2007 was $2.4 billion, so it is a sizeable operation.⁷

      An equally sizeable company that most people have never heard of is Körber AG. But if you smoke cigarettes, what you have in your hand almost certainly involves the work of Körber, because more than 90 per cent of the machines in the world that make cigarettes have been built by the company.

      Körber only goes back to 1947, a stripling compared with the other two companies. Its founder, Kurt A. Körber was born in Berlin in 1909, but when the war broke out he was an engineer at J. C. Müller, a cigarette-machine manufacturer in Dresden. He survived the bombing of the city in 1945 and after the war managed to get from Russian-controlled Dresden to Hamburg, in the British sector, where there were three cigarette factories. He helped them re-establish production and then got the licence from J. C. Müller to set up a cigarette-machine factory under the name of Hauni. That was the basis of the present business, which now dominates the world market.

      But it kept on diversifying, adding business lines in which it could build a similar degree of brand leadership. So it went into paper processing in 1970 and then, as demand for cigarette machines declined, added an electronic manufacturing unit that produced a machine for extracting oxygen from the air. In the 1990s it developed a system for cutting small pieces of paper (such as cheque books) and has 90 per cent of the world market for that. But cigarette machines are still its largest division.

      Kurt Körber died in 1992 and since then the business has been owned by a non-profit foundation that he set up, so it remains a ‘family’ business in this sense. And like many other Mittelstand family firms, it is run by professional managers, who report to the foundation. So in terms of ownership it is as secure as any commercial company can be.

      2. WHAT ARE THE LESSONS?

      Germany did not make some sudden collective decision that it would dominate the world market for certain types of manufactured products or that it would create a collection of medium-sized companies to help it do so. The development of the Mittelstand was not the result of any policy but rather derived from an attitude that technical education and commercial competence were essential for economic prosperity. That emphasis on technology and education goes back at least to the emergence of Germany as a modern state in the second half of the nineteenth century, under, most notably, the chancellorship of Otto von Bismarck. But one of the companies highlighted here precedes that, for Christian Dierig can trace its roots to the early days of the Industrial Revolution in Germany.

      Attitude, it would seem, matters more than policy. Germany has created some huge companies, as have all developed nations, for that is part and parcel of the process of economic development. Nor has the country sought to restrict the size of its companies so they remain medium-sized; that would be absurd. For some reason, though, no other nation has managed to sustain such a body of excellence, and the special characteristics that have permitted the Mittelstand’s companies to thrive despite huge military, political and social upheavals carry messages for the rest of the world.

      There are, I suggest, a number of these messages.

      The first is that dominance matters. To be successful over a long period, a business has to be a leader in its particular market segment. In fast-growing economic conditions, many indifferent companies can thrive as they simply get carried upwards by the tide of growth. The German economy has had its periods of rapid expansion, including the Wirtschaftswunder, or economic miracle, in the years after the Second World War.⁸ But it has also gone through the fire and, particularly after the unification of East and West Germany in 1990, struggled with slow growth and high unemployment.⁹ For medium-sized companies to survive such times they must have deep strength-and one of the sources of strength is dominating the market they serve.

      That also means serving niches, the second message. If you are only medium-sized and want to dominate your market, you are bound to pick a few narrow areas of excellence. You cannot compete on price so you have to be better, in your chosen field, than anyone else. You have the advantage that you can know all the possible customers in the world, and they will make you aware of any potential competition. If your customers want some new product or service, you are in the best position to supply it.

      This leads to a third message-that although most of the Mittelstand is in manufacturing rather than services, much of the added value lies in adding service to the product. Most of these companies are selling to other companies, not to the end user, so there is less need for conventional marketing skills. Instead the quality of service they give, in terms of back-up, sticking to delivery times, fixing problems and so on, makes it worthwhile to pay the additional cost of German wages. How does Germany remain the world’s largest exporter, while having about the highest wage costs anywhere? One of the answers is that back-up is superlative. That is very deep-rooted. I recall as a child that my father found his German suppliers were much better than his British ones at attention to detail, from little things such as responding to customer queries to the rather larger one of paying his commission on time!