Four years ago I was talking to a friend who worked in Ericsson. During the 1990’s he had been very influential in helping that Swedish giant to re-calibrate its business more towards services. I was talking to him about the initiative by Philips lighting to move in a similar direction. He was surprised. “Is that still happening? Isn’t the move away from pure manufacturing old news?”
Well it isn’t. In developing economies, the service sector is of increasing importance. The Chinese government, for example, announced a little while ago that it wanted to increase the percentage of its economy which is services to 50%. It backed this with a range of policy initiatives. There seems to be a number of forces prompting this. As economies become richer people start to spend more on services (like education, health and leisure). This prompts a boom in their service sector. But there are other specific issues. In China, for example, labour costs are increasing and some manufactures are choosing cheaper labour markets. So policymakers are trying to create wealth from new markets.
It’s also still happening in the West. Business leaders and investment analysts have learnt the narrative about moving away from a pure emphasis on manufacturing. They have seen successful strategies to adopt a more service orientation in organisations like IBM and GE. So, some surprisingly well known companies are adopting a move into services in response to the terrible economic outlook. Some in the West see this as a way of stimulating growth and opening up new revenue streams.
So it is still happening. Yet, there is still a dearth of really good reference material and help on this important transition. But that’s another story.