Gianpietro Benedetti | MIB30 Trentennale - 30th Anniversary

Ladies and gentlemen, colleagues. I personally thank you for this recognition from the MIP School of Management of Trieste, and I also thank you on behalf of the Danieli team, because the successes and achievements that Professor Tacconi listed are also the fruit of collaboration and team spirit. With this lecture, I intend to contribute to updating the corporate strategies that the new scenarios require, and which are different, at least for us, compared to the last twenty years. Good evening to everyone.

Professor Tacconi has already said almost everything. I wanted to briefly summarize the management's vision of the past and present — then we'll talk about the future.

The considerations are inspired by Danieli's history and strategy. We operate in a rather specific field: the design and construction of plants for manufacturing metals — steel, aluminum, and copper. These considerations may not have absolute value, but they are applicable even in other sectors. Danieli's profile: a group with approximately three billion in revenue, 9,500 employees — about 4,500 in Europe, 3,800 in Italy, and the rest worldwide, mainly in China, Thailand, Vietnam, India, Russia, and Iran. For over thirty years we've exported ninety-eight percent of our products.

Over these decades we've gone through three major phases. The first, in the 1990s, was diversification and acquisition of high-tech companies. Our main competitors were German, Japanese, and American, and Italy wasn't strongly identified with this sector. We acquired companies in Sweden, Croatia, Germany, France, and America — the American acquisition being the most significant investment at the time. In the 2000s came internationalization — the first factory in China with 1,700 people. We didn't go there just for cheap labor; we brought engineers, technicians, designers, and commercial staff — an integrated company, replicated in India and Vietnam. Throughout this period we invested heavily in innovation: about 1.35 billion over ten years in R&D, thanks to the generosity of our shareholders.

To give an idea of how our competitive world has changed: from 1990 to 2015, we went from five competitors in the US and four in Japan to just three main competitors globally. The vision and moves we made, with some luck, were truly salvific.

But what changes in the future? Many have asked me to express enthusiasm for the Silk Road. It can certainly increase the port of Trieste's activity and bring investments, but it is essentially a highway for Chinese exports. The benchmark must be continuously updated. In the next five to ten years, the main competitors will be Chinese and Japanese — not just because of cost, which is narrowing. Ten years ago everything cost fifty percent less in China; today it's thirty-five to forty percent, and in ten years it will be around thirty percent. But what's really changing is their vision — there is a dramatic increase in quality and technology.

We talk about Italian creativity, but I read an article about Hollywood wanting to collaborate with the Chinese. What struck me most was a Chinese movie star wearing a drastically innovative Chinese dress. Our famous fashion creativity is starting to be challenged. We still know them for cheap plastic objects, but they've worked at extremely low costs for major global companies for over a decade. The iPhone was assembled in China for ten to twenty dollars and sold for six hundred. Today you see the Huawei phone with exactly the same technology — a simple, effective example of what's happening in other sectors including ours. Years ago we imported ninety percent of new plants; today only ten to fifteen percent. They buy any innovative plant in the world, and dozens of technical institutes and thousands of engineers learn from each acquisition. They've learned quality and are starting to develop their own technology. They will be the competitors of the future.

Medium high-tech companies worldwide are being acquired as bridges to Chinese markets. They're conquering sectors like gas power plants worth hundreds of billions. Pirelli tires — fine, never was high tech. If you want a list of medium Italian companies that are no longer Italian but Chinese, they're part of this program to acquire ideas and creativity. From all this, the benchmark has been updated to Chinese competitors — a demanding benchmark. What must we do? We've partially internationalized, but true internationalization requires management capability for local activities and cultural understanding — values differ significantly. This is a theme we must pursue more aggressively.

Facing this situation, what do we do? We live in a country that is not industry-friendly. For about twenty years we've needed evolution in schools and universities — transmitting responsibility to individuals, teaching not just rights but also duties, being proud of what you do regardless of your level. We have a huge debt, rolling over thirteen to eighteen billion per month. No reforms are being made, so the debt won't decrease. It's utopian to think there will be more resources for schools — resources must come from working and committing ourselves.

For company leaders who must plan five to ten years ahead — because you can't navigate day by day — it's a real concern. The simplest solution would be to move abroad to where we have technical operations. But at Danieli we've decided to rule that out. We're convinced we should keep the group's leadership in Italy, here in Friuli Venezia Giulia. Not for populism, but because this is where we grew up and have human capital, even if our culture has deteriorated. Back in our more reckless days we were focused on the challenge and not much on management. Professor Nando tried to convince me many times about the importance of management. I must say I wasn't a good student. Sometimes you need to stop and reflect. So we stay where we were born, with the conviction that we must evolve and build a culture adequate to the new benchmark.

The question is how to compete with the Chinese. In our factories in China and Thailand we must be just as cost-effective as they are, while producing quality and innovating. This creates an immediate mix of our European costs with their local costs. We must serve the customer better and keep innovating. This brings us back to management and multiculturalism — being present internationally doesn't mean being international. We must learn to interface with local collaborators, motivate them, understand their thinking, their objectives. International management schools can certainly help. Improving customer service — it must be central to our activity, requiring commitment and sacrifice.

We remain optimistic that Italy can maintain its credibility, because in two to three years interest rates on state debt will rise, the Draghi effect will fade, and we'll face our debt with an aging population. We need to create GDP through value-added products — innovation and high technology are the only solution. But industry still can't give schools a clear list of the professions needed in the next five to ten years. In conclusion, our vision's priorities are management. In family businesses, management coincides with ownership. As a management company, we struggle to find management exchanges with other companies in the region. We need deeper brainstorming on how to strengthen management methods — companies go through stages from startup enthusiasm to growth to organization to bureaucracy, and we're in a delicate moment where the hierarchy of knowledge has been diluted.

Schools and training: we've collaborated with a school for twenty years and found that when students and teachers are involved in new research, there's strong enthusiasm and excellent results. This collaboration must be strengthened with concrete facts. Hiring: no engineers, no technicians — this is a problem. In some sectors, thirty to forty percent of engineers and technicians will need to be foreign. The Academy hopes to train future ambassadors. Everyone talks about Industry 4.0, but universities haven't even started their courses. We hope to continue investing 130 million per year in innovation, R&D, and prototyping — that's our strength.

So to conclude, our guidelines for the next five years are: innovate and maintain levels; preserve financial solidity — being weak financially can kill; accelerate the structure, because we've become slow and not creative enough, we need to restart with the joy of undertaking new paths; consolidate our international presence; strengthen management; and ensure we listen to the customer, keeping the customer central. We'll invest in constructive relationships with universities and external research. We have a motto, 'Innovatio,' and a six-meter steel sculpture outside our research center called 'The Birth of an Idea.' We've created annual awards, but we need more challenge.

These concepts are not revolutionary, but they must be implemented and shared. We need to relaunch and rediscover them — we've partially lost them. It's not automatic. It takes commitment, and more commitment. Measure, benchmark. We're convinced we can do it, thanks to our company's spirit of continuous challenge. Thirty years ago we had less than seventy billion in revenue, so we've done something. Our technical and research offices are perhaps forty times larger. This intangible asset of innovation and challenge has sustained us, but it must be adapted to the renewed business context. By doing so, it can continue to be the engine of our 2025 vision, to remain 'one step ahead.'