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You are here: Home > Diritto di Voto / EU, Italy, Turin > Preparing for #digital #transformation ? Still work in progress

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Published on 2019-01-18 22:44:01 | words: 2562

Obviously, this week everyone, also in Italy, was talking about Brexit.

Let's say that, in reality, for us Italians is just more of the same: everybody is strategizing, but no aggregate effort, as shown in the negotiations to attract in Italy the EU agencies that were in UK.

If you read Italian newspapers at the time, everyone for a while was convinced that there was no other option but Italy.

As I posted yesterday and then relaunched this morning on Linkedin: ""QDV: as for #Y2K, #Italy has no comprehensive plan for #Brexit- with a difference" (you can read the remaining bits of the thread on Linkedin at https://www.linkedin.com/feed/update/urn:li:activity:6491937562045792256)

And yes, I agree with a Facebook friend from another continent who wrote about "Brexit fatigue: "ok, for privacy I will not share the link but.... I concur with a friend: there is too much of "head in the sand" and "#brexit #fatigue " about the continuous stream of "breaking news"" (see the thread on https://www.facebook.com/robertolofaro/posts/10155705513112016)

Due to past experiences, e.g. Y2K and the Euro, I am moderately optimist on the ability of individual Italian companies to cope with Brexit.

As for the State- it will take a while: in Italy, everybody would like to become a czar of something.

On digitalization, many will remember probably the case, over a decade ago, of the tourism portal for Italy- a grandiose scheme that, already while reading the RFP (I was asked to have a look from a contact in a potential supplier), would not fly. And didn't.

We can work as a disaggregate, but whenever it is time to "fare sistema" (i.e. a semi-technical fancy way to say "act as a country"), we fail.

Mostly because nobody wants to involve those that are needed: each "tribe" tries to involve only those that belong to the same tribe.

So, we can have pockets of "excellence"- but it is difficult to have those pockets evolve into an end-to-end, systemic "excellence".

Even at a local level, most alliances are "us vs. them", and stand together only as far as e.g. election day.

Then, diverging interests gave us cases both on the centre-left and the centre-right of governments whose plug was pulled... by a junior partner (as we are used to coalition governments).

Sadly, even when an individual territory (as it is the case e.g. of major towns) has all the resources needed- simply, scattered across competing tribes.

In Italy, recently we talk a lot also about the new "reddito di cittadinanza" (new or old or transformed- depends who you did vote for).

It started like something close to what was tested in Finland, it is turning into something closer to the Danish flexisecurity.

Frankly, as I wrote in the past, even recently about local issues linked to European agreements (the high-speed link with France), we in Italy are constantly under a veil of cognitive dissonance.

Example? Even the most business-oriented newspapers keep comparing current income and pre-crisis income, "forgetting" to check what happened elsewhere.

It is fine to get back to, say, pre-crisis levels plus a bit- but what if our fellow leading EU Member States (in terms of size, at least) did fare better?

Since 2017, I keep seeing statistics in whatever conference I attend between Turin and Milan- and all converge on a sustained decline, with occasional hopes (overhyped, it seems from today's new) of a rebound.

Just tonight the Bank of Italy notified of a possible contraction on the expected growth of the GDP

The same statistics I saw in conferences state also (including earlier this week) that our companies are still small, still too focused on today, and still both unable to attract foreign investors (except for takeovers or reverse takeovers) and investing less in the future.

But both the latter elements are actually a national affliction, not restricted to the private sector.

As I wrote in the past (and repeated this morning about managing the post-Brexit opportunities or the Y2K), in Italy usually we look at each other, and convince ourselves to be the best before even checking what others do.

Even with startups, it was always a tough time to convince them to crunch some market numbers, and have a look at potential competitors, before writing that old tool.

A business plan- which, in Italian, becomes "industrial plan", i.e. "piano industriale"- as if a business were just a matter of product or service engineering, and not doing or producing something that a market (potential or existing) would buy.

Competitive analysis? Mmmh... not really- if you are convinced to be the best, as we did for the Pharma EU agency, we Italians are inclined to "forget" the audience- we assuem that they will certainly perceive your value.

So, many startups I met (and not just startups- even middle-sized companies) end up trying "evangelize the market" once they have already prepared the next best mousetrap that, in their mind, nobody can avoid to buy.

There is no demand as soon as they meet the market and are asked questions that they are not ready to answer?

No problem- you can "pivot".

But most pivot choices that I heard are simply done without any research, a kind of "we tried this, let's try that"- out of a whim, without even re-assessing market potential or distribution channels.

What I am referring to, as I wrote long ago, is that I keep seeing or hearing proposed business plans and new companies that collect cheers by fans, and that "cheering" is mistaken as being an assessment of the market potential.

So much in love with the product (the "piano industriale" approach), to forget that there have been plenty of products pulled out of the market- in any industry (from movies to food to cars to airplanes).

The Italians concentration of incubators and accelerators is not delivering the number of unicorns (companies valued at 1bln USD or more) expected.

Furthermore, we live the side-effects of the still widespread inability of our companies to manage two issues in our family-owned economy: transition from one generation to the other, and considering that governance is not just a family affair.

I know- most think about the third element, attracting and retaining the right talent.

But, frankly, if you fail on the first two, the best talent in the world would not change the picture (or at least will not stay long enough when every business choice becomes a family affair involving two or three generations).

Our tax-based "cassa integrazione" system actually does not support transitions- as it generates a barrier to entry of new players.

In other countries, when a company has a crisis, has to choose between retaining staff and bearing the cost, or let it go, assuming the risk to have to rehire and/or train new staff.

In Italy, there are different levels of "transition" during a company temporary or structural crisis, so you can basically retain staff while either paying them a reduced salary out of a provisioning done before, called "cassa integrazione", or have, under a certain number of conditions, to a further level.

Innovation could actually help.

But, having smaller companies, including manufacturing companies, implies also that for most "innovation" implies "incremental innovation".

Including most technological startups: the "better mouse trap" approach (including startups in services).

Probably one of the reasons why, while still small, the most promising ones were acquired by foreign companies- eventually delivering the value elsewhere.

The digital transformation of a whole economy has some other side-effects, e.g.both white and blue collar can be replaced by software and machines.

Many clerical jobs linked to specific, predictable, routine business processes and outputs could have a greater chance of disappearing than blue collar jobs that require a level of dexterity or flexibility that so far I did not see in any manufacturing equipment presented.

Maybe eventually "machine learning" will take over that, integrating say four cobots with just one employee.

Call it a new concept of "virtual team"- but replacing four potential human employees with four robots, and a single employee acting as a de facto team leader as well as co-worker, and therefore requiring different skills from those of traditional shop floor workers.

If you want, it could be said that both services and products will gradually turn into "commodities", once everything can be assembled from software or standard (service or physical) components.

Services? If most countries e.g. in the EU converge on a set of rules, beside the difference in languages, anybody could provide (as it is partially already done now) the same service assembled from a mix of service components elsewhere.

Products? Already most of the computers, mobile phones, and cars use a mix of components and subsystems that are produced by third parties.

And both trends will just increase.

But, for the time being, in Italy smaller companies that could e.g. leverage on their own stock of abilities and technology to grow without expanding the payroll, do not

Actually, the industry 4.0 initiatives expanded the market for renovation of the obsolete stock of equipment of Italian companies.

But how many were able to connect that new fancy equipment to information systems?

Only integrating machines with other machines and other processes they could leverage on equipment to alter and improve their own manufacturing approach (and maybe prepare to introduce new, better approaches).

If you cannot transform existing businesses that rely on old processes and old equipment so that they can become more competitive (just buying new equipment would not solve the issue), you end up, as it already happened in Italy in services to consumers, to replace a larger number of jobs scattered across one or more companies, with a small number of jobs.

A typical approach could be to, actually, creating new companies that, as I saw in some cases in the last decade in Italy, reuse the investment in knowledge of a larger entity to "seed" a new, smaller company- a company that could then eventually replace the original one.

Will the "cassa integrazione straordinaria" system be able to cope?

Or will the new "reddito di cittadinanza" eventually replace it? (details? https://www.facebook.com/robertolofaro/posts/10155705412107016)

Other countries are preparing to "phase in" a near future when people will work much less than now, and still plants and utilities and agriculture will produce as much (or more) than today.

Some forthcoming technological changes will have a large impact on a number of existing industries: but you already experienced it.

In Italy, once in a while newspapers report complaints from citizens about the reduced number of mail delivery rounds.

As they expect to see mail delivered, as in the past, at least once a day or, in major towns, more than once.

Which, if you consider delivery by people, is simply not possible, considering the contraction of the number of mail items delivered.

It might be possible again in the future- once mail will be delivered by automated drones.

The side-effect? Less employees- and doing jobs that we would not even recognize (read e.g. the reports from the WEF).

I live in Turin, so I think about cars and mobility- as most of the local manufacturing companies, at a time or still now, are linked to the car and mobility industry.

Now, consider vehicles: a combustion engine vehicle not only has more components, but it requires a complex set of supporting activities.

From gas stations, to delivery trucks, to all the various monitoring and maintenance facilities, and routine inspections- all differentiated by make.

Even without looking into the 2040, already few makers announced e.g. that they will move transmission directly on each wheel (as already discussed as an option for future vehicle in a book from MIT).

And if the trends shown in Norway will expand elsewhere, as discussed in a previous post a transition should cover also the shift from a the current labour force, to a different one, maybe by spreading working hours across people, offsetting temporarily productivity increases created by digital transformation and automation (as it is gradually being done in other European countries).

At a conference few years ago in Milan a representative of a company linked to a German car maker said that approximately 70% of the value of cars is made by components, and another company was said to derive 20% of its turnover from services.

In a world were a car were to be just assembled, and maybe even "standardized" in shape and size to be able to be integrated in urban systems, the differentiating factor would not be the vehicle, but all the "support ecosystem" surrounding it.

But however you look into it, is a different territory for a different market- you can find online plenty of studies about that market.

Think about energy, banking, processed foods, various utilities: it is already difficult to differentiate one supplier from another.

When you talk about issues like those listed above, the natural concept in Italy, as I wrote this morning, is to adopt a "Gosplan" mentality, what we call "cabine di regia" or something similar- as I wrote above, everybody wants to be a czar.

To benefit from digital transformation, we cannot just import processes and systems that assume that our country has a different culture.

In order to replace UK in terms of attractiveness, we would need something more than one-time incentives.

And introducing a real flexisecurity via the reddito di cittadinanza was initially supposed to happen thanks also to a restructuring of the public employment agency.

But, due to lack of funds and timing (and elections), we will have a bit of everything- not a comprehensive system.

Will it work?

Well, it depends on the tribes...

Sometimes, I miss my books on cultural anthropology and tribes that I read as a teenager, before starting to toy with politics (in Italy and abroad).

Today I saw a report published on Brexit prepared by a team including Italians.

Now, I do expect to see more- but do we need more reports?

Or do we need more action, negotiations, and eventually teamwork?