"2021 Made in China Invisible Champion" review experts' heavy interpretation

In the selection of the first "2021 China Hidden Champions" by CEConlines, the comments of the judges play a crucial role. As experienced management experts, they have a deeper insight into the development of China's hidden champions. During this dialogue with managers from around the world, they shared the wisdom condensed in actual combat and management, as well as the insights gained from keeping up with the pulse of the times.

CEConline: The salient feature of Hidden Champions is that they focus on a specific product or segment, emphasizing in-depth focus. However, the uncertainty of the current external environment is constantly increasing, posing new challenges to the operation of enterprises. In your opinion, what are the pros and cons of focusing for the Hidden Champion? How to resolve the crisis brought by the external environment?

Gao Jingxin: Talking about the pros and cons of focusing, it is essentially a matter of returning to whether an enterprise should choose a diversified operation or a specialized operation model. This is a strategic issue. So since it is a strategic issue, we should discuss the advantages and disadvantages of focusing based on the specific industry background. If we discuss it separately from the industry background, I would like to talk about some advantages and disadvantages from the macro level: the advantages of focusing can be focused on a certain field and Technology, overcoming difficulties without distraction, and forming our own core capabilities; at the same time, the more we focus on the integration of the industrial chain and the company's internal management costs, the lower the cost and the leaner; we can then focus more on market cultivation and research on downstream customer preferences; The main disadvantage is how to deal with changes in the market and the environmental impact of the industry. This is the second small problem, how to avoid it? I think the most important thing is the insight and prediction of the industry. It requires the courage and professional ability of entrepreneurs to cooperate with the team to implement risk management and control.

Meng Deqiang: The relationship between specialization and diversification is not a simple relationship between fewer products and more businesses, but ultimately comes down to the accumulation of capabilities and core competition in specific fields. Force to build.

For invisible champions, there are many benefits of focus. From the outside, product focus means a clearer market positioning and brand image, especially for the C-side, which has stronger customer acquisition. From an internal point of view, focus means that resources can be integrated for professional configuration, especially for growing enterprises. The concentration of resources can improve combat capabilities and reduce business risks.

The change in the external environment is an unavoidable fact, but in a certain sense, crisis and opportunity are two sides of the same coin. In the past year, many companies have been unable to cope with the epidemic and have reduced their scale or even went bankrupt. Some companies have regarded it as an opportunity to overtake and strengthen their market position, achieving rapid development and growth and a substantial increase in market share.

Zhang Jin: Focus For enterprises, the advantage lies in that they can better exert their core competitiveness in technology, and can be more targeted in talent training for enterprises. However, focusing means that companies are more focused on intensive cultivation, but their products are relatively single, and regional globalization is an effective way for companies to achieve sustainable sales and market share growth. Regional globalization has put forward higher requirements for the strategic deployment of enterprises' innovation ability, internal management and brand management, business philosophy, and personnel training. In the process of researching invisible champions for many years, Professor Simon has summed up seven secrets of success of invisible champions, namely, the ambitious pursuit of becoming a global industry leader and occupying a high share of the international market, persistent focus and innovation, regional globalization, and innovation. Customers provide high-value products and close to customers, low corporate asset-liability ratio, focus on vocational education for professional talent training, and corporate leaders' "hidden champion leadership". These seven secrets also play a vital role in how the invisible champion can find "opportunity" in the "crisis", how to turn the crisis into safety and turn the crisis into a new driving force for enterprise development in the process of changing the external environment. Innovation in the development of the modern economy also means not only the innovative research and development of the company's own products and technologies, but also the digital transformation. The global outbreak of the new coronavirus in 2020 has brought heavy damage to the global economy, but it has also put forward requirements for flexible management, innovation and digital development, and improved financial management. Therefore, the hidden champion enterprise has withstood the most severe test in the development of the past 20 years, but also handed in a satisfactory answer.

CEConline: From the perspective of the global industrial chain, Chinese manufacturing is transforming into "Made in China" and "Made in China". In order to transform to the mid-to-high end of the value chain, the invisible champion of Chinese manufacturing needs to be filled What shortcomings can be quickly transformed? How to break through the shortcomings?

Gao Jingxin: Under the new economic development pattern of dual cycle, invisible champions made in China need to participate more in the cycle of internationalization, and this cycle is more about the competition of technology and innovation. In this regard, the shortcomings of invisible champions in each industry are different. I think they mainly include basic research and development, process design and equipment manufacturing. I think there are two factors to break through these shortcomings. The first is precise R&D investment, which requires more R&D analysis and benchmarking research to determine specific research directions and investment models; the second is perseverance, which requires entrepreneurs to have Long-termism and craftsmanship are not impacted by the rhythm of the market and the hot demand for rapid iteration.

Meng Deqiang: In the past ten years, the new economy has given birth to the prosperity of many industries, and individual sub-sectors have created a unique Chinese development model, and even reached the forefront of the world. The more this is the case, the more we need to keep a clear head. The foundation of China's sustainable economic development - made in China, will face more and more challenges going forward, and there is even no mature experience to refer to and learn from. For example, there is still a big gap between Chinese companies and European and American companies in terms of technology and variety. The cost advantage is fading under the pressure of Southeast Asian countries. How to have a more favorable position in the global value chain in the future? Stronger innovation capabilities are needed, that is, the transformation to China's creation and the transformation to the mid-to-high end of the value chain.

In the future, Chinese enterprises will rely more on their "hard core strength", which is also the challenge for the further development of China's manufacturing industry today. It is reflected in two aspects: first, in the face of increasingly fierce competition, how to find a new way to differentiate competition, the key is how to find differentiation; The ability of micro-innovation also requires grasping the trend of market demand and consumption changes, and realizing higher-level independent innovation, which is not only at the product level, but also reflects comprehensive innovation at all levels such as technology, services, internal operations, and business models. .

Zhang Jin: Made in China has two dimensions in my opinion, one is made in China, and the other is brand building. The core of quality made in China is quality. Only with the guarantee of quality can the value chain transform to the mid-to-high end with confidence, and brand building made in China has its foundation. The earliest proposal of the "Made in Germany" brand was on August 23, 1887, when the United Kingdom passed the Trademark Law, which clearly stipulated that goods produced in Germany must be marked with "Made in Germany" to distinguish them from British-made goods. It was a shameful label at the time. But over the past 130 years, German companies have successfully transformed what was once synonymous with cheap and inferior products into synonymous with quality products and customer trust through relentless product innovation and strict quality management. The successful transformation of "Made in Germany" and the experience and lessons accumulated in the whole process are very useful for Chinese enterprises to learn from, and the most important success factor for this transformation is the quality of the products. To be successful, Chinese invisible champions need firm belief, perseverance, self-confidence not afraid of failure, courage to break through and innovate, and open-mindedness to accept opinions and self-reflection. With these internal driving forces of the enterprise, we can concentrate on product development and quality with ingenuity, and we can have strong self-confidence and patience to do a good job in brand building.

Although there are cultural differences between China and Germany, the market foundations of China and Germany, China's hidden champions, and China's future invisible champions and Germany's hidden champions also have many similar characteristics. Both China and Germany have a long history of manufacturing and a solid manufacturing base. The number of small and medium-sized enterprises in China and Germany is quite large and accounts for a considerable proportion of the national economy. Both the Chinese and German governments strongly support small and medium-sized enterprises. The development of enterprises and hidden champions, and vocational education and the promotion of dual education are also the strategic priorities of China's education system reform, all of which provide fertile soil for the development of China's hidden champions.

CEConline: In your opinion, what is the key to the success of the Hidden Champions in this day and age?

Gao Jingxin: The key to the success of the invisible champion in the contemporary era I think there are several factors: The first is the accelerated segmentation of the industry, the continuous division of the industry from atoms to molecules. The more refined the industry and the more diverse the division of labor, then each segment is worthy of intensive cultivation again; the second is the effect of technology aggregation formed by the invisible champion, and the threshold of its core competitiveness will increase with digital empowerment. The third is the maintenance of the industrial chain ecology. The invisible champion will understand suppliers and customers more leanly, realize and even lead the needs of customers, and continue to provide high-quality supply, so as to create more and greater value.

Meng Deqiang: To put it simply, there are two key elements of success that are immutable:

The first is focus. Focus is a powerful force. The success of the invisible champion is not accidental, but inevitable. Only by perseverance, hard work, and aiming at a goal can eventually become an absolute powerhouse in a field. Many companies fail not because there are too few opportunities, but because there are too many opportunities. Huawei's achievements to this day have been summed up in a famous saying: Huawei has been attacking a "city wall" with thousands of troops for decades.

The second is innovation. One of the most important conditions for becoming an invisible champion is to be absolutely ahead in a certain product and technology in a certain segment. Behind the success of the invisible champions is the investment in R&D and innovation that is invisible to the outside world, which is the foundation for building sustainable competitiveness. Among Chinese companies, Huawei's R&D investment has surpassed that of Apple and Cisco, which ensures that Huawei will continue to be a leader in the field of communications technology.

Zhang Jin: I think the invisible champions in today's era, including in times of crisis, can still be successful because of their perseverance and ability to explore. Due to the persistence of hidden champions, they have focused on cultivating their own sub-fields, insisted on R&D and innovation, insisted on developing the leadership of hidden champions, adhered to the original intention when starting a business, and did not interfere with the external environment from the beginning of the establishment of the enterprise. The courage to explore is reflected in their courage to innovate, to assume the responsibility of industry breakthroughs, to take the road of globalization, to explore new markets and to understand the needs of customers in different markets, and to explore talent training systems and leadership models that are in line with corporate development. In today's era, this ability to explore is also reflected in pioneering digitalization and exploring digital transformation. Hidden champions are not necessarily the pioneers of digital transformation, but most invisible champions have their own digital strategies and are digital "fast followers" .

CEConline: For other companies, what are the lessons of successful management from hidden champions?

Gao Jingxin: I personally think that successful cases cannot be completely replicated, and the process of success is inevitably mixed with a lot of accidental coupling factors, so the inevitable process of success can be learned from. The key is a strong core executive team. People are the engine and original kinetic energy of enterprise development, and the competence and leadership of the team are the key. This includes analysis and judgment of social and economic development at the macro level, industry insights and trends at the meso level, and enterprise operation and management at the micro level. It is always necessary for entrepreneurs to think and answer two questions in the process of enterprise development: what will the enterprise do in the future? What can companies do to have a future?

Meng Deqiang: Hidden champions in different fields have their own strengths in management, products and operation models. For fast-growing Chinese enterprises, especially small and medium-sized enterprises, there are several points for reference, or Special attention:

•As China's economy enters a transition period, it must be able to adapt to the general environment and transform from the original opportunity and dividend-driven to management-driven and system-driven as soon as possible.

•Upgrade from relying on the personal charm of the founder or team and sensitive grasp of market opportunities to relying on the success of the system and doing things according to the process.

•Focus on the division of labor and status in the industry chain, and drive the company to continue to move closer to more valuable links in the industry chain.

•Conform to the wave of digitalization, promote enterprises to move towards digital operation and management, and make digital an important resource and core competitiveness of enterprises.

Zhang Jin: Hidden Champions are mainly family-owned businesses. Because Hidden Champions focus on sub-sectors, their products are relatively single, but Hidden Champions adopts a regional globalization strategy and because of the ambitious pursuit of high market share , so that the invisible champion enterprises must have the competitiveness of flexible response and timely response in different stages of enterprise development. Therefore, the management strategy of hidden champions is more of a streamlined structure management approach. Different from the traditional structural management theory, the hidden champion enterprise is not constrained by the process system, but is more oriented by the functional organizational structure. Here I must reiterate the importance of the leadership of the hidden champions, the diversified talent training system of the hidden champions and the construction of the corporate culture of the hidden champions to the success of the company. Most of the members of the Hidden Champion, whether they are the founders of the enterprise, the managers of the enterprise or the ordinary employees of the enterprise, agree with the values of the enterprise. The leadership of the Hidden Champion is manifested in the flexibility of sticking to principles but paying attention to details, being brave, dedicated, persistent, and motivating employees. The new generation of hidden champions is younger and women play a bigger role than big companies. In addition, the perfect talent training system and emphasis on vocational education enable well-trained skilled workers and college graduates to provide a diverse talent pool for hidden champions. Hidden champions have an average turnover rate of 2.9%, well below Germany's rate of 7.3%. Hidden champion managers have an average tenure of 20 years, compared with six years for managers in large corporations. A dedicated and stable staff team ensures the stability of the core technology of the enterprise and the competitiveness of the invisible champion. In my opinion, these are valuable management experiences for other companies, including our hidden champions in China, and China's future invisible champions.

Pictures/ Provided by reviewers