What Canadian manufacturers can learn from Germany's champions
It doesn’t get much better than this for a business: Stars like Cameron Diaz, Bradley Cooper and Elizabeth Hurley being photographed using your product as part of their jet-set lifestyle.
For German luggage maker Rimowa, exposure for its distinctive grooved suitcases goes beyond celebrities to also include strategic placement in numerous Hollywood movies.
More importantly, the sleek suitcases have caught the fancy of fashion-conscious globetrotters around the world who are willing to pay up to own one.
Rimowa, a private company founded in Cologne in 1898, sells suitcases at prices reaching as high as $1,700 US. Worldwide sales have consistently registered double digit growth in recent years.
For Rimowa’s operation in Cambridge, Ontario, one of four manufacturing sites around the world, the popularity of the suitcases has meant steady work since the factory opened in 2009 to serve the North American and Asian markets.
In spring 2013, Rimowa moved into a new 80,000-square-foot facility in Cambridge, double the size of the original location. It now employs 300 workers.
Carsten Kulcke, Rimowa’s top man in North America, says the secret of the company’s global success is the result of a single-minded focus on quality, from design and engineering to customer service.
“It’s mastering this product. We control the whole product chain and make sure that once it’s put into the marketplace, it has the quality the brand stands for.”
Rimowa, a client of BDC, is a member of what’s known as Germany’s Mittelstand, a group of mid-sized manufacturers that has attracted international attention for its remarkable exporting success.
Focus on niche markets
The Mittelstand companies focus on niche markets they can dominate with their high-quality products and knack for innovation.
The companies are typically family owned, but hold market shares in their niche that can reach as high as 90%.
They helped maintain the strength of the German economy through the 2008 recession and eurozone difficulties.
Become world class
Hermann Simon believes Canadian entrepreneurs can learn from what he calls Germany’s “hidden champions.” Simon, a Bonn-based strategy and marketing consultant, is the author of Hidden Champions of the 21st Century.
“There are two important lessons,” Simon says. “The first is focus. Only focus leads to world class. So you focus on one thing, be it a product or a technology, where you are really good and try to become world class there.
“But focus makes for a small market. So the second lesson is that you have to make your market large by going international.”
Simon says a key characteristic of the hidden champions is their commitment to continuous improvement, becoming “a little better every year, a little closer to perfection.”
One of Simon’s favourite examples is the German company Flexi, which holds a 70% global market share in its product category–retractable dog leashes. He says Chinese competitors have repeatedly tried to take market share from flexi but have been unable to overcome the durability and quality advantages of the German company’s products.
Refuse to outsource
Another important trait of Germany’s hidden champions is their refusal to outsource manufacturing to low-cost producers.
At Rimowa, the company is exclusively focused on manufacturing suitcases—with the exception of a few travel accessories. Rimowa employees make its products from start to finish, allowing the company to work on improving quality while protecting its intellectual property.
Along the way, there have been continuous improvements to components. In 2000, for example, Rimowa made a huge breakthrough when it began making suitcases from polycarbonate, a lightweight but highly durable plastic.
Kulcke believes Canadian manufacturers can adapt these lessons to compete and win around the world.
“On the premium end, there is a lot of room in every category to apply some brain power, master a product and carve out a niche.”