german mittelstand – how small & midsize german companies are uncommonly successful. best...
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German mittelstand (small and midsize companies, mostly) use a lot of 'uncommon common sense'. Germany has a quarter of America’s population and yet has four times the net per capita exports. It is the world’s second largest exporter – right behind China and way ahead of the US – and has the world’s largest trade surplus (ahead of even China). The ‘secret’ to Germany’s success in the global marketplace is the German Mittelstand – small and medium sized businesses (mostly) that are family owned, small-town German roots and DOMINANT worldwide market shares in their niches. The German Mittelstand thinks differently and do several things differently. Their circumstances have forced them to do things a particular way. All of those together have made them a potent group of companies that dominate niche markets worldwide. What can we learn from their Best Practices? What can we use to make ourselves even better? Just as the world comes to America to learn from us, we too can learn from the successful companies elsewhere – and become BETTER AMERICAN COMPANIES! Could the American midmarket propel the American economy as the Mittelstand does in Germany? Absolutely! Can the American midmarket use some of the best practices of the Mittelstand to become much more successful? Absolutely!! American SMBs can learn how German Mittelstand companies: * Define Niches * Find Markets * Command Premium Pricing * Invest in Customer Intimacy vs. Marketing We have spent considerable time in Germany speaking to experts on the Mittelstand and leaders of Mittelstand companies. We have spoken with German government policy makers, researchers, academics, business group leaders, economic researchers and management consultants. Included in our Knowledge Center are videos and podcasts of interviews with numerous Mittelstand experts, articles and presentations on lessons from the Mittelstand. There are lessons to be learned from all across the globe, but when it comes to midsize companies, the German Mittelstand is one of the best group of companies to learn from.TRANSCRIPT
from German Mittelstand (small/midsize) Companies & Experts
December 9, 2013 1 © 2013 Business Thinking Institute
All Rights Reserved
- Ram V. Iyer
1. Mittelstand companies dominate narrow niches GLOBALLY –exporting machines 1. Enjoy premium pricing in spite of high costs 2. Have steady supply of highly skilled labor and low turnover
2. German companies in one of top 3 positions in majority of industry sectors (Dr. Venohr)
3. Germany is the highest per capita (per person) exporter in the world 4. Germany is the second largest exporter (and largest net exporter)in the world
December 9, 2013 © 2013 The Midmarket Institute 2
German Mittelstand Mittelstand refers to small and medium-sized enterprises (SME) in German-
speaking countries, especially in Germany, Austria and Switzerland. Economic and business historians give Mittelstand companies more and
more credit for Germany's economic might. - Source: wikpedia.org
WHAT DO THEY DO? WHAT CAN WE LEARN?
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Pursue their passion (that happens to be a business)
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Have long planning horizon – 10-30 years
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Business Stewardship, not just profit-driven
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Operate in very narrow niche markets – go deep, go global (broad)
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About 70% are b2b companies
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Majority are based in small towns across Germany
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They are few things to a lot of people (not lots of things to lots of people)!
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Do not outsource core competencies 11
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Enter new markets with own subsidiaries
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Avoid strategic alliances
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Centralized in most companies
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Mostly family-owned & controlled - gradually changing
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Leaders have long tenures.
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“Dual System” of vocational training creates large pool of skilled craftsmen
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Create lifelong employees – mutual dependence
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Masters of incremental innovation, not ‘white space’
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Leverage large/demanding customers to develop new products
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Invest in customer intimacy more than in marketing Makes them formidable in services business
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Follow large customers into new markets
(low risk path)
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Command premium pricing for super niche products
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Germans support and recognize importance of mittelstand
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Has huge German government support
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Self-Financing for growth & innovation; seek ‘patient capital’, if external
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Generally do business with co-operative banks over large multinational banks
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‘Make the Machines that Makes the Tool’ to defend business
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Small German market has made them export-oriented © 2013 Business Thinking Institute
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Extending Products, Extending Markets (Exporting) Producing Great Quality
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Innovating ‘white space’ or ‘blue ocean’; Generally don’t follow management
sciences (unlike American companies) High prices drive customers in
developing countries to create ‘China-Price’ alternatives Centralized management by family
members -often lack deep management bench Basel II/III will make cost of capital
HIGH for them © 2013 Business Thinking Institute
Our Mittelstand Events & Articles
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Find more articles, videos, presentations on the German Mittelstand at
www.BusinessThinking.com/special-section/german-mittelstand
Left: Business Thinking Institute President Ram V. Iyer meets with third and fourth generation leaders of Glasbau Hahn, Mr. Till Hahn and Ms. Isabel Hahn.
Left: Professor Dr. Hermann Simon discusses outsourcing strategy with Business Thinking Institute President Ram V. Iyer.
Above: Prof. Dr. Bernd Venohr talks about the
Mittelstand model.
Below: Dr. Patrick Adenauer, President of ASU, talks about the strengths of German family businesses.
39 Photo: Anushka Iyer
Here are some leaders we interviewed
© 2013 Business Thinking Institute
© 2013 Business Thinking Institute All Rights Reserved
Click here to visit special section on ‘German
Mittelstand’ – exclusive video interviews, articles,
events,..
http://www.businessThinking.com/special-section/german-mittelstand
http://www.mittelstand.us
Ram V. Iyer President
Princeton, New Jersey +1 (609)275-6300
© 2013 Business Thinking Institute All Rights Reserved
CONTACT US
Ram V. Iyer is the Founder & President of the Business Thinking Institute (www.businessthinking.com), a Princeton, NJ-based organization that focuses on helping midsize companies, SMBs and those that serve them – identifying important challenges and sharing solutions, tools, providers and events to help businesses overcome their challenges.
Ram has traveled to over 35 countries and worked at client sites in 16 countries. He has experience in manufacturing, operations, sales, strategy, marketing and entrepreneurship. He has worked at startups, small, medium and large multinational companies. He has a deep interest in the German Mittelstand and has spent considerable time in Germany meeting experts and company executives. You can find videos of his interviews in Germany at www.BusinessThinking.com/special-section/mittelstand. He is a graduate of the Massachusetts Institute of Technology Sloan School of Management. You can reach him at [email protected].
• Prof. Dr. Herman Simon, Author ‘Hidden Champions’ http://www.hiddenchampions.com/ • Prof. Dr. Bernd Venohr, Professor of Strategic Management, Berlin School of Economics
– http://www.berndvenohr.de/english/index_e.htm • Dr. Patrick Adenauer, President of the Association of Family-owned Businesses (ASU) • Dr. Armgard Wippler, Mittelstand Advisor to the German Government • Prof. Dr. Sabine B. Klein, INTES-Institute for Family Business at WHU Otto Beisheim School of Management • Prof. Dr. Ulrich Blum, President, Halle Institute for Economic Research • Michael Holz, ifm – Institute for Mittelstand Research - http://www.ifm-bonn.org/ • Nicole Schaller, http://nicole-schaller.de/ • Till Hahn & Isabel Hahn, Glasbau-Hahn http://glasbau-hahn.com • Hans-Joerg Zobel, Former President, Festo North America
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CREDITS: Based on many documents, books and in-person interviews
© 2013 Business Thinking Institute