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German mid-size companies examples of growth

Tuesday 13 November, 2012

The German American Chamber of Commerce held an event highlighting the backbone of the German economy, the “mittelstand”, mid-sized firms, in Success Strategies from the “Mittelstand.”  This was a fairly big event, as Dr. Juergen Friedrich, CEO of Germany Trade & Invest was flown in from Germany, who noted that American firms are the biggest investors in Germany & that transatlantic commerce comprises 2/3 of the world’s economy.  In Germany, mechanical & electronic technologies contribute to 50% of all exports & 34% of Foreign Direct Investment (FDI).

Ken Bremer, Director of Germany Trade & Invest in Chicago, provided a little background about German mid-sized firms.  95.3% of Germany’s 3.7M companies are family-owned, & 85% are managed by the owners.  24.7% are focused on manufacturing, vs. 13% in the US.  Mid-sized firms train 83% of all trainees, employ 13.9M workers or 61% of all employees, & generate 39.1% of total turnover of German companies.  1300 firms are named as market leaders in electronics, engineering, & industrial products, compared with 366 in the US.  Export revenues have risen from €144B in 2000 to €186B in 2010.  German mid-sized firms use these strategies for success:

  • long-term approach
  • stable client relationships
  • human resources continuity
  • close ties to the local region
  • innovation-54% of firms brought new products to market vs. 34% average for EU firms
  • sound finances-48% with their own equity, 31% debt, 13% public assistance
  • government support

The 1st panel discussion topic was Advanced Manufacturing, which included panelists from Fraunhofer IWS, Rocklin Manufacturing Co., Trebing & Himstedt Prozessautomation GmbH & co. KG.  Orders are down since the onset of the crisis & there is a decline in the knowledge & experience in manufacturing as well.  The US suffers from a herd mentality as they transition from NAFTA-induced macquiladoras in Mexico to manufacturing in China & reshoring back again.  It’s a challenge to find the right person to help in global expansion.  In many cases a local presence is required for support.  Monitor transfer prices on a daily, weekly, & monthly basis.  Follow your customers or other partners to foreign markets-for example 1 firm simple dove-tailed on Siemens distribution network, which got them access to off-the-radar prospects.  It’s also important to create an American website to increase visibility in the US.  To overcome some of these barriers, build personal relationships & do what you say you’re going to do, all of which requires commitments of time & money.  Do your due diligence, be patient, & have realistic expectations.

Panel discussion #2 centered around Green Tech, featuring speakers from Berghof Systems, SIGA Development LLC, & WEMA Glauchau.  1 German firm survived state ownership, but when it was sold to a Soviet firm, they were no longer able to track where their machines were.  They found the Koreans are more reasonable than the Chinese.  Once you learn to export, replicate the process.  Products are developed in Germany to solve specific problems, then standardized for other markets.  Another firm used specific strategies to expand from, for example, Grand Rapids, MI, to Detroit, to Chicago.  Energy policy should establish renewable portfolio standards, determine where we can recycle energy, & provide other incentives to work more efficiently.  Scarce resources are always limited for small firms, but small firms typically have more time than money.  It’s especially difficult to build a business without training, so firms are looking abroad to hire.  Germany’s dual training programs with 1 week in school & 1 week @ work for 3 1/2 years creates well-trained apprentices who don’t just work machines, they learn the systems.  “If you want to sell smart products, you can’t hire dumb people.”  Solving customer problems, finding solutions for customer needs, & simplification by integrating processes all drive German innovation.  Developing products & processes faster & better than competitors is the best way to assure intellectual property protection.  Many countries have banks similar to America’s Export-Import Bank which provide guarantees for sales to high-risk countries.  Knowledge transfer is a problem-German firms bring employees to Germany to expressly deal with the problem.  Learn by doing.  Go there.  Only the paranoid survive.

Other contributors came from LEM Software/Engineering Consultancy for load & energy management, Luri Watersystems GmbH, & Photon AG

While you’ll rarely see meteoric rising firms like Google or Facebook come from Germany, you almost always count on 2-3% productivity improvement every year.  It’s a different mentality, but 1 that works for them. American firms would do well to learn from Mittelstand firms strategies for success.

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