Bringing manufacturing back home to Italy and spreading word of its return
Interview with Matteo Marini
Foreign press coverage of Italy tends to focus heavily on three flagship industries of the Made in Italy label: food, fashion, and furniture. Yet the country is not only the second largest manufacturing nation in Europe, but also boasts a much better competitive ranking than commonly thought (both in Italy and abroad). In the following interview, Matteo Marini, chairman of ABB S.p.A., explains that an industrial revival within the country – predicated on a reshoring of production operations – is achievable, thanks to the major technological changes being ushered in by Industry 4.0. However, Marini further observes that all this needs to be accompanied by an effective promotional push that puts Italy’s manufacturing prowess back at the forefront of international attention.
Is it difficult to promote Italy as a competitive country for tech?
Yes, sometimes it is, precisely because Italy has concentrated its international promotional efforts on food, fashion, and furniture, while not sufficiently playing up the fact that we are the second-ranked industrial power in Europe for mechanical engineering and construction. Yet, when reexamined in light of hard facts, the competitive standing of these Italian sectors is much stronger than commonly perceived.
A linchpin of this competitiveness is the ability – which Italy has in abundance – to combine many technologies and many different skills. Working in a multinational corporation, I come across this almost every day: many neighboring countries have fields in which they excel, but they lack this versatility, which is the capacity to understand “what to use when” in an industrial process. Knowing how far to plumb the depths of technology in an industrial application is what enables you to have a well-positioned medium-tech sector. From this standpoint, I believe that Italy is the uncontested leader.
What explains Italy’s leadership in this field?
One of the main explanations is the training Italians receive, which, at least at higher educational levels, is better than the European average. The seemingly old-fashioned approach of our senior high schools of providing a broad educational grounding, is a winning card: those who concentrate exclusively on a particular technology have too narrow a focus, neglecting the business model in which that technology is utilized. In fact, technological tools are absolutely secondary because technology changes, while those who understand how business works stick around.
In this regard, Italian kids are better placed, but what they do lack is “permission to fail”. In Italy, failure is a mortal sin, which is a profoundly misguided judgment since it curbs the appetite for risk. Allowance for making mistakes is, in fact, a key element even in successful businesses. It is precisely for this reason that Industry 4.0 could represent a turning point for the Italian system: through extensive analytics and augmented reality capabilities, it is possible for individuals and companies to embark on a process of improvement that allows many mistakes to be made but at a low cost.
Does Italy still produce things domestically?
Italy, in my opinion, is at a crossroads. It was dealt a tremendous blow by the crisis in 2008-2009: if we look at the data for 2011, we see that industry largely bounced back in terms of sales revenue but not from the point of view of output. Indeed, for the same level of turnover, production fell by about 20%. This share has essentially been outsourced to countries where labor costs are lower. The skill of Italian entrepreneurs lay in finding a way of returning to pre-crisis sales levels, albeit through strategies that leveraged labor costs. We’re at a crossroads because there is a possibility – though by no means a dead certainty – of bringing a series of manufacturing processes back to Italy.
This is made possible by the fact that some processes can be automated and robotized. So the room for maneuver no longer lies with the cost of labor – which I personally find is always a short-term lever – but with the cost of capital. In this regard, the measures introduced in recent years in Italy (namely, the refinancing of the Sabatini Law and the depreciation mechanisms enacted pursuant to the Industry 4.0 National Plan) open up good prospects. But there would also need to be promotion and strategic support, which is to say, a willingness on the part of the Italian government to do what the American administration has done, that is: kick-start an earnest push towards reshoring without a great deal of false modesty.
How can manufacturing operations be relocated to Italy?
In contrast with Germany, which has placed heavy emphasis on value chains, and with the United States, which has placed its focus on industrial policy and private funding, Italy has chosen the route of tax incentives. I believe such measures are well-suited to the fabric of Italy’s industrial base. Indeed, we don’t have very large firms that can forge value chains like German companies, but we can reckon on an array of small to medium-sized companies. Today, these firms – through tax stimulus and incentives – have the same ability to be players in the field of innovation as larger companies.
I think this system can work. Of course, there would need to be greater promotion and perhaps a clearer government strategy. When I hear it said still that Italy is all about food and fashion, as someone who moves in industry circles, I get nostalgic. I think back to the 1950s and 1960s, when a good many industrial plants in Mediterranean countries sported Italian technology, skills, and construction. Those days are long gone now, but we certainly have a solid footing on which to begin making a comeback.
