Italy is leading the way in technologically sophisticated manufacturing because we are able—particularly in the “medium-tech” segment—to combine the strength of our roots in industry and craftsmanship that are embodied in our culture of enterprise with a vibrancy in innovation that, despite it all, drives the Italian economy, especially in the more dynamic, more industrialised parts of the country—from the large-scale enterprises of the northwest across to the northeast, where we are finally seeing an end to the idea that “small is beautiful” accompanied by a growing quest for the organisational size best suited to carving out high-end niches in the international marketplace; from Emilia and its engineering districts to the “Adriatic backbone”, and on down to the (more fragile, but still significant) manufacturing “islands” of Lazio and southern Italy. In other words, this form of cutting-edge manufacturing—a unique blend of industry and digital technologies— is an essential tool in achieving more sustainable growth for the country as a whole. According to a recent Confindustria study (as published in IlSole24Ore on 11 April), production has shown signs of a slight recovery, growing by 0.7% in March, for an economic landscape that could give some small room for hope. It is true that, compared to 2008, the year in which the “Great Crisis” began, there has been an overall decline of 23.6%, so there is nearly a quarter of industrial production to be recovered, but it is also true that a large part of medium to large-scale enterprises, many industrial districts, and Italy’s leading industrial value chains have all confirmed that the recovery has, indeed, begun, driven by exports (to the EU, to the US and, above all, to emerging nations such as China and Brazil), but slowed by stagnation that is still evident on the domestic market.

So how are we to support this mild recovery and “start the economies engines”? A few, highly interesting ideas can be found in a book by Gianfelice Rocca, president of Assolombarda and chairman of the Techint Group (an Italian multinational with a wealth of history). The book, with the inspiring title Riaccendere i motori (literally “Restart the engines”), speaks of Italian innovation and rebirth and explains the importance of Italian production founded in the medium-tech industry, i.e. high-quality engineering and metalworking, chemicals, plastics, electronics, nautical technology, automotive-related industries, and the medical and diagnostics industries. These industries find their strength in “incremental innovation” and are rich with “compact multinationals” that are able to react to competition from Germany, Europe’s manufacturing powerhouse, while ensuring jobs and taking advantage of exports to help drive GDP growth. They are open, dynamic, used to investing abroad (not to take advantage of low labour costs, but to succeed as insiders in growing markets), while never losing sight of the Italian mindset and the typically Italian strategies, research techniques, and high-end production that ensure greater value added.

This book by Rocca is as important as it is necessary, and it backs up the work already under way in the directions of the “manufacturing renaissance”, industrial pride, the revitalisation of manufacturing through international investment, “smart manufacturing” (to come back to a topic much loved by the economic historian Giuseppe Berta, of whom we spoke right here just a few weeks ago), the “fourth capitalism”, and the examples of excellence in those cornerstones of Italian industry (agriculture, interior design, fashion and, above all, machine automation) throughout a nation that is rich in both human and social capital.

This medium-tech industry has achieved much innovation over the last twenty years, and it has been driven to do so since the end of the long season of the lazy competitive tactic of devaluation brought about by Italy’s participation in the Maastricht treaty and the restrictions of the euro, when it became no longer possible to take advantage of low prices (by devaluing the poor Italian lira) and so became necessary to respond to the high cost of production with innovation, quality and creativity. It is worth recalling those times when populists and demagogues mused about the end of the euro and the return to the lira, boasting of this “competitive devaluation” as one of the positive consequences. These naysayers would throw away two decades of positive industrial transformation and efficient, effective competitiveness only to find themselves on the sidelines of European industry.

As Rocca suggests, it would be better to look to the strengths of our successful medium-tech enterprises, including research, training, infrastructures, credit, a more dynamic, more creative start-up culture, a lower burden of bureaucracy and taxation, lawfulness, and timely justice— not to mention the institutional and social reforms of a nation seeking to give a brighter future to the next generations. “A nation is competitive,” Rocco says, “when the businesses that operate within its borders are able to successfully compete in the global economy, while also ensuring high—and growing—standards of living for the average citizen.”

These medium-tech firms also play a role in improving social balance. They require good, long-lasting human capital; demand that skills be kept constantly up to date, promote meritocracy, maintain beneficial roots to their territory, and, by demanding a high-quality supply chain, improve social capital in general. “A constellation of values that, over the long term, contributes to making a society more solid, more stable, and also richer.” There are six areas on which to focus: innovation, productivity, human capital, meritocracy, social cohesion, and intergenerational mobility. It’s all about uniting good culture of enterprise with the principles of sustainability and development. It’s about Italy’s rebirth and providing a positive paradigm for elsewhere in Europe and throughout the world.

It’s been said many times before. An enterprise is like an adventure, but storytelling, too, is an adventure. When the story is about an enterprise and the individuals that animated it, that adventure is magnified and becomes even more complex and intriguing. But we need to be well aware of what it means to tell the story of an enterprise. What are the implications and the hidden challenges? We also need to keep in mind that in every story there is something of the storyteller as well. From this interplay of the organisation, its members and the experiences of the narrator we get a unique perspective that draws us in and explains much of the enterprise’s work and its corporate culture.

Alessandra Cosso has thought long and hard on this matter, starting from her experience as a consultant for trade unions working to promote cultural change and wellbeing for the individual worker, as well as to strengthen relationship skills and facilitate the expression of one’s self and one’s unique talents. Her book, entitled “Raccontarsela. Copioni di vita e storie organizzative: l’uso della narrazione per lo sviluppo individuale e d’impresa” (Storytelling. Scripts of life and organisational stories: the use of narration for individual and organisational growth), a work in two parts, offers first a look at life seen as a script, with particular emphasis on the system of businesses and organisations (one chapter is dedicated, for example, to bosses, processes, performance and the script of the organisation). The second part, then, is presented like a play, complete with a prologue and five acts, all centred around the particular “visions of enterprise” and using all possible storytelling tools and techniques.

Alessandra Cosso, head of the Corporate Storytelling Observatory at the University of Pisa, provides an intelligent blend of theory and practice as she also takes a look at the psychological aspects that influence “Homo narrans” and presents them in relation to the self-storytelling that is intertwined in her own social and organisational story.

One passage in particular is illuminating: “We are constantly evolving stories. As we live, we tell the stories of ourselves, of those we meet, and of the environment in which we live and which we transform. We follow our own script, a complex screenplay, and we’re almost never aware of it. There are the extras, dramatic turns of events and, sometimes, even happy endings. Being aware of the story that we are embodying is essential to understanding the meaning behind the decisions we make every day, both as individuals and as parts of an enterprise, as well as to managing to be what we want and to take action for what we want, to being successful, and to writing our own happy ending.”

Raccontarsela is a real page-turner to be read from cover to cover. 

Raccontarsela. Copioni di vita e storie organizzative: l’uso della narrazione per lo sviluppo individuale e d’impresa

Alessandra Cosso

Lupetti, 2013 

We learn by trying, through experience and practice. Theory, of course, plays a part. It provides the framework and the tools for understanding and interpreting reality. But we truly learn by experimenting, verifying and comparing. Even in business—perhaps especially in business—where we are faced with the challenges of the marketplace, understanding the mechanisms behind learning is something we all need.

Recently published in Developments in Business Simulation and Experiential Learning, Experiential strategies for building  individual absorptive capacity provides some help in this regard as it takes a look at the mechanisms of learning and relates them to the ability of any organisation to “absorb” knowledge from the various settings with which it comes into contact, whether it be the market, consumers, trade unions, or studies.

As the authors explain at the start of their study, “One of the key elements of competitiveness is an organization’s absorptive capacity, or a firm’s ability ‘to recognize the value of new, external information, assimilate it, and apply it to commercial ends’ (Cohen & Levinthal 1990, 128)”.

But there is one point that we often underestimate, the fact that organisations are made up of individuals, people with their own personalities and their own personal experiences. Organisations are not machines that learn all on their own, so learning is not a homogenous flow of information that ensures equal, constant results. Learning changes from one person to the next, and an organisation’s culture changes from one day to the next.

Therefore, the authors of the study, Hugh M. Cannon  (Wayne State University), Bryon C. Geddes (Dixie State University), Andrew Hale Feinstein (San Jose State University), gave themselves the goal of establishing a strong “conceptual base” for understanding the process of experiential learning in individuals. The purpose was to describe “how individuals absorb knowledge in an organizational setting” and to identify “key learning objectives for an integrated experiential curriculum”. As individuals, we all learn based on our specific social settings (e.g. an organisation), our feelings or rationality, our technical know-how, the motivation we are given, and our past experience.

The study looks into these issues through a series of exhibits that bring together the characteristics of the individual (i.e. inventiveness and the ability to adapt and acquire knowledge) with those of the organisation and of the external context. There is also an effort to create a conceptual model of the three dimensions of knowledge and learning in an organisation – i.e. cognitive, affective and psychomotor – which is then used to create grids that can be used in real-life situations.

One final passage from the study is of particular interest, when the authors note that the absorptive capacity of an organisation depends on that capacity in its individual members, but these two capacities are not the same thing.

Experiential strategies for building individual absorptive capacity 

Hugh M. Cannon, Bryon C. Geddes, Andrew Hale Feinstein

Developments in Business Simulation and Experiential Learning, volume 41, 2014

In her latest book, Thrive, Arianna Huffington tells us that we need to change and that, with our frenetic work schedules, 24/7 connectivity and all our other sources of stress, our current model for success is simply not working. Having worked hard for her own success, which has also brought her great popularity and wealth, she is now taking advantage of her critical skills and showing us how to move beyond power and money. And we should listen to her carefully, as we should the others who are advising us to rethink how we have been organising our time through these hectic years of globalisation, digital revolution and financial boom.

“Nowadays, we’re always in a hurry, and we need quick thrills,” lamented Roberto Vecchioni, an Italian singer-songwriter and author with a sensitivity for relationships, whether it be with other people, with places (and with Milan in particular), or with social settings.  So it’s time for change to avoid becoming overwhelmed, as discussed by Brigid Schulte, a journalist for the Washington Post, in her book recently published by Sarah Crichton Books: Overwhelmed. Work, Love and Play When No One Has the Time. In short, we need to stop being too busy, overwhelmed by our commitments in life, no time for a break or for a bit of quiet reflection. We’re living lives dominated by a fear of empty space in our agendas, doing everything we can to make sure they are packed full of appointments, meetings, trips, deadlines and commitments. We need to find new balance and take heed of the advice found in an Italian blog by and about women, La 27ORA, hosted by Corriere della Sera and edited by Barbara Stefanelli, which talks about the relationship between work and personal life and other issues of great relevance to our modern lives.

We need to rethink time, both in business and, above all, in our personal lives. The financial folly of the 1980s and 90s was driven by an attitude of wanting everything and wanting it now, by an obsession with quick return on investment, by business and investment valuations driven by the opening and closing of the world’s financial markets and by the publishing of quarterly reports for impatient analysts (and holders of stock options valued on the basis of the performance of their companies’ stocks). No long-term vision. No far-reaching strategies. Not until the imbalance and neuroses of “the Great Crisis” when we finally begin to talk about the “real economy”, the renaissance of manufacturing, smart manufacturing, and the “new factory”, and start rethinking how we make use of our time – to “thrive”, as Arianna Huffington would say. Thank you, Arianna.

Of course, it’s more than that. “Modernising is tiring”, as a wise philosopher, Franco Cassano, had warned back in 2001 when he explained how the expressions “wasting time” and “making time” are relative terms, how fundamentalism in modernisation (keeping busy as a philosophy of life, productivity as a value and not as a tool or an indicator, and so on) can keep us from achieving our goals of sustainable economic growth, whether it be for a business or for a nation as a whole. He was right, but it was more or less a case of “a voice of one calling in the wilderness”.

In a time when most of the business world was rushing headlong into the disaster of 2007-2008, in certain circles we were, fortunately, beginning to see another culture of enterprise, one focused on human and social capital, sensitive to the teachings of Nobel prize winner Gary Becker about the ethics of business and the protection of the environment as a guide for new business, and about the values that can lead to a “new wealth” for a community, for a nation, or for a continent. Sustainability.

And so we come back to time, because “sustainability” has at least two implications: both that of balanced development that can be environmentally and socially “sustained” by a community and development, therefore, that can last over time, development that is neither rash nor greedy. To reach this objective, we need a better, more human approach to business – more reflection and less focus on productivity at all costs.

Creativity, the driver of innovation, requires the freedom to wander before setting off on the path to a concrete result. Research, as Karl Popper has taught us, takes time, time for a certain result to be “falsified”, for the claim to be refuted and for the error to be found. Our minds must be free to follow their own paths in order to uncover ideas that can then be translated, in business, into actual products and services and to be ready to keep on innovating. Years ago, Domenico De Masi, a sociologist with a passion for originality, coined a nice expression,  ozio creativo (creative inactivity), and it’s an idea that remains relevant to this day.

Inactivity is anything but a failing. It’s the attitude of making time for everything, including making time for nothing – for complete inactivity and silence – because time filled with nothingness is time for reflection, time for our minds to wander, to be creative, and to ponder concepts like love and spirituality. There can be no civility without silence, no new ideas without freedom. No art. No culture. No interpersonal relationships. No morality in social and economic relations. And it’s worth taking a look back at the founders of economics, such as Smith and Keynes, for some essential thoughts on these points.

In this renewed quest for work-life balance and for sustainable wellbeing, this rethinking of time is crucial. If indeed development is freedom (as taught by Amartya Sen, winner of the Nobel prize for economics), then we need to have a serious, critical talk about time in order to achieve what an overwhelmed person never could: a goal, a project, a dream, an enterprise. Our use of time is a key part of finding new balance between work and life – both quality time and the quantity of time ¬– time for thought, for conversations, for research and – why not? – for meditation and contemplation. Time for a new culture of reflection, of speech, and of action.

So time, place, culture, and values. In Italy, this good use of time is a part of our heritage. Without it, our society wouldn’t have so much art or so much culture on which to base its programmes for development (and Symbola, a foundation that promotes a more “Italian” approach to business, is a great proponent of this). It is a heritage in which we must continue to invest – to invest in reflection and in time, to learn to let time slip through our fingers, to relax. Sooner or later, something will come back to us, and it will be growth.

Achieving innovation through creativity. Also in companies, and perhaps especially in companies. Creativity is an essential step towards opening up new horizons for production and product positioning on the market, even though it is often viewed as the preserve of a few fortunate, enlightened entrepreneurs. It naturally requires a certain predisposition, but creativity is open to everyone. All you need do is learn and, first and foremost, bear this fact in mind.

This is one of the messages that appears in Essere creativi…una possibilità per tutti. Guida al DNA delle idee per innovare ogni giorno (literally, “Being creative.. A possibility for everyone. A guide to the DNA of ideas for everyday innovation”), a slim volume (just under 200 pages), written by Massimo Carignano, Francesco Rossetti, Alessandro Dondo, Fabio Schena and Elisabetta Cavallari. These young people come from different backgrounds, ranging from engineering to economics, through to physics, archaeology and law, applied to the most diverse areas, from university to big industry and SMEs. Their book explores the theory and technique of creativity with a view to achieving innovation by adopting a very different, unusual method. “Innovation is a universal peculiarity of man,” say the authors, also in a genetic and biological sense; it is therefore innate in people – all people. This means it can be studied, explained, applied and developed, by illustrating and working on ideas through a sort of “identity card”. This consists of elements that, like genes, can be assembled and reassembled countless times, generating infinite forms of creative thought. So for everyone, even for those who think they have exhausted all their resources, there is ample room to expand innovation within companies, in production and markets. The authors outline the essential features of “genomation” – the name given to the method – and suggest a range of applications. In this book, theory is followed by practical examples, such as drafting company questionnaires, structuring a sales network, setting up a study centre for SMEs, social commerce, and staff selection and recruitment. And there are also spaces in the form of blank pages to be used for “thinking and reacting” immediately to what we have just read. 

Essere creativi is a positive volume and it is good for corporate culture, but it can also arouse mixed reactions. 

In the opening pages of their labour of love, the five authors offer a fine quotation from Antoine de Saint-Exupéry: “Creating… is like getting that dance step wrong. It means hitting the stone sideways with a chisel.”  

Essere creativi…una possibilità per tutti! Guida al DNA delle idee per innovare ogni giorno

M. Carignano, F. Rossetti, A. Dondo, F. Schena, E. Cavallari

Edizioni Creativa, March 2014. 

TQM means Total Quality Management, which means the perfect company. That, at least, is what business management handbooks tell us. The model seems to be that of a company run like a clock that keeps perfect time and that is well oiled and resistant to all weather conditions. In actual fact, TQM has to deal with the people who need to create it and make it work. That is quite another matter.

The book by Radoica Luburić, of the Central Bank of Montenegro, helps link the theory of TQM with the practice and, above all, with the human and social aspects that influence it.

The study explains that, with TQM, “it should be possible to create a model that ensures a higher level of quality and, at the same time, a higher level of management.” In other words, Total Quality Management is indeed “a paradigm of business success throughout the world.” It is a concept that “instils confidence in customers and triggers chain reactions that lead to improved relations with suppliers.” But this still does not quite explain what total quality actually is. In other words, there are strong links between TQM and the culture of cooperation within the company itself.

Using a series of diagrams that illustrate the intersections between quality, work, management and consequent actions, Luburić clearly explains what this means. And, moving on from the theory of TQM to the way it is put into practice in Japan, the USA and Europe, Luburić adds some important analytical elements.

“The Japanese”, the study explains, “are so obsessed with quality that they almost throw a party when they find a mistake, because they see it as further incentive for yet greater improvements.” The way decisions are made in U.S. firms, however, is completely different from what goes on in Japanese companies. According to Luburić, few people actually make decisions in American companies: this makes things quicker, but then many more people in the company need to be persuaded that the decisions were right. The Europeans adopt yet another approach, which Luburić believes is summed up in the words of Raymond Levy (chairman of Renault in 1990), who said: “Quality is representative of a culture which we Europeans have no reason to let others monopolise. The Europe of Descartes, the Europe of the Age of Reason and the Enlightenment, the Europe of the industrial and technological revolution of the last two centuries holds within itself all the elements of method and exactitude conveyed by the term ‘total quality’.”

In other words, TQM is not a mechanism but a way of being and it certainly needs to be sought in every company, but it is not enough on its own. Quite simply because companies are not clocks: they contain men and women, not cogs and springs. As we were saying, it is quite another matter, but also quite another level of quality.

Total Quality Management as a Paradigm of Business Success

Radoica Luburić (Central Bank of Montenegro)

Journal of Central Banking Theory and Practice, 2014, Vol. 3, No. 1, pp. 59-80

“People first” speaks to the role of social and human capital in the development of Italy as a nation. It is a role to be promoted and strengthened if it is true that Italian businesses, and the Italian economy as a whole, are investing much less than necessary in training, research, innovation and the proper exploitation of their employees’ talents. This was the topic of two days’ of discussion in Bari this weekend at a Confindustria conference, and it was a Confindustria study out of the association’s Research Centre, directed by Luca Paolazzi, that provided the facts and data on Italy’s limitations and on the investments to be made.

The key numbers are no surprise: investment in research equals just over 1% of GDP, too little when compared to the 3% target set by the EU for 2020, or to the current EU average of 2%, or the levels in Germany (2.9%) and France (2.2%), and 54.5% of the total fell upon private-sector firms (data for 2012, up from the 53.6% of 2008). The share for universities has declined, from 30.5% to 28.6%, as has the share for other public bodies. The result of the crisis, of course (in Italy, the lengthy recession has been much more severe than in the rest of Europe), but also the result of a disturbing short-sightedness in policy and of shown by some of the businesses themselves. It is true that the statistics underestimate investment in research and innovation (for small and mid-sized firms, this investment is recognised on the accounts as “consulting”, not as R&D, and a great deal of adaptive innovation—in production processes in particular—is not even fully recognised), but the problem remains, especially in terms of public investment.

There are some highly active innovators, particularly among mid-sized organisations with competitive international operations, which have managed to increase their exports even through the crisis (e.g. the dynamic world of medium high-tech as recently analysed by Gianfelice Rocca, chairman of Assolombarda, in his book entitled Riaccendere i motori, recently published in Italian by Marsilio), and Italian exports are on the rise in industries such as engineering, specialist chemicals and certain cutting-edge pharmaceuticals, along side the more traditional industries like fashion, interior design, and food and agriculture, but none of this is enough to act as a driver of better economic and social growth in Italy. There needs to be more investment in social and human capital.

How exactly?  In Il Sole24Ore (29 March), on the back of the Confindustria study mentioned above, Paolo Bricco explains that, in Italy, “human capital” means three things: real efficiency in the university system; improvements in technical training; and the intelligent integration of immigrants. And there is much that needs to be done in all three areas. Italy has a low number of university graduates (just 15% of the population of people aged 25 to 64, as compared to 42% in the US, which can be seen in a comparison of pro capita GDP: €40,000 in Italy vs. €55,000 in the US), but also a wide gap in degrees in engineering, maths and other scientific fields and a lack of harmony between the necessary conveying of “knowledge” and a lack of real applied “know-how”, which is essential in business.

Little is being done in terms of lifelong learning, and there is no strategy for focusing on training to help redirect segments of the workforce (such as the older generations) that are being left behind as production processes evolve (and training entrusted to the regions unfortunately displays scandalous examples of waste, protectionism, distortion and other unproductive conduct), but there is another area in which Italy is particularly weak: attracting talent. We are losing our most talented, most dynamic graduates to other countries, and we aren’t attracting enough from the rest of the world. Job mobility, which is generally a good thing, has become a “brain drain” for Italy, and to make matters worse, there is more than just the fact that we are unable to attract high-quality talent (hindered by inadequate immigration laws and Italian “bureau-crazy”), but also our poor use of the immigrants that we already have (with Ukrainian mathematicians caring for Italian elderly or Romanian computer scientists unloading fruit at Italian markets, to cite the examples given by Confindustria).

In short, we need a change in policy and in culture – greater, and better, investment in the “knowledge economy”, as summarised by Fulvio Conti, CEO of Enel and deputy chairman of Conti for the association’s Research Centre – and it’s also worth taking another look at the teachings of a great thinker like Bruno Munari, an extraordinarily innovative designer (Munari politecnico is the title of an exhibit that recently opened at Museo del Novecento in Milan), who said, “Imagination is a skill of the spirit, the ability to invent mental images that differ from the reality of the details or of the whole, images that may not even be achievable in practice. Creativity is a productive skill whereby imagination and reason come together such that the result is always practically achievable.”

Italian business is rich with creativity and “polytechnic culture”, but this capital is to be nurtured and grown, not wasted or left to wither and die. That is the key to development.

Telling the story of a business is wonderful, and useful too. But one needs to know how to do it. It is easy to slip into rhetoric, and even easier to slip into nostalgia. Forgetting how useful it can be to relate the history and the present of companies: gaining a better understanding of how the adventure of production developed, in order to avoid making mistakes now, and to create a better future.

But telling the story of a company also has further value. It means conveying the culture that has been used to approach production and the markets. And it also means advertising, business and sales. Somewhat more “modest” objectives, maybe, but no less important.

What matters, as we have said, is knowing how to recount a company experience properly. This is what makes this volume by Valentina Martino – Dalle storie alla storia d’impresa. Memoria, comunicazione, heritage – so useful. The book (just short of 300 pages but very readable) gives an overview of the strategic and operational models that help communicate corporate memory. Because when you start telling the history of a company, you need to bear in mind that you are delving into a very complex story: not just economic, not just technical, and not just one of trade union and social issues. You are dealing with people and machines, individual and collective aspirations, politics and a system that has been and is open to the many influences and needs of its environment. 

Since she is well aware of this, Valentina Martino adopts an interdisciplinary approach, starting out from instruments that give insight into the many individual and organisation stories, into her various sources, and into good business practices and a variety of social networks. 

But Martino’s book has more to tell, for it shows how a critical interpretation of the history of brands and products can lead to compelling narratives, all conveyed in an anti-nostalgic way, with great impact on the present and future.

And there is yet more, because the author believes that tradition is not the exclusive privilege of a time-honoured elite of historic family businesses with some special elixir of life, but rather a strategic opportunity for organisations that are not so old but that are nevertheless aware of their own unique contribution to the collective memory.

In other words, telling the story is always a good thing, whatever the company may be. You just need to know how to do it. 

Dalle storie alla storia d’impresa. Memoria, comunicazione, heritage

Valentina Martino

Bonanno, 2014

Those who are aware of where they are manage to produce more. Because a company is not some metaphysical entity isolated from its environment. It is not some impervious, unassailable bloc that produces, makes profits and nothing else. It is not divorced from history and from those who build it. Corporate culture – which attests to its ability to produce – is also fed by an awareness of the context in which the company operates. The good entrepreneur and the good company and its managers therefore also need room for further investigation of their past. To better understand the present and to be better prepared for tomorrow.

This is illustrated in a speech at LUISS given by Ignazio Visco, Governor of the Bank of Italy, during the celebrations for the hundredth anniversary of the birth of Guido Carli.

“Guido Carli and modernisation of the economy” is not just a way of commemorating a teacher, for it is also an opportunity to focus on the twists and turns of history, and on how important it is to retrace the story of industrial development in Italy. A text that certainly arouses conflicting opinions, but one that needs to be read.

Visco recalls Carli through some excerpts from his report as the Governor of the Bank in 1971. Concepts, terms and concerns that appear very relevant today. Carli wrote of “concerns about the ability of [the system] to survive”, of “preventive reflection”, “defective knowledge”, and “particularistic visions and attitudes” that really do sum up the fears and needs of the present day. And, Visco reminds us, it was Carli who always posed himself, and others, the question of the so-called “structural modernisation of the Italian economy”. An ambitious and complicated but essential objective, which would enable the country to return to growth. Then, as now.

The concerns and objectives are thus almost identical, and so too are the tools needed to achieve them. Starting with de-bureaucratisation and a simplification of the rules. But but also with the untangling of all sorts of state-generated and other traps and snares that hinder development. It is here that, taking from Carli, Visco points his finger and gets people talking. The Governor writes: “Italy’s problems today are very similar to those that could be seen at the end of Carli’s governorship: ‘traps and snares’, in the sense of rigid bureaucratic, legislative, corporate, business and trade-union rules, are always the main hindrance to the development of this country.” And not only, because Visco ends by explaining: “Today there is no lack of awareness of what needs to be done, just as there wasn’t in the past either. But the actions of politics and society appeared to be impeded and what has been done is far from being enough. The consequences of immobility today are however different from those that were seen in the 1970s: back then there was inflation, whereas now there is stagnation. The signs of recovery we see are encouraging, but they must be confirmed in the months and years to come: perseverance along the path of reform is essential. It will be possible to return to robust, long-term growth only by tackling head on the structural problems that were already slowing down the Italian economy even before the latest crisis and that have exacerbated its consequences.”

All good food for good corporate culture.

Guido Carli and Modernisation of the Economy

Ignazio Visco

Banca d’Italia-Università LUISS, 28 March 2014

“Cooperate”: a word from Late Latin cum and operari. In other words, “with” and “work”. The concept of “with” – in the form of “co-”, “con”, “com” and “cum” – is to be found in many highly contemporary words. Words with an eye to the future. “Co-”, a prefix that points to a common course, connoting a communion of strategies, indicating collaboration. It gives character even to words that have come to mean the opposite in common usage. Words like “competition”. Conveying an idea of contest, conflict and confrontation. But which originally meant “going forward” “with” others, towards a common goal: cum-petere. To go back to the origins, in a language that takes into account the needs of a “more just and sustainable” economy (much sought-after in a number of different environments, both secular and Christian since the upheavals of the great Crisis caused by financial greed and social imbalances) there is talk of “collaborative competition”. And this is indeed the title of a book by Fabrizio Pezzani, Competizione collaborativa, published by Università Bocconi Editore, which comes with a future-oriented subtitle: “Rebuilding social and economic capital”.

Italian industry can offer some fine examples of this. Economic analysis and empirical observation of the best manufacturing areas have long shown that the most successful strategies are those of business networks, with extended, high-quality supply chains. This is an interesting evolution of the ‘“district economies” which, during the long course of 1980s and 1990s, enabled companies, including small and medium-sized enterprises, to restructure, become stronger and stand up to the onslaught of new international forms of competition. They were able to find new niches in increasingly selective and fierce markets in both European and non-European countries. A successful strategy indeed, as can also be seen in the analysis by the McKinsey Quarterly journal (no. 1 of 2014) of the “next shoring” of manufacturing (about which we had much to say in last week’s blog). Industrial enterprises grow when they are in close contact with ever-changing markets and top-quality suppliers.

The fact that this is the right way to go is confirmed by Chi vince e chi perde: l’industria italiana oltre la crisi (Winners and Losers: Italian Industry Beyond the Crisis), an ISTAT survey recently carried out by MIP, the Politecnico University of Milan. The underlying indication is clear: those who get ahead are those who focus on “education and synergies”. In other words, on good human capital. And on positive social capital. Which basically means on cooperation. Italian industry has lost a quarter of its production capacity since 2008, but the survey shows that, even in times of crisis, those companies that have focused on foreign markets have managed to increase their turnover. And, what is more, they have been consistently inspired to innovate their products, production processes, high value-added services linked to production, marketing, and so on. Gianluca Spina, dean of MIP, draws an interesting conclusion from this: “The winners are those companies that, precisely during the period of crisis and recession, have invested in training and human capital, but also in creating links between companies through joint ventures, structural alliances and business networks.” In other words, it is necessary to create synergies of products and services, and to integrate different skills. And, in order to enter new markets, to cum petere is the way to do it. Many “monad” companies – which is to say, inward-looking businesses devoid of a spirit of cooperation – have been in decline. The worst in a form of capitalism that turns inwards, with a family-oriented view obsessively dominated by the dogma of owner control, is one that is unable to cope with the new challenges of interaction, of combining the entrepreneurship of the original family with new management skills. This means it is unable to innovate and thus clings to domestic markets that are increasingly stifled, impoverished and in decline.

Another survey has also come up with similar results. Carried out by Studio Giaccardi & Associati, it was recently presented at the Web Economy Festival in Cesena. Basically it says: “Innovation as an antidote to the crisis: companies active online grow up to five times more than traditional ones”, was the Il Sole 24 Ore headline on March 18. The high-tech of Web 2.0. And the local roots of a Romagna with a rich tradition of collaboration and cooperation. SMEs that are online with open, interactive sites see their turnover, productivity and internationalisation all growing. And for start-ups too, interaction and online cooperation are ways to success. Positive corporate culture. And good competitiveness.