Italy has yet to seize the opportunities offered by the Internet of Things (IoT), a linchpin of the revolution in production processes known as Industry 4.0. In order to catch up to other countries, it is crucial to have a vision of tomorrow’s market, as this is the only way to bring the business models of Italian micro-enterprises up to speed with the requirements of the new technological revolution. In the interview that follows, Ludovico Ciferri explains to the Aspen Italia website team why this is the case.
Where does Italy stand with regards to IoT?
Based on the NAC Index developed by Accenture to gauge a country’s “Industrial Internet of Things enabling factors”, Italy is at a disadvantage compared to its direct competitors, particularly in the manufacturing sector. The European Innovation Scoreboard for 2014 also sees Italy at the head of a group described as so-called “moderate innovators”. The risks that this innovation lag could entail for Italian industry are very high, because it means being on a heading to drop out of the G20 within the next twenty years. It means losing even more market share in the manufacturing industry, since the transition from a product economy to a solution economy is unavoidable purely for reasons of the planet’s sustainability. As the effort that this entails for Italy will, hence, be greater than for other competing countries, there is a need to understand what strategies will be most effective in meeting this challenge. The difficulties are primarily economic in nature, because it is an undertaking that requires far-sightedness and patience, but also a vision of what the market of tomorrow will look like.
In what areas is Italy most evidently lagging behind? Could the Japanese experience provide some useful lessons?
Digital infrastructure, e-literacy, entrepreneurial training, and difficulty in carrying forward change and innovation processes are the areas in which Italy most noticeably lags behind countries that are more at the cutting edge. In the specific case of Japan, the country where I have lived and worked now for fifteen years, certain lessons are certainly exportable to our country.
Some of these are positive, such as Japan’s level of investment in research and development (R&D). Others are negative, such as the difficulty in carrying forward change and innovation processes. As far as the positive lessons are concerned, the main one is, as mentioned, the greater-than-3% share of GDP allocated to R&D. Much ink has been spilt regarding how this figure is arrived at, and whether it takes into account certain items that are omitted by other countries. The fact is that, even when it is reduced accordingly, it is still one of the highest percentages in the world, without which it would be hard to go about building robust digital infrastructure. Suffice to say that when the major earthquake of 2011 struck, the digital infrastructure held up and we all communicated via the internet. Perhaps water and electricity supplies failed, even in some parts of Tokyo (situated three hundred kilometers south of the epicenter), but the internet didn’t crash, enabling the world to witness the earthquake as it happened.
What can Italy do to make up for lost ground in industrial applications of IoT?
It’s essential, in particular, to figure out how to accommodate a new production model in an industrial base like Italy’s, around 95% of which is made up of micro-enterprises with fewer than 10 employees and annual turnovers that do not provide scope for major investment in R&D. Consequently, Italy must first choose which model to follow: that of the US, where the state’s role is mainly to simplify development activities; or the German model, where state investment in research and innovation is assumed. Indeed, to raise Italian manufacturing’s share of value added from the current 15% to 20% by 2030, annual investment needs to reach about 8 billion euro, focusing on digital platforms, software, robotics, management of Big Data, and cloud systems.
In what ways can Italy boost its competitiveness and make the most of the opportunities afforded by IoT?
There’s a premise we need to start from: as paradoxical as it might sound, the standard of IT research in Italy is high, yet the country is lagging significantly behind its competitors. Indeed, the lag is not due to any problem with the standard of research, or more generally speaking, with training and education, an inaccuracy that is often repeatedly heard. Rather, the problem lies with a social milieu not inclined to innovation, low levels of e-literacy, and above all, leaders with a poor grounding in entrepreneurship. Hence, it is necessary to help firms recover lost ground, particularly in terms of developing a business mindset.
The Italian lag in adopting IoT is manifestly a problem of process innovation, if not more often of business models that have not been adapted to changed market conditions and the resulting new products. For that matter, there is now little left to do in terms of actual IoT research, otherwise we wouldn’t be on the verge of a large-scale implementation based on proven technologies. What’s needed is not technological research, but, if anything, market research, in order to appreciate, for example, that in Italy, for Industry 4.0 to take root, it must take a different route than it has in Germany. That is to say, it should not be geared exclusively and immediately towards automation, but should aim at transforming business models such that they go some way to anticipating the transformation from “products to services” and from “services to solutions”. In this endeavor, Italian entrepreneurs could have an edge over more structured and less inventive foreign competitors. But of course, a certain amount of daring will be required.
Ludovico Ciferri is president of Advanet, a Japanese company specializing in the development and manufacture of high-performance miniaturized computers. He also teaches Mobile Business Strategy and Private Equity & Venture Capital at the Graduate School of Management of the International University of Japan.
