Forget hi-tech, it's time to get crafty

PARKER KNOLL, the chair manufacturer, is dumping its computers and high-technology machine tools. Our sister paper reported at the weekend how the company is instead running its stock control on a card-based system devised in Japan in the Fifties, and going back to machine tools designed around the turn of the century.

This switch was not the result of perverse Luddite tendencies among Parker Knoll's management or workforce. Quite the reverse. Since the company began de- automating the first of its factories 18 months ago, production has risen by 20 per cent, mistakes have fallen to zero, and lead times cut from 12 weeks to a couple of days. As for the machine tools, the hi-tech ones may do the jobs faster, but they take hours to set up, whereas the old-style ones can be put to work in minutes.

This is a story that should be shouted from the rooftops, for it contains two powerful messages for all developed countries, and a third for European nations in particular. The first says there is no necessary benefit in using computers; that investment does not always bring rewards; and that much of Europe's future prosperity may not lie in high technology at all.

One of the great puzzles of the past 10 years has been the way that computerisation has failed to do much to boost productivity in the service industries. An ordinary PC costing less than pounds 1,000 gives any small business more computing power than would have been available to a multinational in the late Sixties. This ought to enable organisations to achieve enormous gains in productivity, particularly those that handle a large amount of data. So there should have been giant gains in efficiency in financial institutions and educational establishments, not to mention government.

It does not seem to have worked out that way. In the United States, where computerisation has moved fastest, there have been steady gains in manufacturing productivity throughout the Eighties and early Nineties, rising at about 3 per cent a year. But productivity in service industries - even allowing for the fact that it is notoriously difficult to measure - has been pushed to 1 per cent a year, and on some counts may have declined.

This has serious implications for living standards, because manufacturing, at about 17 per cent of GDP, is too small a sector to pull up the living standards of the whole country: the key to boosting living standards is higher service productivity.

What has gone wrong? Parker Knoll's experience may give us a vital clue. If systems have to be modified to suit computers, the net result may be less efficiency, not more. Japanese experience suggests that instead of dumping well-tried work practices, computers should be brought in piecemeal to enhance existing systems. And if, as in Parker Knoll, a card-index system works better, you stick to the cards. The important thing is to encourage a culture of efficiency, rather than rely on often inappropriate new technology. What matters is not the technology itself, but the application of it.

That leads to the second lesson: investment is no guarantee of economic success. There is a great temptation to assume that investment is somehow wonderful, and one of the failings of Europe or North America vis-a- vis East Asia is that these areas do not invest enough.

Yet if one looks back, in the Sixties the industrial country with the highest public-sector investment was Britain, while overall investment (public plus private) was relatively high, too. Much of it can now be seen to have been wasted: we built tower blocks that have had to be pulled down, aircraft projects that were cancelled, and nuclear power stations that produced more expensive power than was available from fossil fuels.

The clear current parallel is grand computerisation projects: the Stock Exchange's Taurus settlements system, now dumped; the efforts to computerise the tax and benefits system; the London ambulance service; the original computer system for London's Docklands Light Railway.

However, it is not just giant computer projects where investment is wasted. At Parker Knoll the machine tools, too, are being replaced. Any investment that is inflexible in its application, be it over-complicated machine tools or, possibly, the Channel tunnel, could be a commercial disaster. The quest for efficiency should be in small, nimble investment projects that can be adapted to suit changing demand, not grandiose ones that cannot.

The same message, by the way, applies just as powerfully to investment in people. There is no point in training people for jobs that may well not exist by the time they are ready: far better to make sure that everyone has a good general education and can therefore adapt themselves to the shifting needs of the labour market.

Some of those needs - and this is the particular message for Europe - will be in what might, for want of a better expression, be called 'craft manufacturing'. Making armchairs might not seem the pinnacle of our hi- tech future: the basic product is at least 3,000 years old and there have been few significant advances for at least 100 years. (Victorian armchairs are more comfortable than the chrome and leather- strap versions that appear in interior design magazines.) Now it seems that the best way to make these chairs is to go back to Victorian machine tools.

Manufacturing with a high craft element, however, is something European nations happen to be stunningly good at. Thus, England makes (among other things) most of the world's racing cars; Scotland the best whisky; Italy much of the world's best clothing; France a range of luxury goods, from perfume to fine wines; Germany a band of middle-technology manufactured goods; Scandinavia top-of-the-range electronic equipment; and so on.

They are all different. The only common theme is that they are built on the deep skill base of the European workforce, skills that cannot be replicated easily in North America or East Asia. So the final message of this little tale of Parker Knoll is that much of our future wealth lies not in totems such as Computers, Investment or High Technology, but in the intelligent and efficient use of traditional skills.