from German Mittelstand (small/midsize)
Companies & Experts
- Ram V. Iyer
December 9, 2013

© 2013 Business Thinking Insti...
German Mittelstand
Mittelstand refers to small and medium-sized enterprises (SME) in Germanspeaking countries, especially ...
December 9, 2013

© 2013 Business Thinking Institute

3
Pursue their passion (that happens to be a business)
December 9, 2013

© 2013 The Midmarket Institute

4
Have long planning horizon – 10-30 years
December 9, 2013

© 2013 Business Thinking Institute

5
Business Stewardship, not just profit-driven
December 9, 2013

© 2013 Business Thinking Institute

6
Operate in very narrow niche markets –
go deep, go global (broad)
December 9, 2013

© 2013 The Midmarket Institute

7
About 70% are b2b companies
December 9, 2013

© 2013 Business Thinking Institute

8
Majority are based in small towns across Germany
December 9, 2013

© 2013 Business Thinking Institute

9
They are few things to a lot of people
(not lots of things to lots of people)!
December 9, 2013

© 2013 Business Thinking ...
Do not outsource core competencies
December 9, 2013

© 2013 Business Thinking Institute

11
Enter new markets with own subsidiaries

December 9, 2013

© 2013 Business Thinking Institute

12
Avoid strategic alliances

December 9, 2013

© 2013 Business Thinking Institute

13
December 9, 2013

© 2013 Business Thinking Institute

14
Centralized in most companies

December 9, 2013

© 2013 Business Thinking Institute

15
Mostly family-owned & controlled - gradually changing

December 9, 2013

© 2013 Business Thinking Institute

16
Leaders have long tenures.

December 9, 2013

© 2013 Business Thinking Institute

17
December 9, 2013

© 2013 Business Thinking Institute

18
“Dual System” of vocational training creates
large pool of skilled craftsmen
December 9, 2013

© 2013 Business Thinking In...
Create lifelong employees – mutual dependence

December 9, 2013

© 2013 Business Thinking Institute

20
December 9, 2013

© 2013 Business Thinking Institute

21
Masters of incremental innovation,
not ‘white space’
December 9, 2013

© 2013 Business Thinking Institute

22
Leverage large/demanding customers to
develop new products
December 9, 2013

© 2013 Business Thinking Institute

23
December 9, 2013

© 2013 Business Thinking Institute

24
Invest in customer intimacy more than in marketing
Makes them formidable in services business
December 9, 2013

© 2013 B...
Follow large customers into
new markets
(low risk path)
December 9, 2013

© 2013 Business Thinking Institute

26
Command premium pricing for
super niche products
December 9, 2013

© 2013 Business Thinking Institute

27
December 9, 2013

© 2013 Business Thinking Institute

28
Germans support and recognize importance of
mittelstand

December 9, 2013

© 2013 Business Thinking Institute

29
Has huge German government support
December 9, 2013

© 2013 Business Thinking Institute

30
December 9, 2013

© 2013 Business Thinking Institute

31
Self-Financing for growth & innovation;
seek ‘patient capital’, if external
December 9, 2013

© 2013 Business Thinking Ins...
Generally do business with co-operative banks
over large multinational banks
December 9, 2013

© 2013 Business Thinking In...
‘Make the Machines that Makes the Tool’ to
defend business

December 9, 2013

© 2013 Business Thinking Institute

34
Small German market has made them export-oriented
December 9, 2013

© 2013 Business Thinking Institute

35
 Extending Products,
 Extending Markets (Exporting)
 Producing Great Quality

December 9, 2013

© 2013 Business Thinkin...
 Innovating ‘white space’ or ‘blue ocean’;
 Generally don’t follow management
sciences (unlike American companies)
 Hig...
Our Mittelstand Events & Articles

Find more articles, videos, presentations on the
German Mittelstand at
www.BusinessThin...
Here are some leaders we interviewed
Left: Professor Dr. Hermann Simon
discusses outsourcing strategy with
Business Thinki...
http://www.mittelstand.us

Click here to visit special
section on ‘German
Mittelstand’ – exclusive
video interviews, artic...
CONTACT US
Ram V. Iyer
President

Princeton, New Jersey
+1 (609)275-6300
info@businessthinking.com
Ram V. Iyer is the Foun...
CREDITS:
Based on many documents, books and in-person interviews
•
•
•
•
•
•
•
•
•
•

Prof. Dr. Herman Simon, Author ‘Hidd...
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German Mittelstand – How small & midsize German companies are uncommonly successful. Best Practices - Innovation, Specialization, Exporting, Alliances, Vocational Training, Customer Intimacy, Premium Pricing

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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.

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German Mittelstand – How small & midsize German companies are uncommonly successful. Best Practices - Innovation, Specialization, Exporting, Alliances, Vocational Training, Customer Intimacy, Premium Pricing

  1. 1. from German Mittelstand (small/midsize) Companies & Experts - Ram V. Iyer December 9, 2013 © 2013 Business Thinking Institute All Rights Reserved 1
  2. 2. German Mittelstand Mittelstand refers to small and medium-sized enterprises (SME) in Germanspeaking 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 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 WHAT DO THEY DO? WHAT CAN WE LEARN? December 9, 2013 © 2013 The Midmarket Institute 2
  3. 3. December 9, 2013 © 2013 Business Thinking Institute 3
  4. 4. Pursue their passion (that happens to be a business) December 9, 2013 © 2013 The Midmarket Institute 4
  5. 5. Have long planning horizon – 10-30 years December 9, 2013 © 2013 Business Thinking Institute 5
  6. 6. Business Stewardship, not just profit-driven December 9, 2013 © 2013 Business Thinking Institute 6
  7. 7. Operate in very narrow niche markets – go deep, go global (broad) December 9, 2013 © 2013 The Midmarket Institute 7
  8. 8. About 70% are b2b companies December 9, 2013 © 2013 Business Thinking Institute 8
  9. 9. Majority are based in small towns across Germany December 9, 2013 © 2013 Business Thinking Institute 9
  10. 10. They are few things to a lot of people (not lots of things to lots of people)! December 9, 2013 © 2013 Business Thinking Institute 10
  11. 11. Do not outsource core competencies December 9, 2013 © 2013 Business Thinking Institute 11
  12. 12. Enter new markets with own subsidiaries December 9, 2013 © 2013 Business Thinking Institute 12
  13. 13. Avoid strategic alliances December 9, 2013 © 2013 Business Thinking Institute 13
  14. 14. December 9, 2013 © 2013 Business Thinking Institute 14
  15. 15. Centralized in most companies December 9, 2013 © 2013 Business Thinking Institute 15
  16. 16. Mostly family-owned & controlled - gradually changing December 9, 2013 © 2013 Business Thinking Institute 16
  17. 17. Leaders have long tenures. December 9, 2013 © 2013 Business Thinking Institute 17
  18. 18. December 9, 2013 © 2013 Business Thinking Institute 18
  19. 19. “Dual System” of vocational training creates large pool of skilled craftsmen December 9, 2013 © 2013 Business Thinking Institute 19
  20. 20. Create lifelong employees – mutual dependence December 9, 2013 © 2013 Business Thinking Institute 20
  21. 21. December 9, 2013 © 2013 Business Thinking Institute 21
  22. 22. Masters of incremental innovation, not ‘white space’ December 9, 2013 © 2013 Business Thinking Institute 22
  23. 23. Leverage large/demanding customers to develop new products December 9, 2013 © 2013 Business Thinking Institute 23
  24. 24. December 9, 2013 © 2013 Business Thinking Institute 24
  25. 25. Invest in customer intimacy more than in marketing Makes them formidable in services business December 9, 2013 © 2013 Business Thinking Institute 25
  26. 26. Follow large customers into new markets (low risk path) December 9, 2013 © 2013 Business Thinking Institute 26
  27. 27. Command premium pricing for super niche products December 9, 2013 © 2013 Business Thinking Institute 27
  28. 28. December 9, 2013 © 2013 Business Thinking Institute 28
  29. 29. Germans support and recognize importance of mittelstand December 9, 2013 © 2013 Business Thinking Institute 29
  30. 30. Has huge German government support December 9, 2013 © 2013 Business Thinking Institute 30
  31. 31. December 9, 2013 © 2013 Business Thinking Institute 31
  32. 32. Self-Financing for growth & innovation; seek ‘patient capital’, if external December 9, 2013 © 2013 Business Thinking Institute 32
  33. 33. Generally do business with co-operative banks over large multinational banks December 9, 2013 © 2013 Business Thinking Institute 33
  34. 34. ‘Make the Machines that Makes the Tool’ to defend business December 9, 2013 © 2013 Business Thinking Institute 34
  35. 35. Small German market has made them export-oriented December 9, 2013 © 2013 Business Thinking Institute 35
  36. 36.  Extending Products,  Extending Markets (Exporting)  Producing Great Quality December 9, 2013 © 2013 Business Thinking Institute 36
  37. 37.  Innovating ‘white space’ or ‘blue ocean’;  Generally don’t follow management sciences (unlike American companies)  High prices drive customers in developing countries to create ‘ChinaPrice’ alternatives  Centralized management by family members -often lack deep management bench  Basel II/III will make cost of capital HIGH for them December 9, 2013 © 2013 Business Thinking Institute 37
  38. 38. Our Mittelstand Events & Articles Find more articles, videos, presentations on the German Mittelstand at www.BusinessThinking.com/special-section/german-mittelstand 38
  39. 39. Here are some leaders we interviewed 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. 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. © 2013 Business Thinking Institute Photo: Anushka Iyer 39
  40. 40. http://www.mittelstand.us Click here to visit special section on ‘German Mittelstand’ – exclusive video interviews, articles, events,.. http://www.businessThinking.com/special-section/german-mittelstand © 2013 Business Thinking Institute All Rights Reserved
  41. 41. CONTACT US Ram V. Iyer President Princeton, New Jersey +1 (609)275-6300 info@businessthinking.com Ram V. Iyer is the Founder & President of the Business Thinking Institute (www.businessthinking.com), a Princeton, NJbased 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 info@businessthinking.com. © 2013 Business Thinking Institute All Rights Reserved
  42. 42. CREDITS: Based on many documents, books and in-person interviews • • • • • • • • • • 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 December 9, 2013 © 2013 Business Thinking Institute 42

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