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At the Center of Things: A Talk with Doug Farren of the National Center for the Middle Market

It wasn’t too long ago that Doug Farren’s main purpose for perusing Ohio’s State Columbus campus was to snare promising supply chain talent on behalf of one of the school’s corporate neighbors (and Farren’s employer), Limited Brands. Today, Farren’s mission is to draw talent to the campus or rather to the National Center for the Middle Market, a partnership between Ohio State’s Fisher College of Business and GE Capital that has quickly become a kind of mecca for middle-market knowledge seekers. Today, as associate director of the center, Farren finds himself very much at the center of things.

MME: The center clearly appears to have quickly set down some deep roots. What’s next? How will the mission of the center evolve?

Farren: As we enter our second year, we’re beginning to think more strategically about the role that we play. When we started, we wanted our basic mission statement to be that of a thought leader and provider of insight that will help middle-market companies to grow. Now, we’re starting to think about the various audiences that have a deep interest in the work that we do. Number one, of course, would be the middle-market companies. They remain the key constituency, but we now have a policy maker audience. And we really need to continue to demonstrate that the insights that we provide inform and educate those on Capitol Hill as well as state, local, and regional governments. Then we have the media, which help with the amplification of these types of issues and messages. We have our academic audience — for whom, quite frankly, the middle market has never been a consideration for much academic research. Just like the media, the academic community turns to the Fortune 500 for many of their studies.

MME: It’s amazing how large enterprises continue to dominate press headlines …

Farren: Well, these are the names that people know, and the academic community is no different. Very often, academics have wanted to study the issues impacting large businesses, or to some degree they will look at start-ups and the entrepreneurial area, but the middle has very often been ignored. Our student audience is another, and that’s been a true mission of the center as well. How do you get students to look at the middle market as an attractive career destination? So we’re doing some of that education through things like career fairs, and we’re going to start profiling middle-market companies each month just so that we start to put a face on who these companies are, because there is just a general lack of understanding of these companies.
The final group is all of the service providers. So there’s GE Capital. They entered into this endeavor really with the mission of understanding a major part of their customer base. They lend to a pretty sizable portion of the middle market, and what began as an initial idea to do a one-time research project eventually evolved into this idea of the center. We’re thinking, Now that we have a base of content, and we’ve established things like the Middle Market Indicator, and there are academic research projects under way — there’s a foundation of really solid insight and content to build upon and for amplifying the message that is coming out of the center. This means engaging more deeply with the companies themselves and further building out programs in executive education.

MME: What issues over the next 12 months do you view as being of deep concern to middle market companies?

Farren: Our fourth quarter survey is in the field right now, so we’ll have data shortly, but when we look across all of the segments, the healthcare challenge remains on a lot of people’s minds. And then there’s the fiscal cliff, of course, which could perhaps be somewhat resolved. But things like the talent issue and the ability to attract and retain people, and a kind of underlying skills mismatch, could very likely come into sharper focus.
When we participated in a career fair last spring in Cleveland, one of the issues being confronted was that there were 10,000 open IT jobs in northeast Ohio and a lack of people with appropriate skills to fill those jobs. So there was an urgent request for us to expand the invitation list to people outside the business school into areas such as engineering and MIS and some of the majors that might be interested in filling these types of roles.
We know that these skill mismatches exist in other regions as well. So if the economy was to pick up, we think that the talent issues could create even bigger gaps when it comes to skills and availability for the middle market.
Another area that we believe is of increasing interest to middle-market companies is innovation. We think that inside the middle market there is a general lack of understanding about it.

MME: With regard to how business owners and leaders can drive innovation within their own companies?

Farren: Yes, well, basically understanding the tools, best practices, and approaches that help to open companies to innovation and disruptive innovation in terms of new products and new services. There have been some good discussions around what exactly middle-market businesses are doing in terms of the innovation challenge and the approaches that can be taken. Just how does a company go about implementing a culture that fosters an innovation mentality? We have seen it come up in our research, and those companies that invest more in their innovation practices see accelerated growth in terms of their revenues. In fact, we have some data that shows that when we look at those companies that we define as “growth champions,” or those 9 or 10 percent of firms that achieve basically three to four times GDP growth in their annual revenue, what we find is that they’re investing about 2.5 times per sales dollar in their innovation and R&D activity as compared to their peers.
We continue to have quite a few requests for information on the topic of innovation and we have two academic projects exploring it that will be wrapping up shortly. One will look at the short-term and long-term performance impact that innovation has on middle-market companies and the other project surveys about 1,200 middle-market companies about how they organize around innovation. What types of processes do they use? What type of head count do they require? What type of investment do they make? We think that this will be heavily consumed once it’s published.

National Center for the Middle Market from Middle Market Executive on Vimeo.

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