- Owner - Turnover and profitability are at their lowest: it has now become only a price-cutting war;
- Me - What are you changing to innovate?
- Owner - Change?!? Are you crazy? I don’t want to change anything!
- Me - Then leave everything as it is and just wait to see what happens…
Salaries, public services, business failures, per-capita wealth, and purchasing power all show worrying data. There is only one cause: the low rate of innovation.
THE 20 CAUSES THAT LIMIT INNOVATION
Quick note: innovation is NOT technological. Technology is promoted as the only path to innovation because technology sellers have an excellent marketing process. But innovation affects all elements of the business model—not just the resources, as they try to sell it to us.
Clearing the thick fog, let’s move on to the causes that limit innovation in Italy:
1) The Gattopardo Syndrome
Making small cosmetic tweaks as signals of innovation, but leaving the business model identical to 20 years ago. The Gattopardo Syndrome is adopted mainly to carry out marketing actions on the current business, but without any real change to the product/service or the corporate model.
Change “clothes”, but not the substance.
2) Strong attachment to the status quo
45% of Italian companies use the founder’s surname as the company name. The reason is not “it has to be like this”: Steve doesn’t do Apple by surname.
Roman Empire, Vatican State, and ethnicity. Apparently three unrelated aspects, but that are actually linked by a founding element in the country’s culture: the status quo.
95% of Italian companies are made up of mPMIs created by the founder, often still in the company—or with their own children in charge. This shapes management with leadership that is often authoritarian, centralized, and driven by strong needs for control.
The keepers of hegemony have only one fear: changes.
3) Reactive entrepreneurial culture instead of proactive
A good part of Italian companies was born in the economic boom of the ‘60s to ‘80s, driven by the market. It wasn’t necessary to innovate because demand was pulled by consumption. Everything had to be done.
It was enough to “collect orders” and deliver.
This led business management design to adopt a reactive approach rather than a proactive one. In today’s VUCA context and commoditized environment, many companies passively endure the market in the hope that the Messiah will return.
The Messiah will never come back again: it’s already something that he came once!
4) Great exploiters, but poor explorers
Many entrepreneurs have strong operational management skills to leverage the company’s current potential, but limited ability to create new ones.
It’s like a mine: extremely good at digging to find the gold inside (as long as there’s still some), but limited ability to find new mines.
5) Limited culture of humility
Sweden is one of the countries with the highest humility indices and mutual support, while Italy is near the bottom.
This cultural limit of “I know everything and you don’t know a damn thing” does not allow external interference , so information and innovation capabilities are limited to the company’s perimeter.
6) Excessive gap between market expectations and company performance
The energy of procrastination is many times greater than the energy needed to innovate.
Many entrepreneurs would also like to innovate, but often the gap between productivity and process effectiveness is so high compared to market needs that the energy to change is lower than what it would take.
So everything is left as it is.
7) Avoiding measurements so as not to question one’s management
“But if we write down our performance in black and white, then everyone will see how bad we are.” This statement was told to me by a sales director.
What is visible can be improved. What isn’t visible, no. In fact, even better: it doesn’t exist.
8) Prefer subjective management methods instead of objective ones
To be in Europe, you can’t just change the currency. You must change your mindset. Italy can no longer afford improvised, family-run management protected by the domestic market. What’s needed is discipline, transparency, responsibility, and the ability to compete with the best. Only then can we play on equal terms in the European and global market. (citing S. Marchionne)
Business management boils down to just one thing: discipline. A standardized process follows precise, repetitive rules: it’s not possible to do otherwise depending on one’s mood, emotions, and how the entrepreneur woke up today.
Many entrepreneurs prefer to maintain anarchic, subjective management instead of an objective, scalable approach—but delegated.
9) Most of the time is spent on operations
Breakdowns, pallets to move, trucks to load, delays, complaints, machine setups. If these are your main day-to-day problems, it means that nobody is planning the future of the company.
Investing your time in emergencies and day-to-day operations doesn’t allow you to direct it toward far more strategic activities: such as innovation.
10) Limited financial intelligence skills
You are about to invest 50k€: are you thinking about the 50k€ you’ll have to pay out, or about the return on investment that it will generate? Italian culture is focused on paid employment (yes, even for entrepreneurs), so assets are perceived as static, while the only adjustable variable is made up of costs.
The entrepreneurial approach is the opposite: I spend X today to earn Y tomorrow (where Y>>X).
We also have another problem: given limited financial skills, many entrepreneurs delegate economic and financial management to the accountant. One of the worst possible choices, since the economic aspect is closely linked to the operational decisions made today for tomorrow (and the accountant doesn’t have that perspective).
11) The presence of one or more older partners
Italy is the second most elderly country in the world after Japan. The limited remaining life expectancy leads the human brain to one strategy: defense.
A conservative approach tends to accumulate resources and not reinvest them, since the fruits of the investment potential wouldn’t be seen—so it’s not worth doing at all.
Many older partners (often founders) are still present inside companies, and although there may be successor children, management remains under the older person’s hegemony—who will always be (biologically, by nature) conservative and reluctant toward innovation.
12) Conservative culture and low risk appetite
In Italy, 1,360 billion euros are sitting idle in current accounts. They don’t generate profits: instead, they are eroded by inflation and bank costs.
This point, together with point 10, shows a conservative approach and low risk appetite. Without accepting even a minimal percentage of risk, it’s impossible to innovate.
13) Poor long-term vision
“Better the egg today or the chicken tomorrow?”
In 99% of cases, you’ll be answered the egg. Short-term thinking has become even shorter in recent decades due to fragmentation caused by entertainment technologies (video, feeds, smartphones in general), constant changes in the world, and a consumer culture of continuous novelty.
This mindset is focused on immediate satisfaction, instead of building something lasting for the future.
This is also worsened by the low quality of Italian politics, fragmented and lacking an industrial strategic plan. Just think that during the term of President Vladimir Putin in Russia, 12 prime ministers changed in Italy (and who knows how many more will have to change).
Discontinuity and long-term plans don’t go together.
14) Functional illiteracy and low levels of education
If you are reading this sentence, you probably don’t suffer from functional illiteracy.
In Italy, 35% of adults are functionally illiterate. Functionally illiterate people can understand only the headlines of an article, images, and little else. In addition, they prefer light and frivolous content: statistically, they will never land on this article.
Italy also has another skills gap: 70–75% of Italian managers have a degree, while Sweden holds the top position with 85–90% of degree-holding managers. Let’s put it near the very bottom for books read per capita and limited investments in staff training.
The fewer the cognitive abilities and the skills, the less ability to innovate.
15) Lack of courage
Compared to the ‘60s–‘80s, with entrepreneurs like Del Vecchio, Ferrari, Barilla, Ferrero, etc., the current historical period does not have visionary, authoritative leaders.
A good part of entrepreneurs just manage the company for the business already underway (“exploiter” as seen in point 4), but without having the courage to design the future.
The Florida Effect (chronic demotivation) is also very widespread, mainly caused by the Syndrome of everything going just fine, always due to the past economic boom that keeps people thinking in the glorious years gone by.
16) Limited trust in the ability to deliver the agreed innovations
In other articles we’ve already discussed the reduced execution capabilities that characterize many modern companies: for more details, you’ll find the full article here Why delivery times have become INFINITE: 10 causes + solution | Programma Socrate®.
Innovation is made up of many small changes, therefore actions. If the ability to “get results done” disappears, timelines become endless, quality deteriorates, and you never know when the pilot will be put into service (TtM, Time to Market): even the most resilient entrepreneur loses patience.
But the capital exposure of the invested money remains.
17) Overestimating one’s own innovative capabilities
Low trust in institutions and the widespread presence of smoke-sellers as alternatives (or fake-gurus) channel many entrepreneurs into the Dunning-Kruger Effect.
This effect is a defensive consequence of shutting down due to the untrustworthiness of the outside world. The phenomenon creates a perception of one’s own reality much greater than the outside reality—overestimating current innovative performance and leaving the business model unchanged.
However, all this presents a big trap: the professors and “experts” out there are not your customers. Comparing your abilities with the wrong stakeholders leads you down the wrong path.
18) Reduced trust in social capital
Social capital is the fundamental means to innovate. The more people there are, the better.
Companies with centralized leaders, focus on control, low delegation, a reduced number of managers, high turnover, and micromanagement are signs of low trust in their employees.
The worse the quality of social capital and its trust within the company, the less capacity to innovate.
19) The intangible is perceived as useless
The innovation process is intangible. If the new laser-cutting machine with automatic nesting based on the design sent via email by the customer is considered innovation, you’re swapping the means for the end.
The reason why customers buy your product/service is intangible—so you need an intangible “tool” to understand what those reasons are.
20) Strong focus on the product/service technique, but not on what’s around it
The product/service constitutes a drop in the ocean in any company’s business model. For many entrepreneurs, it’s exactly the opposite: the product/service is 100% of the company.
This limitation prevents innovating everything around the product/service because the eyes are focused only on that.
When you go fill up your car, do you think about the composition of the gasoline, or about the closest and cheapest gas station?
SOLUTION
Innovation in your company—whether it’s the product/service you sell or any other aspect of the business model (pricing, scalability, channels, etc.)—can be developed through a proven method used in the startup world and in the development of new business areas within already existing companies.
The fears and critical issues highlighted by the article are mitigated through a standardized approach, fully customized to the company’s business model, regardless of the product/service produced, industry, size, geographical area, or number of employees:
- initial analysis of the elements underlying the value proposition requested by the market;
- small prototypes and other tools to carry out pilot tests in the real field;
- targeted measurements and adaptation;
- continuous innovation of the entire business model as a real, new company process.
No investments are needed and new technologies, but only the method.
CONCLUSIONS
+0.4%: this is Italy’s “growth” rate.
+10%: the average rate of business failures each year, with a growing derivative.
30 years: the period of wage stagnation in Italy.
-13 billion euros: the budget reduction to fund public healthcare from 2023 to 2025.
All these figures depend on the same cause: limited innovation.
If you want to keep working in Italy and have us work for your children as well, you have to change the current situation and trigger the process of continuous innovation in your company—in order to generate a steady stream (or one that’s growing) of turnover and profitability.
Don’t wait for the Messiah—or another external savior: act yourself, and now!