Clusters: the pride and joy of Made in Italy

Being able to reinvent themselves and adapt. This has always been the strongpoint of clusters. Together with their ability to work together.

05-05-201114:05by
distretti

 

By Valter Taranzano, President, Federazione Distretti Italiani

 

Some put on a smug smile and say “I told you so”. Some say it’s a miracle. Others applaud, but predict it won’t last. “The clusters, baby, the clusters,” to paraphrase Humphrey Bogart in Deadline – USA.

Exactly, because people will continue to talk about our beloved Italian clusters, both positively and negatively. As president of the Federazione dei Distretti Italiani (Association of Italian Clusters) I naturally toot my own horn. But speaking objectively, today it is truly difficult – unless you have an ax to grind – to say anything against clusters. They are something the Italian economy and business should be proud of.

Even with their congenital defects, it is obvious for all to see that if Italy has begun to crawl out of the current crisis, it is thanks, above all, to the SMEs concentrated in the clusters. If, before, Made in Italy held its own and is now gaining strength, it is because the clusters have not given in. On the contrary, they have “invested” in the crisis, finding within themselves the strength and means to transform themselves yet again and resume their climb.

Being able to reinvent themselves and adapt. This has always been the strongpoint of clusters. Together with their ability to work together.

Some facts and figures. According to the cluster observatory, the Osservatorio della Federazione Distretti Italiani, exports for the 101 clusters examined over the period January-September 2010 rose by 10.5% compared to the same period the year before. In addition, for the first time after a number of years, the growth rate of industrial clusters was higher than that of non-clusters (+16% compared with 15.6%).

So far, so good. But the prospects for 2011? Also good. Over 30% (30.6%) of cluster firms foresee continued increase in exports, 64.5% no change but consolidation of existing levels and only 4.9% a decrease.

So, what’s behind this trend reversal?

Despite widespread skepticism, two years ago when the recession was at its worst, the clusters changed their skin once again, responding to the crisis by repositioning themselves in major reference markets and undertaking a fundamental redefinition of their organizational strategies.

In short, they showed muscle, clearly demonstrating the fortitude of a model that is flexible, proactive and, probably, inexhaustible. It is a “triple A” model – in Italian “adattativo, affidabile, alternative”, which means adaptable, reliable, alternative – through which cluster firms seize the potential changes in market demand and trends and offer innovations in their products or methods, operating through increasingly flexible local cooperation networks.

And these are the two magic words: innovation and networks. Innovation has always been the weak point of SMEs and therefore the stumbling block for clusters. There is no way of getting around it: a small- or medium-sized company just cannot afford the innovation necessary to turn things around. It just costs too much.

The Federazione realized in time that steps needed to be taken and it negotiated agreements with universities, research centers and high-technology poles. All allowing SMEs access to organizations that would understand and support them. Because small companies often had/have ideas, but not the means for testing, improving and discussing them. Maybe they hadn’t figured out yet that one of their production processes could be completed in much less time and much cheaper than they were used to. Or that diversification not only meant innovation, but would also open new scenarios, both internal and external.

All this began to function in a new and different way and the results were seen immediately. Then, cluster companies realized that if they worked together, maybe putting aside the age-old tendency to consider the guy next-door your no. 1 competitor, they could move ahead even faster. And so there began to spring up spontaneously networks of companies, SMEs which, even if geographically distant, were united by type of product and manufacturing processes, through which to channel direct initiatives to cluster firms. This solidified a relationship that already existed, given that clusters have always been network-connected.

Following this logic, companies created vital relationships for identifying successful growth strategies, perhaps uniting around a leading company capable of managing and spreading innovation because it was more solid and better equipped. Smaller companies, for their part, responded by contributing services and infrastructure. Together, they created “network companies” which, in turn, gave birth to “network contracts”, now legally valid. A veritable leap thanks to which SMEs have learned to make better use of existing knowledge through investing in intellectual capital and feeding new ways of doing business.

Starting with exports. So, if China or India (to mention the best-known examples) were the most important players on the international scene, Italian clusters understood that they should not impede their progress, but rather offer themselves as new, reliable partners. A new approach that reshuffled the deck. As a result, China, for example, is in 7th place as an export area for Italian clusters (+81.6% in 2010), and is likely to rise further in rank in the main markets held.
Over the last year-and-a-half, traveling around cluster companies and speaking with their business leaders, from month-to-month I’ve seen the expressions on the faces of those I talk to become less tense and worried and more relaxed and loose. And I’ve seen their companies change. A manager emerged where the company had always been run along rigid family lines. The director went to learn about modular architecture and began to re-think production processes. He studied Lean Production, i.e., how to produce by eliminating waste. The result? A whole new, motivational atmosphere. The overall sense of lack of confidence has been transformed into optimism, regaining that healthy sense of challenge and feistiness that marks an entrepreneur’s activity.

And this is all backed up by the results. Sectors such as hi-tech and agrifood, the last holdouts in Italian exports even in the toughest times, have unfurled their sails, while those in serious crisis (in terms of productivity, creativity and identity) such as engineering, apparel/fashion, furnishings, textiles, leather and pottery, have begun to push back, offering once again the best in Italian manufacturing. Let’s be clear, these sectors have not yet emerged from the crisis, but now, unlike before, they can see light at the end of the tunnel.

And they have once again begun telling others how to do it. This is how the fact that two delegations of foreign businessmen arrive in Italy’s Northeast each week must be interpreted. And what are they here for? To study the organization of clusters which are seen as an example of local development, especially by emerging countries which depend on SMEs.

So what is needed now? More investment, especially in knowledge. In order to properly guide structural change. And the proverbial courage of Italian entrepreneurs is also needed. They should, they must, push themselves further. Towards new markets. What are needed are broad, strong backs, even more streamlined companies and (why not?) cooperation between the public and private sectors that still does not exist. But they’ll do it, I’m sure. And they will be able to continue to proudly raise the Made in Italy flag. Put succinctly, we are facing a new season for the Italy which produces. A miracle? No. “The clusters, baby, the clusters.”

 

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