10/07/2018 – Country Focus / Italy / Europe
Italy's path to the Future
As one of Europe’s worst hit victims of the late 2000s recession, Italy has suffered a prolonged economic trauma, while the country’s recent political turmoil has rocked financial markets and even brought the stability of the euro into question. Buried beneath these crises, however, lies a breeding ground for globally competitive manufacturing, technological development, and innovation, as Gemma Kent discovers.
Almost three months after the 2018 general election, in which Matteo Salvini’s League emerged as the predominant political force, the right-wing party formed a coalition with the anti-establishment Five Star Movement (M5S), led by Luigi Di Maio. At the helm of Italy’s new coalition government is Giuseppe Conte, an M5S-linked independent, law professor and political novice who will be responsible for delivering a combination of populist, anti-establishment and eurosceptic policies ranging from radical tax cuts and higher welfare spending to an overhaul of EU rules on budgets and immigration – all while promising to kick-start economic growth.
Considering Italy bears one of the eurozone’s largest government debts, currently standing at around €2.4 trillion – more than 130 per cent of GDP – the new government certainly has its work cut out. Besides its sky-high public debt, the so-called Bel Paese is also grappling with deep-rooted economic issues such as low productivity, limited competition, too few large corporations and high unemployment, on top of a persistent north-south divide.
On the other hand, Italy’s centuries-old traditions of creativity, design and innovation present a unique opportunity for the country to improve its position in an increasingly competitive global economy. Indeed, from fashion and luxury goods to food processing, automotive and machinery manufacturing, the often family-owned SMEs that have spent decades as the cornerstone of the Italian economy could hold the key to the nation’s future success.
Made in Italy
In a 2017 article published by MIT Technology Review, the Italian Trade Agency (ITA) lauds Italy’s world leadership in manufacturing, machinery and related fields, describing the country as a hotbed for high technology. Although the ITA’s enthusiasm is to be expected given its role in promoting ‘Made in Italy’ in order to attract FDI, one cannot argue with the statistics. Italy is the second-largest manufacturing economy in Europe, home to some of the region’s most environmentally efficient manufacturing systems, and one of only five countries in the world with a manufacturing trade surplus exceeding US$100 billion.
Italy also ranks second worldwide in global competitiveness in the industrial machinery sector and is one of the top three producers of machined parts. In addition, the country is Europe’s third-largest exporter of flexible manufacturing technologies, including robotics, with US$9.6bn in exports solely to the US, and is among the top five non-US hosts for additive manufacturing technologies. Over 70 per cent of Italian-made machinery is exported to various nations across the globe, according to the ITA, and that figure is likely to keep increasing: Italy’s overall machinery exports grew by 17 per cent from 2016 to 2017 alone. Innovative companies in the machinery segment include Pietro Carnaghi, a fourth-generation family business and world leader in the production of large vertical lathes with applications in energy, aerospace and aeronautics, and Galdabini, a precision systems specialist established in 1890 that remains family-owned today.
While the country’s technological expertise is certainly nothing new – consider the achievements of the Roman Empire, Leonardo da Vinci or Guglielmo Marconi – a transition is underway towards the “technologies of tomorrow”, according to ITA President, Michele Scannavini, who adds that “Italy is going through a very important and radical transformation from traditional manufacturing to advanced, flexible manufacturing.” Moreover, unlike some large multinational corporations, Italy’s prolific SMEs are flexible and very fast to adopt the latest technologies. “Today 40 per cent of Italian manufacturing companies use 3D printers for fast prototyping, and 25 per cent use robotics in the manufacturing process,” Mr Scannavini affirms.
Driven by robotics
Certainly, robotics and automation is a particularly promising field of Italian manufacturing, with more than 400 companies employing 32,000 people and generating over €6bn, two-thirds of which is exported overseas – much of it to the US. Among those companies is Genoa-based Telerobot Labs, which designs and builds advanced robotic systems in mechanical and special devices, with a focus on combining robotic and human efforts in order to address old problems in new and innovative ways. “There are operations that humans alone can’t perform and operations that a machine alone cannot perform,” the company’s founder, David Corsini, told MIT Technology Review. “The integration of human capability with the capability of robots is the solution.”
Telerobot Labs is one of several Italian firms operating at the cutting edge of the automation sector, where industrial robots represent one of today’s top global technology trends. Indeed, the International Federation of Robotics’ (IFR) World Robotics Report 2017 forecasts 15 per cent growth in industrial robot installations for 2018–2020, with collaborative robots (cobots) expected to play a leading role in that growth. According to the report, Italy is the eighth most automated country in the world, with 185 industrial robots installed per 10,000 employees – well above the global average of 74.
“The industrial robot has become the way – not one way, but the way – to manufacture a lot of things,” says Arturo Baroncelli, former IFR president and business development manager for Comau Robotics, which is among the world’s largest producers of robots. A division of Turin-based Comau, the company recently supplied 82 robots to Italian luxury car manufacturer Maserati, which required an innovative robotic solution capable of fully automating complex body-shop operations with extreme precision. As the vehicle chassis moves through the production cycle, Comau’s digitally interconnected equipment delivers real-time production data when and where it is needed, helping reduce downtime while improving overall quality.
Developing a startup scene
The proliferation of high-tech manufacturing in Italy has been facilitated, since its launch in September 2016, by the Ministry of Economic Development’s Industrial National Plan 4.0 – described by Michele Scannavini as supporting “the digitisation of the Italian economy”. Industry 4.0 is a long-term strategy intended to generate billions of dollars for technology R&D and to boost innovation-driven economic growth via tax incentives and venture capital funding for startups, among other private and public sources. Meanwhile, the educational component of the plan will see the creation of centres of competence at top Italian universities. Less than two years since its introduction, Italy’s fiscal framework for innovative companies is now one of the most attractive in the world, according to PwC’s Digital Tax Index 2017.
Industry 4.0 follows much-needed steps taken by the government in 2013 to slash the amount of red tape entrepreneurs must navigate in order to start “innovative businesses”, when it passed legislation that provided tax exemptions for eligible startups. To qualify, start-ups must be under five years old, based in Italy and with annual revenues of less than e5m. Excessive government bureaucracy still threatens to impede investment and the growth of the startup sector, however, and is rated the most problematic factor for doing business in the country by the World Economic Forum’s Global Competitiveness Index 2017–18, which ranks Italy in 43rd place – behind India and Poland.
A tenacious Italian startup culture is flourishing nonetheless, but in contrast with the likes of Silicon Valley or London there is no single hub of innovation. Indeed, as a reflection of the country’s post-war practice of clustering entire industries – from shoes to furniture or mechanical components – in regional districts, startup hubs have cropped up in most of Italy’s major cities, presenting opportunities for innovators throughout the country. Finance and fashion capital Milan is perhaps the largest, following its role as host of Expo 2015, but together with Rome and Turin – two other popular locations – it was home to less than 30 per cent of the total number of startups in the country in 2016.
The wealthy northern region of Emilia-Romagna, led by Bologna, is another hotbed of innovation; not only among established local companies such as Ferrari, Lamborghini, Ducati and Barilla, but also for newer firms like Technogym, a world leader in the fitness solutions sector, whose latest innovations include IoT-connected fitness equipment as part of an integrated digital ecosystem, and Musixmatch. Established in Bologna in 2010, the multilingual lyric-sharing platform is now the largest database of its kind in the world, boasting 73 million users and 14 million lyrics, and was nominated ‘Best Startup in Europe’ through Facebook’s FbStart Program.
Tech talent in the South
Surprisingly, however, about a quarter of the innovative startups registered in the second half of 2017 were located in southern Italy, an area typically associated with agriculture, poverty and high unemployment. Indeed, Campania is the only region in the country to have a dedicated Councillor for Startups, Innovation and Internationalisation, while its capital Naples is the location of Apple’s first European iOS Developer Academy, where students can learn how to write code and develop apps for Apple technology. Gaetano Manfredi, rector of the University of Naples Federico II, told The Guardian of the institution’s keen desire – shared by Apple – for graduating students to be hired by local companies or create their own startups based in Naples, since the area often suffers from “brain drain”.
The presence of the world’s biggest technology company has proven important in attracting other multinationals to the region, including Deloitte Digital, which joined Apple at the San Giovanni campus in Naples late last year. Deloitte was followed, in January, by the IT conglomerate Cisco, which launched the Cisco Networking Academy and Co-Innovation Hub at the same campus, where students will have access to learning focused on IoT, cyber-security and network technologies.
Such collaboration between major companies and universities has proven crucial in bringing investment to Italy’s south, which needs desperately to retain the skills and human capital flowing from its high-quality universities. Japanese IT giant NTT Data, for example, maintains a partnership with the University of Calabria – located in the ‘toe’ of the Italian peninsula, an area that is also home to the country’s first ‘Cyber Security District’. Academic institutions ask the company for information on the skills it considers most important so as to incorporate new subjects into their study programmes, thereby enhancing new graduates’ attractiveness and preventing brain drain.
Reversing the brain drain
Certainly, policies that discourage jobless young Italians from departing the country are of vital significance to the future growth and success of the economy. Despite faring the best it has in several years, Italy maintains a youth unemployment rate of 31 per cent – the third-highest in the EU, after Greece and Spain. While some of those young people have decided to create their own jobs by becoming self-employed, the latest figures from Italy’s Ministry of Foreign Affairs show that 1.5m people have moved overseas in the past decade. Indeed, when combined with low fertility rates and an ageing population, the brain drain poses a threat to the Italian workforce that the new coalition must strive to reverse.