Hidden Champions: Austria’s Secret Global Market Leaders
They have managed to reach the top ranks in their respective industry - whether in Europe or on a global level. Nevertheless, they are practically unknown to the general public. The so-called hidden champions go down their own path to success without much fuss - but in an all the more sustainable manner. They are frequently very technologically specialised, do not usually offer popular brand-name products but assert themselves on the international marketplace thanks to sophisticated high-tech components and high product quality. Hidden champions focus on narrowly defined markets with niche products which they sell throughout the world.
Industry leaders with an international orientation
Georg Jungwirth, Professor at the Campus 02 University of Applied Sciences in Graz is an expert in the field of Austria's hidden champions and knows what makes them the way they are. For many years these firms have comprised a focal point of his university's research activities. Jungwirth lists four criteria which have to be fulfilled by a firm in order to be classified as a hidden champion in accordance with the scientific definition:
- First, these companies are at least the number one, two or three in their industry on the global market or at least the number one firm in Europe.
- Second, they are not very well known by the general public, and usually operate in the B2B segment.
- Third, they must be headquartered in Austria.
- Fourth, their annual revenue must not exceed EUR 200 million.
If their revenue is higher, these companies are considered to be world market leaders. Austrian firms such as Andritz AG, Doppelmayr and Swarovski are assigned to this category. There are about 65 of these major global market leaders in Austria, and Prof. Jungwirth has another 181 hidden champions in his data base, with this figure showing an upward trend. On balance there are close to 250 companies which are either the market leader in Europe or at least the third biggest globally in their industry. "This comprises a relatively high number of companies for a small country like Austria and in an international comparison", Junbgwirth states.
Most of these hidden champions (73 percent) operate in the field of industrial goods. Close to one-fifth of them offer consumer goods, and only seven percent are in the service sector. Close to two-thirds of all hidden champions produce high-tech goods from three industries, namely mechanical engineering, metal processing and the electronics industry.
An international focus
Austria's global market leaders employ a workforce of 373 people on average and generate an annual revenue of EUR 56 million. Another key characteristic of these firms is the high average export ratio of 85%. For these firms, internationalisation is usually a key issue from the very beginning, in light of the fact that the domestic market is too small for the respective product in most cases. One example is Schiebel, a company based in Vienna. It is a globally leader manufacturer of mine detectors and unmanned aircraft. Demand for these products in Austria is infinitesimally small, and the lion's share is exported abroad. In addition to Schiebel, companies such as Geislinger (clutch adjusters, Tupack (packaging) and Ovotherm (packaging) are "export champions".
Family structure and great emphasis on values
What many hidden champions also have in common is the fact that they are family-run businesses with flat hierarchies. The culture and values of the entrepreneurial family shape the company's orientation - with positive effects on the sustainable development of the company's value. The stable value system helps the company to deal with economically uncertain times and provides security and orientation. In turn, this is reflected in the high level of employee satisfaction and in stable, long-term customer relationships.
Many of these companies make the conscious and targeted decision to more or less lead obscure or concealed existences. They do without proactive advertising and do not attempt to generate publicity in the media. In most cases, this is not an essential prerequisite for doing business in the B2B segment. The corporate strategy and objectives are often focused on very long-term periods of time, and over generations. The loyalty of employees to the owners – and vice versa – is usually very high, as the expert Jungwirth is aware of. These firms feature a low rate of workforce fluctuation.
In times of crisis, large industrial groups frequently engage in staff downsizing. In contrast, innovative medium-sized firms also strive to retain their personnel, even in economically difficult times. This pays off when they enter growth phases again. As a result, there is a high probability that employees will remain loyal to the company in the long run.
Strategy to counter the shortage of skilled labour
However, hidden champions are also not immune to the current shortage of specialised employees. In order to find qualified staff, hidden champions increasingly decide to be somewhat more present in the public spotlight and to more strongly rely on employer branding. They also more frequently conclude cooperation agreements with technical colleges or universities of applied sciences, for example at career or recruiting events.
Success factors: product quality and research
Prof. Jungwirth considers the willingness of hidden champions to invest in research and development to be a key factor in their success. According to this expert, hidden champions invest an average of about ten percent of their revenue in R&D, considerably more than large companies.
Most hidden champions pursue a high price strategy. 90 percent of them boast a disproportionately high level of product quality. These firms would like to control crucial parts of the value chain themselves. For this purpose, they acquire other companies or competitors. In contrast, they rarely outsource production. Their willingness to innovate is also reflected in the fact that the number of patents per medium-sized hidden champion is far higher than the comparable number of patent applications submitted by large firms. On average, a hidden champion in Austria has 34 valid patents.
Another success factor is the very early internationalisation of hidden champions. About two-thirds of them are so-called "born globals", who usually begin orienting their business operations to the global market immediately right after the firm is founded. This is due to the domestic market simply being not big enough for their own products.
The future meets tradition
One example for this looking outside the box is a company called Voltlabor first established in 2019. There is no doubt that batteries will play a major role in the e-powered mobility of the future. Lithium-ion batteries are at the core of electric cars. They will also be increasingly used as storage systems for solar power plants in private homes. Voltlabor operates precisely in this future-oriented field. Founded by Johannes Kaar, Edmund Jenner-Braunschmied and Martin Reingruber as a spin-off of the Upper Austrian mechanical engineering company Nordfels, the company is expanding quickly.
The promising concept also convinced the Upper Austrian industrial supplier Miba, which acquired a 25.1 percent stake in Voltlabor. Miba's underlying objective is to work together to become a major supplier in the development and production of battery systems and to simultaneously create global technology leaders.
One of the factors that makes Voltlabor a convincing hidden champion is the team managed something which was previously seen as impossible. "Battery cells were not considered to be weldable, but we still succeeded in doing precisely this", says Johannes Kaar. The result is that companies such as Panasonic, an important partner of Tesla, or the internationally successful founders of Kreisel paid a visit to the newcomers. Today Voltlabor is engaged in the series production of batteries. "Our plant has a production capacity in the three-digit megawatt range", states CFO Karr. "We would like to at least double the medium-term capacity on the basis of multiple shift production operations."
The Viennese company Thomastik-Infeld, which has been producing strings for string, plucked and world music instruments for 100 years, is highly innovative in a completely different area. The high-tech strings attract enthusiastic customers across the globe. "Musical strings are not simple cords", says Franz Klanner, Head of Engineering. The cooperation between highly qualified employees and high-precision machines comprises the basis for this successful product. "But people are always responsible for quality assurance", Klanner emphasizes. "Thanks to the progressive design in mechanical engineering, technical expertise and precise dexterity, a sound arises which is convincing on the stages and streets of the entire world", he adds. The material is also decisive. A large number of different wrapping materials are used as the basis in addition to steel or plastic cables. All in all, a total of 28 different materials are integrated into the products. The company continuously invests in research and development in the field of string technology and claims to manufacture the most technologically advanced and reliable musical strings in the world and the ones which feature the richest tone colour. These are just two examples representative of many other hidden champions which are convincingly positioned on the world market.
From Burgenland to Vorarlberg: successful players in their industry
Showcase companies from all over the country stand out throughout the world thanks to innovations and sales successes. A small selection is provided here:
- Isosport Verbundbauteile produces plastic composite materials for the skiing and snowboarding industry.
- Lumitec manufactures innovative LED lighting solutions.
- Swarco Futurit Verkehrssignalsysteme produces polycarbonate traffic lights.
- Greenonetec Solarindustrie builds collectors for solar thermal plants.
- S.A.M. Kuchler Electronics is successful thanks to its sausage and cheese cutting systems.
- Croma-Pharma scores points with hyaluronan syringes.
- FHW Franz Haas Waffelmaschinen GmbH develops and sells waffle and biscuit machines.
- Jungbunzlauer Austria AG is the world's leading manufacturer of biodegradable, natural ingredients.
- Wewalka is the world's largest family-run fresh dough producer.
- Engel Austria specialises in high-quality injection moulding machines.
- Keba AG produces parcel machines for the international market.
- Teufelberger Seil GmbH is a successful supplier of mooring lines for boats and ships.
- J. Meissl GmbH has made a name for itself with umbrellas and umbrella bars.
- Binder+Co AG specialises in screening technology and glass recycling.
- Schaller GmbH is successful in the field of biomass and wastepaper moisture measurement.
- Egger achieves success thanks to its thin chipboards.
- Glockengießer Grassmayr already delivers bells to 100 countries.
- Bachmann electronic produces wind power control systems.
- Julius Blum GmbH manufacture fittings.
- Vienna Symphonic Library stands out for its virtual orchestra music.
- Starlinger & Co produces woven plastic bags.