Hidden Champions and Craftsmanship: A Global Business Built on Specialization

Germany’s hidden champions and Japan’s craftsmanship both involve extreme focus on one thing. Among Germany’s 3.7 million companies is a group of small and medium-sized businesses with exceptional core strengths. Their products are excellent, their pricing power decisive, and their global market shares the largest in particular fields. They dominate niches, have no shortage of customers, and operate steadily for decades or even centuries. Yet unlike large corporations, they are not household names. They keep a low profile with the public and media. German management professor Hermann Simon gave them a distinctive name: hidden champions. He defines them as little-known businesses ranked first or second in global market share, with annual output around €2 billion. By that standard, Germany has more than 1,400, the most in the world and nearly half the global total. These companies often specialize in one product category. Focus enables them to excel and continually innovate. Although their product ranges are narrow, they sell worldwide, serving global customers and gaining enormous room to grow. Professor Simon identifies eight characteristics: 1. Clear goals; 2. Intense focus; 3. Close customer relationships; 4. Partnering with the best; 5. Innovation; 6. Competing in the top arena; 7. Building a broad economic moat; 8. A strong corporate culture. He repeatedly emphasizes: ‘I am a firm believer in focus. Focus is a prerequisite for becoming world-class!’ Japanese craftspeople, known as shokunin, devote their lives to one thing! Among Japan’s more than 4.2 million small and medium-sized companies—the main creators of its economic miracle—an estimated 100,000-plus businesses are over a century old. Hundreds of thousands of craftspeople are their mainstay. Japanese Wikipedia defines the craftsman’s spirit along these lines: ‘Pursue improvement in your craft with confidence. Do not let money or time constraints distort your resolve or force compromise. Do only work you can stand behind. Once begun, use every ability to finish, even if profit must be set aside completely.’ For example, Jiro Ono, the celebrated craftsman featured in Jiro Dreams of Sushi, was born in 1925 and has spent over sixty years making sushi. In a recent interview, he said: ‘I am 93 this year [2018]. I want to make sushi with these hands until I am 100.’ To protect those hands, he always wears gloves when not working, even while sleeping. His restaurant, Sukiyabashi Jiro in Tokyo’s Ginza, has just ten seats and no restroom. Reservations must be made a month ahead. Prices start at ¥30,000 per person, with no ordering: the chef decides the day’s menu. Diners finish within thirty minutes and leave promptly for the next reservation. This unusual little restaurant earned three Michelin stars, representing the highest standard of sushi making. #TShapedBusinessModel