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Mittelstand Disruption Chance
It is not without a reason that small and medium-sized businesses are called the "Mittelstand" or backbone of the German economy. Round 99% of VAT-liable enterprises in Germany belong to the middle businesses and in fact are the driving force of the German economy. The German medium-sized companies have existed for decades building a top-notch reputation in the whole world. „Made in Germany“ has always meant reliable top quality products while high equity quotas have generated the general acceptance for German companies anywhere in the world.
Sounds like a success story, doesn’t it? Why do we have to bother at all about the American phenomenon named „disruption” that lingers in the distant horizon assuming the shapes of Airbnb, Tesla, and Uber?
What effect would disruption have on the splendid middle-size business in Germany? You wouldn’t believe. It’s huge. It is a decisive influence!

What makes up a SME?

Mid-sized business is today a common term for small and middle businesses in the economic sector, service sector, trade, as well as freelance specialists (for instance, architects, tax advisors, lawyers and so on). The borderline between concerns and large companies is not always consistent, and is often determined by the number of employees (e.g. in the production sector 50 to 499 employees or the turnover (within € 50 million annually).

What do we understand by Disruption?

Disruptive technology is an innovation that has the capacity to push the existing products or services out of the market for good.

The telecommunication industry has a beautiful example. Remember how SMS has become a forgotten service we no longer feel a necessity in? It happened due to the arrival of instant messages on the market. Today everyone uses WhatsApp. It is a curious fact that before 2012 SMS-messaging volumes had been increasing in Germany, after which the figures plummeted dramatically. The growing number of Whatsapp users has become the major reason here: in October 2012 there were roughly 9,3 million Whatsapp users, while by the mid-2017 this figure had skyrocketed to the point of 35 million users in Germany.

Back in 2015, The Global Center for Digital Business Transformation presented the anticipated sequence of the changes that the technology disruption is going to bring about to various industries.


Disruption-related challenges that mid-sized companies face

Many enterprises in the mid sector, — perhaps even all of them, — have understood that complacency in business is fraught with tricky consequences. Because resting on laurels allows some daring but client-oriented economy speedboats, a.k.a. well-financed startups, to obtain a greater competitive advantage and overtake the established companies in the lee.

The customer picture keeps transforming all the time, regardless of the size of the market players. Consumers are no longer dependant on huge companies, they are becoming more knowledgeable in different spheres, they can always google and make double check on any product or service, — it doesn’t matter whether we speak about B2B or B2C, — and form their own independent opinion and, moreover, share it with their friends and colleagues in a matter of a second due to the above mentioned instant messaging technologies.

Despite enjoying the long-term fruitful season of success from the past market activities, companies have to realize that their customer picture inevitably gets outdated and the digital incompetence speeds up the process of disruption. External market players run mid-sized businesses and can waste their time for resources allocation. The battle for the customer interface is doomed to be lost if a company bases its assumption on the numerous possible channels of the customer communication and complies a „patchwork carpet” instead of strategically well-thought out portfolios.

6 impulses SME's can use to make the most of disruption

  1. Be brave to initiate a fundamental value transition in your company. The transition from perfectionism, completeness, and thoroughness to flexibility, agility, and feedback oriented product development process. Relying on these principles you can build a new product prototype, but do it as fast as possible and test it on your customers. Based on customer feedbacks adjustment and implementation of the next loop can be performed. These short-cycle batches and customer-oriented approach will help you to come up with products and services that really work for your consumers.
  2. Invest in the right recruitment and respective digital-training of your staff. Show your team what agile, digitization, innovation and customer-centric policy mean. Integrate every team member in the process, encouraging them to optimize their own space in their spheres by using digitization. This way your employees can actively and intrinsically co-design the company transition.
  3. The Internet is used as a functional and partially transparent basis, — keep it in mind and be fast in deploying technological possibilities to compete and counterbalance the „speedboats“ I mentioned above. Digitization now allows you to keep everything you need cloud-based, which is cost-effective and virtually infinitely scalable.
  4. Embrace your business model and your company. Yes, that's right. Encourage your team to think like a startup that wants to penetrate the market and bite off their share of the pie. This approach can enable you to define your countermeasures or perhaps even push ahead with your own spin-off company in the field.
  5. Center your sales communication in a way that would present your market management or technology leadership in a simple way to your customers and in a transparent relation to your customers’ needs. Along with this, your marketing and sales teams/departments into little commu7nitties that can grow and be empowered on a self-sustainable level.
  6. Understand what key competencies your business model is based on, and how, in the worst case scenario you can use these competencies to build a brand new business model. Stay curious to maintain the proactive vision to avoid dealing with trouble when trouble has caught up with you.

Bottom line

Disruptive forces have always been here in the world of economy and business, and they will always be there. The mid-sized companies are not to be perceived vulnerable in the face of this force. Staying aware and learning to be proactive, agile, and trying to push ahead of the curve will enable middle businesses to turn any disruption force into to their advantage.

Are you a mid-sized company and willing to develop sustainability and the potential to generate future-proof solutions? Do you want to act disruptively yourself and would like to find a cool sparring partner? Come on, contact us and let’s kick it off.

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André Wehr
André Wehr
As a founder and entrepreneur, I experience every day how important Traction and Customer Centricity is. It makes the difference between a nice idea and a viable business.

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