What can UK manufacturing learn from the Mittelstand, those mid-sized, family-owned businesses who form the bedrock of German industry? To find out, I joined a delegation of UK manufacturers and union representatives – representing a diverse range of businesses, including MBDA, Brompton Bicycle, GE Aviation, Airbus and Rolls-Royce – on a two day study tour to Baden-Württemberg.
Over the two days, we had the opportunity to visit four leading Mittelstand companies based in the Stuttgart area: KOMET (high precision drilling, reaming and threading tools), MAHLE (engine, filtration and thermal management systems), HELLER (4- and 5-axis machining, milling and turning centres) and BALLUFF (industrial sensors).
Whilst we came to learn as much as we could from the companies we visited, the information flow was by no means one-way. Our hosts were understandably proud to show off their products, demonstrate their manufacturing capabilities and explain what they believe is the secret of their success. But it soon became evident that they also hold UK manufacturers in great esteem, respecting us for our innovation, our flexible workforces and our spirit of entrepreneurialism.
So what is the secret of the Mittelstand’s success? Whilst there is clearly no magic formula, three recurring themes ran through all four businesses we visited.
Taking the long view
Mittelstand companies are built to survive. This is not just about passing down the family business from generation to generation. It’s about shunning the short-termism that being dependent on bank finance and capital markets engenders. And it’s about investing for the future, taking calculated risks and prioritising long-term sustainability over short-term profits.
Automating the future
German manufacturing has many things going for it. Low labour costs is not one of them. Despite this, Mittelstand businesses have fought to maintain domestic manufacturing, believing that co-locating innovation and production creates a positive feedback loop. Many Mittelstand companies over Eu100 million turnover still have their only production facilities in Baden-Württemberg, which has one of the highest labour costs in Europe.
Where they have invested in overseas manufacturing, it is to be closer to the customer, rather than to chase the lowest production costs. All four companies we visited are on a mission to automate their manufacturing processes and to apply lean principles. Industry 4.0 – the next generation of automation technologies and digital systems – is not just a buzz word in Germany. It’s already a reality.
Winning the battle for skills
One aspect that both UK and German manufacturing have in common is that we are both locked in a war for skills. But the Mittelstand companies we visited seem to be winning the battle. How are they able to do this in an area of Germany which boasts leading employer brands such as Porsche, Mercedes, Siemens and Bosch?
All four companies we visited have invested in their own, in-house apprentice training centres, equipped with the latest kit. All four also work with the Duale Hochschule Baden-Württemberg (DHBW) in Stuttgart, where students study for degrees in mechanical, electrical and mechatronic engineering, following the Duales Studium system, whereby they alternate 3 month stints studying at the university with 3 months working for their employer.
My thanks go to Will Stirling of Stirling Media and Jon Tudor of True North Excellence who organised the study tour. For more information on the next Mittelstand tour, please contact Will on 07920 179496 or at email@example.com, or Jon on firstname.lastname@example.org.