March of the skywalkers: Tom Peters On excellence

CONSIDER two news stories from 18 October 1993. The first, in the Financial Times, declared that, due to low productivity, 400,000 auto parts workers across Europe stood to lose their jobs in the next few years. The second, in USA Today, reported that the Golden State Warriors had offered to pay 20-year-old Chris Webber (who had yet to log a minute on a professional basketball court) dollars 74.4m for his services over the next 15 years.

Odd thing is, the headlines make sense. It's a new economy and many people aren't used to it. 'A helluva world,' they exclaim, 'where almost half a million real men get canned, and some kid gets rich.'

Helluva world or not, it's our world. Even the manufacturing minded Japanese concede that entertainment and tourism are key industries of the future - and company after Japanese company is throwing big yen at creativity training.

Yesterday's parasites are today's champs. Yesterday's champs are todays parasites. It's about that simple.

We've long heaped scorn on service workers. Architects? Advertising folks? Entertainers? Pro athletes? They were the periphery, living off the honest sweat of the labouring masses who tilled the soil, assembled our cars, slaved in the mills. Now it's the lumpy-object folks (steelworkers and the like) who are the bit players in the drama of the service-knowledge economy.

We fight it. Lee Iacocca labels the entire service sector a bunch of burger flippers. A German executive, who heads a well- regarded machine-tool firm, warned me (before the German economy's warts were exposed) that Americans put far too much faith in the soft stuff. I reminded him that about half his research and development people were now software programmers, up from 10 per cent just a few years ago.

Two-thirds of Madonna's revenue comes from overseas and the US service sector as a whole may soon rack up a dollars 100bn positive trade balance. (Got that, Lee?)

'As the architect of Japan's industrial future,' the Financial Times said in mid-June, 'the (Japanese) Ministry of International Trade and Industry is increasingly convinced that added value will come not from manufacturing but from intellectual activity, such as software.'

Speaking xenophobically, too bad that the MITI is on to it. The US productivity edge in software and services is obscene - and it can't last. But can you really build an economy on MTV and other soft stuff? Of course. It's the service sector that is driving the software-telecommunications-multimedia mega-industry, not vice versa. The big banks (and other financial services powerhouses like American Express) were among the first to go global; their insatiable appetite for telecom networks and information-processing power has been an enormous goad to the entire information industry.

And don't forget the flicks. Ed McCracken, chief executive of Silicon Graphics, the workstation software superstar, says the Department of Defence used to be his lead customer; now it's Hollywood.

Want to find the action in the new economy? Try the Skywalker Ranch, north of San Francisco, home to LucasFilm. Or Multimedia Gulch, a string of formerly decrepit San Francisco warehouses where slightly unhinged designers are feverishly inventing the economy of 2005. For me it all came home to roost with the news that Nintendo will soon give us (that is, our 11-year-olds) a game player for just dollars 250 with more capacity for processing information than the Pentagon had in its biggest supercomputer 15 years ago.

Bob Buckman runs a chemical company, Buckman Labs. A manufacturer? Sure, some goo eventually changes hands. But Buckman's core competence, he says, is an electronic network that allows his 1,200 people in 70 countries to bring their intellectual resources to bear, almost instantaneously, on any customer problem.

So, too, Britain's dollars 6bn Trafalgar House, the world's third- largest engineering and construction firm. Its global network, which includes customers and subcontractors, has (thanks to the timely sharing of work in process) cut construction rework costs - the bane of the industry - from 10 per cent to 1 per cent of contract value.

Likewise, a mining boom in Australia is spurred by new geophysical software that allows firms to find once-elusive ore.

Yes, some brave souls still climb the steel superstructures to put the beam in place on a Trafalgar House construction job. And skilled operators still work the supershovels that chew up the earth in Australia's ore pits. But make no mistake: they are the parasites. The centre of the economy, even in construction and mining, is the nerds in the back rooms who exercise intellectual muscle - to use yesterday's metaphor - thus igniting an unprecedented, if strange, global boom.

TPG Communications