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Ross BradsenRegional Director Southwestern OntarioSector Lead: Advanced ManufacturingDecember 11th, 2013
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MITTELSTAND COMPANIES
page 2
SMEs in Germany, Austria, Switzerland
• Owner-operated (many privately/family owned) with emphasis on long-term 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
Adapted from: http://en.wikipedia.org/wiki/Mittelstand
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MITTELSTAND COMPANIES
page 3
• 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
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MITTELSTAND COMPANIES
page 4
• 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
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MITTELSTAND COMPANIES
page 5
• 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
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1899
1913
1935
1961
18461934
1975
1923
1964
1924 1925
A selection of well known original Mittelstand companies – note their longevity
1926
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ONTARIO COMPANIES
page 10
• 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?
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ONTARIO COMPANIES
page 11
• Mfg. driven by a growing list of obligations:
1980s QUALITY1990s QUALITY + COST2000s QUALITY + COST + DELIVERY2010s QUALITY + COST + DELIVERY + PRODUCT INNOVATION
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ONTARIO COMPANIES
page 12
• Mfg. driven by a growing list of obligations:
1980s QUALITY1990s QUALITY + COST2000s QUALITY + COST + DELIVERY2010s QUALITY + COST + DELIVERY PRODUCT INNOVATION
Operators Innovators
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PRODUCTIVITY IS AN EQUATION
page 13
• 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 FocusHere
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VERTICAL INTEGRATION
page 14
• 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.
Clayton M Chistensen at OCE Discovery Event 2009
FINAL CUSTOMER or END USER
-----------------------MANUFACTURER-----------------------
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VERTICAL INTEGRATION
page 15
• 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.
Clayton M Chistensen at OCE Discovery Event 2009
--MANUFACTURER-- FINAL CUSTOMER or END USER
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VERTICAL INTEGRATION
page 16
• 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.
Clayton M Chistensen at OCE Discovery Event 2009
-------------------MANUFACTURER------------------- FINAL CUSTOMER or END USER
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ONTARIO MITTELSTAND
page 17
1882
1966
1957
1957
1927
Investors fare better in the fold: Family owned firms outperform others http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/succession-planning/investors-fair-better-in-the-fold---family-owned-firms-outperform-others-study/article12738084/
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Thank you