Category: Events

Milan: living and leading a digital transformation

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Save the date! From May 25th to 28th Milano Digital Week will promote more than 600 events to spread the digital culture: at its third edition, the main topic will be a focus on an Open and Sharing Experience.

The initiative is part of a wider program to push the city of Milan towards a digital transformation, both offering an appropriate digital infrastructure and fostering the awareness of the potentiality of digital skills among the citizens.

The involvement of the people is also encouraged through the Open Government project, which invites the citizenship to a new participative culture, for example, allowing consultations on city budgets.

Both companies and people are now able to exploit the opportunities of the OpenData project, that allows whoever is interested to download various datasets, for instance about events, medical information, scholars, air quality, or cars.

Milano Digital Week will also offer the opportunity to meet the ecosystem of startups that is growing across the city. The environment of incubators, places of innovation, and co-working spaces is the fertile ground where young professionals can cultivate their ideas and develop their projects.

Shared workplaces are available all over the city and boost the spread of the agile working culture: whoever wants to can rent a desk or a meeting room, wherever and whenever needed.

Alongside those, the city is also home to many different co-working spaces: regardless of the business, a freelancer can find a community to join, build relationships and share knowledge and equipment.

Why in Milan? Because here you can find business opportunities, a network of mature companies and venture capital, digital and transport infrastructure, and a mindset for hard work that has been the pride of the city for centuries.

A strong communication network supports the digital transformation of Milan in a smart city.
OpenWifi offers free internet access in many different public buildings across the city.

Public transportation reaches every corner of the city and with the app, any user can buy tickets and gather information on the service.

A widespread bike-sharing service, car sharing and scooter sharing integrate the opportunities for mobility.

Moreover, Milan is one of the most attractive destinations for innovators, startuppers and wannabe entrepreneurs. Thanks to its ecosystem of startup incubators and accelerators, Milan represents a great opportunity where you can breathe life into your ideas and enjoy an engaging environment for growing your business. An example for all is the renowned PoliHub – the Innovation District & Startup Incubator of Politecnico di Milano – which in 2018 was able to collect more than 1,200 business ideas.

In addition to the digital opportunities and high quality of courses, we, as students at the MIP School of Business, can also exploit the power of continuous learning through the FLEXA Platform and a wide community of alumni to improve our network and find new opportunities for our growth.

For everyone who is looking for an opportunity to grow: Join Milan, enjoy Milan!

About the author
 Fabrizio Liponi

My name is Fabrizio and I work as a tunnel engineer in the construction of Underground Line 4 of Milan. Born, raised, studied, living and working in Milan: I love my city and I’m proud to take part in building its future. Travel addicted, I love to meet people and different cultures.

Industry 4.0 and relocation choices: do digital technologies reduce the need for internationalisation of efficiency-seeking firms?

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There is evidence that Industry 4.0 technologies, offsetting the low-cost or high-productivity advantages of some foreign countries, may be a valid alternative to internationalisation for efficiency-seeking firms, which in some cases happen to reshore. Will Covid-19 contribute to boost this trend?

 

Stefano Elia, Associate Professor of International Business
School of Management Politecnico di Milano

 

For several decades, firms have offshored manufacturing activities to countries offering low-cost labour and cheaper raw materials (Kedia & Mukherjee, 2009; Mudambi, 2008). Cost reductions were the primary reasons for US firms offshoring to Mexico and other emerging countries (Lewin & Couto, 2007) and for the enormous transfer of manufacturing activities by Western European firms to Eastern Europe (Fratocchi et al., 2015; Kinkel & Maloca, 2009; Schmeisser, 2013). As a result, more fragmented and geographically dispersed value chains emerged globally (e.g. Gereffi & Lee, 2012) and regionally (e.g. Arregle et al., 2009; Asmussen, 2009; Rugman & Verbeke, 2004).

While this trend is not over, we are witnessing the spatial reconfiguration of these supply chains driven by the emergence of new low-cost and high-productivity destinations, and of different cost and quality factors between countries, which modifies their relative attractiveness (Ellram, Tate, & Petersen, 2013). Companies’ intentions to change their manufacturing source is shifting from “offshore” being the predominant option, to “relocating to third countries” (i.e. moving from a first to a second host country) and “back-reshoring” (i.e., moving from the host to the home country) being viable alternatives to offshore (The Economist, 2013). Barbieri, Elia, Fratocchi, & Golini (2019) recently provided evidence that relocating to third-party countries was a preferred option for efficiency-seeking firms and suggested that by moving manufacturing between countries they adopted a “footloose” relentless search of locations to minimise costs and enhance productivity.
This trend has begun to be challenged and (at least partially) inverted by the new disruptive phenomenon. Industry 4.0, dubbed the Fourth Industrial Revolution, which denotes the emergence and diffusion of new, integrated digital industrial technologies that are widely acknowledged to hold a disruptive potential on manufacturing systems, products, and business models (Frank, Dalenogare, & Ayala, 2019; Strange & Zucchella, 2017). Industry 4.0 provides efficiency-seeking firms with a unique opportunity to use valuable digital technologies to offset the low-cost or high-productivity location advantages of some foreign countries and provide a valid alternative to internationalisation. Recent research undertaken by Politecnico di Milano in partnership with the University of Bologna (prof. Paolo Barbieri) and the University of L’Aquila (prof. Luciano Fratocchi) has provided empirical evidence of this phenomenon. Based on a sample of 118 European firms, the research showed that the development of a firm-level Industry 4.0 competitive advantage (based on the digital technology patenting) could reverse the propensity of the cost-saving firms to relocate to third-party countries, and encourage back-reshoring. Conversely, productivity-enhancing firms increase their tendency to undertake back-reshoring only when their home country adopts Industry 4.0 policies, i.e. a set of national initiatives to transform the production system by adopting digital technologies across several firms and industries.

The reasons behind the asymmetry in the drivers of back-reshoring decisions for cost-saving and productivity-enhancing firms can be found in the location advantages that are searched by these two types of firms. Firms investing abroad to save on costs are likely to exploit the lower cost of labour offered by some host locations. The development of Industry 4.0 technologies by cost-saving firms is a strategy to substitute for low-skilled labour with technology (Ancarani et al., 2019). This situation offers the extraordinary opportunity to switch from a host country-level cost-based comparative advantage to a firm-level competitive advantage based on Industry 4.0 technology intensity. Such a firm-level competitive advantage is likely to increase the degree of freedom of the firm in its relocation choice, including making it possible to return home. After obtaining similar (or a superior) level of cost-savings with digital technologies, the firm can afford back-reshoring to exploit Industry 4.0-based competitive advantages without facing internationalisation burdens such as coordination and transportation costs, institutional and cultural differences etc. (Stentoft et al., 2016; Wiesmann et al., 2017).

Firms investing abroad to enhance their productivity are likely to rely on other advantages than merely the exploitation of low labour costs while still pursuing conditions that can make them competitive on price. The primary mechanism such firms can use to enhance their productivity via cross-border investment is to “learn-by-interacting”. This occurs by gaining access to different international business networks that expose the firms to the various technological, managerial and organisational capabilities that are available in the foreign country’s ecosystem (Alcácer et al., 2016; Bertrand & Capron, 2015). In other words, firms can enhance their productivity by sourcing knowledge, resources and experience from the foreign production system by establishing economic relationships with the networks of suppliers, buyers, competitors, partners, associations and labour markets (Alcácer et al., 2016; Alcacer & Oxley, 2014; Johanson & Vahlne, 2009; Oxley & Sampson, 2004; Oxley & Wada, 2009; Pisano & Shih, 2009). This is possible when there is a technological and competitive gap between the host and the home country (Bertrand & Capron, 2015, p. 644). Introducing an Industry 4.0 policy in the home country could enable the host economy to fill any gaps as policies can be designed for many companies and attempt significant changes within the production system that increase competitiveness and technological intensity. This offers firms located abroad for productivity-enhancing reasons the opportunity to implement their learning-by-interacting strategy in the home country, reducing the need to relocate to third-party countries in favour of the probability of returning home. This allows a policy implication to emphasise the crucial role of Industry 4.0 not only in transforming the national production system but re-attracting the productivity-seeking firms located abroad and contribute to the return of manufacturing within Europe.

The Covid-19 outbreak is expected to boost the relocation phenomenon further. According to UNCTAD, this health emergency might have a potential long-term effect on the reconfiguration of the Global Value Chains (GVCs). The pandemic is demonstrating how having too many interconnected and distant countries might become a critical issue for global production networks. This is especially true when they are also dependent on one main manufacturing centre (such as China), and all nodes are asynchronously subject to an emergency that stops production activities and shuts down the entire GVC for some time. This worldwide health emergency might lead to a reconfiguration of the GVCs, and a partial relocation or de-concentration in fewer or closer countries that were less affected by the pandemic or which could ensure faster and more coordinated recovery of the production activities and the value chain. Hence, Covid-19 is expected to further accelerate some trends that were already happening, i.e. decoupling (or loosening) of GVC ties and relocation across countries, which were prompted by other forces such as the trade wars and the challenges posed by climate change. All these forces demand more regional, resilient and sustainable supply chains (Economist, 2020). This goal can be reached only through widespread adoption of digital technologies, which facilitate the reconfiguration and partial reshoring of the GVCs, and provide a strategic tool to redesign the firms and countries’ competitive advantages.

Covid-19 impact on Luxury Industry

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How the pandemic will change luxury consumers behavior

 

Prof. Alessandro Brun, Professor of Quality Management, Director of the Master of Global Luxury Goods and Services Management (MGLuxM)
Coauthor Cecilia Castelli Extended Faculty MIP Graduate School of Business
School of Management Politecnico di Milano

 

Last week, luxury groups posted their Q1 2020 results and – not surprisingly – numbers are confirming that even the industry that doesn’t know crisis capitulated to the effect of Covid-19 outbreak. Hermes proved to be “the” evergreen luxury, with “just” a single digit reduction in Q1 revenues (-6.5% vs Q1 2019). Double digit losses for LVMH (-15%), Kering (-15.4%); Moncler posted a -18%, after 24 consecutive quarters of double-digit growth.

In this scenario, brands are reflecting upon the future of luxury industry after the pandemic.

The most important reflection is that the lockdown is changing the habit of people globally. I think that, after the emergency will be over, some of the luxury consumers will change their spending pattern permanently.

  • Wealth, not income – If before the outbreak, HENRYs (High-Earning, Not Rich Yet) would spend a considerable fraction of their disposable income in luxury goods and experiences, after the lock-down several families may have limited cash availability for superfluous spending, while HNWI (High Net Worth Individuals) may have their spending capacity unaffected.
  • For those who will stay home – people will travel less – especially flights will be affected – due to governmental restriction, fear of infection, companies organizing more efficient conference calls in place of face-to-face meetings. This will impact negatively on some channels (especially Travel Retail), specific destinations (e.g. Las Vegas), specific customer segments in the flagship stores of world’s fashion capitals (Chinese visiting Milan, London, Paris, and exploiting tax free shopping), and product categories (suitcases and luggage). On the contrary, many people are rediscovering the joy of cooking (in March 2020, Bread machines was the second fastest growing category in eCommerce after disposable gloves, according to a Stackline study1), Hence, with the reopening, socialization occasions may happen at home, and categories such as Art de la Table may benefit.
  • Hedonistic experiences – After the sacrifices of lock-down, customers will crave for hedonistic products and services to satisfy the need of self-indulgence and personal pampering – shifting away from the “band-wagon effect” and moving into the “luxury as a personal affair” area. Premium beauty products, but also home-spa and home-wellness, and intense sensorial experiences in the fine food and drinks territory, could benefit.
  • Responsible luxury – The pandemic outbreak stimulated deep societal reflections around the main theme of “where is humanity going?”. Consumers will be even more aware of sustainability, and brands and product categories allowing “responsible consumption” will be privileged. Giorgio Armani penned an open letter to WWD, in which he challenged the current fast-fashion mindset, saying he believes in an “approach to the design and making of garments that suggests a way of buying them: to make them last”2.
  • Looking for discounts – if, on the one hand, we could expect a wave of anti-consumerism, the habit of waiting for end-of-season sales and doing pilgrimages to Factory Outlets and buying from off-price channels will be further strengthened by the self-appeal to frugality. If brand and retailers would resort to significant discounts to get rid of the unsold SS20 collection, they would risk to foster the vicious circle of off-price and bargain hunts. A recent McKinsey study revealed that special promotions were the main reason for purchasing clothing during the crisis for 56% of consumers3.
  • Online is the new normal – the transition to a life in the digital world was accelerated as through a time warp, and customers are buying more online as well as consuming more digital content. This represents a major change in paradigm. When we started designing the first “Master in eFashion” at MIP, 15 years ago, the online penetration in the Personal Luxury Goods segment was only 1%. In 2013, according to a McKinsey study, 44% of the 220B€ total luxury sales were influenced by digital – yet the perspective was still that the brick and mortar retail was the “normal” way to make business. Whether the perspective in the post-pandemic will turn 180 degrees, so that the online will be the norm and the brick and mortar will be a way to “support” it’s hard to say. But one think is unquestionable: a brand without a strong online presence, today, is a non-existing brand in the eyes of many a consumer.
  • When your own initials are enough – Economic theories say that after a “quarantine of consumption” (as Li Edelkoort defined this unprecedented period of forced fast from conspicuous consumerism4), consumers may switch “revenge spending”5.

But after the lockdown is over, the world will enter into a “stage 2” of the war, in which the Covid enemy will still be there in the battlefield, thus reducing the appetite for conspicuous consumption. Before the crisis, brands with a very bold visual identity (such as Gucci) were performing extremely well thanks to the enthusiasm of brand sensitive customers – but in a climate of “social thriftiness”, luxury consumers could steer towards the quality and intimacy of “no-logo brands”, as they are finally understanding the meaning of Bottega Veneta payoff (“When your own initial are enough”: there’s room for feel-good purchases even without a big flashy logo on your t-shirt).

  • A renewed pride for local producers – this may vary in strength on different markets and for different product categories, but we are already witnessing the first signs that are forewarning the rise of full-fledged “buy local” movements.

______________________________________________________

1 J. Styrk. The top 100 fastest growing and declining categories in eCommerce. Stackline, March 31st, 2020

2 L. Zargani. “Giorgio Armani writes open letter to WWD”. WWD, April 3rd, 2020

3 Amed, Berg, Balchandani, Hendrich, Rölkens, Young, Jensen. The State of Fashion 2020: Coronavirus Update. BoF e McKinsey&Company

4 M. Fairs. “Coronavirus offers ‘a blank page for a new beginning’ says Li Edelkoort”, Dezeen, March 9th, 2020
https://www.dezeen.com/2020/03/09/li-edelkoort-coronavirus-reset/

5 N. Gopalan. “Revenge is a dish that’s off the china menu”, Bloomberg, April 21st, 2020
https://www.bloomberg.com/opinion/articles/2020-04-20/china-luxury-revenge-spending-surge-is-likely-to-fade

It is never too late to pick ourselves up. It is never too early to prepare.

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Although it is not possible to predict the duration of the Covid-19 pandemic, it is essential not to be totally absorbed by the emergency and to start thinking about the most effective strategy to face the recovery phase.

 

Paolo Trucco, PhD, Centre for Risk and Resilience Management of Complex Systems
School of Management – Politecnico di Milano

The embers beneath the ash

With the pandemic still in full swing, and the numbers of new infections and deaths still rising, both in Italy and in other parts of Europe and the world, it seems inappropriate to think about what comes next, especially in terms of production. However, in order to live, a society, a community needs to be taken care of, it needs goods and services, which unfortunately cannot be guaranteed outside the market-economy model.
After two weeks of the government-decreed production block involving most industrial sectors, many companies have had to suspend every business activity or find temporary solutions to ensure minimal operational continuity. Even companies in the so-called essential or strategic industries are operating in emergency conditions and therefore with greatly reduced levels of performance. If we look at the typical profile of an operational disruption (Figure 1), we are currently all, for one reason or another, in the period of maximum impact. We do not know exactly how long it will last, nor how long we will be able to sustain it. However, if industry and Italian society as a whole wish to look to the future, it is important not to let ourselves be overcome by the gravity of this emergency and to start thinking about the most effective strategy for dealing with the recovery phase, so as to ensure it comes quickly and fully. The embers beneath the ash must be kept alive. We need to be prepared to seize the early signals of recovery and to turn every opportunity that may arise into value.

 

Figure 1. Time profile of an operational disruption with different recovery capacities.

What should we expect?

At the moment, no one is truly able to trace out how economic recovery will unfold. However, some fundamental elements seem to be clearly outlined:

  • The recovery of supply and demand will take place at significantly different times in different parts of the world. Speed will also be different: for structural reasons, due to the severity and breadth of the pandemic, or due to the decisions made by local governments. In short, it will be a geographically asynchronous recovery.
  • In every corner of the globe, national and supranational institutions will make a massive effort to stimulate the economy, but such measures may not be fully coordinated or consistent with each other. We will see a period of sub-optimal allocation of resources and not everyone will benefit in the same way.
  • Due to its magnitude and degree of interdependence, crucial energy and transport infrastructure will most likely suffer most from the turbulence created by the two previous factors. As a result, global supply chains and energy-intensive industries may rebound with greater difficulty.
  • The specific nature of the event has created both a supply shock (production stops) and a demand shock (rapid contraction in consumption and investments). The recovery phase, within the supply chain, will also be marked by the need to manage two opposing disturbances: a ripple effect, downstream, as a result of prolonged limited supplies, and a bullwhip effect, upstream, as a result of a recovering yet still highly uncertain and volatile demand.
Be ready at the (re)starting blocks

In a previous article on the impact of COVID-19 on global supply chains (Coronavirus is the acid test of global supply chains’ resilience), we already described the fundamental characteristics of resilient supply chains: the ability to sense weak signals of emerging pressures or shocks, to prepare for the unexpected and to respond rapidly and in an adaptive manner to crisis situations, by reconfiguring processes and operating models. Looking now more in depth at how to manage the recovery phase in specific contexts, we can identify three elements of resilience that we believe will play a key role:

  • Visibility. The recovery phase can only hope to be successful by achieving end-to-end supply chain visibility, both as regards the operational capacity of suppliers and sub-suppliers and the dynamics of demand, in terms of geographical redistribution and sales channels. Unlike in normal conditions, the magnitude and mode of response to emerging demand will have to be planned according to the actual capacity of the supply chain, until a new state of structural equilibrium is reached.
  • Collaboration. During a turbulent emergency, transparent, stable relations are far more important than tactical behaviour. Those who have been able to build collaborative relationships with their suppliers and distributors will find themselves in a position of greater advantage. The need to replace suppliers who have been unable to overcome the crisis can turn into an opportunity to strengthen relations with more dynamic, crucial suppliers.
  • Multichannel distribution. With volatile, rapidly changing demand, the opportunity to use multiple sales and supply channels will allow companies to recover faster in the short term and, in all likelihood, gain new market shares in the medium term.

 

Actions and tools to implement a resilient strategy

Below is a list of practical, albeit incomplete, actions that may help to manage rationally both the present situation, for those first companies allowed to resume operations, and the time when production resumes universally:

  • Continuously monitor the evolution of the pandemic and of the measures implemented by governments in the most relevant markets (Figure 2);
  • Segment acquired orders by degree of completion and customer reachability (status of pandemic control measures in the target country) and prioritise billable orders;
  • Search for possible alternative configurations to execute high priority orders waiting to be processed;
  • Reassess the priority of orders on a daily basis with a 1-2 week (rolling) visibility;
  • Map the status of crucial suppliers (i.e. those having the greatest impact on priority orders) by drawing up a questionnaire to verify business continuity conditions (include questions requesting information on the business continuity of crucial sub-suppliers).
  • Cross-check the business continuity assessment of suppliers (Figure 3) against the markets-orders table to identify feasible orders;
  • Agree operational continuity plans and production capacity allocation priorities with crucial suppliers and re-schedule delivery times based on new order priorities;
  • Evaluate alternative options for crucial vendors on complete lockdown;

 

Figure 2. Example of a market-order segmentation table based on the stages of evolution of the COVID-19 pandemic

 

Figure 3. Example of a table to manage the risk of supplier Business Interruption (BI)

 

It is no wonder that the speed with which we have been hit by the pandemic and the continuing uncertainty about how and when it will be managed by the authorities has left many feeling confused and disconcerted. However, now is the time to strengthen our evaluations and actions, leveraging on in-house skills and capabilities. It is never too late to pick ourselves up. It is never too early to prepare for what lies ahead.

Financial Times Executive Education Rankings 2020

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The School of Management of Politecnico di Milano betters 2019. In Europe, the School is placed 2nd and 3rd among schools linked to technical universities for its Open and Customised programmes

After its 9th place globally for its online master courses, MIP Politecnico di Milano has also climbed the rankings in Executive Education

 

MIP Politecnico di Milano Graduate School of Business confirms its standing among the world’s best schools for its Open and Customised programmes in the FT Executive Education Rankings 2020. The School of Management is placed 81st in Executive Education – Customised programmes and 74th in Executive Education – Open programmes.

Furthermore, the School of Management is in 2nd and 3rd place in Europe in the Open and Customised categories, respectively, among schools linked to “technical” universities, these being universities that specialise in engineering and technology subjects and are intrinsically geared towards combining innovation and management skills.

In March, the Financial Times Online MBA Ranking 2020 accorded 9th place in its international classification to MIP’s offer of distance learning Masters in Business Administration.

In the Financial Times Executive Education – Open Programmes – Ranking 2020, MIP Politecnico di Milano has risen from 79th to 74th place, improving its scores in almost all parameters, with the highest recorded in Follow-up, Facilities and Female Participants.

Taking only Europe into account, the School of Management is placed 2nd in the group of technical universities with a Business School or Department of Management, and 7th in the group of generalist universities with technical expertise that also have a Business School or Department of Management.

In the Financial Times Executive Education – Customised Programmes – Ranking 2020, MIP is placed in 81st placed compared to last year’s 80th, amidst a greater number of schools under consideration. The scoring was determined by many parameters, above all Follow-up, New Skills & Learning, Future Use, International Clients, Overseas Programmes and Faculty Diversity.

The FT rankings are composed of two distinct parts. The first part relates to “Open” programmes, designed for individual professionals who take decisions independently about the direction and type of education. The second part relates to “Customised“ programmes, which specifically target companies and provide training to their managers and high-potential employees. The parameters that make up the end result are evaluated personally by the participants, CEOs and HR directors of the companies that have experienced the programmes directly.

Vittorio Chiesa and Federico Frattini, Chairman and Dean of MIP Politecnico di Milano: “We have worked extremely hard to continue and improve our offer, including in executive education. In the upcoming weeks, we will present our D-HUB Management Skills platform and Management Toolbox designed for professionals who wish to contribute towards their company’s growth by using our digital programmes. These results reward our great efforts in an increasingly competitive climate that requires continuous investment in the quality of our teaching programmes”.

 

Privacy and Covid: the real questions to ask ouserselves

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Applications that track citizens’ movements to prevent the uncontrolled spread of contagion raise several concerns about privacy. Yet every day we voluntarily expose and give away our data without realizing it.

Tommaso Buganza, Professor of Leadership and Innovation
Daniel Trabucchi, Assistant Professor of Leadership and Innovation
School of Management Politecnico di Milano

 

We are living in an unprecedented situation. The global pandemic shown in many Hollywood movies is now a reality and – without popcorns– it looks quite different.
In Italy – as hopefully will soon happen in other countries – the rate of diffusion started finally to decrease. The discussion is now moving to the management of “Phase 2”. What will “the new normal” look like? What will it be like to live in a world in which the virus is under control, but still present?

Digital experts are proposing possible “futuristic scenarios” in which mobile applications will track us to immediately inform potentially exposed people and interrupt the transmission chain (see, for example, the Pan-European Privacy-Preserving Proximity Tracing project). Recently – on April 17th – the Italian government signed a contract for the voluntary tracing app “Immuni”, aiming at developing contact tracing using the Bluetooth technology.

Meanwhile, Google is already sharing anonymous data to identify people who are breaking the lockdown (Giuffrida, 2020; Hamilton, 2020) and partnered up with Apple to develop a contact tracing technology (Apple, 2020). At the same time, the world is starting to look ahead, asking “how” – since “if” is no longer an option– this global emergency will change our lives in the years to come. In an article recently published on the Financial Times, Yuval Harari describes the possible downsides of using available technologies to track people movements and behaviors. On the one hand this would help the sustainability of the national health-care systems, but, on the other hand, the cost could be a “new normal” where our vital functions are constantly measured, stored and analyzed. It is easy to imagine how this huge data base, along with the increasing knowledge about human biomechanics and the impressive advancement of AI, might lead to a reduction of democracy and civil rights in our countries (Harari, 2020).

Humans looks frightened, not only by the pandemic but also by the loss of privacy (Brody and Nix, 2020). Are we slowly but inexorably losing our freedom?

But what do we already know about data? Data is the new oil, being considered a precious resource to be exploited. Data is valuable because they allow us to understand things that we wouldn’t otherwise. They show us something we don’t know, both as individuals and as a community. They show us things that are there, but that are too complicated for individual human brains to see.

Think about Netflix, one of the services many of us enjoy most in these lockdown days. Choosing a new movie, or a new series is an epic adventure. That’s true. But you might not know that Netflix already made it a lot easier for you. Probably you noticed that the “match score” (the percentage indicating how likely you should appreciate the content) is often very high. That’s because Netflix tracks all your behaviors, previous shows, frequency of watching and then, leveraging AI, proposes you only movies and series you should like. You can try a little experiment if curios. Search the whole catalog, you will discover many more contents…and probably don’t like them!

This is just one example of services that many of us use everyday…but the list is long. Spotify can suggest songs, Amazon products, our fitness app –Runkeeper, Runtastic, Freeletics… the next training session optimized using the data we provided through previous ones.
This may sound like something unique of the app economy, but it’s not. Google built its empire on a data-driven business model, targeting ads on the search engine, using players to tag images (with the game Google Image Labeler) and captcha to detect addresses (Perez, 2012) or street view images…possibly to help self-driving cars (Kid, 2019). Even Starbucks – a brick and mortar company – uses the data from its mobile app to get insights on their customers’ habits and tastes (Gallea-Pace, 2020).

We all know these stories but now, all of a sudden, we find ourselves more fearful and privacy sensitive. We are afraid of the impact that technology may have on our lives, but we fail (again) in recognizing that this already happened.
Major digital companies know us perfectly, they know a lot more about us than we imagine. And some of them, over the years, became extremely good in profiting and capturing value from data (Trabucchi et al., 2017, 2018).
They “pay” us back with more personalized services or, in some cases, with free services…which we like even more.
Companies – of course – must respect all privacy laws, and GDPR in Europe has played a huge role in this. However, companies can do a lot with the data we provide them because we accept the terms of use… usually without reading them.

Curiously, this isn’t even the first time that the privacy issue violently explodes. Two years ago, all the social media of the world were filled with the #LeaveFacebook movement.
The Cambridge Analytica scandal highlighted Facebook’s data-based business model and its implications for our privacy, and even the impact that data can have on our lives through micro-targeting and similar phenomena (Cadwalladr, 2019). In those days, it seemed like the world realized what had been there for years: data is valuable, companies use it. Looking at Mark Zuckerberg wearing a suit and tie in front of the US Congress, many of us thought that Facebook would become as empty as our cities are today. The reality is that it didn’t happen. After the clamor, we went back to our habits… we enjoy our free digital services too much to bother considering we actually pay them with our data currency.

And here we are again. In this unique historical moment, we think a lot about how the “new normal” will be like. If we really care about our privacy, we should ask ourselves: will our near future be different only in terms of social relationships and physical movement or will it also put into discussion our well-established digital life?
We can still get our privacy back… if we want.
But, are we ready to give up those wonderful services provided by Netflix, Waze, Amazon, Spotify, Instagram, Facebook, TikTok, Twitter, Snapchat, and all the others?

So, this is our point: is this sudden upheaval around privacy connected to the use of personal data to protect public health really justified? Perhaps we should rather accept that the “new normal” is posing even more frightening questions.

Do we value free services more than public health?
Do we trust private companies more than our governments?

Covid-19: the impact on B2C eCommerce

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Lockdown has profoundly changed consumer habits: online purchases of food and essentials have grown exponentially. The reaction of retailers has been varied and influenced by the product sector and the presence of an eCommerce initiative. In the recovery stage, profound restructuring awaits the Retail world.

 

Riccardo Mangiaracina, Professor of Logistics and Production Systems Management, Scientific Head B2C eCommerce Observatory
Valentina Pontiggia, Director B2C eCommerce Observatory and Digital Innovation in Retail
School of Management Politecnico di Milano

 

Before the crisis ….. eCommerce, a channel growing in Italy and abroad

In the more mature markets, eCommerce has become a major channel for generating consumption. In 2019 in China or the UK, for example, of every 100 euros spent by consumers, about 20 went online. In markets where eCommerce has developed more slowly, online has nevertheless accounted for a significant slice of the growth of business. In Italy, for example, eCommerce in 2019, although it still represented a small part of total purchases (7.3% of the total), generated 65% of the total Retail growth (online + offline) [1].

In recent years, the online channel has increased not only the size of the market but also its range of action and influence. In the first place, eCommerce has become decisive in the development and promotion of highly innovative new models of relations with consumers that, although starting from online, have spread throughout Retail. This transformation has involved the entire value chain: marketing, where artificial intelligence and augmented reality have allowed the consumer to “experience” the product (both online and in-store) before owning it; payments, where the use of biometrics, already fairly widespread online, has become increasingly important offline too; and logistics, where various innovations have emerged both to improve the service and to give the end customer significant control of the process.
Secondly, the success of eCommerce and the emergence of new ways of buying and interacting have changed the original significance of the physical store, which is no longer the only means of physical access to the product. In this transformation process, traditional retailers have given the store new features, mainly from a relational point of view, and entrusting the transactional stage to eCommerce. There have been many experiments in new formats in Italy too, primarily in Milan [2].

The importance acquired by eCommerce has also led to greater public and institutional attention (not always in a positive way). New regulatory obligations (PSD2 with so-called Strong Customer Authentication to authorise financial transactions online and Web Tax), attention to sustainability issues (not only financial but environmental too) and the dominant position of certain giant corporations, in particular Amazon and Alibaba, are just some of the most hotly-debated topics.

 

During the crisis ….. eCommerce, a tool for responding to the emergency 

Business is one of the areas most affected by the Coronavirus emergency. The reaction of retailers has been strongly influenced by the presence or otherwise of their own initiatives on online channels.
Many physical stores, especially those focused on food and basic necessities, have engaged with eCommerce for the first time. The most immediate solution has been the use of third parties already online. Many restaurants have put their menu of ready-to-eat dishes online through food delivery platforms and many supermarkets have activated eCommerce solutions through alliances with platforms that have already enabled (from a technological and operational point of view) online shopping under the aegis of certain major retail chains. Even more widespread are the numerous neighbourhood stores that have started working with less advanced digital tools than eCommerce, but with are just as interesting tools, such as the many neighbourhood stores (grocery stores, pharmacies, …..) that can take orders via WhatsApp or by phone.
Players that have been online since the beginning of the epidemic have seen an increase in orders attributable to new consumers who have decided for the first time to use their services. This emergency, however, has revealed something as simple as it is important. In online initiatives, especially in food, operations have forcibly dictated rhythms and especially imposed limits. Practising eCommerce requires commitment and a perfectly functioning and efficient operating mechanism: optimised picking and transport processes, especially when we are talking about “supermarket” shopping (which, by the way, consists on average of 50 items of low unit value and which require special treatments such as temperature-controlled transport). The dependencies between the physical and digital worlds have had varied impacts: all those multi-channel retailers of clothing, beauty products, IT and electronics, forced to close their stores, have found online a valuable opportunity to maintain the relationship with customers, in some cases deepening it, and to create value (rather than sales) with their consumers. In this regard, note the sending of questionnaires to users to gather opinions and suggestions for improvement and the provision of online courses (fitness, cooking, …..) relating to products on sale.
During the crisis we have therefore seen the barriers to omni-channel integration, that had blocked the development of the digital strategy of Italian retailers for years, fall one after the other. The management of the emergency has convinced even the most reluctant to change to overcome internal interdepartmental conflicts, to define clear responsibilities and to dedicate the resources necessary to achieve a new idea of business, integrated and independent of channels. A green light therefore for investments in order to boost the eCommerce channel or to favour sales strategies founded on integration between online and offline experiences, like click&collect, drive&collect or the setting up of online ordering in store.

 

After the crisis ..… eCommerce, an essential element for the resumption of business

In these days of the emergency there are many questions to be asked about the effects and changes that await us in the business world. Among the few certainties, in our opinion, are the proximity that the online and physical channels are demonstrating forcefully at this difficult time and the indispensable role that eCommerce will play in the recovery of business and consumption.
During the health emergency Italian consumers have understood the value of this channel as never before: eCommerce has allowed a large slice of the population to benefit from value-added services, important and essential as they are, like food delivery. Growth of web shoppers (who at the end of 2019 amounted to just over a third of the Italian population) and greater familiarity with and confidence in online transactions and digital payments (including those shoppers already used to purchasing online) can generate a positive effect on the development of eCommerce.
The other side of the coin is that the praiseworthy efforts of supply-side players will not have been in vain. Once the crisis is over, investments in technology (to handle traffic spikes), the presence of new trained staff and the optimisation of picking and transport processes will be in place to better manage not only the current extraordinary demand but also a future in which the digital world will be increasingly fundamental.
eCommerce will be more and more the engine of Retail growth and innovation: once we have put this crisis behind us, as consumers we will be looking at a new and more digital normality. A major challenge for our Retail!

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[1] Source: B2C eCommerce Observatory – Politecnico di Milano School of Management
[2] For full Research results, “eCommerce: Retail Growth and Innovation Engine” available at www.osservatori.net

The global crisis since Covid-19 and the repercussions on international trade and global value chains

Posted on | by Marta Re Ferrè | Leave a Comment on The global crisis since Covid-19 and the repercussions on international trade and global value chains

The shock to the world economy caused by the Covid-19 health emergency has a global scope also because of the high interdependence between national economic systems. But closing borders and applying trade restrictions is not a viable solution: acting in a coordinated manner can ensure an effective restart for all economic systems, balancing the needs and production capacities of individual countries through international trade.

 

Lucia Tajoli, professor of International Markets and European Institution
School of Management Politecnico di Milano

 

It is still too early to have official stabilised data but it is now very clear that the spread of the so-called COVID-19 and the associated pandemic are having a very significant impact on the world economy, with clear implications for international trade as well.
International trade was already decelerating in the latter part of 2019, due to the general slowdown in the economic cycle in many countries. The early months of 2020 are confirming this strong slowdown in trade. The World Trade Organisation (WTO) is continuously updating forecasts for the current year, which show downward trends for both trade in goods and in services as a result of the shock to production and demand that is spreading to various countries. Given the high level of uncertainty, however, the major international institutions are not ready yet to provide precise figures. The estimates produced by the WTO in April on the possible dropoff in trade also show a very wide range, between -13% and -32%.

The fall in international trade is an inevitable consequence of the current situation, since the areas currently most affected by the health crisis with its serious economic repercussions are those of the major players in world trade: China, the European Union and the USA generate more than half of all world trade. Thus, the impact of the slowdown in these countries is felt in global trade flows, even in areas with relatively slight exposure to the contagion.

One particular aspect of trade makes the impact of the crisis more serious and concerns observers. The importance of global value chains and the role they play in world markets has grown for at least 20 years. According to a recent World Bank report, most trade flows between countries nowadays take place within the global value chains (GVCs), i.e. they are generated by production processes that cross the borders of countries and involve specialised companies located even in faraway areas in the chain of production of goods, especially complex ones. The role of these global value chains in this crisis appears crucial. According to some observers, this international organisation of production has created a fragile economic system that is more exposed to international shocks. The risk of a disruption in the supply of the inputs needed for production is greater in a production chain that is very geographically dispersed. Moreover, the presence of these production chains can amplify the transmission of shocks according to the so-called “bullwhip effect”. In the presence of a negative shock that affects many economically connected countries almost simultaneously, the slowdown in production of an economic system supplying essential production inputs is transmitted to related systems downstream, reducing their production capacity, adding a further negative squeeze to the local slowdown in production (which may be due to local supply and demand factors), and thus amplifying the shock. The areas where the spread of the epidemic has been greatest are closely linked by GVCs in many crucial sectors, from textiles-clothing to consumer electronics. As a result of this shock-amplifying effect, forecasts of the trends in the global economy and international trade are more negative than in any other crisis in the past.

It is important to remember, however, that these global production chains, although they have made the different economies more interdependent, have generated enormous efficiency gains in very many sectors and made many goods available at prices that have encouraged mass diffusion among all consumers. Without specialisation in specific stages and components of production of certain countries and companies connected with each other, many commonly used goods today would not be available or would only be available at prohibitive costs. In addition, this production organisation has also allowed emerging countries to participate in international markets, finding in the GVCs a means to access production that they could not develop independently, thus generating growth, employment and diffusion of technology.

Even before the current crisis there was talk of a trend in shortening GVCs and “reshoring“, i.e. bringing back to certain countries production cycles previously located abroad. This is because this international production organisation, even if it allows efficiency gains and cost advantages, for some companies and some sectors is too complex, with the loss of direct control over some production stages and an increase in organisational risks and costs. In fact, the phenomenon of reshoring has been limited to certain countries and certain particular production niches. Lack of control over the production cycle appears potentially risky for some countries, first and foremost for China, pushing it in recent years to shorten its international production chains for mainly geopolitical reasons. This choice has had global effects given the economic importance of this country. However, the current crisis could lead to a further downsizing of international production chains, for reasons that include reducing the interdependence of countries.

It should be remembered, however, that even in this time of crisis, trade between countries plays a fundamental role and it is essential that countries do not try to hinder it excessively. International trade often ensures the availability and affordability of vital medicines, medical products and healthcare services, particularly for the most vulnerable countries: no country is entirely self-sufficient for the products and equipment it needs for its public health systems. Much medical equipment is also manufactured within GVCs that make advanced components available that are not always easily produced in all countries. In addition, through international trade it is possible to overcome shortcomings in the production of medical equipment and drugs, as well as of various types of essential goods, distributing these goods more efficiently where they are most needed. In this emergency situation, despite the temptation of some countries to close borders and to apply trade restrictions in order to accumulate stocks, governments also realise that they need each other and that it is important to act in coordinated fashion as far as possible in the face of a problem that is absolutely global.

A drastic downsizing of global value chains would have very serious consequences, both during the crisis for the effect this would have on many goods and services supplied, and after the crisis impacting many key sectors that have developed as a result of this interdependence. However, the current crisis may be an opportunity to rethink certain organisational aspects of these production chains, accepting a rebalancing between risks and benefits, perhaps leading to a partial reduction in efficiency in order to achieve a reduction in risk, for example by accumulating larger stocks or further diversifying suppliers, distributors or logistics channels. Yet it is precisely this acute crisis and the need to ensure an effective recovery of economic systems that underlines the importance of not abandoning a mode of international organisation of production that has produced fundamental economic improvements, and of keeping international trade open precisely as a means of balancing the needs and production capacities of individual countries.

 

 

Figure 1 – Participation of countries in global value chains (2015 data)

Source: World Bank, World Development Report 2020

 

Figure 2 – Increasing trend of the involvement of GVCs in production sectors

Source: World Bank, World Development Report 2020

Logistics sector changes resulting from Covid-19 pandemic

Posted on | by Marta Re Ferrè | Leave a Comment on Logistics sector changes resulting from Covid-19 pandemic

More than other areas, the Covid-19 pandemic forced the logistics sector to adapt quickly to the new regional, supply chains and consumer needs and test new flexible, digital and shared organisational models. The starting point for the next challenges.

 

Prof Marco Melacini, professor of Logistics Management, Director of the “Gino Marchet” Contract Logistics Observatory
School of Management Politecnico di Milano

 

The health system is at the forefront of the emergency response which work with other sectors providing essential services. Logistics, with its roots in military supply systems, provide the foundation to meet today’s challenge, ensuring these sectors’ operations by supplying necessary products. Although we are still in full emergency, it is useful to start thinking about “phase 2” and how the logistics will change, especially as it is unlikely that the country will return to normal in the medium term and there may be several “stop and go” moments, perhaps by limiting the “red zones” to smaller areas.

The best way to answer the question of how logistics will adapt, is to observe the last month’s reaction to the crisis which disrupted the lives of people and companies, and particularly the logistics of the pharmaceutical and food supply chain, which remained fully operational.

Adopting a “smart” rather than a cost-minimising strategy to handle the foreseeable demand, was seen as important. Practically this meant greater resource redundancy (firstly warehouses) to quickly locally reallocate stocks and overcome critical issues, such as stoppages. Implementing this strategy requires quicker decision-making, with increasingly dynamic and data driven choices. The smart working method was adopted for planning. This was more effective for companies that had experienced remote working and adopted cloud technologies and software. The latter allow remote access to computer systems and increase visibility along the supply chain.

However, there were some activities which must remain on site, such as order picking and transport. For these, it was essential to use social responsibility for workplace safety. Practically, this meant Personal Protective Equipment (PPE) distribution for workers, frequent workplace sanitisation (warehouses, transport cabins, and terminals or handling aids such as drugs delivery boxes), body temperature monitoring of everyone before site access, and reviewing operating procedures (e.g. to reduce the resource sharing, such as voice picking headsets, and increasing operating distances between operators). Reducing physical “contact” was a good reason to move to supply chain digitisation — making it possible to avoid printing and paper handling of transport documents.

The “smart” strategy is based on flexibility and allows quicker implementation of the most suitable solutions to respond to any change. The logistics tertiarisation and the related model used across the country enabled companies to be flexible. Some logistics operators quickly reallocated goods across more than 25,000 sqm of warehouse space. Horizontal cooperation between contract logistics operators (a sector worth more than € 84 billion in turnover) is and will be essential to a sharing economy. This cooperation consists of the use of stationary trucks/drivers from other supply chains to manage the high growth in demand especially sudden consumption peaks generated by fears in the population. It was possible to move warehouse personnel from mothballed sites making up for the reduction in operating capacity in the face of a physiological rise in absenteeism. The close relationship between company and worker, typical of the cooperative model, favoured communication within the company, reducing potential risk areas, and providing greater operational flexibility, to partially offset the inevitable productivity loss. We started daily planning, working closely with customer companies to align logistics capacity as closely as possible to market demand. This was essential to ensure economic sustainability in a low-margin environment such as contract logistics.

The situation we are experiencing led to a specific coordination model for emergencies: frequent alignment meetings, adoption of choices that in the short term do not always optimise costs (for example the greater difficulty of finding return trips or mandatory distances in the warehouse, to the detriment of productivity) but ensuring service continuity, cooperative customer company relationships that go beyond an outsourcing contract, an open book approach while sharing market signals and operational choices.

At the strategic macro-choice level, alongside the critical analysis of the future service to be provided based on contingencies (some companies have reduced the number of deliveries per point of destination to reduce order fragmentation), we noticed the centrality of delivery capacity in urban areas. This included home deliveries (e-commerce has made the definitive leap forward in its Italian development and grown by more than 50 per cent) and the individual sales point, with the rediscovery of the value of proximity stores (often used as omnichannel preparation points for urban deliveries). These urban logistics, with their city-centred origin and destination, will be increasingly important. In the transportation field there has been the development of road-rail inter-modality, which is fundamental to overcome transport blockages between EU countries, and future management of the crossing and supply of new “red zones”. Lastly, warehouse automation, which is still underdeveloped, will be increasingly important to promote work in protected areas with a lower concentration of people.

 

“Border” crossing times between European states (source: sixfold.com/covid-19)

In conclusion, it is not simply a matter of returning to a logistical “normality”, but finding new balances that will allow us to face this and future challenges, such as any economic recession and the need to increasingly focus on climate change.

At MIP Corporate Education is digital

Posted on | by Simona Strepparola | Leave a Comment on At MIP Corporate Education is digital

The educational offering for companies moves completely online in the face of restrictions due to Covid-19. A passage facilitated by a teaching method conceived to be versatile, flexible and at the service of companies, as Davide Chiaroni explains

Education doesn’t stop. It continues, but online. This is also true for the Corporate Education offering of MIP Politecnico di Milano which, already largely based on a digital experience, accentuated this characteristic to meet the needs of companies. «The experience we gained in recent years with D Hub, our e-learning platform, not only allows us to continue to make our educational offering available», explains Davide Chiaroni, Associate Dean for Corporate Relations at MIP, «but also to remodel it on the basis of unforeseen needs that emerged during the Covid-19 spread».

Take advantage of time for

There were three lines that MIP decided to pursue in this extremely delicate period. «In the first place, we wanted to show that we were there for our businesses. We did so by broadcasting through our digital channels a free webinar on the impact the coronavirus is having on the economy, addressing urgent issues such as smart working or the supply chain in this moment marked by such a significant disruption», explains Chiaroni. «The second front will be opened shortly: it involves the D-Hub Management Skills platform, available until the end of 2020, which will house the over 950 clips produced by our business school. It’s an initiative aimed at employees, company collaborators, associations and foundations. A real ad hoc library at the service of companies, a tool with which to transform this period of exceptional difficulty into an opportunity to relaunch through the training of one’s human resources». Lastly, a third point: «While on one hand some companies have reduced their business, on the other many companies in specific areas such as the pharmaceutical or financial sector found themselves faced with the task of managing data and projects at a much faster pace. This means that people need to be trained to act in a faster and more efficient manner. For them we are making the effort to further redesign our digital educational offering, because that foreseen for the physical classroom is clearly not practicable at this time».

Understanding and acting: the Corporate offering

However, our course offering isn’t changing. The last two years, in particular, have been characterized by strong demand for courses tied to digital transformation, big data and analytics, but also to the world of marketing and e-commerce: «There are two axes that guide our offering, Understanding and Acting. The part tied to Understanding has the goal of helping companies to understand the changes underway, the challenges they face and their training needs». Acting instead, says Chiaroni, has a more operational approach: «These are more in-depth and longer programmes, with the purpose of transferring skills, knowledge, ways of taking concrete action». These two lines intersect with a transversal axis, that of the target: «In both cases, our courses cover the needs of both of more junior and senior managers».

A platform conceived for the Corporate world

Educational flexibility and versatility are possible thanks especially to a strong digital identity. A path undertaken already in 2014 and which in 2019 took shape with the inauguration of the D Hub platform: «It was created with the corporate universe in mind. We wanted a platform that could be fully used when someone is on the move, which could be accessed with the corporate login, and that would integrate all the necessary educational tools. We offer hundreds of digital capsule courses, recently expanded and created also thanks to the participation of companies. There are videos that include evaluation tests, in addition to metrics that allow us to evaluate the educational effectiveness of the capsule courses themselves, and therefore to fine-tune and improve them. Our goal is to provide an education that is truly digital, and not simply computerized», concludes Chiaroni.