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Here's a lesson in the economics of
the last two-and-a-half centuries.

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It's one long chase.

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Someone invents
a clever way of making money.

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Others try to catch up.

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We were the first to industrialise,
but they caught us,

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so we moved on by using our brains
rather than our hands.

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Always trying to outwit
our competitors.

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It's all about
being more inventive.

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That has kept us ahead so far,
but others are still out to steal,
copy or improve on what we do.

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In this programme, we look
at where this chase has taken us.

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Not to disaster,
but to new industries
based on brainpower,

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like pharmaceuticals or technology.

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Or our film
and other creative industries.

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Creativity and innovation are the
lifeblood of the British economy.

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'I'm in China,
on my way to the enormous
international fair in Shanghai,

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'the Expo.
I want to find out how Britain
sells itself internationally.

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'It's vital we sell more to
the world to pay the bills that have
arrived since the financial crash,

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'but have we got anything
the world wants to buy?

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'In this series, we look at
the manufactured goods we sell,

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'at the services we export

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'and today
at the most nebulous sector of all -
intellectual property.

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'The Expo is a great place
to show off our wares
to 400,000 visitors a day.

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'Every nation is represented here.
Their pavilions are
their shop windows.'

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Luxembourg.

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'Some are more successful
than others.

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'160 years ago,
we started these world fairs
with our own Great Exhibition.

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'Back then, we were secure in
our role as workshop of the world,

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'but the world has been catching up
ever since.'

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Now we're reduced to just one
pavilion between the French over
there, the Italians over here.

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And we're competing for attention
with 186 others.

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'But I have to say our pavilion
stands out in this crowd.'

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Amid the bland stands
and the ones that try too hard,

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ours is a shimmering beacon
of originality.

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So striking
and yet, really, quite subtle.

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'But other countries sell themselves
in a different way - with products.

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'The French pavilion has wines
on display.

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'The Italians,
fashion and Ferraris.'

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Ours is less hard sell.
It's more high concept.

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It's a wonderful idea -
quarter of a million seeds
embedded in these acrylic needles.

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But, you know, the only thing is

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there really is nothing in here.

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'For many, our empty pavilion
symbolises our economy.

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'"It's a big void," they say.

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'"We don't make anything any more,
so we have little to sell."

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'Many feel
we're economically inadequate.'

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Looking down on this thing from up
here, you get that sense of a link
between economic activity

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and national identity.

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What do we do? What do we
specialise in in the world economy?
What's our niche?

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What are we proud to produce?

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'Well, to me, our pavilion perfectly
symbolises the best of our economy -

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'our inventiveness,
our brilliant ideas.

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'The question is,
can we sell enough of them to get us
out of our economic gloom?

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'As the original industrial nation,

54
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'Britain long ago discovered that
being clever is highly lucrative.

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'There's a rule in the modern
economy - you make the most money
by being first,

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'by doing what others can't do.
We've made ourselves rich that way.

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'A good example - the British
company that transformed the world's
skylines and made billions

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'in the process.'

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It's about 200 metres,
240 metres or so
to the top of the building.

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Wonderful view. Wonderful view.

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'The company that made the windows
for this skyscraper tells you
why innovation is such a big earner.

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'One discovery
goes a very long way. It can be
replicated again and again.'

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Now this building
has 3,960 panes of glass

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and they weigh
350,000 kilograms.

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'The glass was made by
the St Helens firm Pilkington's.'

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Not only was this glass
made in this country,

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but the process,
a wonderfully innovative process
which allowed this glass to be made,

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was developed in this country, too.

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'It changed everything.
Virtually all skyscrapers
are made using it.

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'It's called the float glass process
and Pilkington's invented it
in 1952.

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'It was theirs and theirs alone
and it took them from just being
one of the pack

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'to being well out in front.'

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St Helens is the greatest centre
of glassmaking in the world.

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So let's begin
with this kind of glass

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and tell the romantic story
of one of the greatest
industrial inventions of the age,

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the float glass process.

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'Before float, glass panes
were made by pouring molten glass
onto a plate.

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'But there was a problem. The glass
produced was rough and uneven.

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'It had to be ground and polished
by giant industrial machines.

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'And this process
was hugely expensive.

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'After the Second World War,
the demand for housing and cars
created a massive need for glass.

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'It was a race for manufacturers
worldwide to develop
a cheaper production process.

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'In 1947, Pilkington's found
the first essential ingredient in
the creation of a great innovation -

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'a genius.
Engineer Alastair Pilkington.

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'Oddly, he wasn't a close relative,
but had the same surname.

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'He experimented with the idea of
producing perfectly flat clear glass

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'by floating it on molten tin.

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'No one had made it work before.
Early results suggested
the method had promise,

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'but converting this into
an effective industrial process
was an immense challenge.

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'You can see the scale
of his ambition by walking down
the float line today.'

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This bit is the...
The Pilkington bit, the clever bit.

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That's the float glass.
If you want to have a look through,
you'll see the ribbon coming through.

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Oh, yes. Absolutely clear.
So the stuff rippling on the top
is glass? It's glass, yeah.

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'Then came the second ingredient
for innovation - money.

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'In 1955, after only three years'
development, Pilkington's invested
in a full-scale production line.

96
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'It was a massive financial risk,
soaking up all the company's
profits, month after month.'

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You need to stand back.
That flame's going to come out.

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There you go. Right.
Is there a good end to put first?
Just stand to one side...

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'A year after they started
their test line running,

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'they still weren't producing
saleable glass from molten tin,
and it was costing a fortune.'

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OK. There you go, it's gone.
'It was the third ingredient
that created perfect glass.'

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Wonderful. 'Luck.'

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A certain critical part of the plant
broke and this changed its shape

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and by this means we suddenly,
to our surprise,

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found ourselves making
our first saleable glass.

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The whole section of the line
of grinding and polishing could go.

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You can see the glass here
just comes out absolutely flat
and smooth.

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'After seven years' toil

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'and £7 million -
equivalent to £130 million today -

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'Alastair Pilkington achieved
his goal, beating all competitors
to making better, cheaper glass.'

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So did that initial £7 million
investment, which seemed like
a lot of money in 1950s prices,

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did it pay off?
Well, of course it did!

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Because this was a) so valuable
and b) no one else could do it,

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Pilkington didn't just have
an innovation that created
float glass.

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They had an innovation
that generated enormous returns.

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Innovation pays.

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'For its innovation, Pilkington made
billions as other companies paid
to use the technology.

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'Today the company's part
of a Japanese-owned glass giant,

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'but it continues to make glass
here, to do research here, and
it generates plenty of earnings.'

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And you can jump on it?
Yeah. No problem.

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Oh, yeah.

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Seems to be safe.

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'The huge rewards it earned
through the decades derived
from coming first.

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'We'd all like that kind of success,
so where should we look for it?

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'Well, to understand this, think
of the entire production process

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'and the different stages in it.
Call it the value chain.'

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When it comes to earning a good
living for ourselves, we have to
produce things people will pay for.

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A lot of us assume that means
manufacturing, but that's naive.

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There are three major steps of value
creation in the production process.

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And the first is about
the magic of creativity.

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Yes, the first is coming up
with a new product or process,
like Pilkington,

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built on the research
of scientists and engineers.

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Only then comes part two -
the manufacturing,

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the machine in the middle
that churns out the product. This is
the tangible bit of the process.

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Now this does add value, of course,
but less than you'd think, as
so many nations can do this well.

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Then there's the third step,

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the marketing, advertising
and branding. Teams of people

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with innovative ideas
to make products appealing.

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Now in the modern value chain
it makes sense for us
to innovate in the first stage,

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coming up with the idea,
and the third, selling it.

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That's where the biggest bucks
can be made.

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I know it's not a very British
example, but one study broke down
the cost of a 300 iPod.

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Now most of the price goes
to the retailer and to the people
who supply all the components,

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but on the back it says, "Designed
by Apple. Assembled in China."

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For the design, Apple get about 80.
For the assembly,
China gets less than 5.

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That is the value
of creativity and branding.

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'I've said the global economy
is like a chase.

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'The more advanced economies,
like ours, run ahead

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'with the skills to get to
where the most money is and where
the others find it hard to follow -

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'to the end of the value chain.'

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Of course, we do have
a lot of problems at the moment,

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but the economy was right to
concentrate on the most valuable
parts of the value chain.

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More science at one end,
more marketing at the other.

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The science is built on
research and development, or R&D.

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Many companies have made the journey
away from simple manufacturing
towards more research-based output.

156
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'The history of Britain's
biggest spender on R&D,
GlaxoSmithKline,

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'illustrates the transformation.

158
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'In the 1930s, Glaxo made
dried baby milk under the slogan,
"Glaxo builds bonny babies".

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'But then came the Second World War.

160
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'The discovery of penicillin
offered a potential lifeline
to wounded soldiers,

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'but the problem was
scientists only knew
how to make it in tiny quantities.

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'Drug companies, including Glaxo,
were asked to find a way

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'to manufacture penicillin in bulk.

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'Its scientists worked day and night
on the task. It was only
towards the end of the war

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'they accumulated
a significant stockpile.'

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On D-Day, the 6th of June, 1944,

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156,000 people landed

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on these very beaches of Normandy.

169
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'On that day itself,
6,000 were killed,

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'but 18,000 were wounded.

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'Penicillin made an enormous
difference. Instead of saving
five out of every ten wounded,

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'medics were saving
eight out of ten.

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'Bolstered by refocusing
its efforts on R&D,

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'Glaxo emerged from the war
a very different company.

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'It had made a fundamental shift
from the relatively easy task
of manufacturing powdered milk

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'to the tougher job
of developing drugs.

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00:17:27,280 --> 00:17:33,320
'And when the NHS was founded
in 1948, Glaxo was ideally placed
to be a preferred supplier.

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'It never looked back.'

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The development of Glaxo
mirrors that of our economy overall

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00:17:42,680 --> 00:17:48,320
from manufacturing things
to manufacturing innovations
and ideas.

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00:17:48,320 --> 00:17:52,800
It illustrates how we've moved up
the value chain.

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00:17:52,800 --> 00:17:55,840
'This is a perfectly natural
evolution.

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00:17:55,840 --> 00:18:01,880
'As economies become more advanced,
they have the resources to spend
on research and education.

184
00:18:01,880 --> 00:18:07,000
'As they spend more on education and
research, they become more advanced.

185
00:18:07,000 --> 00:18:09,640
'That's what progress consists of.

186
00:18:12,280 --> 00:18:19,720
'And progress is exactly what we've
enjoyed in Britain and we need
more of it if we're to pay our way.

187
00:18:19,720 --> 00:18:23,760
'Our economy has moved
into science-based industries.

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00:18:23,760 --> 00:18:30,080
'Pharmaceuticals is
one of our most important.
Its exports are worth £18 billion.

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00:18:30,080 --> 00:18:35,920
'Glaxo, now called GSK,
is the world's fourth-largest
pharmaceutical company.

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00:18:35,920 --> 00:18:40,160
'None of that would be possible
without R&D.

191
00:18:40,160 --> 00:18:43,280
'I want to see what that looks like.

192
00:18:43,280 --> 00:18:49,320
'This operation in Hertfordshire
is where many of GSK's innovations
originate.'

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00:18:50,720 --> 00:18:57,560
This is really a double facility -
a factory and an R&D centre -
with 1,000 people in each.

194
00:19:00,720 --> 00:19:05,320
'It isn't easy to invent
or discover things,

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00:19:05,320 --> 00:19:09,080
'otherwise everyone would do it.
And it's a risk.

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00:19:09,080 --> 00:19:12,920
'Andrew Witty
is the Chief Executive of GSK.'

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00:19:12,920 --> 00:19:17,760
So we have to dress up? We do.
There's a very strict protocol.

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00:19:17,760 --> 00:19:21,800
These are disposable lab coats,
are they?

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00:19:21,800 --> 00:19:25,520
They'll be recyclable.
Here we go.

200
00:19:25,520 --> 00:19:30,720
We need a pair of goggles. Get
the goggles on. And we're good. OK.

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00:19:32,400 --> 00:19:35,560
So the cost of a new drug.

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00:19:35,560 --> 00:19:41,680
What does a drug cost, then?
If you look for the industry and
take the total amount spent on R&D

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00:19:41,680 --> 00:19:45,720
divided by the number of successful
drugs actually introduced,

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00:19:45,720 --> 00:19:48,960
it runs at about £550 million each.

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00:19:48,960 --> 00:19:55,600
£550 million. It takes into account
the cost of all the failures.
It's the only practical way.

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00:19:55,600 --> 00:20:00,240
For GSK and our competitors, we're
all trying to beat that average.

207
00:20:02,440 --> 00:20:06,040
'How do you improve the odds?
GSK has discovered

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00:20:06,040 --> 00:20:10,680
'it works to get the right cluster
of talent together in one place.'

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00:20:11,640 --> 00:20:16,200
As science has evolved,
it's much more multi-disciplinary.

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00:20:16,200 --> 00:20:22,240
The discoveries all occur
on the interface of disciplines.
Quite often you'll find an IT expert,

211
00:20:22,240 --> 00:20:27,080
an informatics expert or a molecular
designer who uses computers

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00:20:27,080 --> 00:20:31,560
with somebody who does everything in
a test tube. It makes things happen.

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00:20:31,560 --> 00:20:35,400
'Even with such a cluster of brains,
it's not easy.

214
00:20:35,400 --> 00:20:39,880
'It's back to that constant chase.
You research to stay a step ahead

215
00:20:39,880 --> 00:20:43,720
'and then you watch others
catch up.'

216
00:20:43,720 --> 00:20:48,360
If you succeed, you can make a very
good return with a patent life.

217
00:20:48,360 --> 00:20:54,440
When your patent goes,
you will essentially make no money
from that business going forwards.

218
00:20:54,440 --> 00:21:00,480
That is what drives this industry.
Many companies have not been able to
reinvent themselves in that 10 years

219
00:21:00,480 --> 00:21:02,720
when you earn the reward.

220
00:21:05,000 --> 00:21:09,840
One of the worst things about my job,
a slightly adrenaline-driven moment,

221
00:21:09,840 --> 00:21:14,280
is you get data at the end
of a 15-year research programme

222
00:21:14,280 --> 00:21:20,120
and there's a moment when somebody
opens the envelope and it either says
success or failure.

223
00:21:20,120 --> 00:21:25,680
And the reality is that's what
makes this such a high-risk
and expensive business.

224
00:21:26,680 --> 00:21:32,480
'There's a vast amount of money
coming into the UK economy
from companies like GSK

225
00:21:32,480 --> 00:21:36,320
'who specialise
in research and innovation.

226
00:21:36,320 --> 00:21:40,120
'But like Pilkington's,
GSK innovates

227
00:21:40,120 --> 00:21:42,560
'and also manufactures.

228
00:21:43,480 --> 00:21:49,320
'This room churns out billions
of doses of respiratory treatment
each year.'

229
00:21:55,200 --> 00:21:57,560
Essentially, this is the line.

230
00:21:59,000 --> 00:22:06,640
This room here produces 50 million
packs of Seretide Advair a year
for distribution around the world.

231
00:22:06,640 --> 00:22:11,880
Overall, the company last year
sold £5 billion of Seretide Advair.

232
00:22:19,080 --> 00:22:25,120
'The manufacturing is clever,
but the real value has been added
by the investment in knowledge.

233
00:22:25,120 --> 00:22:32,360
'And that knowledge is not just to
do with the ingredients of a drug,
but also ways of making it.'

234
00:22:36,480 --> 00:22:41,520
20 years ago, this machine would have
consumed the entire building space.

235
00:22:41,520 --> 00:22:48,000
It would have had 20 or 30 people
working on it and you've never have
the volume capacity you have today.

236
00:22:48,000 --> 00:22:53,200
You can see here - one person
keeping an eye on this facility.

237
00:22:53,200 --> 00:22:59,040
60,000-70,000 packs already coming
off it. We'll get it up
to a peak of about 108,000

238
00:22:59,040 --> 00:23:01,400
when it's running full blast.

239
00:23:06,680 --> 00:23:11,160
'Advair Seretide is exported
around the world

240
00:23:11,160 --> 00:23:16,280
'and even though GSK also has
manufacturing plants outside the UK,

241
00:23:16,280 --> 00:23:20,600
'we still earn money from them
because the drug was invented here.'

242
00:23:20,600 --> 00:23:27,040
The lesson from GSK and Pilkington
is that although they both
manufacture, it's the brainwork

243
00:23:27,040 --> 00:23:30,680
and innovation that adds most value
to what they do.

244
00:23:30,680 --> 00:23:36,720
What's the logical conclusion of
that? Companies that don't actually
make anything physical at all.

245
00:23:36,720 --> 00:23:40,760
Nothing? How far can we push
that business model?

246
00:23:40,760 --> 00:23:47,440
Can we really pay our way
in the world by becoming a nation
of boffins and geeks?

247
00:23:52,200 --> 00:23:58,120
'Well, come to Cambridge,
to the area outside the city
known as Silicon Fen.

248
00:24:00,600 --> 00:24:05,240
'1,400 hi-tech companies have
sprung up in these business parks

249
00:24:05,240 --> 00:24:07,880
'employing over 40,000 people.

250
00:24:10,560 --> 00:24:17,000
'It's an interesting feature
that these businesses like to be
near each other, to be plugged in.

251
00:24:17,000 --> 00:24:21,440
'They tend to cluster, just like
the scientists in Glaxo labs.

252
00:24:21,440 --> 00:24:26,480
'One of the companies here
has become the runaway success
of the last decade

253
00:24:26,480 --> 00:24:33,080
'and what they do can be found
inside virtually all the digital
devices we take for granted.'

254
00:24:38,280 --> 00:24:40,760
In here, mobile phone.

255
00:24:41,720 --> 00:24:43,760
And there...

256
00:24:46,400 --> 00:24:48,640
Somewhere here

257
00:24:49,600 --> 00:24:52,440
is a little piece of Britain.

258
00:24:53,400 --> 00:24:59,840
There we go.
There it is. Just under NEC.
You can see it says ARM.

259
00:24:59,840 --> 00:25:04,480
It's a very successful company,
one of our best, actually,

260
00:25:04,480 --> 00:25:08,920
and remarkably few people
have actually heard of it.

261
00:25:13,400 --> 00:25:16,400
'Unlike Pilkington or GSK,

262
00:25:16,400 --> 00:25:20,920
'ARM Holdings focuses entirely
on stage one of the value chain.

263
00:25:20,920 --> 00:25:25,160
'They don't make processors.
They design them.

264
00:25:25,160 --> 00:25:30,280
'It's pure innovation
and it's valued at over £7 billion.

265
00:25:30,280 --> 00:25:32,800
'Tudor Brown is its President.'

266
00:25:34,600 --> 00:25:37,240
Hi! Tudor! Hello, Evan Davis.

267
00:25:37,240 --> 00:25:43,080
Good to meet you.
I've heard a lot about you.
Ha! I've heard a lot about you.

268
00:25:43,080 --> 00:25:47,520
So come on through. Let me
show you some other technology here.

269
00:25:49,400 --> 00:25:55,240
You wouldn't sort of know
that this is one of Britain's
most successful companies.

270
00:25:55,240 --> 00:25:59,280
I don't know. How do you...?
It looks quite plain.

271
00:25:59,280 --> 00:26:02,720
Well,
there's no great buzzing machines.

272
00:26:02,720 --> 00:26:08,720
This is thinking and whatever.
I like the artwork.
Those are just a couple of plots.

273
00:26:08,720 --> 00:26:14,520
Let's take you into an office.
It's quite warm in here.
Some of them like it warm.

274
00:26:14,520 --> 00:26:20,200
The brain operates better
at this temperature.
Some people wear hats, even!

275
00:26:20,200 --> 00:26:27,600
'It may appear rather dull, but
the designs generated in this room
shape the future of computing.'

276
00:26:27,600 --> 00:26:33,440
Some of the guys
are hopefully doing some work.
'ARM started in the early '80s,

277
00:26:33,440 --> 00:26:37,280
'designing small, but powerful chips
for British home computers.'

278
00:26:37,280 --> 00:26:41,720
And actually this chip here...
No touch screen. No, no, no.

279
00:26:41,720 --> 00:26:48,960
This is the first ARM processor.
'The chips had potential
for small portable products

280
00:26:48,960 --> 00:26:53,120
'and drew the attention
of a US computer company.'

281
00:26:53,120 --> 00:26:58,960
Along came Apple, actually, in 1990
wanting to create the Newton,
the world's first PDA.

282
00:26:58,960 --> 00:27:04,000
Here we've got a Newton. This is
why ARM the company was created.

283
00:27:04,000 --> 00:27:09,840
And now, you know, you could look
at that and think that's the iPhone.
It's a bit bigger.

284
00:27:09,840 --> 00:27:16,280
Hello. It was a bit too slow
and a bit too heavy, but that was
the vision behind this product.

285
00:27:16,280 --> 00:27:20,800
Then, in the mid-'90s,
the mobile phone revolution started.

286
00:27:20,800 --> 00:27:25,200
And Nokia was the first company
to adopt our technology.

287
00:27:25,200 --> 00:27:28,000
And ARM power is in...

288
00:27:28,000 --> 00:27:31,680
ARM is in pretty much
every mobile phone, yeah.

289
00:27:31,680 --> 00:27:37,120
And as the phones become more
sophisticated, they have more chips.
Yeah, absolutely.

290
00:27:37,120 --> 00:27:43,160
Something like the iPhone or these
smart phones have an awful lot
of ARM technology in them.

291
00:27:43,160 --> 00:27:49,600
You've got chips in an iPhone.
Without giving away your commercial
secrets, what are Apple paying you?

292
00:27:49,600 --> 00:27:52,200
Remember, we don't make the chips.

293
00:27:52,200 --> 00:27:57,840
We license our designs
to semi-conductor companies.
For that we get a licence fee.

294
00:27:57,840 --> 00:28:03,440
When they make the chips
and sell them to Apple or whoever,
they pay us a royalty.

295
00:28:03,440 --> 00:28:10,640
We get a few cents off each chip.
It's not huge... No, but... In
the last year, 6 billion ARM chips.

296
00:28:10,640 --> 00:28:15,840
You add all that up, it means
the company is doing very well.

297
00:28:15,840 --> 00:28:23,600
You don't at any point feel, "It's
sad that we don't make the chip.
Maybe we should." Not at all.

298
00:28:23,600 --> 00:28:30,040
We don't want to manufacture.
You have to build a factory
that costs you 5 billion to start.

299
00:28:30,040 --> 00:28:36,080
It's a hugely expensive game.
We have no expertise in that.
Other companies are much better.

300
00:28:36,080 --> 00:28:40,920
We're damn good at what we do and
that's what we want to keep doing.

301
00:28:40,920 --> 00:28:46,960
'It's right, of course, to
concentrate on the high-value work
and it's a huge contributor

302
00:28:46,960 --> 00:28:52,560
'to the UK economy,
but it does signal a problem with
the intellectual property industry.

303
00:28:52,560 --> 00:28:58,520
'Only the very cleverest
can earn a living in it. We're not
all as brainy as these guys.'

304
00:28:58,520 --> 00:29:03,360
Come in here on the left and we'll
see an office with real hardware.

305
00:29:03,360 --> 00:29:07,600
'It raises the issue of how the rest
of us contribute to the economy,

306
00:29:07,600 --> 00:29:11,560
'how big we need our unintellectual
property industries to be.'

307
00:29:11,560 --> 00:29:14,400
Ah, the playroom, the playroom.

308
00:29:14,400 --> 00:29:20,240
Yes, it's playing in a way, but
there are some semi-serious outcomes
from the sort of thing we do.

309
00:29:21,720 --> 00:29:24,640
So this is some Lego

310
00:29:24,640 --> 00:29:29,960
that one of our guys here
has created and built.
It's a Rubik's Cube solver.

311
00:29:29,960 --> 00:29:33,440
To begin with,
the phone is using its camera.

312
00:29:33,440 --> 00:29:39,800
It's pointing downwards to take
an image of each of the faces of the
cube and it works out the solution.

313
00:29:39,800 --> 00:29:44,640
Would you like to race it, Evan?
Here's a cube that I scrambled
just now.

314
00:29:44,640 --> 00:29:48,280
I have a feeling your system
will be better than mine.

315
00:29:48,280 --> 00:29:50,600
On your marks, get set, go.

316
00:29:50,600 --> 00:29:52,360
Well...

317
00:29:52,360 --> 00:29:55,080
I think it's going to win.

318
00:29:55,080 --> 00:30:00,320
The key is to think of them
as cubes, rather than as surfaces,
I think, isn't it?

319
00:30:06,360 --> 00:30:08,960
OK, he's won.

320
00:30:14,880 --> 00:30:16,920
Very nice. Very nice.

321
00:30:16,920 --> 00:30:22,960
So, hopefully, you'll remember
how to fly this. I'll pop it
down about here. Here we go.

322
00:30:22,960 --> 00:30:28,440
So we've got these ARM chips
in so many different objects,
you wouldn't...

323
00:30:28,440 --> 00:30:35,480
'ARM has evolved from being at the
centre of one of the most rapidly
growing industries - mobile phones

324
00:30:35,480 --> 00:30:39,680
'to being partners
of the computing world's giants.'

325
00:30:39,680 --> 00:30:41,800
Up... Ah, there we go.

326
00:30:41,800 --> 00:30:45,560
'Warren East is the chief executive
of ARM Holdings.'

327
00:30:45,560 --> 00:30:49,400
You are friends of, partners to
all the big ones -

328
00:30:49,400 --> 00:30:52,240
Google, Apple, Microsoft,

329
00:30:52,240 --> 00:30:57,400
the three behemoths of American
software, hardware culture.

330
00:30:57,400 --> 00:31:02,920
You're there with all of them.
That's absolutely the philosophy
of our business model.

331
00:31:02,920 --> 00:31:05,360
We enable and we don't pick winners.

332
00:31:05,360 --> 00:31:09,960
We believe sharing a slice
of a very big pie

333
00:31:09,960 --> 00:31:13,800
is a lot better than having
the whole of a much smaller pie.

334
00:31:13,800 --> 00:31:16,720
Come on, come back, come back.

335
00:31:16,720 --> 00:31:23,560
'ARM's strength has been built
around having a highly skilled
and highly educated workforce.

336
00:31:23,560 --> 00:31:27,200
'It's no coincidence
that it's found in Cambridge.

337
00:31:31,320 --> 00:31:37,240
'These old colleges are the key
to Britain's modern success
in research and science.

338
00:31:37,240 --> 00:31:42,280
'Universities help companies
innovate and the economy reaps
the reward.

339
00:31:42,280 --> 00:31:48,480
'That clustering effect, it works
in our favour in that great chase
that is the global economy.

340
00:31:48,480 --> 00:31:52,920
'Top talent likes to move
to where other top talent is,

341
00:31:52,920 --> 00:31:56,960
'so the more success you have,
the more success you get.'

342
00:31:58,760 --> 00:32:04,000
Now, the great hope
for the British economy
is that we remain front-runners

343
00:32:04,000 --> 00:32:07,840
at this whole business
of creating intellectual property.

344
00:32:07,840 --> 00:32:13,400
That hope rests on the fact that it
is quite hard for other countries
to catch up with us,

345
00:32:13,400 --> 00:32:19,440
so a country like China can come
to the west and buy a factory,
remove it lock, stock and barrel,

346
00:32:19,440 --> 00:32:23,920
take it back home and replicate
exactly what we're doing,

347
00:32:23,920 --> 00:32:26,400
but could it come and buy this?

348
00:32:26,400 --> 00:32:31,960
What is it?
It's an academic business network.
It's hard to get your hands on it.

349
00:32:36,360 --> 00:32:40,640
Clustering is great for the UK
and it's great for Cambridge.

350
00:32:40,640 --> 00:32:45,200
But there is a problem. Clusters
suck in resources from elsewhere,

351
00:32:45,200 --> 00:32:51,720
so while Cambridge is packed
with top-class firms, it's left
other parts of the UK behind.

352
00:32:51,720 --> 00:32:55,160
The economy clearly needs jobs
elsewhere -

353
00:32:55,160 --> 00:32:59,280
good industries in every corner
of the land, to use all of us,

354
00:32:59,280 --> 00:33:01,680
all the resources at hand.

355
00:33:04,720 --> 00:33:10,560
Well, we've seen how our economy
has evolved towards the science end
of the value chain.

356
00:33:10,560 --> 00:33:14,920
Now we have to see how and why we've
made another move over the decades

357
00:33:14,920 --> 00:33:17,400
to the other end of the value chain

358
00:33:17,400 --> 00:33:21,920
where marketing, advertising
and branding put the creative icing

359
00:33:21,920 --> 00:33:23,960
on the manufactured cake.

360
00:33:47,840 --> 00:33:52,560
When people enjoy a good education,
they become more affluent.

361
00:33:52,560 --> 00:33:55,200
Their whole way of consuming
changes.

362
00:33:55,200 --> 00:33:59,440
They have more time. They can
afford more than basic subsistence.

363
00:33:59,440 --> 00:34:04,760
They begin to think
about self-expression
and what they say about themselves.

364
00:34:04,760 --> 00:34:11,080
Fairtrade chocolate - it tells me
that I care about other people
or that I can afford to care.

365
00:34:11,080 --> 00:34:15,840
The Italian and the Brazilian menu
choices tell me how worldly I am.

366
00:34:15,840 --> 00:34:18,760
The newspapers remind me
how clever I am.

367
00:34:18,760 --> 00:34:24,920
Then we have the dazzling array
of different coffee choices
which says so much about oneself.

368
00:34:24,920 --> 00:34:28,720
I'll have a mocha
with white chocolate, please.

369
00:34:35,560 --> 00:34:41,120
It's a funny thing, but the more
affluent and the more educated
consumers are,

370
00:34:41,120 --> 00:34:43,760
the more frivolous
they tend to look.

371
00:34:43,760 --> 00:34:49,800
They seem to be more worried
about the froth on the cappuccino
than the coffee itself, and why not?

372
00:34:49,800 --> 00:34:53,840
If you've got enough coffee, maybe
it's a bit of froth that you want.

373
00:34:53,840 --> 00:34:57,680
But there's a really interesting
feature of modern economies.

374
00:34:57,680 --> 00:35:01,040
They tend to respond
to those kinds of consumers.

375
00:35:01,040 --> 00:35:06,560
They adapt and produce things
to serve the more trivial needs
that rich consumers have.

376
00:35:06,560 --> 00:35:12,600
Douglas Adams puts it rather well
in The Hitchhiker's Guide To The
Galaxy. I'll paraphrase his line.

377
00:35:12,600 --> 00:35:18,880
"There are three phrases of human
development - will I eat, what will
I eat and where shall we do lunch?"

378
00:35:18,880 --> 00:35:21,600
Well, Britain is in phase three.

379
00:35:39,200 --> 00:35:42,840
Visit a supermarket in Britain
or any advanced economy

380
00:35:42,840 --> 00:35:47,360
to see how much effort in
rich countries goes into marketing,

381
00:35:47,360 --> 00:35:50,400
packaging
and all the fripperies attached.

382
00:35:50,400 --> 00:35:54,240
They may be frivolous,
but they're valuable activities,

383
00:35:54,240 --> 00:35:58,280
elevating bog-standard commodities
into something special.

384
00:36:00,080 --> 00:36:04,720
Right, let me walk down the biscuit
mile. There are so many biscuits.

385
00:36:04,720 --> 00:36:07,960
Chocolate Orange Viennese Biscuits,

386
00:36:07,960 --> 00:36:12,280
Plain Chocolate Butter Biscuits,
Oreos, of course, Digestives.

387
00:36:12,280 --> 00:36:15,320
How much shortbread
does a society need?

388
00:36:15,320 --> 00:36:21,360
Choc Chip Shortbread Rings. Why have
a hole in a piece of shortbread?
What difference does that make?

389
00:36:21,360 --> 00:36:24,400
It makes it more pleasurable to eat,
doesn't it?

390
00:36:24,400 --> 00:36:29,800
It costs the manufacturers a lot,
offering this proliferation
of biscuit choices.

391
00:36:29,800 --> 00:36:35,040
But it makes money
because enough consumers shun
the cheaper, boring options.

392
00:36:35,040 --> 00:36:38,240
Because so many of our basic needs
are fulfilled,

393
00:36:38,240 --> 00:36:42,640
we tend to worry less about quantity
and functionality these days

394
00:36:42,640 --> 00:36:46,240
and more about the aesthetics
of the products we buy,

395
00:36:46,240 --> 00:36:49,080
the packaging,
the meaning they give us.

396
00:36:50,080 --> 00:36:55,440
Adding value
through marketing innovation
is one of Britain's strengths.

397
00:36:55,440 --> 00:36:59,720
Just as much as the work of a Glaxo
lab or a Cambridge business park,

398
00:36:59,720 --> 00:37:03,920
this is the natural direction
for our economy to have taken.

399
00:37:04,920 --> 00:37:10,840
Every single item is designed to
appeal to somebody, to add a little
bit of colour to their life,

400
00:37:10,840 --> 00:37:13,640
to give them
a little bit of identity.

401
00:37:13,640 --> 00:37:15,840
My favourite is down here.

402
00:37:15,840 --> 00:37:18,360
Here we go - Skinny Water

403
00:37:18,360 --> 00:37:24,320
with the bottle in a nice,
skinny shape as well for people
who are concerned about their shape.

404
00:37:24,320 --> 00:37:30,160
As the world becomes more affluent,
so consumers want
more sophisticated products.

405
00:37:30,160 --> 00:37:33,680
We shouldn't regret being
big players in the industries

406
00:37:33,680 --> 00:37:37,720
like design, marketing and
advertising that serve these tastes.

407
00:37:37,720 --> 00:37:41,560
Exporting these skills helps us pay
our way in the world.

408
00:37:49,280 --> 00:37:55,040
Britain's strength in this area goes
right back to the 19th century.

409
00:37:55,040 --> 00:37:59,040
Sunlight Soap was one
of the country's great exports,

410
00:37:59,040 --> 00:38:02,520
working its way
into the far corners of the world.

411
00:38:02,520 --> 00:38:08,040
# As long as my sweetie is
by my side, doing the dishes with me
Now there's no moonlight... #

412
00:38:08,040 --> 00:38:14,080
It transformed humble Wirral grocers
William and James Lever
into multi-millionaires.

413
00:38:15,560 --> 00:38:21,520
Back in 1884, instead of cutting
slices of soap from blocks,

414
00:38:21,520 --> 00:38:25,280
they pre-wrapped it
and branded it Sunlight Soap.

415
00:38:25,280 --> 00:38:30,000
It was their guarantee that each bar
was of the same standard as the last

416
00:38:30,000 --> 00:38:32,960
and this idea was
a roaring success.

417
00:38:34,160 --> 00:38:38,560
In 1886, they were producing
1,000 tons of soap a year.

418
00:38:39,560 --> 00:38:44,000
Ten years later,
it had risen to 40,000.

419
00:38:45,000 --> 00:38:48,880
By the 1930s, it was
the largest company in Britain.

420
00:38:51,400 --> 00:38:55,880
And today,
as the global corporation Unilever,

421
00:38:55,880 --> 00:38:59,520
it continues to produce
some of our biggest brands.

422
00:39:06,000 --> 00:39:09,760
A lot of people are apt to think
it's all fluff.

423
00:39:09,760 --> 00:39:14,800
How can a nation earn a living
or pay for its imports
through marketing?

424
00:39:14,800 --> 00:39:20,360
It may not make a living
for everybody, but it can
certainly make a lot of money.

425
00:39:20,360 --> 00:39:23,920
There's a revealing tale
of the takeover of a company

426
00:39:23,920 --> 00:39:27,440
that's been one
of Britain's best brand inventors,

427
00:39:27,440 --> 00:39:33,640
the company behind one of our
greatest contributions to the world
of confectionery - the Kit Kat.

428
00:39:33,640 --> 00:39:36,440
That company was Rowntree.

429
00:39:36,440 --> 00:39:41,040
In 1988, it was fought over
by two Swiss food giants -

430
00:39:41,040 --> 00:39:45,080
Nestle and Suchard
who wanted to buy it.

431
00:39:45,080 --> 00:39:49,320
After a long boardroom battle,
a selling price was finally agreed

432
00:39:49,320 --> 00:39:52,560
that had the value of the brands
at its heart.

433
00:39:55,520 --> 00:40:01,360
Rowntree, the British firm
who make Kit Kat and Smarties,
are to be bought by Nestle,

434
00:40:01,360 --> 00:40:04,200
the Swiss food giant
who make Milkybars.

435
00:40:04,200 --> 00:40:09,040
The successful bid topped all
earlier offers at over £2.5 billion.

436
00:40:09,040 --> 00:40:11,240
Morning. Morning.

437
00:40:16,320 --> 00:40:22,160
Rowntree's factories and machinery
and so on were valued
at half a billion pounds.

438
00:40:22,160 --> 00:40:27,680
The value added by the brands
accounted for much
of the additional two billion.

439
00:40:27,680 --> 00:40:31,520
If you look at the manufacturing base
or buildings alone,

440
00:40:31,520 --> 00:40:34,560
that doesn't explain at all
the final price.

441
00:40:34,560 --> 00:40:38,520
It's all to do with Nestle looking
at those brands and thinking,

442
00:40:38,520 --> 00:40:42,760
with these properties, we can build
a big, successful, global franchise.

443
00:40:44,280 --> 00:40:47,880
Nestle paid handsomely
for the brands.

444
00:40:47,880 --> 00:40:53,800
Britain pocketed the money
and Nestle's investment in them
has taken that old British Kit Kat

445
00:40:53,800 --> 00:40:58,960
into global markets that previously
it couldn't afford to reach.

446
00:41:01,080 --> 00:41:05,920
Today, the seemingly innocuous snack
bar has become a global super brand.

447
00:41:07,120 --> 00:41:14,000
Dubai Airport has the privilege
of being the single largest place
where Kit Kats are sold in the world.

448
00:41:14,000 --> 00:41:18,040
Over a tonne of Kit Kats are sold
in Dubai Airport every single day.

449
00:41:21,360 --> 00:41:28,480
'17 billion Kit Kat fingers are sold
every year in 70 countries. That's
more than any other confectionery.

450
00:41:28,480 --> 00:41:33,320
'Even under Swiss control, Britain
continues to earn money from it.

451
00:41:33,320 --> 00:41:39,360
'Nestle invested in an R&D lab
in York and the city still makes
a billion Kit Kat bars a year,

452
00:41:39,360 --> 00:41:45,200
'a formidable demonstration
of the value of a brand
and its potential for export too.

453
00:41:49,680 --> 00:41:53,840
'So we've seen why there's
an impeccable economic logic

454
00:41:53,840 --> 00:41:59,040
'in Britain specialising in the
high value ends of the value chain,

455
00:41:59,040 --> 00:42:01,440
'the science bit and marketing.

456
00:42:01,440 --> 00:42:04,600
'It made us rich,
but here's the bad news.

457
00:42:04,600 --> 00:42:07,160
'It hasn't made us rich enough.

458
00:42:07,160 --> 00:42:13,000
'There's a gap between
what we've been buying from abroad
and what we've been able to sell

459
00:42:13,000 --> 00:42:15,440
'and now we have bills to be paid.'

460
00:42:15,440 --> 00:42:20,200
Hello, could you take me to China,
please? That would be terrific.

461
00:42:23,280 --> 00:42:29,320
'Now I want to see how much further
our brainpower and creativity
can go to help close the gap.

462
00:42:29,320 --> 00:42:35,560
'With many millions of new, affluent
middle class, China is the place
our brands should be heading.

463
00:42:56,800 --> 00:43:00,720
'Despite appearances,
this isn't Reading or Basingstoke

464
00:43:00,720 --> 00:43:03,880
'or any other British town.

465
00:43:03,880 --> 00:43:09,040
'This is Thames Town
on the outskirts of Shanghai.

466
00:43:16,600 --> 00:43:20,640
'It was a commercial venture
built by Chinese speculators

467
00:43:20,640 --> 00:43:26,080
'who used British architects Atkins
to create
a traditional British town.

468
00:43:26,080 --> 00:43:32,040
'But when the rail link to it
was cancelled,
it became more of a ghost town.'

469
00:43:32,040 --> 00:43:37,600
I'm sure the developers here
really had intended
it would be a thriving community -

470
00:43:37,600 --> 00:43:41,240
retail, accommodation,
apartments, houses.

471
00:43:42,240 --> 00:43:48,720
They must be slightly disappointed
that really it's a kind
of glorified film set.

472
00:43:48,720 --> 00:43:55,040
Every corner you go round, there
are more people taking photographs.
There's another group over there.

473
00:43:59,800 --> 00:44:01,840
Churchill.

474
00:44:03,000 --> 00:44:06,520
"Corner store",
just like any British corner store.

475
00:44:06,520 --> 00:44:09,200
And next door to the "Apoolo".

476
00:44:09,200 --> 00:44:12,240
It's sort of almost there,
isn't it? Just...

477
00:44:12,240 --> 00:44:14,240
Just not quite.

478
00:44:16,240 --> 00:44:22,440
I mean, this place brings up a bit
of a worry I have about British
brands and their success here,

479
00:44:22,440 --> 00:44:28,840
a worry that Britain
is somehow seen as a rather sort
of exotic backdrop, a curiosity,

480
00:44:28,840 --> 00:44:31,880
rather than a driving,
modern economy.

481
00:44:31,880 --> 00:44:35,920
Certainly we can sell,
certainly we're good at marketing,

482
00:44:35,920 --> 00:44:40,120
but the worry is that we're slightly
better at marketing to ourselves

483
00:44:40,120 --> 00:44:43,560
than we are outside
of our own country.

484
00:44:47,240 --> 00:44:52,080
'But it doesn't take long in China
to find one bit
of encouraging news.'

485
00:45:00,760 --> 00:45:02,800
Xiexie.

486
00:45:07,720 --> 00:45:09,640
Hmm!

487
00:45:10,640 --> 00:45:13,120
There are so many teas in China.

488
00:45:13,120 --> 00:45:17,080
There's one here
that's good for the eyes.

489
00:45:17,080 --> 00:45:22,600
There's one
that reduces the symptoms
of excess internal body heat.

490
00:45:22,600 --> 00:45:25,640
The one I've got is a cleansing tea,

491
00:45:25,640 --> 00:45:28,600
a sort of Chinese detox.

492
00:45:28,600 --> 00:45:31,720
But of all the teas in China,

493
00:45:31,720 --> 00:45:36,360
guess which outsells
its nearest rival by two to one?

494
00:45:36,360 --> 00:45:38,880
A little bit of show and tell here.

495
00:45:38,880 --> 00:45:43,280
Yes, it's Lipton from Unilever.

496
00:45:44,280 --> 00:45:50,440
The Chinese buy around 300 million
pounds of Lipton's tea every year.

497
00:45:50,440 --> 00:45:56,160
If we can sell tea to the country
that gave it to the world,
surely we can sell anything.

498
00:45:59,160 --> 00:46:03,160
Looking around,
there are some successes here,

499
00:46:03,160 --> 00:46:06,800
such as the luxury brand Rolls-Royce
and Burberry.

500
00:46:06,800 --> 00:46:11,840
And retail giants Tesco's
and Marks & Spencer
have also got a foothold.

501
00:46:11,840 --> 00:46:14,880
Does that mean
we can sell anything?

502
00:46:14,880 --> 00:46:17,480
A test of how our brands are doing

503
00:46:17,480 --> 00:46:22,520
is to see if they're getting
into the homes of the burgeoning
middle classes.

504
00:46:22,520 --> 00:46:26,400
As we've seen in Britain,
a rise in education and affluence

505
00:46:26,400 --> 00:46:29,560
leads to a more sophisticated
consumer culture

506
00:46:29,560 --> 00:46:32,000
and this is happening in China now.

507
00:46:32,000 --> 00:46:35,760
These are the people we should be
targeting our brands at.

508
00:46:45,840 --> 00:46:47,880
COMMENTARY IN CHINESE

509
00:46:49,360 --> 00:46:54,160
'This is Yuan Ming.
She does what I do.
She presents business programmes.

510
00:46:54,160 --> 00:46:59,240
'She also hosts Call Me Boss,
the Chinese equivalent
of Dragons' Den.'

511
00:46:59,240 --> 00:47:01,480
CONVERSATION IN CHINESE

512
00:47:03,480 --> 00:47:05,120
APPLAUSE

513
00:47:05,120 --> 00:47:08,840
'But where my programmes reach
a few million,

514
00:47:08,840 --> 00:47:12,240
'Yuan Ming's are seen
by tens of millions.'

515
00:47:12,240 --> 00:47:17,920
Hello. Hello. Yuan Ming? Hi.
I'm Evan. Lovely to see you.

516
00:47:17,920 --> 00:47:23,200
'Who better to find out
if British brands are reaching
the affluent classes?'

517
00:47:23,200 --> 00:47:25,880
Come in, please.

518
00:47:25,880 --> 00:47:28,400
CONVERSATION IN CHINESE

519
00:47:34,000 --> 00:47:37,000
I want a bit of a snoop around.
Why?

520
00:47:37,000 --> 00:47:42,520
I want to see what sort of brands
you buy, whether you're
a bit of a fashion person.

521
00:47:42,520 --> 00:47:46,840
No, I'm not. Well, I'm a gadget
maniac. You see, I have an iPad.

522
00:47:46,840 --> 00:47:49,880
Yeah, I've already seen number one
there.

523
00:47:49,880 --> 00:47:55,920
Maybe we have something
in the refrigerator. This is...
No, this is from France, I guess.

524
00:47:55,920 --> 00:48:02,240
Let's see what we have...
Tsingtao beer. Champagne.
Oh, champagne, French. Nice.

525
00:48:02,240 --> 00:48:05,560
Orange juice.
Oh, we have some... Spanish.

526
00:48:05,560 --> 00:48:10,760
This is depressing. You've got
something from everywhere
apart from Britain.

527
00:48:10,760 --> 00:48:13,120
I'll try to find some British one.

528
00:48:13,120 --> 00:48:16,280
No. No, it's not very British,
is it?

529
00:48:16,280 --> 00:48:22,320
No, it's slightly depressing...
What do we have? I don't know. This
is what my quest is to find out.

530
00:48:22,320 --> 00:48:25,960
I have Laura Ashley
and also I have some Earl Grey.

531
00:48:25,960 --> 00:48:30,760
Phew, we got there, we got there!
Laura Ashley. Thank you, Laura.

532
00:48:30,760 --> 00:48:35,800
I'd love to hear what your mum
thinks. OK. I mean, Rolls-Royce,
not the car...

533
00:48:35,800 --> 00:48:38,080
CONVERSATION IN CHINESE

534
00:48:40,760 --> 00:48:42,800
My mum says, "Is it British?"

535
00:48:42,800 --> 00:48:46,520
She said, "Is it British?"
Oh, how could you not know?

536
00:48:50,960 --> 00:48:55,280
Can we eat another dumpling, by the
way? We've slightly ignored the...

537
00:48:55,280 --> 00:48:59,880
'My overriding impression is
what a small player we are.

538
00:48:59,880 --> 00:49:02,840
'It's hard work finding
British products.

539
00:49:02,840 --> 00:49:07,760
'I know we sold around £8 billion
of exports to the Chinese in 2009

540
00:49:07,760 --> 00:49:13,880
'and the figure's growing,
but it's not much, considering
their £3 trillion economy.

541
00:49:15,680 --> 00:49:21,720
'We aren't selling enough yet
and the evidence in China is that
it's not going to get any easier

542
00:49:21,720 --> 00:49:24,240
'because China itself is changing.

543
00:49:24,240 --> 00:49:28,280
'Remember the chase - some
countries advance, others follow?

544
00:49:28,280 --> 00:49:33,120
'Just as we concentrated
on the most valuable sections
of the value chain,

545
00:49:33,120 --> 00:49:36,640
'that's exactly what the Chinese
are beginning to do

546
00:49:36,640 --> 00:49:40,680
'as their economy develops away
from low value manufacturing.

547
00:49:51,800 --> 00:49:57,840
'Look at this advert for trainers
from a Chinese sports manufacturer,
Li-Ning.

548
00:49:57,840 --> 00:50:00,640
'It was made in fact
by a British ad agency,

549
00:50:00,640 --> 00:50:06,280
'but China clearly wants
to own the brands,
as well as make the footwear.'

550
00:50:07,400 --> 00:50:11,200
Thank you very much.
Brilliant. Lovely.

551
00:50:13,480 --> 00:50:17,000
'I've come to Li-Ning's
flagship store in Shanghai

552
00:50:17,000 --> 00:50:22,440
'to see if China is catching up
with the west
in developing sophisticated brands.

553
00:50:24,040 --> 00:50:27,560
'Cindy Wu is head
of brand development.'

554
00:50:29,080 --> 00:50:33,120
Cindy Wu? Yes. Hello. Evan Davis.
Nice to meet you. Nice to meet you.

555
00:50:33,120 --> 00:50:35,880
Lovely store. Welcome to our store.

556
00:50:35,880 --> 00:50:40,600
So how long has it been like this?
Is this brand-new?

557
00:50:40,600 --> 00:50:46,720
Yes, this is actually our new
flagship store in Shanghai. It looks
a little bit like Nike Town.

558
00:50:46,720 --> 00:50:51,760
Did you go to a Nike Town store
and think,
"Let's make it look like that"?

559
00:50:51,760 --> 00:50:57,000
We just want to establish
our own flagship stores
which could represent our brand.

560
00:50:57,000 --> 00:51:00,280
'This place looks good,
if slightly familiar,

561
00:51:00,280 --> 00:51:04,400
'but can Li-Ning do anything more
than copy western brands?'

562
00:51:05,560 --> 00:51:09,520
Now, you've got to tell me
about this swoosh, Cindy.

563
00:51:09,520 --> 00:51:12,040
We've got this swoosh.

564
00:51:12,040 --> 00:51:17,880
First of all, we don't call it
a swoosh. No, that's what Nike call
theirs. We call it a logo.

565
00:51:17,880 --> 00:51:21,280
And you can see
that there's actually a difference.

566
00:51:21,280 --> 00:51:25,000
This is our original logo
and this is our new logo.

567
00:51:25,000 --> 00:51:30,800
You admit that one looks
a bit like some other logos,
but this one is a bit more original?

568
00:51:30,800 --> 00:51:33,840
Really? They come
from different inspirations.

569
00:51:33,840 --> 00:51:38,400
That one was inspired by the Chinese
red flag flying on the podium

570
00:51:38,400 --> 00:51:43,320
and this new logo came from one
of the actions of our founder.

571
00:51:43,320 --> 00:51:49,560
He was a gymnast and he has an action
named after himself with his feet...
Oh, a position. Right, right.

572
00:51:49,560 --> 00:51:54,320
There's something I want to ask you
about these shoes over here. Sure.

573
00:51:54,320 --> 00:51:57,720
'They've got the branding bit.
What about the science?'

574
00:51:57,720 --> 00:52:03,240
If you go to one of
the established, big manufacturers
that we're all used to,

575
00:52:03,240 --> 00:52:08,280
they have teams of people
designing these,
so they're really good for the feet.

576
00:52:08,280 --> 00:52:13,760
Now, are yours just bits
of sort of plastic and fabric
or are they designed?

577
00:52:13,760 --> 00:52:16,600
Have you got scientists working
on them?

578
00:52:16,600 --> 00:52:23,520
We have a lab established in Beijing
and also our global innovation
centre in Portland in the USA.

579
00:52:23,520 --> 00:52:26,560
So you really are putting
a lot of money into...

580
00:52:26,560 --> 00:52:32,720
We believe that to become
a world-class sports brand,
we have to own our own technology.

581
00:52:32,720 --> 00:52:35,080
'They've also got the ambition.'

582
00:52:35,080 --> 00:52:39,120
We have gone through a lot
of R&D product design plans

583
00:52:39,120 --> 00:52:44,120
to prepare ourselves to be one
of the top five brands by 2018.

584
00:52:44,120 --> 00:52:46,440
Top five Chinese brands?

585
00:52:46,440 --> 00:52:51,000
No, top five sporting goods brands
in the world. Right.

586
00:52:51,000 --> 00:52:56,360
So you really do have plans
to be conquering the world.

587
00:52:56,360 --> 00:52:59,200
I mean in a good, commercial way.
Sorry.

588
00:52:59,200 --> 00:53:04,720
'Although I'm taken aback
by what I'm seeing,
I shouldn't really be surprised.

589
00:53:04,720 --> 00:53:10,160
'We've moved beyond "pile 'em high
and sell it cheap".
Why shouldn't they follow us?'

590
00:53:10,160 --> 00:53:12,720
You are profitable as a company?

591
00:53:12,720 --> 00:53:17,760
Or are you still investing
in it so much
that you're not making any money?

592
00:53:17,760 --> 00:53:19,800
We are profitable.

593
00:53:19,800 --> 00:53:26,240
In 2009, we have made
8.3 billion RMB in our revenue.

594
00:53:26,240 --> 00:53:30,760
8.3 billion -
that's about £830 million.

595
00:53:30,760 --> 00:53:33,120
Yes, more or less. That's a lot.

596
00:53:33,120 --> 00:53:36,760
And then we made
0.9 billion RMB revenue.

597
00:53:36,760 --> 00:53:41,040
£100 million of...of profit,
of profit. Of profit.

598
00:53:41,040 --> 00:53:45,880
Crumbs! Yeah, profit. That puts you
in quite a big league, actually.

599
00:53:45,880 --> 00:53:49,720
I wonder whether we in the west
should be terribly worried

600
00:53:49,720 --> 00:53:55,760
because we've been waiting
for China to be rich enough for us
to sell lots of things into China

601
00:53:55,760 --> 00:54:00,800
and the day you become rich enough
for us to start selling
loads of things to you,

602
00:54:00,800 --> 00:54:04,840
pay back all the money we borrowed
from you in the last ten years,

603
00:54:04,840 --> 00:54:11,560
you'll be selling all this nice,
fashionable stuff to yourself.
Crumbs! What are we going to do?

604
00:54:11,560 --> 00:54:15,560
'And that's a question
many people are asking.

605
00:54:15,560 --> 00:54:21,400
'What happens when the next
hip chocolate bar is Chinese,
not British?

606
00:54:21,400 --> 00:54:26,000
'We might have been great
at inventing things in the past,

607
00:54:26,000 --> 00:54:29,920
'but why shouldn't others be
as good as us in the future?

608
00:54:29,920 --> 00:54:34,800
'National champions
like GlaxoSmithKline run out
in the front now...

609
00:54:36,320 --> 00:54:39,840
'..but companies elsewhere
are chasing behind.'

610
00:54:42,480 --> 00:54:46,440
We run constantly with that feeling
just behind our neck

611
00:54:46,440 --> 00:54:52,640
that if we don't succeed on the next
round, you aren't going to be here
in 15 or 20 years' time

612
00:54:52,640 --> 00:54:56,680
and in many ways that creates
the energy in the organisation.

613
00:54:59,600 --> 00:55:03,640
There are no guarantees. There is
no 11th commandment which says,

614
00:55:03,640 --> 00:55:07,760
"There should be a drug company
in Britain called GlaxoSmithKline."

615
00:55:12,520 --> 00:55:17,160
You'd better succeed because
if you don't, nothing will save you.

616
00:55:21,360 --> 00:55:23,960
But there's no need to be alarmed.

617
00:55:23,960 --> 00:55:26,800
From what I've seen, at our best,

618
00:55:26,800 --> 00:55:29,520
we're among the world's best.

619
00:55:31,000 --> 00:55:33,680
UK designers are very good.

620
00:55:33,680 --> 00:55:38,080
They're very versatile,
problem-solving types.

621
00:55:38,080 --> 00:55:44,240
The world changes, the problems
to be solved change. New industries
come, old industries go.

622
00:55:44,240 --> 00:55:46,760
The UK can't do everything.

623
00:55:46,760 --> 00:55:51,800
It has to focus on the highest
value activities it can find.

624
00:55:53,800 --> 00:55:56,560
The best answer comes from a blend

625
00:55:56,560 --> 00:56:02,600
of some of that British
problem-solving mentality,

626
00:56:02,600 --> 00:56:06,840
together with some specialist,
but quite narrow expertise

627
00:56:06,840 --> 00:56:12,680
that you find in engineers
in some other regions of the world,
for example, in America.

628
00:56:13,680 --> 00:56:17,640
We can't be complacent,
but our whole economic history

629
00:56:17,640 --> 00:56:22,640
is one of running to stay ahead
and getting richer in the process.

630
00:56:22,640 --> 00:56:24,800
It's no different now.

631
00:56:24,800 --> 00:56:27,960
It all comes back
to the value chain.

632
00:56:27,960 --> 00:56:33,480
As the world changes,
as other countries get richer,
new opportunities arise.

633
00:56:33,480 --> 00:56:40,120
We have to find new nooks and
crannies which best use our skills
and will enable us to pay our way.

634
00:56:40,120 --> 00:56:45,600
Britain is in the global
top division when it comes
to science and creativity

635
00:56:45,600 --> 00:56:51,120
and the income they generate
will continue to pay
many of the country's bills.

636
00:56:54,560 --> 00:56:57,360
But one important observation -

637
00:56:57,360 --> 00:57:02,320
we can never be entirely reliant
on intellectual property alone.

638
00:57:02,320 --> 00:57:07,680
That reminds me
of those old sci-fi movies where
there's some evil brain in a jar,

639
00:57:07,680 --> 00:57:10,720
trying to survive
without any kind of body.

640
00:57:10,720 --> 00:57:12,760
We don't want to be like that.

641
00:57:12,760 --> 00:57:16,800
We need people who are not cut out
to wear white coats in laboratories

642
00:57:16,800 --> 00:57:19,640
or black collars
in advertising agencies.

643
00:57:19,640 --> 00:57:25,680
We need them to be productive
as well. We need regions which don't
have clusters of knowledge workers.

644
00:57:25,680 --> 00:57:28,720
We need them to have industries
of their own.

645
00:57:28,720 --> 00:57:33,200
We want to be clever,
but we don't ONLY want to be clever.

646
00:57:35,200 --> 00:57:37,600
'Next time on Made In Britain,

647
00:57:37,600 --> 00:57:41,640
'our services economy where
over three-quarters of us work.

648
00:57:41,640 --> 00:57:44,440
'From call centres in Sunderland...'

649
00:57:45,520 --> 00:57:49,280
This is a bedroom or a lounge?
It is a bedroom. It is a bedroom.

650
00:57:49,280 --> 00:57:51,960
'..to estate agents in London.

651
00:57:51,960 --> 00:57:55,160
'Can this help us pay our way
in the world?'

652
00:57:55,160 --> 00:57:58,480
Very nice indeed.
Again the views over the park...

653
00:57:58,480 --> 00:58:02,320
To discover more about how Britain
pays its way in the world

654
00:58:02,320 --> 00:58:07,760
and to contribute your own
experiences to the Open University's
online toolkit, visit...

655
00:58:10,520 --> 00:58:14,040
And follow the link
to the Open University.

656
00:58:32,960 --> 00:58:37,000
Subtitles by Subtext
for Red Bee Media Ltd 2011

657
00:58:37,000 --> 00:58:40,040
Email subtitling@bbc.co.uk