# Transcript

MAN

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

Now, a lot of us assume that means manufacturing them. But that's naive. There are three major steps of value creation in the production process. And the first is about the magic of creativity.

Yes, the first is coming up with a new product or process, like pilkington, built on the research of scientists and engineers. Only then comes part two, the manufacturing-- the machine in the middle that churns out the process. This is the tangible bit of the process.

Now, this does add value. Of course it does. But less than you think. There's so many nations can do this well.

Then there's the third step. The marketing, advertising, and branding. Teams of people coming up with innovative ideas to make products appealing.

Now, in the modern value chain, it makes sense to us with our brained-up workforce to innovate in the first stage, coming up with the idea, and the third, selling it. That's where the biggest bucks can be made.

I know it's not a very British example, but let's get a measure of this. One study broke down the cost of a $300 iPod. Now, most of the price goes to the retailer, and for the people who supply all the components that go inside.

But on the back it says, "Designed by Apple, assembled in China." Well, for the design, Apple get about $80. For the assembly, China gets less than five. That is the value of creativity and branding.