German lessons

So the Mittelstand is likely to keep powering Germany’s export machine for years to come. But does it have any lessons for the rest of the world? Mr Simon says that although 80% of the world’s medium-sized market leaders are based in Germany and Scandinavia, successful Mittelstand-style companies can be found everywhere from the United States (particularly the Midwest) to northern Italy, so the model does seem to be transferable.

Three general lessons—for politicians as well as corporate strategists—follow from this. First, you do not need to try to build your own version of Silicon Valley to prosper; it is often better to focus on your traditional strengths in “old-fashioned” industries. Second, niches that appear tiny can produce huge global markets.

The third lesson is that Western companies can preserve high-quality jobs in a vast array of industries so long as they are willing to focus and innovate. Theodore Levitt, one of the doyens of Harvard Business School, once observed that “sustained success is largely a matter of focusing regularly on the right things and making a lot of uncelebrated little improvements every day.” That is a lesson that the Germans learned a long time ago—and that the rest of the rich world should take to heart.

http://www.economist.com/blogs/schumpeter