Austrian companies: Take the curtain calls!
The good news: Austria's companies are successful all over the world. The bad news: hardly anyone knows about this. A couple of years ago, I thumbed through The New York Times and a headline caught my eye. It read: "If it wasn't for the Umlaut..." Coming from a country that poses an obstacle for many American tongues to be pronounced correctly because of such an Umlaut – "Österreich" – (it is also sometimes confused with the country down under), I immediately felt that this article must be about Austria. Of course, I was right! To be precise, the article was about Grüner Veltliner and actually praised the quality and richness of flavor of this Austrian wine.
The author acknowledged its increasing popularity in the U.S. and that Grüner Veltliner nowadays can be found on restaurant lists across the country, even to the author's surprise who wrote: "That's one of those happily inexplicable things." Actually, such an assessment happens to Austria quite often. Austria has the lowest unemployment rate in Europe; our country is the second richest within the European Union; we enjoy higher growth rates than most of the other European Union member states, and managed to overcome the financial crisis of 2008/09 rather quickly. If observers take notice of our solid fundamentals, they come up with titles like "The Austrian Miracle" (Foreign Policy, November 2012) – suggesting that these excellent basic indicators are also "one of those happily inexplicable things".
While this asssessment might be fine for Austrian wine, it is definitely not a reliable basis for a country and business location to explain the foundation of its competitive position. Austrian companies are masters of globalization. Foreign trade is of central importance to Austria – and this trend is unbowed. Whereas exports (goods and services) only made up 37.1% of GDP in 1990, by 2000 that figure had already risen to 46.2%. During the past years, there has been further growth in this sector at a lightning speed: nowadays exports make up almost 60% of the entire economic output. The international competitiveness of Austrian products and services is no accident. In Austria, 2.8% of GDP is spent on Research and Development. In the Eurozone, only Finland and Germany achieve a similar level. In 2013, Austrian companies and universities filed 2,395 patent applications.
In proportion to its population size, thus, Austria ranks fourth within the monetary union. Creativity, intelligence and quality are the trademarks of Austrian products, as shown by the structure of Austrian exports, which mostly consist of complex or high-tech products, the manufacture of which requires a great deal of knowledge and expertise. Export successes are also the reason behind the important role that the industrial sector plays in Austria. In the years between 1990 and 2013, the industrial quota rose from 17.1% to 22.5%, contrasting the international trend. Austria now has the fourth highest industrial quota among the EU-15. Many of these Austrian companies that successfully conquer global markets are actually global champions; that is world market leaders in their respective fields. Yet, many international investors and analysts, but also economists and business commentators are quite simply unaware of the extraordinary performances of these Austrian "hidden champions".
The term "hidden champions" was actually coined by the German author and strategy consultant Hermann Simon, who has identified more than 2,700 of these barely known market leaders worldwide. According to his long-term research, the Germanspeaking area (Germany, Austria, and Switzerland) is home to more than 55% of all hidden champions worldwide. Although this area has a population of less than 100 million (1.5% of the world population), there are more small and medium-sized world market leaders located there than in the rest of the world. Hermann Simon attributes the success of hidden champions to some distinctive factors:
• outstanding in-house innovation and research
• a highly skilled labor force thanks to the dual system of apprenticeship and vocational education
• a strong export oriented approach
• and a high vertical integration of manufacture
Austria's hidden champions feature all of these traits. They have managed to excel in industries that often look extremely competitive on the surface – such as the steel industry or automotive supply sector – but due to their high-degree of specialization, they have achieved global market leader positions in their respective niches. Considering these hard facts, Austria's solid economic position and the achievements of its companies do not come as a surprise or as "one of those happily inexplicable things." However, it is our task as members of the business community to convey this message to international stakeholders. For this reason, some of the largest and most innovative companies in Austria, together with the Vienna Stock Exchange and Austria's Central Bank, have joined forces under the 21st Austria initiative, in order to start a dialogue with opinion leaders around the world.
By the means of in-depth discussions and conferences in financial hubs such as New York, London or Hong Kong, we want to initiate a fruitful exchange about strengths and challenges that Austria and the wider region face as a business location and feed the learnings of this conversation back to Austrian decision makers. As a privately- driven initiative we simply apply the lessons learned from our hidden champions to Austria: constant improvement and ongoing innovation is the best prerequisite for sustainable success.
By Dkfm. Dr. Claus J. Raidl
Spokesperson of 21st Austria
President of the Austrian Central Bank
Published in Austrian Information: Summer/Fall 2014