The Mighty Marvelous Mittelstand Rules:
SBI/Success By “Ichironomics”

Who is the Number One exporter in the world?
Who has (probably) the highest wages in the world (not CEO "wages"!)?

If you answered that it was a nation of 83 million folks in Western Europe—namely Germany—you'd be correct.

If you answered Siemens you'd be wrong.
So, too, BASF—wrong.
Or Commerzbank—wrong again.

If you answered "Mittelstand firms" you would be spot on!

But I'm getting ahead of myself ...

Last week's BusinessWeek featured the best companies to go to work for as a fresh-caught college grad. Deloitte was #1 (I'm a Deloitte fan, especially their program for retaining women and getting them into senior leadership roles, but best in the U.S.?). The likes of Google was on the list, too. But, to me, personally, not a damn company on the list ought to be on the list—that's a little heavy-handed, but not by much.

Why, oh frigging why, is it always the Gargantuan Companies (because they are the magazines' advertisers??) on such lists (repeat, this week's Fortune has a biggie on the best leader development programs—100% monster institutions again) and not any of America's wonderful middle-sized companies?

About a year after In Search of Excellence appeared (October 15, 1982), my partners, Bob LeDuc and Nancy Austin (my coauthor on A Passion for Excellence) and I decided to launch a series of 4-day intensive workshops on implementing the main ideas in Search. We called them "Skunks Camps" (after Lockheed's renegade "Skunkworks"—look it up in Passion, or on the Web), and held them 100 miles south of home (Palo Alto), at a lovely spot on the Pacific called Pajaro Dunes.

Considering the firms in Search, 100% Big Dudes (who else would McKinsey guys feature?), it was obvious to us that our participants would be, say, VPs or EVPs of Fortune 500 companies.


We had a few F500 denizens—mostly from Search companies such as 3M and J&J. The rest? American "Mittlestand":

Frank Perdue, and son Jimmy, of Perdue Farms. ("It takes a tough man to make a tender chicken.")
Tom Malone, president of the stellar textile firm (and, arguably, inarguably to me, America's quality leader) Milliken & Company.
Don Burr, founder of People Express.
Tom Monaghan, founder of Domino's Pizza.
Stew Leonard, and son Stew Jr, of Stew Leonard's.
Hal Rosenbluth of Rosenbluth International, the pathbreaking travel services firm.
John Fisher, the acclaimed IT guru from a much smaller Bank One of Columbus.
John McConnell of the steel's Mittelstand star, Worthington Industries.
Bob Buckman of the Memphis specialty chemical firm, Buckman Labs—Bob almost single-handedly invented what we now call (and genuflect to) "knowledge management."

And so on.* (*Some "troubles," for sure, at Stew Leonard's and People Express—but absolute pathbreakers at the time, 1984.)

I fell in love with these guys!!

Talk about a tough audience! No bullshit tolerated—and if they heard something good, it was launched 3,000 miles away in the likes of Salisbury, MD (home of Perdue), the day after it was discussed at Pajaro Dunes. E.g., Frank P liked Tom Malone's description of Milliken University, about the first of the corporate "universities," and got up the next day at 4 a.m. PST, called Salisbury, and launched Perdue University.

Hence, I've had a soft spot for the likes of these folks since 1984—and as time has passed I have come to appreciate the likes of them, and the likes of the techie start-ups from "the Valley," too, as the true engines of our economy.

And, to this day they are unsung!

I was so taken, that on the advice of the fellow who headed our European operations, Lennart Arvedson, I decided to explore this odd German phenomenon, called the Mittelstand. To make a long story as painless as possible, a year or so later I could be found in Germany on a three week TV shoot—for a program on this "Mittelstand phenomenon." It was by far the best show I've ever done, among a dozen or so, though the "obscure" topic meant less attention than for most of the others.* (*You'll find the stories in print in my Liberation Management.)

These Mittelstand firms tend to ... DOMINATE (exactly the right word) ... high-end niche markets. The three we featured in our show "The Mighty Mittelstand: The 'Secret' to Germany's Leadership of the World in Exports" (yes, they led then, too—including, amazingly, textile exports!) were:

Playmobil (part of Brandstatter Enterprises), the peerless toy makers; Trumpf, the high-end machine tool superstar; and Rationale, supplier of tippy-top high-end cooking equipment (the "combi-cooker") to most of the high-end restaurants in the U.S. and Europe.

Each tallied a few hundred million dollars in revenue, and all three were growing nicely. Oddly enough, to this day I think I'm the only American "management guru," prominent or otherwise, who has studied these firms—I guess when people see the astounding German export figures, they assume it was Siemens or BMW or the tooth fairy, and leave it at that.

The point of all this is to insist that there are thousands of Fab Firms out there that are really worth working for when one exits university—focused on product, surviving only by continuous innovation, manageable in size, meritocratic to a fault (they can't afford not to be), and providing incredible opportunities to get ahead quickly. The chief problem is, the youngster has to find 'em; they aren't among the Gargantuans who make it easy by showing up with donuts at the college employment center.

Oh dear, I do love, love, love Canada's London Drugs (beating the hell out of their new opponent, Wal*Mart, with 4X Wal*Mart's sales per square foot) and Canada's Cirque du Soleil; Connecticut's $50 million+ Basement Systems (the basement mold and dampness removal superstar; founder Larry Janesky's book, Dry Basement Science, is edging up to 150,000 copies sold—no kidding, I carry it around with me as an icon to what's possible, anywhere and everywhere); Ralph Stayer's Johnsonville Foods; David Kelley's IDEO, the premier product design and innovation consulting firm; the late Harry Quadracci's Quad/Graphics; Dennis Littky's exciting The Met/Big Picture schools; Maxine Clark's supercalifragilisticexpialidocious Build-A-Bear; Rick Semler's seriously cool Brazilian powerhouse, Semco; Derby CT's Griffin Hospital (home of the fantastic, patient-centric Planetree Alliance); and every damn one of the firms featured in Bo Burlingham's Small Giants: Companies That Choose To Be Great Instead of Big.

Yup, these are my stars, home to many of the best leaders I've met in business, unsung engines of German and American economic prowess—and noticeably, to me, AWOL from the likes of the BizWeek and Fortune "bests" lists.

Publisher Rich Karlgaard took me over the top on this in his "Digital Rules" commentary in the current issue of Forbes (October 1). He beats up Michigan ("Tackling the Michigan Problem" is his title) and praises to the sky the likes of Minnesota and Washington. Consider Spokane:

"Spokane, like Minneapolis-St Paul, refuses to bet the economy on one or two industries. Rather, it practices what one city booster calls 'Ichironomics.' Like the Seattle Mariners' center fielder, Ichiro Suzuki, we try to hit singles and doubles. We want to improve the overall conditions for small businesses, not chase the large employer."

"Ichironomics"—love it. Wonder how you translate that into German?

(NB: Mr Suzuki has 227 base hits, and he's batting a stratospheric .351, going into the last week of MLB's regular season—in 2004 he broke the all-time record for hits in a single season, with a staggering 262.)