Once upon a time…
Once upon a time the Italian economy amazed the world as it does today to the Chinese one. Economists of international stature studied the Italian "model", according to the colorful definition of Giorgio Fuà, to draw lines to apply to stagnant economies. Italian exceptionalism was determined by the pervasiveness of industrial districts, aggregations of small and medium-sized enterprises specialized in a specific manufacturing sector and distributed over a historically well-characterized territory.
The relations between the economic subjects of a district went far beyond the mere industrial and productive character to extend to aspects of the social and civil life of the territory to which they belonged. Then what happened happened and the engine of the districts started to stall together with the loss of dynamism of their territories. However, districts could make a comeback with the new wave of Industry 4.0. It is a completely new scenario characterized by strong innovation and by a competition that becomes truly global and is implemented through new vehicles such as platforms and the network effect.
Fabio Menghini, a pupil of the economist from Ancona, deals with this theme in a book, short but intense like those of Fuà. In fact, Menghini teaches Strategy and Finance in the Financial Economics course at the Giorgio Fuà Faculty of Economics. The book also contains a contribution by Marco Cucculelli, professor of applied economics at the Polytechnic University of the Marches.
Of the analysis and of the theses advanced in this book - entitled Industry 4.0. Enterprises and districts on the web economy. Pathways for the development of Italian manufacturing — we offer a brief summary written for our blog by the author himself.
The Industry 4.0 plan
The Industry 4.0, first announced by Germany, now about eight years ago, has also found its implementation in Italy in the National Business Plan 4.0, launched at the end of 2016.
The first results, recently disclosed by the Ministry of the Economy and Finance, appear encouraging. In our country, however, fixed investments remain significantly below the level prior to the great economic crisis and it is still too early to understand whether we are dealing with a real trend reversal or the effect of simple plant modernization interventions. This difference is by no means secondary, as today the Italian economic system is facing a double challenge.
The first is to show the will and the ability to implement policies of catch up compared to the more industrially advanced countries from which Italy has progressively moved away.
The second appears in many ways even more critical: repositioning our industry within the new scenarios that the so-called fourth industrial revolution, represented by the application of the Internet to the productive world, is prefiguring.
We will focus below on some of the key points concerning this second challenge.
Infrastructures and monopolies
In the last ten to fifteen years, gigantic monopolies have arisen practically out of nothing, creating standards and infrastructures to which almost all the world's operators have had to adapt. Some simple examples: Microsoft and Apple have become the dominant systems in the computer industry. As Android and Iphone are with regard to telephony. Of the top ten cloud providers in the world, nine are American (among them, of course, Amazon, Microsoft, IBM, Google, etc.) and only one German: SAP.
The question that arises today concerns whether and how companies and countries (including Germany) will be able to continue to compete, having to resort to standards and infrastructures held by private monopolies. Indeed, this has numerous implications, not all of which have yet been sufficiently explored.
How much can it affect the competitive strength of an industry or a country not having a telecommunications government or proprietary software architectures and applications? And how will the groups that hold these resources be able to modify or influence the directions of R&D, the quality of the services offered, their methods of access and use, the pricing? And what to do when these same players (as is already happening) expand the perimeter of their original business and become, in many areas, direct competitors?
This was one of the reasons that prompted Germany to make Industry 4.0 the most important national investment program ever implemented in recent decades.
The challenge of the webs platform
A further threat is added to what has just been said: the affirmation of web platforms (until now known in their social or B2C versions) as the main hub in relations between companies. In the competition between web platforms, the winner is the one who will be most able to exploit the cumulative advantages of the "network effect" and here too we are witnessing the emergence of large operators who are neither German nor European. USA and China take the lion's share and have already reached global levels of diffusion.
We are referring to platforms such as Alibaba to indicate one of the biggest players in this context, or to NetEase Kaola, also Chinese. It is evident that the affirmation of web platforms brings with it a gigantic contractual power towards companies. Which they are forced to access in order to market their own semi-finished or finished products.
The German Industry 4.0 plan and its progressive extension to other European countries, has the aim, also in this case, of rebalancing the forces in the field. An initiative extended to the entire European manufacturing industry, with over two million companies and thirty million employees strong, could in fact make it possible to create the critical mass for the creation of European platforms, as well as new management and communication standards between companies.
But in the meantime, what about individual companies that face global web platforms alone? Italy first, given the prevalence of small companies, must urgently identify interventions that protect and safeguard our producers against the global giants of the new digital economy.
Towards new locations
Finally, while the dislocation of production systems has now reached global dimensions, competitive advantages seem to take on increasingly territorial connotations. We are referring to locations where you can have skills, resources, suppliers, skilled workforce and efficient institutions. In a word, an ecosystem capable of generating innovation and leadership. This is the main source of the added value of a product. The rest is commissioned through web platforms and supply chains where, from time to time, the cost of factors is lower or, thanks to the negotiating power achieved, the best contractual conditions are obtained.
The doubt arises whether Italy has too hastily shelved the extraordinary experience of the districts, which drove the economic development of the last century.
In this regard, one has to rethink what Porter already stated several years ago: new successful sectors and new clusters arise from already existing ones. New activities based on advanced technologies do not establish themselves starting from scratch, but where there is already an activity base, locational advantages, the seeds for a new cluster.
A recent case seems to confirm this: an Italian start-up is opening a new plant for the production of metal powders used to feed 3D printers. It will be based in Terni, to exploit the existing skills in that area which has always had a metallurgical vocation.
We need to think seriously about these issues. With the full deployment of the competitive strength of its industry, Germany already today exercises a formidable capacity of attraction. The effect that this may have on Italian industry and on what remains of our districts should be given the utmost consideration.
Industry 4.0, Italy and Germany
Germany and the EU are acting decisively on Industry 4.0 to equip companies with the means that can allow them to defend their market shares in a scenario, the digital one, where market concentrations tend to increase and traditional geographic trajectories to change.
On these grounds, the scenario of a contextual cooperation and competition between European countries is foreshadowed. Germany in the first place, which is investing much more in Industry 4.0 than Italy and with clear objectives of independence and global leadership.
In this context, it is essential to create the spaces necessary to guarantee a non-subordinate role for the Italian manufacturing industry. There are many individual entrepreneurial realities that compete today in the most advanced markets and with the most innovative technologies.
Too often they face these challenges alone. We should start with them. To support them in basic research and development (which cannot be tackled by individual companies), to carry out processes of progressive consolidation and thus increase the size of the company, to allow for the dissemination of knowledge, the training of resources, skills and adequate infrastructures. Possibly, as mentioned, starting from the old districts and the skills still kept there.
