Success Factors for Micro and Small Businesses

There are five success factors for Germany's SME leaders:

One, extreme focus on the needs of global customers

Talk to these SMEs and you'll hear a lot of the same things: "We want to be the best company in our field "We want to be the best in our field", "We want to be committed to this field for the long term". At Heidelberg Printing Machines, you can still order parts for a press that has been in service for 100 years - a signal that the company retains the ultimate commitment to its customers.

These companies are committed to going hand in hand with their own customers in technology. Joachim Kreuzburg, chief executive of cell-culture company Satorius, said, "We don't do gold diggers. We sell shovels to gold diggers." German SMEs struggle to keep up with the latest technological developments in their respective industries.

Most of their customers are corporate clients, and this extreme focus on the customer requires significant investment in innovation and research and development. Germany's SME leaders have five times as many patents per employee as large corporations, but each patent costs one-fifth as much.

II. The belief that short-term profits are not everything

It is not a coincidence that only a small proportion of German SMEs choose to go public. These companies often choose to keep their holdings in family hands. Their constant goal is long-term value. There are also family businesses that, even though they employ top external managers (more common among fourth- or fifth-generation family proprietors) to run the business, still show an ability to control the long-term direction of the business and sustainable customer relationships.

Three: Considerable attention to the workplace and employees

I have observed that managers of German SMEs spend a lot of time on the factory floor in order to get to know the workers who work for them on a deep level. Managers have one thing in mind: their job is to deal with their employees and help them grow. This personal, friend-like relationship not only lasts, but fosters a collaborative spirit and a culture of mutual trust. This focus on people is reflected in the employee retention rate: German SMEs have a turnover rate of less than 2%. Long-term employment relationships are an important reason why employees perform well and remain motivated.

Four: Setting ambitious goals

Management at German SMEs gives direction to every employee, leading to ambitious goals that are characterized by a unique spirit of cooperation. Martin Herrenknecht, CEO of Herrenknecht Germany, believes that ambitious goals will enable employees to work tirelessly in the same direction and ultimately reach their goals.

The company that just built the world's longest rail tunnel, the 35-mile-long Gotthard Base Line Tunnel, is obsessed with becoming the global leader in mechanized tunneling technology. There is no profit in the eyes of an entrepreneur with such an ambitious goal, only a mission. 40 years ago, Martin Herrenknecht founded this engineering company alone. Over the past few decades, his perseverance and passion have allowed him to triple the number of employees, and he relies on a team of 5,000 "reliable experts" to achieve the company's ambitious goals.

5. Building on family traditions

German SMEs are particularly good at drawing on some of the qualities that family businesses have been able to pass on for decades: fairness, a long-term orientation, a family-like atmosphere, and a willingness to encourage innovation.

Of course, this comes with some risks. Without succession planning for the next generation, these businesses will become very vulnerable. Another risk is the possibility of cliques in the family going to war if jealousy, resentment or hostility develops between siblings.

In my view, these small and medium-sized businesses represent the heart of the German economy more than the large, well-known companies. The success of the German economy is based in large part on the flat-out capitalism and down-to-earth enterprise of small and medium-sized businesses. These companies know that excellent products and services are the cornerstone of long-term customer relationships, and that leadership in technology and innovation builds sustainable advantages. Their core value is trust: trust in their people and trust in their customers. These unorthodox and innovative companies teach us a valuable lesson about how to survive in turbulent times.