Ross Bradsen
Regional Director Southwestern Ontario
Sector Lead: Advanced Manufacturing
December 11th, 2013
MITTELSTAND COMPANIES
SMEs in Germany, Austria, Switzerland
• Owner-operated (many privately/family owned) with emphasis on longterm profitability (in contrast to the public corporations which face
quarterly pressure to meet short term expectations).
• Focus on the final customer /end user as much as, if not more than, the
immediate customer
• Achieve unprecedented efficiencies by designing a business model with
a razor-thin focus and learning to do few things really well
• To compensate for their razor-thin focus... they diversify internationally
and enjoy great economies of scale
page 2
Adapted from: http://en.wikipedia.org/wiki/Mittelstand
MITTELSTAND COMPANIES
• Export-oriented, they focus on innovative and high value manufactured
products and occupy worldwide niche market leadership positions in
numerous segments
• They become leaders by being “the best” and charging premium prices
over competition
• They maintain leadership by “staying the best” and “maintaining
premium prices”. They do what’s in the best long term interests of the
end user.
• They are not afraid to change. They innovate to stay “the best”
Adapted from: http://en.wikipedia.org/wiki/Mittelstand
page 3
MITTELSTAND COMPANIES
• Germany's Mittelstand companies (SME) are a very important part of the
country's economy. In 2003, these companies employed 70.2% of all
employees in private business, according to the Institut für
Mittelstandsforschung.[5] Some predicted their demise that year due to
narrowing of credit availability and a record number of firms collapsing.[6]
So far these predictions have failed to materialize, Mittelstand
companies continue to employ 70% of Germany’s workforce.
Adapted from: http://en.wikipedia.org/wiki/Mittelstand
page 4
MITTELSTAND COMPANIES
• Germany's Mittelstand companies (SME) are a very important part of the
country's economy. In 2003, these companies employed 70.2% of all
employees in private business, according to the Institut für
Mittelstandsforschung.[5] Some predicted their demise that year due to
narrowing of credit availability and a record number of firms collapsing.[6]
So far these predictions have failed to materialize, Mittelstand
companies continue to employ 70% of Germany’s workforce.
Adapted from: http://en.wikipedia.org/wiki/Mittelstand
page 5
A selection of well known original Mittelstand companies – note their longevity
1935
1923
1924
1913
1925
1899
1961
1975
1926
1934
1846
1964
ONTARIO COMPANIES
• Natural resources > export > elsewhere doing the value-adding?
• Many Ontario Mfrs. are branch plants > branch plant mentality?
• Very good at doing what head office wants: Quality-Cost-Delivery
• Management is Operationally focused
• Good at managing inputs and meeting HQ or customer demands. Ready
to serve: “I can quote on that”
• Operator or Innovator? Does management scour the world looking for
opportunities to innovate? Do they invest in continuous R&D? Do they
develop proprietary products? Can they raise risk capital? Do they focus
on immediate customers and on end users? Can they resist pricing
pressure by giving more/better than the competition?
page 10
ONTARIO COMPANIES
• Mfg. driven by a growing list of obligations:
1980s
1990s
2000s
2010s
page 11
QUALITY
QUALITY + COST
QUALITY + COST + DELIVERY
QUALITY + COST + DELIVERY + PRODUCT INNOVATION
ONTARIO COMPANIES
• Mfg. driven by a growing list of obligations:
1980s
1990s
2000s
2010s
QUALITY
QUALITY + COST
QUALITY + COST + DELIVERY
QUALITY + COST + DELIVERY
Operators
page 12
PRODUCT INNOVATION
Innovators
PRODUCTIVITY IS AN EQUATION
• Lagging productivity versus the US is often cited as the
challenge that must be addressed, but we focus mostly on
the denominator.
Productivity = Outputs
Inputs
Need
More
Focus
Here
Historic
Focus
Here
page 13
VERTICAL INTEGRATION
• Many Mfrs. have outsourced process steps (de-verticaled*). This
started in the 1980s, driven by institutional shareholder pressure for
short term financial results.
• Mfrs. that only “do one process well” have shed plant/capacity and
have further distanced themselves from end-users. The result is lost
inherent human know-how on how to leverage the value chain to
innovate to meet evolving customer needs.
-----------------------MANUFACTURER-----------------------
page 14
FINAL
CUSTOMER
or END USER
∗ Clayton M Chistensen at OCE Discovery Event 2009
VERTICAL INTEGRATION
• Many Mfrs. have outsourced process steps (de-verticaled*). This
started in the 1980s, driven by institutional shareholder pressure for
short term financial results.
• Mfrs. that only “do one process well” have shed plant/capacity and
have further distanced themselves from end-users. The result is lost
inherent human know-how on how to leverage the value chain to
innovate to meet evolving customer needs.
--MANUFACTURER--
page 15
FINAL
CUSTOMER
or END USER
∗ Clayton M Chistensen at OCE Discovery Event 2009
VERTICAL INTEGRATION
• Many Mfrs. have outsourced process steps (de-verticaled*). This
started in the 1980s, driven by institutional shareholder pressure for
short term financial results.
• Mfrs. that only “do one process well” have shed plant/capacity and
have further distanced themselves from end-users. The result is lost
inherent human know-how on how to leverage the value chain to
innovate to meet evolving customer needs.
-------------------MANUFACTURER------------------- FINAL
CUSTOMER
or END USER
page 16
∗ Clayton M Chistensen at OCE Discovery Event 2009
ONTARIO MITTELSTAND
1882
1957
1966
1957
1927
page 17
Investors fare better in the fold: Family owned firms outperform others
http://www.theglobeandmail.com/report-on-business/small-business/sbmanaging/succession-planning/investors-fair-better-in-the-fold---family-ownedfirms-outperform-others-study/article12738084/
Thank you