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Italian report 1999

Italian report, RESER 1998 - Andrea BERGAMI & Lanfranco SENN R � s e a u E u r o p � e n S e r v i c e s & E s p a c e

- SERVICES & INTERNATIONALISATION -

Italian Report .

SERVICES & INTERNATIONALISATION - Andrea BERGAMI & Lanfranco SENN

Index

1 - Introduction
2 - Innovation
3 - Services quality
4 - Information technology
5 - Transports
6 - Public services
7 - Bank and financial services
8 - R�f�rences

Introduction

Over the past two decades the Italian economy has been marked by a steady shift away from the production of goods toward greater emphasis on services. Today, services already dominate the Italian economy contributing more than half to internal employment and output.

The service sector is a fairly broad area and the literature produced in 1998 is keeping with this situation: researches and studies turn out to be very specific Nevertheless some problems common to all or many service activities have been pointed out: for example the topic of service quality or the question of innovation in services industries. Faced with hard competition and rising operating costs, the predominant problem of service firms is whether to pursue aggressive growth strategy through service innovation or to focus on improving quality of existing services.

The attention is have focused on the explanation of the concept of quality and innovation referred to the particular characteristic of service industries.
Transports, IT (Information technology), public services and financial services have been the others main fields of interest of researches and articles.
Particularly, in relation to IT, the passage from analogical to digital transmission has been highlighted such as the diffusion of new types of communication (e.g. teleservices), while, referring to public services ,the consequences of the processes of privatisation and liberalisation, which have invested the Italian economy, will be pointed out.
This short paper outlines some of the conclusions drawn by this literature.

Innovation

Innovation in services is at the core of survival and development of service firms. Increasing global competition, rising operation costs and customers demand for services that have to be perceived as unique experiences have pushed service industries in an era in which success depends on innovation.

In short, producer service constantly try to find ways to offer new and better products and establish a competitive edge today and in the future.
But an important question remains open: what is innovation in the service sector? Some studies refer to innovation as the purposeful and organised search for changes and the systematic analysis of the opportunities that such changes might offer for economic or social innovation.

To study service innovation one needs to be sure what level of innovation is being examined.
It's possible to recognise three categories of innovation based on two dimensions:

1) the type of technology employed;
2) the effects of technology employed on established consumption patterns.

Incremental innovations represent the most common type of service innovation, involving small improvements over present processes or procedures; they seldom require new technologies or changes in customer behaviours.
Distinctive innovations represent significant improvements over present processes or procedures; they generally involve some degree of behavioural changes on the customer side. In some cases they may require some technology which is new to the firm (e.g. telephone banking services).

Important innovations represent significant improvements based on new technologies or approaches that require substantial adjustments in both delivery systems and customer behaviours. In addition two aspects of innovation may be distinguished: product innovation and process innovation.

The first is concerned with the development of new products, services and concepts that are critical to a firm's growth and performance; the second concerns the enhancing of industry's competitive capabilities by bringing any new problem-solving idea into use. Ideas for reorganising might include cutting costs, putting in new budget systems or improving communication.

Services quality

Measuring performance in services has proven difficult largely due to the fact that production and sales occur simultaneously and because the services provided are heterogeneous. Developing meaningful performance indicators for services has been hampered because of the difficulty in defining and categorising the appropriate inputs and outputs.

Services possess at least four characteristics that differentiate them from manufacturing firms:
1) intangibility (services primarily meet needs of convenience and personal satisfaction);
2) perishability (they generally cannot be stored as inventory);
3) simultaneity (services are often produced and consumed concurrently);
4) heterogeneity (the nature of delivery may vary from one time to the next because people are often involved in supplying it and because each customer is different).

The intangible nature of services makes them more difficult to quantify. The perishability and simultaneity of services make difficult to determine a firm's capability to produce in the absence of an immediate demand.
The concept of simultaneity implies that the functions of marketing and operations are very difficult to separate and are often performed by the same individuals at the same time. In this context efficiency and productivity, which are the two most commonly used indicators to measure performance, seem to be inadequate.

As a matter of fact, service quality has to be expressed as a function of customers' expectations of the service to be provided (based upon their previous experience, the firm's image, and the price of the service for example) compared with their perceptions of the actual service experience [29]. There is a fundamental relationship between customers' satisfaction and service quality. There has been some recent debate about the relationship between satisfaction and service quality. The emerging view is based on the notion that a service experience comprises many individual service transactions.

Each of these transactions plays a contributory part in the development of the customer's overall view of the quality of the service.
Some of the early service quality literature suggests a simple relationship between performance and perception. It is argued that any increase in performance leads to an increase in the perception of service quality and, conversely, any reduction in the level of performance results in reduced perceptions of service quality.

In other words, if performance is adequate, customers will be satisfied; while, if the service is poor, then customers will be dissatisfied. The role of expectations must not be forgotten: if customers expect a poor performance then they may be satisfied with a poor performance.
Some researches have pointed out five elements on the grounds of which a customer would value service quality :

1) trust (the capacity of providing services that agree with expectations);
2) tangible elements (physical structures, productive plants, front-line staff);
3) answer capacity (the capacity of providing services quickly);
4) reassuring capacity (the degree of staff's competence and kindness);
5) empathy (the capacity of providing individualised services to customers).

Service industries need to understand the types of service quality factors for their own services and understand their various relationships between perception and performance in order to design, measure and control their services.

Information technology

The passage from analogical to digital transmission and the consequent convergence of telephony, computer science and television in a single system is a fact.
The diffusion of Internet, that all over the world has already 50 millions of users, has been increasing more and more and the actions for the cablage of the cities go on even if with different programs.
The Intranet technology, on which the principal software producers are betting today, already allows to achieve firm networks supporting flexible work and developing new organisational models , which are able to improve efficiency and integration.
In this context it's possible to recognise two trends: the emerging of a demand for new advanced services called "teleservices" and the progressive success of a new urban model. Teleservices provide services such as marketing, selling, technical support, customers enquiries and reservations over the phone.

Several factors have led to this increase in the use of the telephone for customer contact. First, telephony has been transformed by the development of digital exchanges, intelligent telephone networks and their integration with computer data bases.
Second, telephony cost have been falling and new customer services have been introduced. Third, telephone penetration has increased and individuals are familiar and comfortable using it.

Finally, complex and rich information can be communicated over the telephone in real time. Teleservices are employed in a range of industries including financial services, hotels, travel and transport services. They are usually produced in a "call-centre" placed in a single location or in a limited number of locations.

In this way it's possible to achieve cost savings: for example property costs can be reduced by rationalising property portfolios, and making a more cost effective use of space, while capital costs can be reduced by using technology more intensively. By reducing the need for face to face contact between the producer and the consumer and so the distance between the supply and the demand, through the integration of advanced telecommunications and computer technology, call centres extend the number of service activities that are geographically mobile.

When labour intensive services with face to face interaction are replaced by the telephone there is obviously less need for production to be located physically close to the producer and this provides a new opportunity for peripheral towns, cities and some rural areas, many of which traditionally have a narrow service base, to attract some of these new forms of exportable services. Moreover local economic governments are interested in call centres because they are potential sources of new jobs.

Not irrelevant will be in the future the consequences of new technologies application for the territorial organisation: the concept of space and distance will be totally rethought and the digital city, constituted by electronic places with an increasing number of people, services and activities, will be a reality.

The relation between technology and cities has always been complicated because there is a certain "inertia" in the organisation of physical space, but the digital city is not physical so, bringing a growing number of functions in networks' flux, it aims at replacing physical spaces with connections and links of information.

Transports

Global economy, caused by liberalisation of goods and capital markets, technological innovations which reduce transport and communications cost and changes in strategies of firms and investors leads to an increasing interdependence of national and international markets. For these reasons the transport system is suffering deep transformations particularly in the sector of goods transport where demand concerns not only the simple transport but also stocking, packaging and accomplishment of administrative affairs.

In this context nodal centres for goods have a strategic importance to stimulate forms of co-operation and integration between different specialised operators and inter-modality becomes more and more important.

The objective is to consider each stage of the transport chain as a link of an integrated logistic system that has to be co-ordinated entirely to minimise costs and time-to market of goods. This system brings itself into effect mainly through Hub and Spoke models. It consists of concentrating land, air and sea traffics in a few places (Hubs) - which are the largest airports, seaports and rail terminals - from which goods leave towards peripheral structures or store-houses from where final deliveries occur by reduced ways (Spokes).

The developing of this model produces two important consequences:
1) rationalisation of goods flows and following contraction of the number of structures dedicated to goods movement;
2) concentration of logistical operators and their progressive specialisation;

The distributive structures have two substantial functions: transit and stocking of goods. The first aims to maximisation of quickness with which goods go through the logistic channel production-consumption. The structures dedicated to this purpose are platforms, gateways, nodal centres for goods and inter-modal centres.
The second has as its target the preservation of goods during the period that passes from a transfer to another: central and suburban warehouses carry out this task.

Moreover attention is being paid in Italy to question concerning high-speed trains, the improvement of some airports (e.g. Malpensa 2000 program and the southern airport system) and the integration of long distance with metropolitan and regional transport. Particularly the southern airport system situation casts light on the heavy lacks of which this transport system suffers: urgent measures are necessary to overcome the crisis.

Public services

One important topic in the Italian discussion of 1998 highlights the problem of public services in a period of decreasing financial resources and increasing citizens' demand and the question of the inadequacy of Public Administration.

Three issues have drawn the attention :
1) the beginning of a process of privatisation of several public activities and services;
2) a tighter control of public expenditure;
3) the search for greater efficiency and effectiveness of local administrations.

The fields in which the debate is occurring are telecommunications, water service, energy (both gas and electricity), transport (both motorways and railways), airports; but private health services and educational services are also under discussion.
The problem of public sector restructuring and modernisation is taken up in several publications, stressing the need for changes: changes in service attitude (services for citizens-clients), public and client sensitive administration, servicing instead of administering.
It's emphasised that Italy needs new forms of local administration. The process of privatisation and liberalisation of the most important public services has been considered in the Italian debate as a process that doesn't require necessary actions on the structure of the sector but needs a complex system of rules.
Indeed, foreign experiments serve as a model and they prove that reorganisation of the sector is the first step in any regulation.
Decentralisation of decision-making, decentralised budgeting, product definition and product orientation and the question of outsourcing are the keywords in this context. In addition, changes in human resource management in public administration are considered to be necessary.
The increased tendency to innovate in the delivery of local services reflects tardy recognition of certain inherent limitations of the public sector as a direct producer of services, at least of those services which are new or changed in character.
The public sector is far less flexible than private operators regarding staff working hours. This means that services will operate only during the working day and be closed in the evening and at weekends: this may be not satisfactory for certain kind of services.

The public sector may also lack the kind of personnel necessary for guaranteeing the professional management and technical capacity necessary for achieving high levels of economy, efficiency and effectiveness in service delivery. Not only may it be unable to pay competitive salaries, but the kind of career prospects it can offer may be unattractive to managers and technicians as opposed to bureaucrats. A whole series of problems concerning the measurement of output and productivity of public services, efficiency and effectiveness of public policies is exploding.

It' s generally recognised that concepts such as efficiency, effectiveness and productivity create considerable problems of terminology when they are referred to the public sector. Public services are placed in rather non-defined markets, the peculiarity of which derives from the fact that there is a supply and a demand but there aren't mechanisms of re-equilibrium normally exercised by prices.

The performance of agencies providing public services at a local level is evaluated on the basis of the goals they propose to achieve in assuring the welfare of the community and in saving public resources.
The implementation of methods and techniques of measurement implies new regulatory rules on actors and institutions charged to measure and certify the performance of public services and administration.

A strong attention can be observed in the field of social and health service where financial constraints, on the one hand, and new clients-patients' demands, on the other hand, meet each other. The analysis reveals that there is not enough responsibility on the side of the client, fragmentation of functions on the supply side, not enough horizontal co-operations between institutions; generally there is no result orientation but input orientation.

Bank & financial services

Retail banking generally encompasses the provision of banking and financial products to consumers and small business by commercial banks and many other kinds of financial services firms. Italian retail banking today is a highly competitive market involving many different kinds of players, including national and international commercial banks, saving banks, co-operative banks, and a growing array of other financial and non-financial institutions.

Two of the main players are commercial banks and savings banks. The differences in the origins and initial customer segments of the commercial banks and savings banks have now disappeared because commercial banks have entered the traditional marketplace (the retail sector) of the savings banks.

Similarly, savings banks have moved strongly into traditional commercial banks activities. Deregulation, intensifying competition and developments in technology on one hand have allowed new competitors in the form of non-bank financial institutions and retailers to enter the retail banking market, on the other hand they have stimulated banks to reduce their cost/income ratios and to allocate more efficiently their own internal capital resources.

Retail banks began targeting specific customer groups and differentiating their products in order to meet the demands of various customer segments: for example they developed "bancassurance" strategies in which retail banks and insurance companies joined together in order to provide customer with a full range of financial services.

"Bancassurance" is a strategic attempt by banks (and insurers) to capture and sustain a greater market share of increasingly financially sophisticated customers. The emergence of "bancassurance" as a retail banking strategy is determined by various factors including shifting demographic patterns, changing customer need, changing savings trends and increased competition. In an era where intense competition is greatly facilitated by technology the need to maintain market share has necessitated that retail banks become increasingly market and profit conscious.

This has resulted in a bigger emphasis being placed on policies aimed at improving the quality and efficiency of management. Traditionally management in retail banking was essentially conservative and not particularly profit or cost conscious. Emphasis was typically placed upon technical skills associated with lending competence. The emergence of an increasingly marketing-orientated culture within retail banks has forced the management to become more dynamic: less emphasis is being placed on technical skills and more on selling and marketing abilities.

This fundamental change in bank culture is already being reflected in reward, recruitment and training programs. Greater stress is being given to retailing and selling skills: indeed in relation to recruitment there is less emphasis upon technical aptitude and more on developing specific managerial skills. The need to improve cost efficiency ratios has increasingly forced the management to become more profit and risk conscious. Reorganisation of banks along functional lines that reflect business markets and sectors is another attempt to put a greater emphasis on service quality and satisfying better the needs of customers.

R�f�rences

� Alpa G., Carullo A., Clarizia A., Le SPA comunali e la gestione dei servizi pubblici Il Sole 24 Ore, Milano, 1998 (Public services)

� And� B., "I poteri dell'Authority per le Telecomunicazioni tra liberalizzazione ed eccesso di regolazione" in Economia e diritto del terziario n�3 Franco Angeli, Milano, 1998 (Public services)

� Biffis P., Le operazioni e i servizi bancari Giappichelli, Torino, 1998 (Banks/financial services)

� Bissa M., Festa S., "Rete logistica e sistema paese. Il ruolo degli interporti" in Commercio: rivista di economia e politica commerciale. Rassegna del Centro di studi sul commercio (CESCOM) dell'Universit� "Luigi Bocconi" di Milano Franco Angeli, Milano, 1998 (Transports)

� Bolognini M, "Telecomunicazioni digitali e citt�: futuro remoto anzi prossimo" in Impresa & Stato. Rivista della Camera di Commercio di Milano n�47 CCIAA, Milano, 1998 (Information technology)

� Castelli F., Gobbo F., "La regolamentazione dei mercati finali e dei mercati intermedi nelle telecomunicazioni" in Economia e diritto del terziario n�3 Franco Angeli, Milano, 1998 (Public services)

� Cazzola C., Grillo M., "Lo stato della concorrenza nel mercato del gas e delle sue prospettive" in Economia delle fonti di energia e dell'ambiente n�3 Franco Angeli, Milano, 1998 (Public services)

� Conferenza sul trasporto intermodale ISTIEE, Trieste, 1998 (Transports)

� D'Alberti M., Concessioni e concorrenza Istituto Poligrafico e Zecca dello Stato, Roma, 1998 (Public services)

� Dalla Chiara B., "Le strutture intermodali e l'apporto della telematica" in Trasporti industriali n�464 Luglio/Agosto 1998 Jackson, Milano, 1998 (Transports)

� Ferrari S., Il miglioramento della qualit� nei servizi: casi e problemi CEDAM, Padova, 1998 (Service quality)

� Genco P., Maraschini F., L'ingegneria impiantistica Il Mulino, Bologna, 1998 (Information technology)

� Giorgetti R., Il servizio sanitario. Guida alla normativa e al sistema organizzativo Maggioli, Rimini, 1998 (Public services / health services)

� Giustiniani M., Rossi G. M., Guida all'out-sourcing in banca: sicurezza e servizi tecnici: Vantaggi rischi e aspetti legali per una gestione pi� efficiente della sicurezza e dei servizi tecnici. Bancaria, Roma, 1998 (Banks/financial services)

� Gozi S., Prospettive dei servizi pubblici nell'Unione europea CLUEUB, Bologna, 1998 (Public services)

� Grassini F. et al., La concorrenza nei servizi di pubblica utilit� Il Mulino, Bologna, 1998 (Public services)

� I servizi di pubblica utilit� in Italia. Rapporto sullo stato e sulle condizioni di sviluppo. La Rosa, Torino, 1998 (Public services)

� L'offerta di servizi di consulenza alle imprese. Interventi tenutisi nell'ambito del seminario su "Nuovi orizzonti per l'attivit� bancaria in Italia", S. Marco - Perugia, 6 Marzo 1998 Associazione per lo sviluppo degli studi di banca e borsa, Milano, 1998 (Banks/financial services)

� Lolli A., Drusiani R., "Per una gestione imprenditoriale del servizio idrico integrato" in Economia delle fonti di energia e dell'ambiente n�3 Franco Angeli, Milano, 1998 (Public services)

� Maggi S. Reti telematiche e servizi socio sanitari Franco Angeli, Milano, 1998 (Information technology)

� Mandelli A., Internet marketing McGraw - Hill, Milano,1998 (Information technology)

� Onofri M.N., "Gli interporti e la loro funzione in Italia" in Trasporti industriali n�464 Luglio/Agosto 1998 Jackson, Milano, 1998 (Transports)

� Paiola M., Servicing: progettare e produrre innovazioni nei servizi CEDAM, Padova, 1998 ( Service innovation)

� Pezzani F., "L'euro e i servizi pubblici" in Impresa & Stato. Rivista della Camera di Commercio di Milano n�48 CCIAA, Milano, 1998 (Public services)

� Prosperetti L., Come funziona la liberalizzazione dei servizi pubblici: un analisi di alcune esperienze internazionali Universit� degli Studi di Milano, Milano, 1998 (Public services)

� Ranisi M., "Scali pi� efficienti per promuovere i rapporti con Oriente e Mediterraneo" in Il Nuovo Corriere dei Costruttori Ottobre/98 ANCE, Roma, 1998 (Transports)

� Relazione annuale sullo stato dei servizi e sull'attivit� svolta. Roma: Presidenza del Consiglio dei Ministri, Roma, 1998 (Public services)

� Tendenze nell'offerta di servizi di gestione del risparmio. Interventi tenutisi nell'ambito del seminario su "Nuovi orizzonti per l'attivit� bancaria in Italia", S. Marco - Perugia, 6 Marzo 1998. Associazione per lo sviluppo eft"> L'offerta di servizi di consulenza alle imprese. Interventi tenutisi nell'ambito del seminario su "Nuovi orizzonti per l'attivit� bancaria in Italia", S. Marco - Perugia, 6 Marzo 1998 Associazione per lo sviluppo degli studi di banca e borsa, Milano, 1998 (Banks/financial services)