Georg Jungwirth is a professor at the University of Applied Sciences Campus 02
in Graz and knows the successful companies very well.
For years, Georg Jungwirth has been studying the phenomenon of "hidden champions," of which there are an astonishing number in Austria. In his various studies of successful companies, he also discovered why the economic high-flyers prefer to remain hidden and are hardly known to the public. In Austria, a company is considered a hidden champion if it generates annual sales of no more than 300 million euros per year, and these are usually medium-sized companies. There are currently around 250 global or European market leaders in Austria.
Is success still not socially acceptable in Austria? Many companies are reluctant to go public when they are extremely successful...
Georg Jungwirth: Many of the small and medium-sized European and global market leaders, the 'hidden champions', do not make a big deal about their success. I have been dealing with the topic since 2007, when we began to build up our hidden champions database and conduct one study after another. At first I did not understand why someone with a leading position on the global market did not market this fact better. One of the reasons for this is that many of the medium-sized and smaller hidden champions are family-run companies that have their own rules. One of the typical rules is that these entrepreneurs act relatively discreetly and do not shout out loud about how successful they are and how much money they have. This is partly done to protect their own family and privacy. Many of the entrepreneurs remain modest.
But failures are also not discussed publicly. Isn't that also a matter of mentality?
Jungwirth: The fact that modesty is a virtue is still true in many family businesses in Austria. Another reason for the reticence of both medium-sized hidden champions and the large Austrian global market leaders, who mostly operate in the industrial goods market, is that it is a B2B business and the end consumer hardly comes into contact with it. Business owners have also told me that when taking over other companies, the competition and antitrust authorities impose completely different, stricter requirements if it is known that they are a global market leader. For the size of the country, there are an extremely large number of global and European market leaders in Austria. Their 'war chests' are usually well filled and they often take over other or weaker companies. So it is an advantage for hidden champions that they do not have the authorities on their radar.
In contrast to the USA, people in Austria simply don’t like to talk about money.
Jungwirth: I worked in the USA for a while, in Silicon Valley, and I know the difference in mentality. But Americans also have a completely different approach and a different relationship to the capital markets. These companies usually want to go public. If a smaller start-up is still not listed on any stock exchange after a few years, then it almost has to justify this. In Austria, it is exactly the opposite: the hidden champions usually do not want to go public at all and do not bring in an external investor into the company.
Is the number of hidden champions in Austria increasing?
or is the number actually declining in view of the crises?
Jungwirth: We define a hidden champion as a medium-sized company that is so successful internationally that it is either number one in Europe or among the top three in the industry worldwide. This definition is common internationally and we have also introduced it. However, we have not adopted the scale up to which annual turnover a company is a hidden champion from our German colleagues. There, a company with a turnover of up to three billion euros is considered a medium-sized company. In Austria, that would already be a corporation. That is why we have found a different upper limit. A company that generates a maximum of 300 million euros in annual turnover is considered a hidden champion in Austria. It is still a medium-sized company, has manageable structures and a flat hierarchy, the boss still knows all of the employees and it is usually family-run.
Every year, some of the Austrian hidden champions grow beyond this limit and we then list them in our database as large, Austrian world market leaders, such as Red Bull, Swarovski or Wienerberger. However, every year a few new companies follow suit. There are some very interesting start-ups here that have pursued the strategy of operating very internationally from the outset and are 'born global companies'. Two thirds of all later hidden champions were immediately active internationally after their launch. Many start-ups pursue very innovative ideas for which the Austrian market is too small. These companies have also recognised that one of the success factors is R&D expenditure and therefore invest a lot of money in research and development. There is a good chance of becoming a hidden champion later on. In addition to high product quality, early internationalisation and innovation, a good working atmosphere in which employees feel comfortable and remain loyal to the company for years is also a success factor. There is also no hire and fire like in many listed companies.
So the hidden champions are multiplying despite the multiple
Crises of recent years, such as the pandemic, supply chain
difficulties, energy crisis and the Ukraine war?
Jungwirth: They are not decreasing. Some are disappearing because they have become too big and have exceeded the sales ceiling, but new ones are coming every year. Some of these operate in super niches or in areas where there is significantly less competition than on the mass markets. Family-run companies in particular pursue long-term strategies. One such entrepreneur once explained to me that he does not think in quarters, but in generations. When you pursue such long-term goals, the entire workforce pulls together because the employees know where you are headed. This is also different from listed companies, where the management board and the company goals change every few years. In my opinion, a long-term orientation has a better chance of success than changing strategies. All in all, the number of hidden champions is increasing. There are currently around 200 medium-sized global and European market leaders in Austria. That is a huge number. In addition to this, there are another 50 or so large global market leaders. Austria has a lot of great companies that are very successful internationally and that we can be proud of.