European countries such as Germany have spawned a large number of "hidden champions" companies with leading market shares but little-known.

In contrast, Chinese companies often dream of becoming bigger and stronger and eventually going public. What is the difference between China-Europe Business Road?

What are the implications of "hidden champions" for Chinese companies?

Will China be the strongest competitor for Germany's "hidden champion"?

　　Focusing on the above-mentioned issues, China News Agency's "East-West Question·China Dialogue" invited Hermann Simon, the father of "Invisible Champions" and a famous German management scholar, and a professor of the Department of Innovation, Entrepreneurship and Strategy, School of Economics and Management, Tsinghua University, and a professor of technological innovation. Chen Jin, director of the research center, started a dialogue.

　　Herman Simon believes that the three pillars of ambition, specialization, and globalization, combined with long-term strategies, are the secret to the success of "hidden champions".

Germany's advantage lies in high technology and expertise, while the advantage of Chinese companies lies in the speed of development and the friendliness of consumers to innovation.

He believes that China has become the best testing ground for innovation, especially digital innovation.

　　Chen Jin said that American companies are strong in strategic innovation, German companies are good at technological innovation, while Chinese companies are good at integrating resources and innovating business models; The coordinated development of China, Germany and the United States will greatly contribute to the development of the entire world economy.

An excerpt from the conversation follows:

China's "hidden champion"

Will be a strong opponent of Germany's "hidden champion"

China News Service reporter: Professor Simon's "hidden champion" theory is well-known all over the world.

Germany and other European countries have a large number of "hidden champion" companies.

Compared with Chinese companies who dream of becoming bigger and stronger and eventually going public, what are the differences between China-Europe Business Road?

Herman Simon:

"Hidden champions" are the top three companies in the global market with less than $5 billion in profits, but little-known companies.

They are mid-sized companies focused on specific, niche markets, very low profile, but segment leaders.

　　The Chinese and German economies are at different stages of development, and the "hidden champions" are also different.

First, from the perspective of globalization, Germany takes the lead in the process of globalization. German "hidden champions" usually have more than 50 international branches, while Chinese "hidden champions" usually have no more than 10 international branches.

　　Second, from an innovation perspective, China's "hidden champions" are investing heavily in innovation and R&D.

The story of Nokia falling from the altar and Huawei leading the world shows that innovation is the cornerstone of the future, and China's "hidden champion" will be a strong opponent of the "hidden champion" of Germany (and other European countries).

Chen Jin:

The outstanding performance of Germany's "hidden champions" is due to the relatively high degree of industrialization in Germany.

China is still in the middle and late stages of industrialization, and it will continue to increase investment in technological depth.

At present, some Chinese enterprises have stepped up the development of specialization and new products or "hidden champions", but the number and development level of "hidden champions" still lag far behind Germany.

China News Service: Professor Simon has said many times that China will be a strong competitor to Germany's "hidden champion".

Apart from competition, is there enough room for win-win cooperation between the two companies?

Hermann Simon:

There is indeed room for win-win cooperation between German and Chinese companies. Germany's "hidden champions" have established a foothold in China. There are more than 2,000 factories in China, and they have carried out close cooperation with Chinese companies.

　　Conversely, it is not uncommon for Chinese companies to acquire German companies.

In the past seven years, more than 300 German companies have been acquired by Chinese companies, of which about 50 are "hidden champions".

Now many German companies are actually owned by Chinese companies, but they operate under German brands. This model also works well.

However, the number of new factories opened by Chinese companies in Germany is very small, a total of 5, while German companies have as many as 2,000 factories in China.

This again shows that the two countries are at different stages of globalization.

We expect a strong wave of Chinese investment in Germany.

Chen Jin:

There is a lot of room for cooperation between China and Germany, because China is a developing country with a huge population, and consumption is upgrading, and the huge market size provides good opportunities.

Whether it is traditional infrastructure or new infrastructure based on digitalization, it has brought a once-in-a-lifetime opportunity for Sino-German business cooperation.

China than Germany

Provides better opportunities and environment

China News Service reporter: How do you view the strengths and weaknesses of Chinese, American and German companies in terms of innovation capabilities?

Hermann Simon:

High technology and specialization are the two outstanding competitiveness of Germany.

The United States is good at organizing processes and is keen on setting international standards.

And Chinese enterprises have the advantage of fast development.

I am always amazed at the strong execution of Chinese entrepreneurs.

There is now a new perception that Chinese consumers are more receptive and receptive to innovation than German consumers.

As a result, China has become the best testing ground for innovation, especially digital innovation.

(Here) you can really test yourself if you can succeed.

　　China is leading in many fields, such as high-speed rail, artificial intelligence.

For example, a German "hidden champion" is building its artificial intelligence center in Shanghai.

They believe that China offers better opportunities and environment than Germany.

Chen Jin:

American companies are strong in strategic innovation, German companies are good at technological innovation, and Chinese companies are good at integrating resources and innovating business models.

The three countries should learn from their respective advantages and learn from each other's strengths to achieve better development.

If we can follow the trend of globalized operation, establish a multinational enterprise that integrates different cultures and civilizations, and realize the coordinated development of China, Germany and the United States, it will make a great contribution to the development of the entire world economy.

China News Service reporter: How can Chinese companies learn from the success story of Germany's "hidden champions" and embark on a road of independent innovation of "long-termism" and "specialization and innovation"?

Herman Simon:

The three pillars of ambition, specialization, and globalization, combined with long-term strategies, are the secret to the success of "hidden champions".

　　If you want to be a leader in the global market, and at the same time, you must be specialized. Only by being specialized can you become a world-class player. But if you are specialized in making the market smaller, then you can make the market bigger through globalization.

With globalization, niche markets can also allow mid-sized companies to grow to considerable size.

These are the most important guidelines for Hidden Champions.

　　At the same time, it is necessary to truly develop high technology and adhere to a long-term strategy.

Another important aspect of the long-term strategy is improving employee loyalty.

The annual employee turnover rate of Germany's "hidden champions" is only 2.7%, and employee loyalty is extremely high.

Chen Jin:

Some Chinese enterprises have begun to strengthen their investment in core technologies, and the Chinese government has realized that SMEs should take the road of "invisible champions".

It is necessary to turn small and medium-sized enterprises into market powerhouses, rather than followers of large enterprises.

In terms of innovation ability, we need to be better and stronger, and our business thinking should focus on long-term development and sustainable development.

Reporter from China News Agency: Are the rules of the game on which the "hidden champion" succeeds still applicable today?

Herman Simon:

The game has changed and exports are increasingly being replaced by foreign direct investment.

The Sino-US trade dispute and Ukraine conflict under the epidemic have hit the global supply chain, and global valuations have been reshuffled.

　　Instead of shipping products around the world, we must root in our target markets, increasing supply chain risk.

So this is a whole new game.

I think it's a further development of globalization, more regionalization, more complete value chains, and less cross-regional exports.

Sino-German cooperation is more effective than US-German cooperation

China News Service reporter: How do you view the similarities and differences in entrepreneurship between China and Germany?

Herman Simon:

The people of both countries are diligent and hard-working.

We also have a craftsman spirit.

When I speak in China, I often ask a question - who has the ambition to become a "hidden champion"?

Half of the audience raised their hands, which is more than in Germany.

The entrepreneurial spirit and ambition of companies in both countries are very similar, and I think it all stems from Confucianism and German work ethic, etc.

This has laid a solid foundation for the product chain and is conducive to achieving win-win cooperation.

In fact, the cooperation between China and Germany is more effective than the cooperation between Germany and the United States.

Chen Jin:

I think Chinese entrepreneurs are deeply influenced by Confucian culture.

At the same time, some ideas of Taoist civilization were integrated on the basis of Confucian civilization, forming a new Confucian civilization, combining order and flexibility.

Many Chinese and German philosophers have the same ideas.

In the future, we will put more emphasis on uniting commercial enterprises around the world and working together with the love of the world.

　　(Source: China News Service WeChat Official Account)