What CEOs Can Learn from Germany’s Hidden Champions

They’re among a group of mid-sized German manufacturers that all CEOs might want to know more about, according to the Harvard Business Review.

A recent analysis by the German Savings Bank Association shows these companies—known as Mittelstand—had an average profit margin in the last fiscal year of 7.3% – beating the 6.3% achieved by the 110 largest German companies.

And this outperformance is no coincidence. The Harvard Business Review says they share a host of common success factors, including a determination to offer the best product in any given field, coupled with an extreme focus on customers’ wishes.

“Some companies are good at reinvesting in employees, but it’s about helping them become better employees.”

At a company called Heidelberger Druckmaschinen, for example, customers can still order replacement parts for a 100-year-old printing machine.

Investment in innovation and research and development is especially strong among these companies, which somehow have five times more patents per employee than larger companies, but at a fifth of the cost per patent.

Other common characteristics include having a focus on long-term value, rather than short-term profits, and possessing managers who form very close relationships with their workers.

‘These companies understand that excellent products and services are the foundation of a long-term customer relationship, and that leading in technology and innovation builds sustainable strengths,” The Harvard Business Review says.

“Their core value is trust with both their workers and their customers. These unorthodox, innovative companies hold important lessons for the rest of us on how to survive in turbulent times.”

Ross Kelly :Ross Kelly is a London-based business journalist. He has been a staff correspondent or editor at The Wall Street Journal, Yahoo Finance and the Australian Associated Press.