No Time for Chickens

As we meet with more and more of the midmarket companies in America, we are astounded at how many of them are hiding under their desk “riding the recession out.”

The old “Story of Chicken Little” comes to mind: Chicken Little was in the woods one day when an acorn fell on her head. It scared her so much that she trembled all over. She shook so hard, half her feathers fell out.

Chicken Little is a story for teaching courage and it seems that courage is what the midmarket lacks. This is troubling given that the midmarket is the backbone of the American economy.

The National Center for the Middle Market at Ohio State University’s Fischer College of Business conducts the largest survey of the midmarket. The survey of nearly 1,500 midmarket C-level executives concludes: “the health of the middle market is vital to overall U.S. prosperity.” The center estimates that the midmarket encompasses 195,000 businesses and contributes 34 percent of total employment in the US. The study categorized only nine percent of the midmarket companies as “growth champions” that exhibited double-digit revenue growth in 2010 and 2011, and projected the same for the rest of 2012.

According to Doug Farren, Director of the National Center for the Middle Market, the characteristics that set growth champions apart from slower-growing companies include: having a sharper focus on customers, investing in innovation, having a broader geographic vision for their business, cultivating a strong management culture, and doing a superior job with talent management. “It’s not who you are, it’s what you do that makes you a growth champion,” said Farren.

Investment in innovation was the strongest common theme across growth champions, he said. They tend to invest 2.5 times more into R&D per sales dollar than slower-growing companies.

Midmarket company executives that want to ascend the ladder from marginal growth into growth champions should ask themselves some key questions, including whether they allocate and protect funding for innovation, and how they can strengthen innovation and make it repeatable and measurable.

The recession is a time of opportunity for smart companies to out-maneuver the competitive field and for strong companies to put capital to work. It is the perfect landscape to enact strategy and make strides in the market.

Here at the Studio we frequently discuss the paralysis that occurs in the face of change and the desire to take calculated risk but the inability to pull the trigger: all part of the human condition. Our working theory at the moment is that growth and innovation isn’t possible without growth in the team and in the individual. To us, growth means expansion of the mind to empower humankind to walk through and explore the unknown in the fabled “door number two.”

The midmarket needs a shot in the arm. Don’t be a Chicken Little. Don’t be afraid. No, that’s not the sky falling. In fact, it may be opportunity knocking.