Open your daily newspaper, and you find multiple references to large, multibillion-dollar companies. These players include household names such as Procter & Gamble or Ford Motor Co., as well as more obscure business-to-business names such as Schlumberger.
Whether hailed or vilified, those behemoths dominate the headlines with daily announcements on mega-mergers, sky-high executive compensation or reshuffling of management ranks. These also are the companies featured in most business school case studies that prepare the next generation of corporate leaders.
At the other extreme, you find the small players, those that fall under the ever-changing U.S. Small Business Administration guidelines — small fry destined to remain obscure unless they are deemed promising startups with the potential to strike it big.
Hidden between these two poles, however, is a vast layer of “middle-market” businesses, who are neither small nor very large, that play a very important role in the national economy.
Rarely studied
With a few exceptions such as the Mittelstand, widely recognized as the backbone of the German economy, middle-market companies are rarely studied by scholars, who are loath to go through the trouble of collecting data on mostly nonpublic firms. The media who finds them less “glamorous” — their economic importance notwithstanding — also seldom covers these businesses.
Thus, a zoom-in on middle-market companies — their features and unique challenges — is long overdue.
Lack of resources
And what are the challenges typical of such companies? To begin with, they are in great need of resources, ranging from capital to an established brand name to political clout.
Middle-market firms lack the scale to compete with the “big boys,” and may be reluctant to take them on if their survival is dependent on work provided by the large players. Their access to capital is more limited, constraining their growth and, in difficult times, their very survival.
Often the most critical shortage faced by middle-market companies, however, is knowhow. Such companies may not know much about the broader national market, not to mention the world beyond, and how to get there without burning their fingers, or worse.
They may be disconnected from the final consumer, lacking key data on customer needs and changing tastes and trends. They may not even know where to look for the missing information and, once obtained, how to systematically analyze and make sense of it.
In short, they don’t know where to start on the route of becoming a bigger company.
Also, unlike promising startups, they may not be attractive to talent seeking growth opportunities, or to experienced senior executives from a large firm where much of big company knowledge is embedded. (Business schools, for one, are reluctant to encourage recruitment into these lower paying firms so as not to jeopardize their rankings.)
In the next column installments, we will try to shed some light on the middle market firm and how it can meet its challenges.
Oded Shenkar is the academic director at the National Center for the Middle Market, the leading source for knowledge, leadership and research on midsized companies, based at the Fisher College of Business, in collaboration with The Ohio State University and GE Capital. Oded is the Ford Motor Co. chair in Global Business Management and a professor of management and human resources at the Fisher College of Business.
