How can a strategy be developed that turns a company into a hidden champion? Where is the best place to start? What results does strategy development achieve? What is the role of consultants in this process? We will address these and similar questions in this chapter. There are naturally no standard answers. The lessons of the hidden champions are not a checklist to be worked through, automatically resulting in a strategy for success. There is not even a standard procedure for strategy development. The right approach, taking either the market or the company’s competencies as a starting point, must be determined for each case individually. Despite this warning against one-size-fits-all approach, the strategy development process usually encompasses the following stages:
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Notes
- 1.
See the instructive book by Phil Rosenzweig, The Halo Effect … and the Eight Other Business Delusions That Deceive Managers, New York: Free Press 2007.
- 2.
Carl von Clausewitz, On War, York: Oxford University Press 2007 (German original published in 1832)
- 3.
ROI = return on investment. Alternatively, ROCE = return on capital employed, defined as profit before tax divided by total assets.
- 4.
The question was “Please state the average ROI (i.e., total return on investment before tax, for the last ten years in percent).”
- 5.
The question was “What percentage of revenues do you spend as a long-term average on research and development?”
- 6.
See Arie de Geus, “Planning as Learning”, Harvard Business Review, March-April 1988, p. 70–75.
- 7.
See W. Chan Kim/Renée Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Boston: Harvard Business School Press 2005.
- 8.
For a more detailed description of the competition map, see Hermann Simon, Frank Bilstein and Frank Luby, Manage for Profit, Not for Market Share, Boston: Harvard Business School Press 2006, p. 33–38.
- 9.
To explain the difference between absolute and comparative advantage, we use the relative market share (company’s own market share divided by market share of the strongest competitor). Let us assume that a company is the market leader in all segments. Then it has an absolute advantage everywhere and its relative market share is always larger than 1. There can nevertheless be large differences between the relative market shares. In segment A, it may be 2.5; in segment B only 1.1. In this case, the company obviously has a “comparative advantage” in segment A when compared to segment B. If the company had to choose one segment and all other things were equal, the decision would be in favor of A.
- 10.
Reference is made to specialist literature, e.g., Hermann Simon, Frank Bilstein and Frank Luby, Manage for Profit, Not for Market Share, Boston: Harvard Business School Press 2006 or Hermann Simon and Robert J. Dolan, Power Pricing, New York: The Free Press 1996.
- 11.
The Transrapid is a magnetically levitated (maglev) train that has no wheels but is propelled by magnetic forces and reaches speeds of up to 280 miles (450 kilometers) per hour. The Hamburg-Berlin route was not built due to opposition from the Green Party. The first Transrapid line opened in Shanghai on December 31, 2002 and has been operating smoothly since then. The maximum speed of the Shanghai Transrapid is 432 kilometers per hour (268 miles per hour).
- 12.
A basis point is 1/100 of 1%, so 200 basis points equal 2 percentage points.
- 13.
“Structure follows strategy” was coined in 1962 by the late Alfred Chandler, then professor of business history at the Harvard Business School. Chandler showed in four case studies (DuPont, General Motors, Standard Oil and Sears Roebuck) that the need to restructure emerged from strategy shifts driven by new technologies and market changes.
- 14.
Hermann Simon, Strategy for Competition, New Delhi: Leads Press 2008.
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Simon, H. (2009). Hidden Champions: Audit and Strategy Development. In: Hidden Champions of the Twenty-First Century. Springer, New York, NY. https://doi.org/10.1007/978-0-387-98147-5_11
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DOI: https://doi.org/10.1007/978-0-387-98147-5_11
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