Hidden Champions

Simon, a German academic and consultant, identified several hundred mid-sized companies that hold the leading world market share in narrow product categories while remaining almost unknown to the public. Most are German, family-owned and located outside major cities. He studied them systematically through surveys, financial data and interviews, and the work has continued through several expanded editions.

The defining pattern is narrow scope combined with global reach. These companies define their market extremely tightly, often as a single component or process, and then serve it everywhere in the world rather than diversifying at home. Simon argues that this combination produces market shares that would be impossible in broader categories, and that the resulting volume in a narrow niche funds research spending per unit of revenue that far exceeds industry norms.

The other recurring features he documents include ownership by families with very long time horizons and no external equity, chief executives with unusually long tenures, close and technically detailed relationships with a small number of demanding customers, manufacturing kept in high-cost home countries because the process knowledge is the advantage, deliberate avoidance of publicity, very low employee turnover in regions where the company is the main employer, and a preference for organic growth and self-financing over acquisition and leverage.

The study is essentially cross-sectional and selected on success, so it cannot show how many companies pursued the same strategy and failed. The German institutional context matters more than Simon allows: the apprenticeship training system, the local bank relationships and the tax treatment of family firms support this model and do not exist elsewhere in the same form. Later editions address globalisation, digitalisation and the rise of Chinese competitors in these niches, which is the principal threat to the model.