DI.CO. Service, Italy: Business creation and entrepreneurship
DI.CO. Service is part of a flexible network of small companies which provides a complete range of turnkey services in the field of automatic machines and mechanical engineering. The company maintains a flat organisational structure with specific areas of specialisation, activating services according to customers’ needs. The flexibility of the network ensures a general reduction in costs and a rapid and high-quality response to customer needs. Moreover, in response to market changes, it allows for a shift in production from the supply of units to the supply of complete machines.
DI.CO. Service was established in 1988 by a former employee of IMA (Industria Macchine Automatiche) – a world leader in the design and manufacturing of packaging machinery. The company’s founder worked as an assembler for IMA from 1960 to 1974, also carrying out other assembly jobs for the company between 1974 and 1980. In 1987, along with a number of other collaborators, he began his own production activities, progressively diversifying his client portfolio among other factories in the sector, as well as in other sectors. Subsequently, he became involved in the production of complete machines for companies.
Currently, the activities of the enterprise are organised around a network of 10 companies. The structure of this network is flexible and the number of operating units can vary according to customers’ differing needs. DI.CO. Service represents the central node of this network, with which the nine other operating units interact. DI.CO. Service supplies services to the other units, namely: the planning of orders, administration and finance, logistics, credit management, human resources management, training planning and payment services. Overall, the network of 10 companies employs a total workforce of 150 employees.
Description of the initiative
Driven by a market demanding ever-shorter production delivery times, along with high production specialisation, the founder of DI.CO. Service wanted to experiment with the possibility of managing and coordinating a network of small companies. A central aim was to avoid all problems concerning ‘size’ and to develop a more flexible and dynamic network. The networking approach pursues three main objectives: reinforcing the procurement function, slimming down production, and using a quality system to obtain internal benefits, in turn achieving the desired certification. The flexibility of the network ensures a general reduction in costs and a rapid and high-quality response to customer needs. Furthermore, as a network, DI.CO. Service activates only those specific skills that are required to meet the customers’ needs, involving only the most relevant operating units.
DI.CO. Service is considered the parent company, around which all of the other companies perform their activities. Over the years, every time a new division develops within DI.CO. Service, or when one of the member companies reaches a certain size, a spin-off process leads to the setting up of a new smaller company. Whenever the market demands a specific activity, instead of incorporating the activity within the company, DI.CO. Service prefers to assign the responsibility of managing an external operating unit to one of its expert employees. The spin-off processes relate to both manufacturing and services. This drive is reinforced by the tendency among contractors to no longer demand basic components but rather complex products. The existence of a purchasing office, for example, gives the company an advantage over other competitors that may have more workers but which are unable to directly devise procurement policies as required by the developing market. A further strength of the company concerns the presence of assembly capacity, which gives it a competitive advantage in relation to the supply of assembled units.
The idea of creating a flexible network is very much based on market demands. The company is a private initiative, which means that it does not benefit from any public funding. The founder of DI.CO. Service holds a 51% share in DI.CO., along with a variable percentage in all of the other units. Within each company, a partner who is also a technician or expert in that company’s specialisation is also present. DI.CO. Service has a functional hierarchical structure, while the other companies are organised in accordance with a ‘flow model’, with traces of a ‘matrix model’. Each single operating unit has its own core business, while being part of the network since it carries out a specific part of the commissioned process. Nevertheless, the central aim is to maintain a flat organisational structure. Each unit is not economically dependent on DI.CO. Service, but is also free to work for other companies. Normally, the number of orders dealt with in collaboration with DI.CO. Service should represent 50% of each unit’s total production.
As the central node of the network, DI.CO. Service provides a complete range of turnkey services in the field of automatic machines and mechanical engineering in general. To this end, it takes advantage of the synergistic relationships between the operating units and the collaboration of external high-skilled suppliers. The company receives and deals with the orders that require the production of a complete machine in term of logistics, finance, quality assurance and administration. The network benefits from the financial backing of a banking institution, which forms part of the shareholder structure.
DI.CO. Service has a board of directors in which all the partners take part; this helps to ensure that all members of the network are involved in the decision-making process. In recent times, an important and strong relationship has been fostered with Bologna University’s Engineering Department in relation to the planning phase. Throughout the years, the DI.CO. Service concept has received the support of consultants in the corporate world.
DI.CO. Service also pays particular attention to continuous training, financed through private funds. The heads of the operating units usually meet once a week for training on different subjects, depending on changing needs. Until now, DI.CO. Service has been financing training courses in the English language, team-working, marketing, accounting and budget management.
However, according to the external trade unions, as the clients’ demands are becoming increasingly specific, the company’s strategy should focus more strongly on product innovation and diversification in order to remain constantly competitive. Therefore, the trade unions believe that there is a need for a structural change within DI.CO. Service’s organisation, in terms of improved production planning aimed at increasing the diversification and innovation aspects of products.
One of the main factors in relation to DI.CO. Service’s success has been its collaboration with Tetrapak and, in particular, the support policies that it provides to the subcontractors in terms of its training and management culture.
Another key element regarding the network’s success has been the capacity of DI.CO. Service’s founder to understand the importance of developing an entrepreneurial model capable of rapidly adapting to changes in demand, on the one hand, while remaining competitive in the world market, on the other. Furthermore, the presence of highly specialised artisans has ensured the reliability of products and services provided and, as a consequence, an increase in the number of orders.
The case of DI.CO. Service also provides a good example of how human resources can be maximised. Each time an opportunity arises to develop a single specialised activity, an employee who had previously worked inside an existing production unit is assigned to a legally as well as economically autonomous task. Moreover, the network has increased employment rates by providing work to 150 people.
DI.CO. Service and its network members have secured the UNI EN ISO 9001 series quality certification, with the help of consultants. The flexibility and synergy of its network contributes to lowering costs, reducing production lead times, enhancing the quality of products and services, and increasing the specialisation of the company’s activities. Furthermore, in response to market changes, it allows for a shift in production from the supply of units to the supply of complete machines.
Exemplary and contextual factors
DI.CO. Service has managed to change its structure, without benefiting from public aid, in an effort to increase its competitiveness in a global market. In a regional context, characterised by a high proportion of small and medium-sized enterprises (SMEs), DI.CO. Service represents one of the first successful examples of a network of SMEs set up as an alternative to a strategy oriented towards increasing company size. Through spin-off processes, it has developed a flexible and dynamic entrepreneurship model.
Davide Dazzi, Fondazione Istituto per il Lavoro, Bologna