“Don’t dance where the elephants play”

The secret has been revealed. After intellectual attention mostly turned the spotlight on all sorts of management guru sequences, the next big idea in the management world seems to be German’s ‘Mittelstand’.

Germany is the worlds greatest exporter after China and no European country has survived the financial crisis with such durable results. Herrmann Simon, from Simon-Kucher & Partners, dedicated his most recent sequel of ‘Hidden Champions’ Germany’s middle class.

According to the Economists Schumpeter article the ‘Mittelstand’s’ success is rooted in a fertile soil of “staid-sounding” industries, like mechanical engineering and leaving sexy ones to Silicon Valley.

The German middle class is very focused and has made it to their competitive advantage identifying niche areas. Once overcome the entry in difficult markets they manage to climb the ladder by constantly bringing up innovations and so staying ahead of the small percentage of competitors.

In the end, tiny niche markets can supply big global markets.

The graph below is a great visualizer of the ‘Mittelstand’s’ influence for Germany’s economy.

Further qualities listed in the article really seem to be what we as customers would expect from any successful operation, though are actually rare found: these include passionate salespeople as well as truly meant customer services. In fact, the majority of their revenue is made rather in service than products.

Yet nobody is perfect and so do management specialists warn the ‘Mittelstand’ not to miss the chances of turning their firms into giants to survive the globalisation. Further, they observed an increasing difficulties of attracting the world’s “brightest to make their career in rural backwaters“, as 70% are based in Germany’s countryside.

Finally, Theodor Levitt, doyen of the Harvard Business School, formulated a perfect statement: ” sustained success is largely a matter of focusing regularly on the right things and making a lot of uncelebrated little improvement every day

Reading this one could get sentimental, though the recruitment problem of successors for future ‘Mittelstand’ innovations really could make them become extinct.

And are the strengths of the ‘Mittelstand’ really what made Germany overcome the financial crisis with less bruises than other developed countries?

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6 Responses to “Don’t dance where the elephants play”

  1. rudi2020 says:

    Awesome, this means 0.3% of companies (everything but the “Mittelständischen” ) in Germany account for 59.2% income tax.

    However, Germany’s Mittelstand has overcome the crisis quite well, as this article reveals. I dont think theres is a long time recruitment problem at all: look at all the foreigners which degrees are now accepted in Germany. Or all the guys how don’t have to go to army and will therefore have finished their studies one year earlier.

    Thumbs up for the Mittelstand and Levitt’s remark on sustainable progress. Levitt’s (RIP 2006) statement looks almost like a philosophy.

  2. hem says:

    Excellent article about Soimon’s and Venohr’s Hidden Champions, now called “the Mittelstand”. Management teaching often miss that point!

  3. bravenewloock says:

    However, the “Mittelstand” is hit very hard by the crisis, perhaps harder than big companies, as their access to capital is limited. According to a recent study published on MittelstandsWiki, about 18% of all German Mittelständler have a “poor credit rating”, and 40% of all Mittelständler have a return on sales of 1% or less, making them extremely vulnerable to any disruptions…I don`t think that the Mittelstand is the new cardinal route to economic success…

  4. Pingback: Germany’s Mid Sized Companies content. Are they? | BraveNewFinance.

  5. olexa5 says:

    Thanks bravenewloock.

    Of course they are effected by the crisis and I think they would have being doing better if there wouldn’t have been the problem that banks were mistrusting each other and they refused to pass on the financial support they got from the government to those who are the actual backbone of the German economy. Maybe one could have chnaged this outcome by linking the support to conditions and re-considering the credit rating in the context of bad times.

    Still I’m convinced one shouldn’t forget what kind of characters are standing behind these companies and that they are our bright heads to be proud of.

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