Hermann Simon

Hermann Simon is a renowned German business author, management thinker, and founder of the strategy and marketing consultancy Simon-Kucher & Partners. While you might not find his name splashed across financial news headlines, his ideas are a goldmine for thoughtful investors. Simon is best known for coining and popularizing the term ‘Hidden Champions’ to describe a fascinating category of highly successful but largely unknown companies. His work provides a powerful lens for identifying businesses that dominate their markets from the shadows. By focusing on the characteristics that make these companies great—such as extreme focus, global ambition, and relentless innovation—Simon offers a practical roadmap for investors seeking to uncover quality businesses that the rest of the market has overlooked. His research bridges the gap between academic theory and real-world business strategy, with a special emphasis on pricing power as a key driver of profitability.

Born in 1947 in Germany, Hermann Simon is a member of the “Thinkers50 Hall of Fame,” a global ranking of management thinkers. He has a foot in both the academic and business worlds, having served as a professor of business administration and marketing at the universities of Mainz and Bielefeld before founding his own highly successful consultancy. His firm, Simon-Kucher & Partners, is now a global leader in advising companies on pricing strategy—a topic he argues is the most critical and underestimated lever for improving profits. This dual background as both a thinker and a practitioner gives his work a unique, real-world credibility. For investors, Simon isn't just an academic; he's someone who understands what makes great businesses tick from the inside out.

Simon's most influential contribution to business and investment thought is the concept of the “Hidden Champion.” He first wrote about these companies in the 1990s after studying the backbone of Germany's export-driven economy, the Mittelstand (its small and medium-sized enterprises). He discovered a legion of companies that were absolute world-beaters in their field yet remained virtually invisible to the public.

According to Simon's research, a company must meet specific criteria to be considered a Hidden Champion. These traits are precisely what should make a value investor's ears perk up:

• Market Leadership: They must be among the top three companies in their global market or number one on their continent. This isn't about being big; it's about being the best.
• Mid-Sized Revenue: Typically, their annual revenue is below €5 billion. This size keeps them off the radar of most large-cap analysts and media outlets.
• Low Public Profile: As the name suggests, they are “hidden.” The average person has likely never heard of them or their products, even if they use them indirectly every day. For example, the world leader in cinema seating or the dominant producer of high-tech bottle-capping machines.
• Deep, Not Wide: Hidden Champions achieve dominance by focusing obsessively on a narrow niche market. Instead of trying to be everything to everyone, they aim to be the undisputed best at one specific thing.
• Relentless Innovation: They invest heavily in R&D—often double the industry average—to maintain their technological edge. This creates a powerful and durable economic moat.
• Close to the Customer: They don't outsource customer relationships. Their leaders and engineers work directly with clients to solve problems, leading to incredible loyalty and deep market insights.
• Born Global: From day one, these companies think globally. Because their niche is so narrow, they must serve the entire world market to achieve scale.

The Hidden Champion thesis is a treasure map for finding high-quality businesses. These companies often possess the very characteristics that legendary investors like Warren Buffett look for:

• Durable Competitive Advantages: Their market leadership and technological edge create deep economic moats that are difficult for competitors to cross.
• Exceptional Pricing Power: As the go-to provider in their niche, they can often dictate prices rather than just accept them, leading to fantastic margins.
• Long-Term Orientation: Many are family-owned or have management teams that have been in place for decades. They think in terms of generations, not fiscal quarters.
• Potentially Undervalued: Because they are “hidden,” they may not attract the attention of the broader market, offering opportunities for diligent investors to buy a wonderful company at a fair price.

Beyond Hidden Champions, Simon is a leading authority on pricing. In his book Confessions of the Pricing Man, he argues that companies obsess over costs and sales volume while neglecting the single most effective tool for boosting profitability: price. For an investor analyzing a company, this is a crucial insight. A company that competes solely on being the cheapest is in a precarious position. A company that commands a premium price because of its superior quality, service, or technology has a much stronger and more durable business model. When you evaluate a potential investment, ask yourself: Does this company have the power to set its own prices? Simon's work teaches us that the answer to this question reveals a great deal about the quality of the business.