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Dealing with complexity today: how to launch the recovery

Digital format, 27/07/2020, Annual Conference for the Friends of Aspen

The outbreak of the Covid-19 pandemic and the lockdown that followed has dealt a hard blow to Italian enterprise. According to Bank of Italy estimates, the 2020 GDP contraction will be somewhere between 9 and 13%. Despite the stimulus package launched by the Italian government and the extraordinary measures enacted by the European Recovery Fund, the recovery remains an uncertainty in terms of both timeframe and modality.  We find ourselves in the predicament of having to plan a future much more uncertain than the present, not least in light of the critical state of public finances and of questions regarding the mid-2021 renewal of financial coverage measures guaranteed by the ECB.

Public investments will surely play a key role in the process of recovery, but that should not private enterprise is any less important, given the energy and power of “creative destruction” it is capable of contributing to supply the extra impetus needed to launch and sustain the recovery.

Two main concerns dominate: sustainability and digitalization. Sustainability – environmental, economic and social – remains an extraordinary opportunity to boost the productive system on the condition that we make a major cultural leap. Indeed, the environment must no longer be considered among a firm’s costs but rather as a driver of value. Bio-plastics, recycling plants and “green” products are just a few examples of the enormous opportunities for exports and for confirming Italy as a global leader.

Digitalization has always represented a driving economic force and, despite the 2020 contraction, the IT sector is expected to make a full recovery in 2021.  Double-digit growth is estimated for applications such as IoT, blockchains, cloud computing, AI and cybersecurity.

Today’s digital investments are not only opportunities but also essential to the task of adjusting to the “new normal” – everything from work reorganization to redesigning the production line and transformations in healthcare and education. The data show that companies that have been able to embrace the digital transition were better prepared for the crisis and are bouncing back more rapidly, not least in the Made in Italy sectors and exports.

The transition requires a leadership capable of providing new content and models. The pandemic has foregrounded some of the essential features a leader must possess, paramount among them the courage to take chances, make decisions that may be unpopular and the ability to unify people and ensure their representation. Underlying everything must be the wealth of experience that only a person with a history of confronting complex situations can have gained.

Associated with leadership is management ability – something that was heavily called into question during the lockdown. If the priority for business owners and managers is to produce the maximum efficacy, achieving the best results in the minimum time, what has worked best during this crisis has been critical thinking, i.e. the capacity to reflect on why things must be done and to reprogram business models; the effect has been disruptive and has led to a radical redesign of work methods. Equally important has been leaders’ adoption of a clear and direct communication style devoid of bromides and rhetoric.

Finally, this crisis has been a golden opportunity to reorient the nation’s industrial policy.  Along the lines of the Plan for Industry 4.0, specific fiscal instruments are needed to steer investments in accordance with the above-described strategies; similarly, intermediary business associations need to strengthen their dialogue with lawmakers in an effort to highlight problems and set priorities. Moreover, the recovery program must hinge on human capital: investments must focus on creating skills both through training young people and through refresher and reskilling programs for those already working. The goal is to propel what are increasingly rapid technological transformations, not to be panting to catch up with them.

At a more general level, we need to restore confidence among citizens, institutions and businesses – in no system can laws be a substitute for the efficacy of a relationship based on trust.