Business consulting is an art. Enhancing the vision to grow
Accommodate consumer stimuli. Investing in technology, processes, and product development. And enter the largest target markets with factories. That's how you stay competitive. Face to face with one of the most experienced consultants, who has been supporting those who do business for 40+ years.
He is one of the world's leading experts on the agro-industrial and consumer goods sectors: working side by side with hundreds of entrepreneurs, he has developed a sensitivity, experience and completeness of vision that is rare to find in the generalist consultancy majors. Luigi Consiglio, Founder of Eccellenze d'Impresa (EDI), is firmly convinced that only innovation and internationalization are the engines of growth for every company; he looks at the world of corporations – often paralyzed by processes - with a lot of skepticism related to their ability to create value.
It is a cold morning in early December when Sistemi&Impresa is welcomed into EDI's headquarters: we are in Via Durini in Milan, just a few steps from Piazza San Babila already decorated for Christmas. It is in the offices of the consulting firm, which takes its name from the award created in 2014 and which has seen more than 2,000 excellent companies nominated, that we are hosted by Consiglio, who defines his job as following: “We help companies grow and make money; it is a job that we love, and that gives us so much.” Meanwhile, as we take a seat, he adds: “EDI is a strategy and implementation boutique in which we adapt global cultural and managerial themes to the specifics of Italian entrepreneurship.”
This is the prelude to a long chat in which the consultant merges with the entrepreneur and becomes an interpreter of the complexities faced by those who must lead a company, focusing the attention on those entrepreneurial skills which themselves represent a competitive advantage. From here arise (some) guiding principles to be transferred to entrepreneurs extensively covered in the book Campioni d'Italia written by Consiglio and published by Mind editions: “The entrepreneur can never be satisfied. He cannot afford to look back. He must always be vigilant and in search of the new, the challenge, the creative madness capable of breaking the habit and radically renewing his company. The artisan matrix and the expertise in terms of product and process make the Italian enterprise unbeatable on international markets.”
The 20-year collaboration with Marco Fortis, confirmed in Consiglio’s move to EDI, supports this intuition with the numbers of the Edison foundation. Speed in development, family leadership, internationalization, organizational streamlining, widespread entrepreneurship and the ability to listen to all components of the company are the distinctive factors of the specific nature of the Italian company.
Companies such as Rana, Molino Casillo, Valdo, AsdoMar, and Caffè Borbone - to name a few - are the cases from which EDI's experience and culture derive and demonstrate the effectiveness of the model and the ability to push client companies beyond the boundaries of their comfort zones. Among the missions of EDI, there is also a social aspect: the consulting firm helps young people enter working dimension and, for some time now, has focused especially on women's entrepreneurship.
In this regard, the latest success story, which has gained a certain notoriety, involves the coaching of the five young female entrepreneurs from Mariscadoras in Rimini, who approached EDI for some guidance and suggestions regarding the blue crab business: an alien species that is not fished in Italy which has a very strong demand and very high prices in the US. With the support of the consulting firm, the five entrepreneurs managed to contact buyers interested in buying all the crab produced; involving the marinas and processors in the network venture, Blueat has stipulated a supply chain agreement to hold the purchase price of the crab steady, committing to collect all the catch, in any quantity and at any time, also because the quality of the Italian product is better than Mexican and Far Eastern ones. “The demand was there, we built the offer, and a particularly thriving and sustainable business took off,” comments Consiglio. The talk starts from here.
What are the characteristics to consider when evaluating a company?
The short answer is the ability to generate cash in the long term and, therefore, the progression in shares value. But it must be understood what the reason for such value generation is; the same can range from the sources of the uniqueness of the offer, its defensibility, scalability and consistency with the current and prospective demand of the target markets. Strong research and development, product expertise spread throughout all levels of the organization and a strong focus on serving the customer are the ingredients capable of generating value in the long term. To this it must be added an ability to attract talent aligned to the company's values and the methodology to integrate them with the corporate culture and experienced people. A continuous progression of overall growth, in short.
Why do you believe there is a need for this constant self-analysis by company leaders?
Nokia, Motorola, Seat, Pagine Gialle, Fiat, Lancia, Alfa Romeo, Maserati, Benetton-I'll finish the list that could go on for pages-are all companies that did not “see it coming.” They were companies that were focused on power and finance. This is not how success stories are built. The entrepreneur must be vigilant and continually look at the consistency between the business mix and the future needs of customers. There are many like that and they are the heritage of Italy. They are a worldwide uniqueness that comes from the craftsmanship expertise of which our country is overflowing. We are children of Stradivari and Florentine bankers, we are not children of finance, speculation, and industrial giants. This product expertise allows them to make a continuous analysis of the scenario and competitive position of their products and to increase their perceived competitive advantage. Business processes must be consistent with market needs at any cost. This continuous innovation fuels the uniqueness of the enterprise and constantly increases its value.
How do you understand if you are offering a commodity or a premium product?
If the product manages to enter the process and improve it, it is not a commodity, it is an ingredient. If a consumer product becomes indispensable and solve a consumer need, then it is not a commodity. If a product succeeds in giving those who buy it a special image, then it is not a commodity. There can be more than 10 Ebitda points of difference between a raw material and an ingredient consistent with an industrial process (4.5 percent versus 15.5 percent). Therefore, it is worth working on the significant differentiations in the offering. Continuous scouting of opportunities is the key to success for the enterprise. Having widespread entrepreneurship and the ability to listen to all the valuable information coming back from customers is an absolute asset of world champion companies.
In those terms it all sounds very simple....
I'm afraid it is simpler than people think. Certainly, a curious and enterprising nature of leaders is essential. It is critical not to be afraid to take risks. Engaging leadership that can inspire is important. And lots and lots of passion for the product. Companies are driven by research and development, not by finance and human resources. The latter must follow and be of service. I know I'm being disrespectful in saying this, but I followed almost 500 cases, and I hope I can be forgiven for some rude behaviour.
How can the entrepreneur value the enterprise alone?
He must build an enterprise in which every part of the organization is handled by those with an entrepreneurial attitude. The leader has the role of showing the way and thinking about innovation; to do this, he must have involved trusted people who can do their part. For example: the person in charge of Logistics should not just call a truck, load it up, and watch it go...he or she must question what the most efficient model is, to be able to achieve the objective at the lowest cost and with a higher level of service, even proposing to change the company's business model. Big changes can be made by simply looking at the business from a different perspective. For example, the turnaround done by Walmart-the world's largest large-scale retail trade -in just over a year is paradigmatic and shows how everything is possible, even in very large or 2-million-worker-sized business organizations just like Walmart is. The world's largest retailer changed its perception from a destination supermarket to a logistics platform competing with Amazon. 90% of Americans live within 10 miles of a Walmart supermarket. If I receive an online order, I can process it from the supermarket in less than an hour, I use the store employees at the end of the shift by giving them overtime, and I beat the competitor on the level of service and breadth of the available range. All large-scale retail companies have the same problem, they are squeezed between online and discount. But how many of them are reacting strategically by leveraging their strengths?
What advice can we give to entrepreneurs for them to change their vision?
The entrepreneur must have the ability to watch from the sidelines. It must look at its business from a different angle and reimagine it. It is a process that must never stop. Traveling, watching competitors, understanding customers, listening to their objections, studying startup innovations, understanding process technologies, nurturing curiosity in the employees, rewarding innovative ideas and never punish a bad proposal or a mistake, to motivate the creative energy of everyone within the company. Don't be afraid to change everything, even to destroy an already approved plan, or give up on an investment that doesn't look the way you thought it would. The work of the entrepreneur, in the product development process, fine-tuned at Harvard, with Marco Iansiti, is defined as the injector in an engine. Success, in 90 percent of cases, comes from there.
Haven't the recent crises been enough of a lesson?
I count at least four recent shocks that have affected businesses psychologically and economically. Starting with the Covid, then there was the shortage of raw materials because of the pandemic emergency and China's decision to buy stocks in four times the volume of the past just to protect itself but creating a commodity shortage. Then there was the war in Ukraine and finally the inflation. Uncertainty became the 'rule of the game' and forced people to reckon with their strategies. The crises did not generate an immediate recession, rather they contributed to the shift in consumption in the direction I anticipated earlier, that is, toward products that have an appropriate level of value relative to price. Those who were able to foresee this, put themselves in a safe position and generated value (and continue to do so); the others stopped. Despite the crises, however, demand has continued to pull impetuously. The world has felt like living and spending precisely because of the crises, but spending is becoming much more selective.
Which companies suffered most from these crises?
Those who looked at the world as if nothing had changed, because in any case the company was continuing to make money. This is the case of the Automotive sector, which did not evaluate in time the arrival of the electric motor, which today has crippled several companies. But it is also true on the eBike industry: there was an increase in the market in the short term, but the manufacturers did not ask themselves what they would do with their bicycles once the market was saturated, and so they found themselves with full warehouses and at risk of default. I can understand small, product-focused companies getting overwhelmed by large geopolitical phenomena, but large companies that fail to notice market upheavals are inexcusable, especially those that can, precisely because of their size, even direct the economic development policies of a country, if not an entire Continent, I justify them less, much less. Luxury and Automotive have missed a great opportunity to rethink their development models, and I do not understand why.
Why do you think it is SMEs that win the competition with the big ones?
Large companies focus on efficient and repetitive processes. They work on overall profitability and carefully avoid risk. Innovating is risky. Better to cut costs, reduce quality or quantity, and bring profits in short-term. But this way does not build value or prepare for a future of growth and satisfaction. Only entrepreneurial companies have the independence and risk appetite that allows them to invest beyond economic logic. Spend on projects that will have returns beyond three years or even five. It is primarily a cultural issue. But in the struggle between David and Goliath, I have never seen the latter win.
Can you give us an example?
A decade ago, the yogurt market in the U.S. was at a standstill. Until a 29 -year- old young Turkish man, Hamdi Ulukaya, took over a factory from Kraft - the story goes that he repainted it together with his wife - and with a loan of about $1 million launched Greek yogurt in New York under the Chobani brand: the winning idea was not to limit distribution to places frequented by Greek Americans, but to offer the product to large-scale retail chains. Today Greek yogurt has a 40 percent market share in the US. Yoplait, Danone, General Mills watched and then chased. So did Kind with respect to nut bars or Sabra in hummus, and again Kevin in ready-to-eat protein. In short, all innovation in U.S. food comes from small- to medium-sized companies. So, my argument has a robust demonstration. And the same point applies to Europe.
However, business in Italy is often held back by the generational transition: what do you think about this
I consider generational transition a misnomer: there should not be a transition but a synergy between generations that are called upon to hold hands. Seniors bring experience and young people bring energy: together they produce enthusiasm and the ability to make connections. D&I is also this: integrating distant populations into fertile paths of exchange. This also applies to business leadership. Normally, a healthy company has many more projects than human and financial resources. If one could set aside for a moment the issue of power and that is, who is in charge, one would be able to see the enterprise as a clot of opportunities: everyone can and should take a baton and run toward a goal. The generational shift refers to power, but it is not this that creates value, rather it is the merit of the creative energy and spirit of the organization that is nurtured by everyone.
You talk about “entrepreneurial anxiety” that needs to spread in business: what do you mean?
I have been lucky enough to be around many great entrepreneurs. Extraordinary men. The common trait is never being fulfilled, never satisfied with the result achieved: before planning, the entrepreneur consults the world; he is objectively concerned; he takes a high risk, he does not know the outcome; it is pure adrenaline. But when the entrepreneur makes the decision, he becomes frosty and calm. From then on it is only serenity and reassurance. Living like this is like living 100 lives. It feels like never sleeping, but the feeling is of building something destined to stay. The feeling is of making history.
Many Made in Italy companies focus on history to position their products; do you think this is a good strategy?
Tradition is a great marketing platform. Italian companies start at an advantage thanks to the Made in Italy megabrand, but it is only a starting point. Adapting the product to the precise needs of markets, building factories close to places of consumption, and entering local supply chains, make companies truly international: entrepreneurial companies of Italian tradition, but international in supply and culture. I would buy their shares immediately.
What are the skills that entrepreneurs must have?
He must have the ability to look and listen with an unencumbered mind, he must set himself to listen to what the world is telling him, to understand how his technologies and skills can best respond. And the more he listens with an unencumbered mind, the better his long-term strategy will be. He will also need to surround himself with people who are as diverse as possible from each other as well: this is critical and relates to the importance of diversity and inclusion within the strategic process; having these ingredients enriches the stimulation. It may feel like dealing with people who waste time, but ultimately, their contributions will prove to be the most important in fertilizing thinking. It's easy to work with a perfectly matched team, but that doesn't necessarily lead to increased company value over time. The key is to imagine new levels of service and increase creativity; to do this, you need to have different people around you for enriching prompts. The risk, otherwise, is to wallow in your own thinking.
What is the role of the consultant in this scenario?
The consultant must inspire the entrepreneur. Unfortunately, in consulting there is a widespread idea related to stand alone projects: doing an analysis and deliver a summary document. But our job is far from it: it consists of to sit down with the entrepreneur and wait for the right moment to tell his or her vision thinking about the company. The consultant must add an outside vision that can enrich the entrepreneurs. He or she must play the role of the 'contrarian,' who says uncomfortable things and does not fall into the temptation to please the business leader's strategy, because that is the only way to stimulate growth.
And doing so is an art.
