Hidden Champions: Outsourcing the Right Way

  • Welcoming the government’s new playbook.

The German economy is rightly lauded for its power and sustained levels of stable growth. The manufacturing sector in particular employs over 15% of the workforce. For context, manufacturing in the US accounts for just over 10% of the workforce and, in gross and percentage terms, German manufacturers employ more than their British and French counterparts combined.

You might  be forgiven for thinking that large industrial operators like Siemens and Volkwagen are the reason for this but it’s not the case. In fact, the real strength of the sector is in its Hidden Champions – a term coined by Professor Hermann Simon. These are specialist SMEs who are characterised by highly-focused & customer-driven strategies as well as growth & market leadership. They’re termed ‘hidden’ because they’re usually low-profile, operating quietly away from the public eye and being largely self-financed rather than through equity or capital markets. Frequently, these companies operate away from high-population cities and hubs, often found in regional towns of less than 50,000 people, affording workers the opportunity for a higher standard of living while contributing to regional development strategies and decentralisation.

So, what’s the parallel with Her Majesty’s Government’s new ‘Outsourcing Playbook‘ for procuring public services from external suppliers? Two critical aspects:

  1. Early engagement, consultation and encouragement of broad participation particularly with SMEs and VCSEs.
  2. A commitment to procurement processes being of proportionate duration and effort to the size and complexity of the contract opportunity so as not to create a barrier to entry for SMEs and VCSEs.

Working, as we at GES do, with high-quality SMEs (and as one, we like to think) it’s easy to understand this policy. We can see first hand, the waste and inefficiency brought by big company mentality and the contrasting lean innovation brought by engaging SMEs. Innovation is an overused word in the civil engineering & construction sectors without doubt. We subscribe to the view that innovation doesn’t just mean some new system, product or process. Rather, innovations are often found in doing what we’ve always done, just better. Really high quality SMEs in the construction & civil engineering sectors are characterised by a high measure of commitment to quality production, highly qualified technical & vocational staff with low staff turnover, deep & focused specialist knowledge and close customer relationships / partnerships.

So, kudos to John Manzoni and his new playbook. If the government adopts the strategies contained therein, the small uplift in overhead costs for managing more subcontractors will be returned is spades by the efficient delivery & access to innovative staff that specialist SMEs will offer. These ‘Hidden Champions’ might just save the industry at large.

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