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Central Asian Leaders meet Hidden Champion in the Rhineland

[12.11.2018]

In June 2018, the TÜV Rheinland Academy gladly received executives from Kazakhstan, Kyrgyzstan and Uzbekistan in Cologne as part of the Manager Training Program. It is unusual to have three countries from Central Asia represented within one group of MP participants, and it actually brought their business community closer together. The training not only sparked trade between the German and foreign companies, but also catalysed more regional economic cooperation.

“How to do business with Germany” was a conceptually-oriented training session which familiarised participants with the peculiarities of the German economy, including the “Hidden Champions”: SMEs that have achieved notable international success.

What exactly are “Hidden Champions”?

These are medium-sized companies that are leaders in niche market segments. By focusing on small, mostly premium market segments, hidden champions avoid price battles with corporations or large companies. This positioning allows them to evolve a high degree of specialisation and significant customer proximity. These “hidden gems” are not household names, and are mostly family businesses. Also, they are regarded as the driving force behind German export success.

After theory comes practice, so a visit had been arranged to LAD GmbH in Troisdorf, a hidden champion in the field of food packaging. The owner-managed company has been producing and selling high-quality absorbent pad-making machines for the food industry since 2005. The pads are affixed in plastic trays to soak up moisture. Meat, fish or berries can be fed right into the customers’ packing stations. The company’s clients include many well-known supermarket chains.

The managing director of the company, Alexander Stieben, welcomed the Central Asian executives together with his daughter, the personnel manager at LAD. Everyone relaxed right off the bat, among other reasons due to the fact that Mr Stieben and his family had migrated from Kazakhstan to Germany some time ago. So there were many commonalities, reciprocal inquiries, and a shared language: Russian.

First off, Stieben gave a presentation of his company and its production, and described the differences in setting up and managing a company in Germany versus the current business models and corporate management in Kazakhstan. Since he had already been an entrepreneur in his home country, he was able to use concrete examples to support the distinctions. The visitors demonstrated a high level of interest with their numerous questions about the German taxation system, HR management and leadership, safety regulations and relevant legal matters. During the subsequent tour, the entrepreneurs were able to observe the machines in action. State-of-the-art ultrasonic welding technology affixes the absorbent pads at two to five placement points in the plastic trays, thus meeting extremely high food hygiene standards.

The MP participants expressed surprise that the company deliberately pursued such a narrow specialisation, without seeing a need to diversify. As a mid-growth company, though, LAD is not focused on the mass market, Stieben explained, and does not follow a cost-leader strategy. In fact, their laser focus on a very limited range of products is what allows them to maintain such consistent quality and innovation in production, and this justifies a premium price strategy. In this model, participants learned first-hand how to implement the theoretical concepts in actual business life. So the “Hidden Champion” concept is diametrically opposite, in terms of strategic management, to the “market share concept”, in which companies try to gain as much of a market share as possible in order to benefit from economies of scale.

Many of the Central Asian executives were deeply impressed by this approach and plan to incorporate its elements into their future corporate governance. The six representatives of the food industry were particularly interested in the absorbent traylining machines. Two of the participants took home product samples to introduce to their own team, in hopes of integrating the processes into their own production lines.

LAD already has a presence on the Russian market and plans to expand into Kazakhstan. Stieben was all the more pleased with this great opportunity to make new contacts with potential, future Central Asian customers.

TÜV Rheinland Akademie