A localized reflection on economy.
I am observing the economy in whihc I live and work, the Italian one: behind what the official figures say, I rely on my personal observations, like anyone does, and I use them to elaborate stuff.
What I see is a lot of small businesses (SME in English, PMI in Italian) closing down. Not shutting down for lack of customers, or for business decisions which caused a bankrupt.
Not at at all.
It is just the closure of thriving activities because no one wanted them any more after the owners put too many years on their backs and they just say “it’s over”.
I saw this in shops, small industries, service business. The astonishing thing is watching customers going there until the last day, trying to enjoy the service one last time.
It is not pricing the issue, it is availability of resources. Human resources.
The effect of demographics, mostly, and of biases about education and craftmanship. Better be an unemployed graduate then running a thriving sewing service shop with high school diploma.
Or not?
Ok, that’s it for the setting, but I think…what can we do about it?
- nothing. This is an option. We just hope that the “invisible hand” will take care of this, leaving it to the market. It is like leaving to gravity taking care of our life when we are in water without swimming. Not so clever.
- sewing. This means taking pieces of eceonomy (businesses) and connecting them in a meanigful way so to create a value chain that delivers more value starting from an important asset…a huge customer base
Ok, if people are scarce, than sewing would be hard. Really?
My bet is not: if we structurally identify value chains (and we forget about horizontal views of markets for a while), we can imagine that digitalization may offer chances to extract more value, better quality of life, from the same firms.
I throw an example: I visited a couple of small mechanichal workshops on sale, with no investors and with many customers. I thought: what is any of their customers (big industrial firms) would buy those firms upstream, place some of their more entrepreneurial employees there with some shares as goodwill, and let them work independently? This would have granted continuity to customers, it would have dampened the risk of starting a venture for some wanna-be entrepreneurs, and it would have created a vertical integration without the need for overheads control.
Maybe I am naïve, but I think that the answer to a slowly dying population of SME is an orchestration of integrations and digitalizations that may create middle-size firms, able to be more productive via some R&D efforts. Not forgetting sales as well: many SME are eager of Sales Agents, so the chance for distributors is to scout for those starving high-quality producers and lead the show by acting as holding companies.
Am I the only smart guy in the room? No way! PE are very active in those things, but what they lack (in my view) to succeed is the right pool of talented people able to organize from the operating point of view the new holdings.
Tailors, to the point.