Germany’s Midsize Manufacturers Outperform Its Industrial Giants

Called the Mittelstand in German, this class of highly specialized, often family-owned businesses makes up the backbone of the national economy. Germany is ranked fourth in the global economy, but it’s home to only 28 companies in the Fortune 500. Great Britain and France each have more. But when it comes to little-known leaders in their market, Germany has 1,307 “hidden champions,” nine times as many as those two countries combined. These midsize manufacturers make adhesives for mobile phones, food for ornamental fish, and the world’s most expensive set of headphones. What makes the companies so successful? They vary in export orientation, organizational structure, and ownership, but their highly specialized nature has led many analysts to say they’re all following a niche strategy. I believe the model is much more than a niche strategy. The German Mittelstand is at the forefront of a modern management model that builds flatter, more-innovative, and more-networked enterprises.