Talking Talent

If the film The Graduate were remade today, writes Director of IBM Research Dr Paul Horn, the word of career advice whispered in Dustin Hoffman’s ear might well be ’services’ instead of ‘plastics’.

Today, we exist in an economy where the services sector is the economy.  Services – everything from fast food to brain surgery - accounts for about three-quarters of Australia’s GDP and an even larger share of employment, with around 8.8 million, or 85 per cent, of Australians working in the services sector (according to the Australian Government’s Services Report, released in June 2007).

Deloittes research tells us that our best performing manufacturers generate 50 per cent of revenue and profits from services.  IBM’s rapid revenue growth can be directly attributed to services.  And IBM is not alone - services are fastest growing part of many businesses.  Despite this, less than 20 per cent of CSIRO’s R&D is classified as ’service related’.

The drivers of growth an innovation in the services sector can be attributed to the following factors:

• Outsourcing; 
• Changes in manufacturing (whereby manufactured products are the basis of a service rather than an end); 
• Consumer demand resulting from increased discretionary spending; 
• Globalisation; 
• And through the deployment of new technology. 

At the Australian Institute of Company Directors conference in Shanghai last year Professor Michael Enright, Director of Enright, Scott and Associates broke down the costs of your average Barbie doll.  If a Barbie doll costs $10.00, he argued, then:

• Manufacture parts costs $1.00 
• Assembly costs 0.35 cents 
• Logistics costs 0.65 cents 
• Retail costs $4.00 
• Brand (such as design etc) costs $4.00

So, we can see that Australia needs to be in the design end of goods and services.