Insights

Digitizing the heart of Germany's Economy – the “German Mittelstand”

Practice Lead - Client Services
Valtech

May 24, 2017

How are Digitization and the German Mittelstand related?

Facts first: the phenomenon of the “German Mittelstand” existed long before the phenomenon of digitization or even of digital transformation. But what does one have to do with the other – and why is there more emphasis than necessary on German small and middle-sized businesses in the media discussion about digitization?

Ultimately, this gives the “German Mittelstand” the impression that digitization is a necessary evil and a rational compulsory event. In most minds, even feelings such as "fear" and "desolation" could spread.

Digitization, however, begins precisely there: in the heads of the decision-makers. And it is certainly still a long way from the head to the heart. And also, to the supposed heart of the German economy. Particularly as partners and pioneers in digitization, we take responsibility for countering the media panic and digital agitation with solutions, rather than ongoing doom scenarios.

If you want to promote digitization, you need to understand what and how decision-makers think about it and what defines the “German Mittelstand”.

It is precisely because of its medium-sized corporate landscape that Germany has an unbeatable advantage in global competition. The phenomenon is still admired and appreciated abroad. Especially, because it cannot be replicated easily. When we speak of middle-sized enterprises, we actually mean a special kind of entrepreneur. The most beautiful proof, in my opinion, is that the "German Mittelstand" is now part of other languages. Being a “Mittelständler“ is a matter of mindset and less of quantitative criteria such as number of employees and turnover. And digital transformation is also a question of mindset, as we ourselves always convey to our customers. Both phenomena therefore have a common basis: the attitude of people, that makes the difference and guarantees success.

"German Mittelstand" cannot be understood through numbers and facts alone. It is important to keep in mind that the spectrum ranges from the small craftsman to the world market leader with several billion euros in sales. In the same range, the so-called "hidden champions", the secret world champions, are also found as a special group.

Nevertheless, quantitative characteristics help to understand the importance of the “Mittelstand” even more clearly, in spite of all definition related blurs. Approximately 16 million people work in such small and medium-sized enterprises. This is approximately 60% of employees subject to social insurance. We are talking about more than 3 million, or about 99%, of all private-sector companies in Germany, which contribute slightly more than half of overall economic performance.


As a digitization company, not to consider the middle class at all and not to deal with the differentiated attitudes of the decision-makers in these companies, would be at least “half wrong”, quantitatively speaking. Or, in other words: “Mittelstand” is far more than the middle.

What characterizes “Mittelstand” is the unity of property and management as well as financial independence. In short: the responsibility with your own wallet. Thus, courage becomes a force of innovation. It is precisely this courage that we have to support as a digitizer – with our solutions. For example, to manufacture new products faster, to better serve customers' wishes, to offer new business areas and services, thus further strengthening the innovative power.

Who, if not we? We need to help, strategically support and, above all, explain digitization and identify opportunities. As standardized as necessary and as innovative as possible, to maintain the decisive difference as a competitive advantage for companies. This is how the “Mittelstand” will succeed in digitization, too.

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