hidden Champions: Lessons from 500 of the World's Best Unknown Companies. With Hidden Champions of the Twenty-First Century, Simon has updated his earlier analysis in the context of the rise of China, and finds that his original ideas are even more valid today. He provides examples and data to make his case that mid-size firms can be globally successful, without recourse to management fads and magic bullets.

Simon estimates that 80% of the hidden champions are based in north-west Europe, especially Germany and Scandinavia - most definitely not low-cost regions.  He also notes that many of the hidden champions are based in small towns where it is difficult to hire the top talent attracted to big cities and big corporations.  That hasn't stopped them being successful; likewise, Simon is dismissive of those who opt for the easy outsourcing route for core activities.

The last chapter is especially useful, as Simon distills his ideas into eight lessons for success:
  1. Effective leadership with ambitious goals
  2. High performance employees
  3. Depth (supply chain and vertical integration)
  4. Decentralisation
  5. Focus
  6. Globalisation
  7. Innovation
  8. Closeness to customer
I strongly recommend anyone thinking about how to improve their mid-size business  (or simply wanting to feel good about their potential) to read this book.  It could almost be tailor-made for New Zealand's manufacturers.

Disclosure: Isambard receives commissions from Amazon for purchases made via links from this website, but that has not influenced my opinion.

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