A Low-Cost State Needs People and Ideas
Italy must refashion itself as a low-cost nation. Many successful corporations have done the same: WalMart in retaling, Dell in PC manufacturing, Southwest in air travel. Each of these companies offers its customers an extraordinary and challenging proposition: good quality at a highly competitive price. But can a state turn into a low-cost nation? Namely, can it provide good services at a cost that is lower than the one currently saddling public administration? The answer is yes.
The first stage is the spending review, and this is a necessary but not sufficient condition. Accurate, deep auditing of the costs of government is critical to ascertain useless expenditures, which can be cut with no further delay. The resulting savings can be destined to finance smarter public investment. But a spending review is not enough. To turn Italy into an innovative low-cost nation, it must be assessed whether the things achieved by successful low-cost companies can be replicated in the management of public spending.
When the Pentagon restructured its logistics, it called on Wal-Mart and Federal Express to understand how to move soldiers and tanks around the planet with the same effectiveness and at the same low costs attained by those two companies. Thus the challenge is learning and implementing the two main strategic moves made by low-cost corporations.
The first has to do with people chosen for leadership positions in organizations. Functioning low-cost government requires public managers who are able to implement the principle of doing more with less every day. And people are the first source of resistance to change: in most media statements what administrators say is that the status quo is better and that more, rather than less, resources are needed. Successful low-cost firms have put persons at the helm of their organizations selected for their ability to eschew the orthodoxy of prevailing business models. These are managers who practice no-frills, cost-cutting management, but are nevertheless able to deliver quality services to users.
Low-cost government thus first of all requires managers and personnel entrusted with command and leadership, although selected for their orientation toward efficiency (producing at the lowest cost) and effectiveness (doing the right things speedily and in an innovative way).
The second strategic move made by successful low-cost companies was to radically redesign their business models. Dell did not imitate its rivals to offer PCs at a competitive price. It set out do everything differently with respect to competitors. This is the second true challenge. Without radically revising organizational models for the provision of public services, low-cost government is impossible. Structural reform in public administration is equivalent to changing the business model of a firm.
When is a change in the business model needed? When cost and quality performance worsens and the competitive environment is sending alerts for business survival. With respect to the Italian state, such alerts have been evident for years. Our courts, prisons, hospitals, universities, police and military forces, indeed the whole of Italy's local and central public administration, are sending distress signals. Resistance to change derives from the refusal to accept that things can be done differently and better. Do we want to reduce sovereign debt, or better yet, help citizens and firms? We can do it by transforming the country into a nation managed according to low-cost principles. We can do it, if we stop using the world impossible all the time. And if we decide that that time to change is now rather than tomorrow.