Recovery and competitiveness: how Italian companies see it

Will it be a V, a U, a W or a zig-zag? While the debate continues on what shape the economic recovery will take, we asked a top management from leading companies in our country to give us a snapshot of the Covid-19 period. This has been an ongoing discussion over the past few months during talks organized for the Executive MBA at SDA Bocconi School of Management. The aim is to get a clearer understanding of how our companies have faced - and how they’re preparing for - the challenges, transformations and new competitive factors emerging on today’s global landscape.

We spoke to Claudia Lotti, Partner & Associate Director of the Boston Consulting Group. She believes that Italian companies, which were already struggling before Covid-19, have been severely impacted by the pandemic. Now their only chance of survival hinges on a series of “external” aids: social shock absorbers are implemented, collective and individual layoffs are suspended, access to funding is guaranteed by SACE, and recapitalization obligations are deferred. But despite all this, she adds, in 2021 the perfect storm may come, when companies will be feeling their structural criticalities, and they’ll be allowed to fire employees, when support measures will disappear and interactions with the banks go back to normal. In this scenario, we can expect an overall decline in consumption.

Francesco Faella, President of Tetra Pak Italia, thinks that the major challenges in the near future revolve around the customer and the consumer. In the food sector, like in other industries, consumers have become more knowledgeable; they take more interest in the companies and the products they choose. Beyond security and quality, sustainability will play a more and more central role, a sphere in which companies are called on to make a concrete, proactive commitment, not only in relation to consumers but along the entire value chain. Moreover, a strong sense of responsibility in business and a transformation to digital work methods and customer relations represent two additional factors to implement, especially in light of possible future lockdowns.

To shore up the competitiveness of businesses, Luca Sacchi, Senior Vice President and Head of Strategic Innovation at Piaggio, points to innovation, which today more than ever before represents a strategic asset for organizations. Innovation is very frequently seen as something separate from the production process, as if it were something “on top” instead companies need to adjust that interpretation and incorporate innovation in production, service provision and sales processes. For Piaggio, investing in innovation means anticipating customer needs, creating cutting edge products from a technical, stylistic and functional perspective, and on the strategy side, holding on to market leadership.

Innovation and sustainability of products and processes: these are the assets that Mapei (an Italian company that manufactures chemical products for the building industry, TN) .is betting on to grow its markets. Stefano Ranghieri is Head of Marketing at this company, which currently counts 31 research laboratories the world over. He told us that Italy is one of the most active countries in terms of efficient use raw materials, and the entire organization is investing heavily in solutions that cut consumption of raw materials while preserving performance. Mapei has also had to revolutionize customer relations in an industry, construction, with a solid foundation built primarily on human interaction. The cornerstone for the company is rapid adaptation: in just a few weeks Mapei converted all its training activities to digital platforms, and created new customized sales tools for its corporate partners.

Another company that values physical contact and human relationships in business is Red Bull, a global emblem of experiential marketing. But how do they react when they have to cancel are public events? With the spirit of adaptation, and by staying true to their brand values and the brand promise. Roberto Giugliano, Head of Marketing for Red Bull, says the key is to not lose sight of corporate strategy. In this sense, Red Bull confirmed its online investments in distinctive brand content, mainly with contributions from athletes on the Red Bull roster who shared not only about their achievements, but their daily lives, and the different challenges that they – like all of us – are facing. Changing consumer habits and the new needs emerging in the post Covid-19 period also represent a growth opportunity at the level of product category, a way to extend the brand footprint to new consumption occasions. As far as distribution, the company has not yet changed course but the strategy will inevitably take into account an upsurge in online sales.

Looking at Lamborghini, we can see what’s happening in an industry that’s half way between a sports car and a luxury automobile. As CFO Paolo Poma tells us, super sport cars represent a super-niche market that counts 100,000 new vehicle registrations per year, with an exclusive customer base and delivery times running from six months up to a year. The current recession has made a sizable impact on Italians’ wealth; worse still, it’s caused a sense of uncertainty about the future to ripple through all levels of society. Although super sport cars are clearly not one of the priorities for consumers right now, in a certain sense this sector symbolizes a sure-fire way for us to have fun again, to enjoy life through experiences we had to miss out on during the lockdown. Even though it’s still too early to go out on a limb, Poma is seeing signs of a major upswing in orders, which in some geographic areas are back to pre-Covid levels and beyond. In terms of the new challenges that the entire automobile industry is facing, the Lamborghini executive emphasizes the growing complexity of managing a global supply chain, from suppliers to distributors, a complexity driven by the evolution of work methods.

Our conversations with Italian business leaders also gave us the chance to discuss the strengths our country can leverage to stimulate recovery.

Poma notes the importance of growing and supporting businesses: the weight of additional debt, accumulated to support companies and families, can only be sustained through growth, which in turn can be fueled by the enormous potential of Italian manufacturing and entrepreneurship. What’s critical for the country to relaunch business and create new jobs is a clear, effective industrial policy that cuts across party politics. Sacchi at Piaggio asserts that the entrepreneurial environment has to boost the quality level that we have in world of high-end manufacturing, and improve our potential in service provision. It’s true that Italy wins high marks in high-range segments and super-niche markets, but we must make the rest of the world aware of the fact that this quality can be extended to other product categories too. According to Faella at Tetra Pak, the Italian enterprises that expand abroad with their products act as ambassadors for Made in Italy quality. This, along with a traceable value chain, should also reflect our companies’ commitment and value system which consumers can identify with. Emphasizing the strategic value of innovation, Ranghieri at Mapei claims that although many organizations are finding it hard to invest in research and development, Italy still manages to embody creativity and technological innovation.

Cosmo Schinaia, Country Head for Italy at Fidelity International, asserts that Italy’s strength has always been a quality business environment. From highly-capitalized companies that have put Italy on the map with their world-famous brands, to enterprises with medium and small capitalization and brands that may be little known to the general public but with products of exceptional quality, making them attractive on global markets. Schinaia also encourages us to reflect on another crucial element that can activate investments and expedite renewed consumption: the “nest eggs” of Italian savers. The Covid-19 crisis struck Italy when the country was already weak, because over the past ten years we have not reaped the benefits of global economic expansion. This economic disadvantage has impacted investors, i.e. Italian savers, traditionally inclined to buy bonds; instead now they have changed course, setting aside savings to deal with unexpected events. We can still see the outcome of this process today, with over 1.4 billion euro sitting in Italian bank accounts.

To sum up, the companies we interviewed show that they have clear ideas on the strategies to implement in order to grow and fuel the recovery. The challenge now is to create the conditions that will make it possible to work steadily in these directions.