Merloni Elettrodomestici

Millions of European consumers know the top brands of Ariston and Indesit, but fewer realise that behind those household names is a family business whose history epitomises the sector and its most traditional values.

Vittorio Merloni, head of Merloni Elettrodomestici, harks back to the simple philosophy of his father Aristide, who founded the original company back in the 1930s. "My father loved to say that in every business venture, success has no value if it lacks involvement in social progress, "he recalls.

Since then, the Merloni family has built an enormous industrial conglomerate. It employs 13, 600 people and produces 8 million household appliances each year in six European countries. Revenues last year reached €1. 6 billion. Vittorio Merloni insists that this success is due to a pledge to innovation, experienced management and a strong commitment to the community.

The Merloni business history is typical of so many family enterprises. It had a forward-thinking founder, experienced significant changes during the upheaval of transferring control from the first to second generation and still places great emphasis on the idea that family executives should learn the business from its most basic operations before assuming positions of responsibility.

The founder, Aristide, insisted that his three sons – Vittorio, Francesco and Antonio – each study to degree level before entering the family business, then named Industrie Merloni. He created three operational divisions, each headed by one son, prior to his tragic death in a vehicle accident in 1970.

Having initially produced weighing scales in the 1930s, Merloni diversified first into liquid gas cylinders and later into water heaters and cooking stoves. During the 1960s, Merloni began manufacturing and distributing washing machines, dishwashers and refrigerators under the Ariston brand.

The brothers did not always agree on the direction of the company. Within five years of their father's death, a split occurred. Vittorio, Francesco and their sister Ester retained the family business, while Antonio created a competing operation. "The division into three companies was very difficult, creating family conflicts and internal competition, although it certainly contributed to our success, "says Vittorio. "We have become more dynamic since then. Separated, we improved tremendously; united, we would have gone backward. "

Certainly the changes in 1975 witnessed a new era of growth for Merloni Elettrodomestici. At that time it was among the smallest of 300 competing operations across Europe. Today it is third in the European marketplace, having competed with well-known Italian manufacturers including Zanussi, Zoppas, Indesit, Ignis and Candy, as well as other major manufacturers throughout Europe.

Having run the business for more than 20 years, Vittorio handed over operational management to an outsider, Francesco Caio, who was recruited from Omnitel. This was a significant move, even though Vittorio may be grooming his own children to re-join the company at a later stage.

"Francesco Caio told me 'this company is like a glass of still water, and I will make it sparkle'. The final result was excellent, " says Vittorio.

Caio has since moved on, handing over operational control to another non-family member, Andrea Guerra, whom Vittorio describes as "young and highly innovative". The two men have taken Merloni firmly into the Internet and technological age.

Growing through innovation
One other significant milestone for Merloni was the decision in 1987 to take a market listing on the Milan stock exchange. He emphasises that today Merloni operates in a much more similar way to a conventional listed company. He believes the move served to encourage innovation in the way the business behaved, rather than serving a single family interest. Certainly, soon after the listing, Merloni was able to acquire another Italian brand, Indesit, and the French company, Scholtes.

"Innovation is the only way to grow, " Merloni emphasises. "For us, innovation has been the engine for development. On average, every two years, we start a new project and this allows us to extend our competitiveness. "

As examples, Vittorio describes two key current technology-driven projects. First, Merloni created Wrap, a business which exists to identify, combine and exploit the multitude of patents owned by the group, with an emphasis on digital technologies.

Ariston Digital is another business operation created to exploit the know-how acquired during the development of several generations of electrical household appliances. The eventual aim is the practical launch of the Domotica, or InternetEnabled Home.

"The future is there: for the working woman, the single person who is always in a hurry, or the large family – a house brightened up by the marriage of digital technologies, "explains Vittorio. "We are focusing on an Internet home with innovative features, such as voice-controlled lighting, temperature control, interactive TV and, thanks to the 'Webcam', the ability to monitor rooms remotely over the Internet.

"From your office you could close the blinds, lock rooms and disable potentially dangerous appliances. These can all communicate with each other, thereby enabling them, for example, to control the amount of energy they all consume at one particular time. The project is ambitious, but we are on the right track. "

The company, with its roots in traditional family values, is actually at the leading edge of technology, ready to provide the next generation of high-tech appliances to European consumers.

In operational terms, the company also took a decisive and radical step when the barriers between East nad West were broken down during the 1990s. Apart from providing new potential markets for Merloni products, the comapny also spread its manufacturing base tp include production operations in Poland and Russia (in addition to its existing plants in Italy, France, Portugal and Turkey).

Teaching them to fish
Vittorio has also taken a firm view of family strategy in relation to Merloni's future management. Today, none of his four children - Antonella, Maria Paola, Aristide and Andrea, work in the business. But some ofthem may return, later.

Sons Anrea and Aristide indug=lge their passion for motorcycling by creating related business ventures. Andrea acquired Benelli ( a famous Italian motorcycle brand), while Aristide operates a website, motonline, for what his fahter describes as "motorcycle fanatics".

Daughters Antonella and Maria Paola are also running businesses in technology, sailing and entertainment.

"I strongly pushed my children to work on their own because in a managerial company quoted on the stock exchange you cannot be the boss by right, and when there is a CEO in the company who runs the business, he must have his own independence, "explains Vittorio.

But does he expect his children to return to the company? "They can only return to the position of CEO, or in my place. So they have to train, understand and be strong and proven for the business. This is the strength, but also the weakness of a family business: you aren't born a boss, you become one. My aim is to make a leader rise above the others and be spontaneously recognised by everybody.

"There is a Neapolitan proverb that says 'you shouldn't give fish to the people; you have to teach them how to fish'. That is what I am trying to do with my children. "

Caring for society
Vittorio is very proud of the fact that Merloni places great emphasis on encouraging its own people and promoting their strengths. While this is an international company, he still refers to it as 'Merloni of Fabriano', stressing that the business remains headquartered in its original home, the Marche region of Italy. The 400 staff in Fabriano represent Merloni's corporate 'soul', he says.

During the earthquake disaster which struck the Marche and Umbria regions in September 1997, Merloni lent out employees to help and also assisted in the reconstruction of local schools and historical buildings. "There are few firms that manage to conjugate a special care for society with economic success, "he asserts.

He does not pretend that, at a personal level, the family history has not witnessed many stresses and strains, especially during the period following the death of the company founder. For many years after they split, Vittorio and Antonio found themselves in direct competition. "It is important to separate family from business, "adds Vittorio. "With my brother Antonio, for example, we have had moments of great tension professionally but we have always spent Christmas together with family.

"The reality is that a businesman is always a soloist, an individual, someone who wants to excel. "

That strive for excellence has served Merloni very well during its 71 years, especially since the 1970s, when Ariston became Italy's market leader and the company first began exporting.

The company faces some exciting challenges today, including the adaptation of technology to create a new generation of products. There is also the possible return of one or more of Vittorio's children to work alongside the professional managers who run Merloni Elettrodomestici – one of Europe's best-respected businesses.