Der Mittelstand (The German Middle Order companies) © Robert Jones 2011, 2013 robert.jones@anglia.ac.uk

German Lessons The Economist 13th July 1996 Riled by the cult of American business methods, German management theorists are explaining what Germany does best. Take a look at this article in Lecture Part 2

Hidden Champions – Lessons from 500 of the World’s Best Unknown Companies Hermann Simon (1996) Hermann Simon (2009) Hidden Champions of the 21st Century – Success Strategies of Unknown World Market Leaders

No. of firms Turnover Employed SME Large firms http://www.ifm-bonn.org/index.php?id=1017

www. bis. gov. uk/assets/biscore/statistics/. /bpe_2010_stats_release www.bis.gov.uk/assets/biscore/statistics/.../bpe_2010_stats_release.pdf

2010 Prof. Dr. Bernd Venohr

Professor Dr Bernd Vernohr Germany's Mittelstand Champions - their secret recipe, Part 1 http://www.youtube.com/watch?v=S5B2fI3DwCw

2010 Prof. Dr. Bernd Venohr

Dr Vernohr’s findings German companies are leading in 2/3 industrial sectors Not just good products – it is a management model Often B-2-B – 90% of the 1,500 firms studied Mittelstand average €100 million, 600 employees, export 60% of revenues 70% are family companies 70% in rural areas or small cities, not large cities Not start-ups, average 70 years old Key elements: 1. Focus (Drucker) 2. Not monopolists – world class in key processes 3. Family-owned enlightened family capitalism

Strategy Focus on small segments but market dominant in their niche Stay away from volume / mass markets where the elephants play Compete on value Close to customers 20 subsidiaries, 90% have subsidiaries in USA, feedback for innovation Strong innovation, big spending on R&D, often in traditional areas Incremental innovation Good environment for innovation in Germany

World class Processes Sophisticated production networks, not just outsourcing All firms still manufacture Flexibility in work arrangements, zero to 60 hours / week Kaisen operational constant improvement, Toyota as benchmark

Governance - Corporate culture Family values Not just profits, mission is to generate something to pass to next generation Drucker – profit is constraint, a bi-product Stakeholder principle – based in community (Drucker companies as communities) Very long contracts Leaders love their businesses with a passion Leaders are engineers or scientists, no professional managers Flat organisation structure, look at human beings not human resources Solve customer problems better than other companies But must import some professional outside managers

Summary Common sense Value to customers “the purpose of a business is to create and keep a customer” If you are small, focus and go for leadership Continuous Improvement Long term management basis Motivate all stakeholders Leadership with passion / love / knowledge Treat employees as human beings Grow structure in line with growth

Professor Dr Bernd Vernohr Germany's Mittelstand Champions - their secret recipe, Part 2 http://www.youtube.com/watch?v=YgQ9HUbM7IM

Examples of British middle ranking companies http://www.youtube.com/watch?v=K2p2dLPyx2E

Examples of British middle ranking companies http://www.youtube.com/watch?v=ONYn9TyVGmQ

http://www.youtube.com/watch?v=CROJhEyMdhU

http://www. gecapital. co http://www.gecapital.co.uk/en/docs/LFTM_The_mighty_middle_UK_mid-market.pdf

http://www. gecapital. co http://www.gecapital.co.uk/en/docs/LFTM_The_mighty_middle_UK_mid-market.pdf

Around 21,000 British businesses meet the study's definition of a “mid-market” firm: revenues of between €20m and €1 billion and a workforce of between 150 and 3,000 The main challenge for British firms, by contrast, is getting hold of workers with the right skills Whereas big firms shed 1.5m jobs between 2007 and 2010 in Europe's four big economies, medium-sized ones added 192,000 to their payrolls. Small firms created 94,000 jobs in that time.

http://www. gecapital. co http://www.gecapital.co.uk/en/docs/LFTM_The_mighty_middle_UK_mid-market.pdf

Examples of British middle ranking companies http://www.youtube.com/watch?v=8brFB5y_QBE

What is the position of middle-order companies in your country ?