Italian SMEs Must Speak Digital to Grow

Italian SMEs Must Speak Digital to Grow


by Gianluca Salviotti, SDA Bocconi School of Management
Translated by Alex Foti

Not including micro-firms, in 2017 the approximately 150,000 Italian enterprises having at least a €50 million turnover and less than 250 employees reported a growth trend in revenues and employment that recovered significantly compared to previous years. A long-awaited recovery in growth which now seems to slow down again, raising substantial concerns. In terms of figures, for example, it is evident that in the first half of 2018 the growth of in the birth rate of new firms markedly decreased, going from +8.2% in 2017 to +1.3% in the first six months of the last year. On the qualitative front, the first nine months of 2018 showed a drop in the number of registrations in the Italian Register of innovative SMEs.

So less small and medium firms and a lesser number of innovative SMEs? That would be a big problem, especially considering SME-innovation combination represents the common denominator of Italian SMEs that better performers in EU markets, according to a recent ranking released by the Financial Times. There is a lot of the Made in Italy in this ranking (one fifth of the 1000 companies in the ranking were Italian), lots of entrepreneurship and, as we were saying, lots of innovation, which in most cases is expressed in the most fascinating but also the most complex element to be added to the entrepreneurial recipe, especially in the smalland medium companies segment: digital transformation.

While the benefits of digitization have been widely demonstrated by now, from the more efficient management of production, operations and collaborations, to stronger growth in international markets and innovation of supply and business models, SMEs still experience significant difficulties in reaping the advantages of digital technology. This is a problem that has deep and well-known roots, starting from intrinsic limits to the resources, skills and functional roles available for managing digital transformation. Add to this that there are factors such as organizational inertia and resistance to change, along with a lack of trust and reluctance to invest in digital technologies, given an unclear perception of potential returns. Without forgetting the role played the industrial district or manufacturing sector, in particular when the conditions are missing for a "choral" transformation of all the companies operating in the same industry, such as the lack of inter-company cooperation, leading firms, or international projection.

Central and local public institutions have tried to develop policies supporting digitization to overcome the problems that characterize this segment of firms. Most initiatives have concentrated on supporting investments in technology and infrastructure (e.g. hardware, software, networks), mainly through tax incentives or subsidized loans, and occasionally on IT training support. Although these policies have been effective in driving the first phase of the digital transition, essentially confined to technological infrastructure, the results have so far been limited.

If the digitalization of SMEsS to date is still an unfinished work, it is necessary to rethink policy by abandoning the traditional logic based on subsidizing technology purchases, to pursue a networked digitization model oriented to the digital transformation of shared economic relations and processes. As shown by the results of a research program launched by the SDA Bocconi School of Management as early as 2016, policies should focus on the design and dissemination of technological platforms for whole districts and sectors, either governed by public agencies or developed by new forms of private entrepreneurship, in order to enable SMEs to interact more effectively and efficiently with customers, suppliers and partners, by improving industrial collaboration, job specialization, information sharing, and speed of market response.

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