One of my favourite strategic questions is : “What can you be the best in the world at ?”.
It gets you thinking about whether you are an inch deep and a mile wide.
Would you be better served by being very, very good at some subset of your current activities – maybe a “hidden” champion.
Hidden champions are relatively small but highly successful companies that are hiding in plain sight.
I recently learned about two Adelaide Hidden Champions – Hallprint and FCT Flames – more about them shortly.
Hidden Champions do not seek to grow by “discounting” – they grow by providing extreme value – through their very deep (but niche) expertise. This means that they can often achieve great margins – in fact they need great margins to fund growth.
Usually they are “flywheel businesses” rather than shooting stars.
Their competitive advantage accumulates (like a flywheel gaining speed) as they grow their expertise and knowledge over time. They command extreme loyalty from employees, partners and customers.
The term “Hidden Champions” was originally coined by German Hermann Simon to describe the small, highly specialized world-market leaders in Germany.
According to his definition, a company must meet three criteria to be considered a hidden champion:
- Number one, two, or three in the global market, or number one on the company’s continent, determined by market share.
- Revenue below $4 billion
- Low level of public awareness.
It was originally thought that such companies were mainly only to be found in German speaking countries but after research (for his book Hidden Champions) , Simon concluded that there are hidden champions everywhere around the world, but they are the most frequent in German speaking countries – and a key factor behind Germany’s stellar export performance.
Here’s a list of selected Hidden Champions.
One of my favourites is Tetra – the world leader in fish food for aquarium fish.
The company was founded in 1955 by Dr. Ulrich Baensch.
In the 1950’s there were about 50,000 fish hobbyists in Germany but it was a time consuming hobby as the enthusiast had to collect live food from streams and river beds.
Dr Bausch suddenly made it easy to keep fish at home by developing a credible dried flake option.
The company is now the global leader in fish food for aquarium fish – employing 700 people, with representatives in 90 countries.
At the recent Business SA Export Awards it was great to hear the stories of two great South Australian Hidden Champions.
Hallprint, which was founded in the 1980’s is the world leader in providing fish tags (and allied products) for fisheries research agencies.
They have about 60% of the global external fish tag market and have exported to over 100 countries.
This is quite a small company (suggested revenues < $2 Million) but what extraordinary depth of knowledge. Be interesting to see if they can move from a transactional (product) business model to more of a “services” model in the future.
More on Hallprint in this story and this Business SA member profile.
Company website here www.hallprint.com/
If you want a flame at an event – these are your “go-to” guys.
FCT Flames is a spin-out from FCT Combustion – a specialist industrial combustion and process engineering company.
They won the contract for torches and cauldrons for the Sydney 2000 Olympics and worked with research partner, the University of Adelaide.
They impressed the customer with their results and since then FCT Flames has been involved in every Olympic Games and elite sports games in the world.
Of course they have amassed an enormous amount of expertise with all of these projects and given the reputational risk if these high profile displays failed – why would you use anyone else ?
This is a great story of technical problem solving, productisation and then commercialisation.
More on FCT Flames in this story and this Business SA member profile.
Company website here http://www.fctflames.com/
What can you be the best in the world at ?
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