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Interview: Hidden champion researcher Dr. Georg Jungwirth gives high marks to the Vienna Region’s medium-sized global market leaders
Austria is considered an excellent location for so-called “hidden champions”. Dr. Georg Jungwirth from the CAMPUS 02 University of Applied Sciences in Graz has been researching hidden champions since 2007 and highlights their factors of success in Austria.
How do you define hidden champions?
Georg Jungwirth: The German economics professor and management consultant Hermann Simon is a pioneer of hidden champion research, and he defined the criteria by which companies are classified as hidden champions. First of all, ranking: the company must be one of the top three global market leaders or at least the European market leader in its sector. Secondly, location: the company’s head office must be based in the respective country. And thirdly, turnover: annual sales must not exceed a certain upper limit. In this regard, there is a great difference between Austria and Germany. While the upper limit for annual sales for medium-sized companies is three billion euros in Germany, it is set at 200 million euros in Austria. There are additional criteria, but those are rather “soft” factors such as the popularity of the company. We started hidden champion research in 2007 and built up a database which forms the basis of our annual studies and our discussions with managers of various hidden champions in an effort to derive criteria for success from it.
What are the latest findings in terms of success criteria?
Georg Jungwirth: The dominating criterion for success is the research rate. With hidden champions, the rate is about ten percent. For these companies, it is a matter of course to invest a lot in research & development. Besides the hard facts, we also seek to make the soft facts more measurable because many managers regard the corporate culture as a criterion for success. Many of the hidden champions are family-run businesses with flat hierarchies. They have little fluctuation, a low sickness absence rate, high employee loyalty, and the management has confidence in its team. This has a positive effect on the work climate, motivation, and ultimately on the corporate performance.
So the size of the company is a criterion for success as well?
Georg Jungwirth: It turns out that typical hidden champions in Austria have an average of 300 employees and create an annual turnover of about 60 million euros. A company of this size is easy to manage. Often enough, the directors of the companies know all their employees by name. Employees are more motivated in an environment like this.
Is there a higher concentration of hidden champions in Austria than in other European countries?
Georg Jungwirth: Within the last few years, the number of hidden champions in Austria has fluctuated between 180 and 190. There is fluctuation because new companies enter the stage while at the same time, some companies experience such significant growth that they exceed the upper sales limit and can no longer be regarded middle-sized. There have already been talks about raising the upper limit in the near future. Other former hidden champions disappear from the market, because they are either bought up or become insolvent. In relation to the population figure, Austria does not need to sell itself short compared to Germany. We can compete in terms of the concentration of global market leaders. In Germany, there are about 1,500 hidden champions, the highest number in Europe. Switzerland has a relatively high concentration of global market leaders as well, but the number is significantly lower in other countries. Compared to countries with a comparable population figure, such as Finland or Sweden, the concentration is significantly higher in Austria. Portugal has fewer hidden champions as well. Furthermore, we also have a substantial number of large-scale global market leaders in Austria, so altogether, we have about 250 world-class companies.
How many hidden champions are there in the Vienna Region? Can you name a few examples?
Georg Jungwirth: In the Vienna Region, 43 companies meet the criteria for hidden champions. Additionally, there are 31 large-scale global market leaders. With 23 middle-sized hidden champions and 14 large-scale global and European market leaders, Vienna is the top dog. Followed by Lower Austria, which has 15 hidden champions and 16 large-scale global market leaders. Burgenland has five hidden champions and one large-scale European market leader. The Viennese global market leaders include, for example, “Thomastik-Infeld”, global market leader in strings for bowed and plucked instruments, “Frequentis”, global market leader in information and communication systems for air traffic safety, as well as “Pochtler Industrieholding”, global market leader in, among others, car airbags (iSi Automotive).
Why is the Vienna Region optimally suited for hidden champions?
Georg Jungwirth: Vienna has the best infrastructure in the country. Many companies set up their head office there because you are closer to political decision-makers and Austria-wide institutions, and you also enjoy logistical advantages. Hidden champions in the rural regions have the disadvantage of longer transportation routes. The vicinity to the Vienna Airport is certainly an advantage for internationally active companies in Vienna, Lower Austria and Burgenland.
Electrical engineering, mechanical engineering, metal processing: Why do these industries spawn so many hidden champions?
Georg Jungwirth: True, over 60 percent of the Austrian hidden champions work in these industries. Austria has a tradition of companies in the metal processing industry. The same goes for mechanical engineering, many companies have existed for generations and have evolved organically. In the electrical industry, I’ve seen companies which have existed for a long time but are originally from entirely different industries, such as the Knill Gruppe in Weiz, which began as a blade forge over 300 years ago. Another reason is certainly that Austria features exemplary cluster constellations which help these industries to become well-anchored. We have an excellent supplier industry which takes R&D seriously.
Do hidden champions have a chance of becoming more visible and popular in the future?
Georg Jungwirth: There are different motives. On the one hand, many hidden champions indeed try to step in front of the curtain and advertise the fact that they are global market leaders. After all, this position is an indicator that you are doing a great job. But many of these companies are too small to be recognised by the media. Especially when these companies are in the B2B business and their products cannot be explained easily, it is difficult to pique the public’s interest. In this case, I think it’s the media’s job to report on solid success stories to make these achievements more palpable. The Salzburg-based company Geislinger GmbH, for example, is a global market leader in torsional couplings. The product alone will not be of interest to the general public – but it’s a different story when you learn that the biggest ships of the world are equipped by Geislinger. On the other hand, there are hidden champions which like to remain in the background because their success is based on cornering a market niche. A characteristic trait of a niche is to steer clear of the mass market. Also, there is no transparency in the B2B markets in terms of the current market position of a company. One significant reason for not shouting your success from the rooftops is quick growth via company acquisitions along the value chain. The approval process for company takeovers takes longer if the competition authority learns that the buyer is a global market leader.
What are the biggest challenges for hidden champions in the next years?
Georg Jungwirth: The application of success criteria. While our research findings are primarily addressed at students, they are also intended for the economic system to demonstrate that you can be a world-class company despite limited resources and opportunities. In high-wage countries such as Austria, it makes sense to invest more in R&D, go international early on and focus on distinguishing yourself from your competitors with superior products.
The interview was conducted by medienkomplizen / Christian Scherl
Photo: Copyright: FH CAMPUS 02/Melbinger