The first lesson: Goods of excellent quality
That, Mr. Volcker, is the first and most fundamental lesson. It all starts with a high bar: Produce goods of such quality and innovation that the world wants your stuff. In America, that’s what Steve Jobs and Bill Gates did. In Germany, an entire economy is organized around this principle, especially industrial and manufacturing products. In the end, the best mousetrap wins.
President Obama talks about the strength of America’s small businesses. But it is not the same as small- and medium-sized businesses in Germany. They are called, simply, the Mittelstand (“middle estate”) and they are the backbone of German business. I’m astonished by the numbers: the Mittelstand makes up 90 percent of all German companies, providing 60 percent of all jobs that require social security payments and 80 percent of all official vocational positions.
Together they create huge chunk of Germany’s GDP and, most significantly, fully 22 percent of all Germany’s exports.
There have, of course, been massive failures, thousands of bankruptcies. Old family companies have disappeared. Many have been bought by larger companies. And yet many survive—an estimated three million firms—and thrive. In Germany, the entire country has not been consolidated into sprawling conglomerates, as is often the case in the United States. Big business is hugely important in Germany. But the Mittelstand is Germany’s secret weapon.
Typically, these companies have revenues below $1.25 billion and fewer than 3,000 employees, sometimes fewer than 100. And they are mainly family-owned firms nestled comfortably in the German countryside.
But what else distinguishes them?
“It is a mentality,” says Klaus Fischer. “It means risk and responsibility, being close to the people, being independent—including independent of the banks, if possible.”
Fischer ought to know. He is CEO and owner of Fischer, the famed maker of fastening systems—like small nylon wall anchors—plus automotive interiors and technical toys. Fischer is headquartered in the Swabian village of Waldachtal, 40 miles south of Stuttgart.
In the early 1970s, when the company founded by his father in 1948 was faced with global competitive pressures, Fischer traveled to Japan. There he studied the just-in-time production methods, the “Kanban” approach to inventory and production, and revamped his ailing business.
Today “kanban”—which translates from Japanese as “signboard” and functions as an inventory control system—is visible all over the production floor where eight million anchors are produced every working day. Color-coded paper slips on a tracking board show the state of every production order.
During a walk through the plant, I am amazed that it is as clean as a dairy, just like in Japan. Fischer adopted another Japanese concept: “kaizen”, or continual improvement. “We try to implant in every worker the improvement gene,” says Fischer.
Klaus Fischer’s favorite words today are “lean” and “waste.” He loves the first and hates the second. Fischer adapted the Japanese methods to his own taste, then cleverly rebranded the whole package as the “Fischer Process System.”
With slick marketing savvy like that, perhaps it is no wonder that Fischer competes well in the world market. Its fastening systems division alone produces 14,000 different products in eight plants around the world. Its automotive systems division is known for car interiors: ventilation jets, dashboards, cup holders. Its primary customers are the luxury brands: Daimler, BMW, Audi.
Fischer even sells his methodology and Process System through a new division called Fischer Consulting.