G20: Insights from the Social Progress Index 2014

By Andrew Johnstone-Burt - November 25, 2014

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The G20 provides a valuable opportunity for leaders to discuss a wide range of global economic issues and to use their collective power to make a difference. The G20’s immediate task is breaking the cycle of low growth, including diminished business and consumer confidence.

A common observation we have is that governments are at, or close to, the limits of macroeconomic policy responses. We observe now there exists a challenge for governments they need to think beyond the usual macroeconomic levers to support social progress. I believe growth on its own without social progress is an empty goal.

In the past we have seen that traditional approaches to solving society’s most complex and challenging social problems have are not been sustainable. These complex problems take time to come to fruition, therefore we need to apply fresh thinking and to act with a sense of urgency.

There is a growing recognition of the need to measure progress over and above GDP to understand the sustained impact of any growth strategies. A more holistic framework of progress measures is needed. Deloitte is working with the Social Progress Imperative, a non–profit which is driving the global debate on measuring what matters most to advance progress through their Social Progress Index (SPI). Designed to complement GDP, and other economic indicators, this new index measures a country’s social and environmental strengths and weaknesses to help prioritise investment decisions.

By examining the SPI indicators and comparing G20 countries we demonstrate the ways in which the SPI can be used to unlock opportunities for true growth in Australia and examples of how these opportunities could be solved through the solution economy. Of the 40 G20 countries the Netherlands, Sweden and Canada ranked the highest in terms of social progress, among G20 countries Australia ranked 6th on the SPI.

Australia’s key social challenges identified through the SPI, when compared to other G20 countries including:

  • Affordable housing: in Australia housing affordability has continued to decline. 862,000 lower income households were experiencing housing stress, comprising 15.8 per cent of all Australian households and 28.2 per cent of low income households in 2002–035. In addition 105,237 people in Australia were homelessness in 2011.
  • Adult literacy: even though Australia does well on the high level measure, there are problematic trends below the surface. In 2011–12 around 3.7% (620,000) of Australians aged 15 to 74 years had literacy skills estimated at below Level 1, with a further 10% (1.7 million) at Level 1 and 30% (5.0 million) at Level 2 (noting that the assessment scale ranges between below Level 1 – the lowest rating – and Level 5).
  • Obesity: the growing trend in overweight and obesity is reflected in Australia. Between 2007–08 and 2011–12, the rate of adult overweight and obesity significantly increased nationally to nearly two thirds (from 61.1% to 63.2%). Children are also affected with a quarter (25.3%) of children (aged 5–17 years) being overweight or obese in 2011–12, (17.7% overweight and 7.6% obese).

I am excited to deliver some  good news: governments, non-government organisations, individual investors and the private sector have been moving towards the solution economy. This will provide new ideas and solutions to social problems, improved communication and collaboration to break down historical silos and unlock true growth. There is a real opportunity to bring new approaches and perspectives to solving society’s most complex challenges, to take an outcomes based focus and collaborate to deliver improved outcomes. If we are to realise the benefit of solving these issues we need to act swiftly and united.


Au-andrew-johnstone-burt-1x1Andrew Johnstone-Burt is the national leader of Deloitte Australia's public sector group. He has a range of specialist skills across policy reform and fiscal sustainability in the public sector in Australia, United Kingdom, and Europe. Along with 10 years’ military service, Andrew has more than 20 years’ advisory experience in strategy, people, change and ICT. He is regarded as a trusted adviser for a number of Australian federal and state government departments.

India’s rebound: will the world be patient?

By Gary Coleman - November 11, 2014

India report_image7At the World Economic Forum’s India Economic Summit this past week, the new Modi government was under particular scrutiny. But as the event concluded, it was clear that most participants were bullish about India given the actions that the government is proposing—with a note of caution, though. With the government now six months in, reforms seem to be slow in coming—and that could be a problem.

The thing is, there’s a lot to be done in order to meet the potential the world is seeing in India right now. A major challenge is the employability of the Indian working population. With one million workers set to enter the job market every month as India’s under-25 population comes of working age,  creating jobs is paramount. But India, like much of the world, is experiencing a talent paradox: 60 percent of India’s total population is available for work, but only 25 percent is capable of being used by the market. How to address this issue was the topic of a session I moderated last week at the summit. Of the many solutions put forward, several proposals the Modi government is seeking to implement were discussed and applauded.

But employability is just a start—to create jobs India must improve its competitiveness overall. With the right policies in place, employability and skills can straightforwardly be improved. But items like infrastructure are long-term investments and are critical to moving raw materials and resources as well as bringing in the FDI needed to boost manufacturing. According to Deloitte Global’s report, Competitiveness: Catching the next wave in India, clearing up bottle-necks in construction projects—some of which the Modi government has already taken action on—will be critical to improving growth.

Creating a pro-business environment will also play a role. India dropped in the World Bank’s latest Doing Business Index, released two weeks’ ago, slipping to 142—the lowest among the BRICS.  While this is a lagging indicator and will most likely improve next year, regulation, taxes, and labor laws all need reforming if “doing business” in India is to improve. The most competitive countries in the world, according to the 2014 WEF Competiveness Index—Singapore, Switzerland, and the United States—all rank in the top 20 on the World Bank index. With that in mind, Modi has vowed to move India into the top 50 of the index.

With promises like this, Modi is clearly putting the world on notice that India is getting ready to take its place as a leading economy. And if the WEF summit last week is any indication, the world is eager to be a part of that journey. But as one speaker at the event’s closing plenary commented, there won’t be a big bang in India; rather reform will come in increments. The question is, will the world wait?


Dttl_garycoleman_56x56Gary Coleman is Managing Director, Global Industries, of Deloitte Touche Tohmatsu Limited. He is a member of Deloitte’s Global Markets Committee and is the lead partner in Deloitte’s strategic relationship with the World Economic Forum. Follow him on Twitter @gcoleman_gary.

Dynamic times ahead for the North American steel industry

By Nick Sowar - November 10, 2014

Steel Blog nd_man_glb_ho_2078When I meet with Deloitte member firm clients around the world, I often get asked about the state of the steel industry in North America. From my perspective, I have never witnessed such dynamic times in the history of the global industry, and North America is currently one of the hotspots of change.

There are three important trends leading the way and driving these paramount times in the industry. First, there appears to be a pick-up in mergers and acquisition activity in North America this year as steel producers execute much needed consolidation strategies. In the first nine months of 2014, there were 66 deals reported (up 20 percent in volume from last year) with a total transaction value of US$8.9 billion. A significant recently-completed deal was the sale by ArcelorMittal and Gerdau of their respective 50 percent interests in Gallatin Steel Company ("Gallatin") to Nucor Corporation. For Nucor, the strategic acquisition expands the company’s position serving flat-rolled customers in the growing pipe and tube segment.

Second, there is a continued focus on operational improvements, reducing structural costs, and improving financial performance. For example, U.S. Steel is implementing a strategic focus it calls “The Carnegie Way” to create value, strengthen its balance sheet, and improve core business process capabilities, including supply chain, manufacturing, and procurement. The company is also seeking to be leaner and recently announced the closure of some production facilities in both the U.S. and Canada.

The third trend is focused on capital raising. Russian producer, Evraz has filed a registration statement to raise capital through an initial public offering (IPO) of ordinal shares in its North American operations. The funds will help the company acquire assets in the region, as well as help to pay down debt.

As we approach 2015, steel demand growth in North America is likely to decrease to around 2 percent from stronger levels in 2014. In markets such as the U.S. and Mexico, apparent steel use is forecasted to increase by 6.7 percent and 6.9 percent respectively this year but plateau to a 1.9 percent and 3.5 percent growth in 2015.  Where will the demand come from? Senior leaders attending the 2014 Steel Success Strategies Conference in New York in June indicated that the oil and gas industry and the automotive sector are expected to be the leading drivers of medium-term growth in North America. I was fortunate enough to attend this event and hear top global metals industry executives discuss the demand realities.

Regional production, however, is not keeping up with demand, attracting imports of steel products to fill the gap. Crude steel production in North America increased by 2.3 percent in the first nine months of 2014 with volumes at 91 million tonnes, representing just over 7 percent of global production. Recently released data indicates that imports of steel products in markets like the U.S. have increased by 35 percent through to August 2014 with more imports coming from Russia, Korea, and China. Furthermore, excess global steel capacity (anywhere from 300 million to 500 million tonnes) will likely continue into 2015 and will put significant downward pressure on steel prices into 2015. Iron ore prices fell to a five-year low in September 2014 by 40 percent to around US$80 per tonne and likely contributed to lower prices in scrap and direct-reduced iron (DRI). Moreover, it is unlikely that overcapacity will be significantly reduced in the short-term in places such as China, where most of the excess capacity is located. Countries with overcapacity will likely continue to look for export markets. Contentious unfair trade complaints around the world will likely be ongoing if the practice of dumping of government-subsidized steel persists.

Sustainable profitable growth and competitiveness of the steel industry will be underscored by the industry’s ability to capture the innovation opportunities from disruptive technologies to meet evolving customer needs. Specifically in advanced manufacturing both from improvements in technologies and materials advancements. Innovation efforts by the steel industry are not often in the spotlight, but many initiatives are yielding new solutions that warrant attention. For example, ArcelorMittal’s spreader beam innovation created the world’s only automated variable-width spreader beam which adjusts to accommodate both scrap bucket and hot metal ladle widths in the electric arc furnace. The award-winning solution provides speed and efficiency in switching between scrap and hot metal charging. The automation took a seven-minute changeover down to 50 seconds, adding the potential for an extra heat of steel per day at the facility. 

Another example is in the automotive sector. Steel has advantages over other competing materials including variables associated with cost, strength, and durability. Within the 2015 Honda Fit, weight reductions were achieved in a number of ways including the extensive use of super-high-tensile strength steel that provides increased structural strength with less material. With 27 percent of the body structure made with these high-grade steels – the vehicle body is 44 pounds lighter than the previous model – fuel-efficiency performance was also improved.

For North American steel companies, energy developments around shale gas also offers longer-term prospects to enhance global competitiveness. However, to the advantage of North American countries like the U.S. over the next one to three years, shale gas will continue to be a largely regional resource with only a limited impact on global markets. Although other countries would likely want to replicate the North American shale gas revolution, they must overcome more challenging geology, and gaps in technology, infrastructure, and domestic service capability before commercial production can begin, as well as political and environmental obstacles in some jurisdictions.

In my several decades of involvement with the global steel industry, I can say that this is truly a monumental time for the steel industry filled with disruptive challenges yet also high-potential opportunities. After the sector weathered years of battered performance from the effects of the global economic downturn, steelmakers have struggled to recover and are more than ever resilient. North America is a region to watch as changing customer demands and energy developments will accelerate innovation within the industry as it strives to remain competitive.

Sources: Thomson Reuters. Nucor, Press release. United States Steel 2013 Annual report. Pittsburgh Post-Gazette. CBC. Evraz. Press release. World Steel Association. American Metals Market, Steel Success Strategies infographic. The United States Census Bureau. Bloomberg. Deloitte Global Energy Resources.


Nicksowar_56x56Nicholas (Nick) Sowar is the Deloitte Global Metals Sector Leader. He has over 37 years of experience with Deloitte, including over 30 years serving leading steel companies worldwide. Nick currently serves as the global lead client service partner or industry advisory partner for several Deloitte member firm global steel clients.

Mexico: A place for investment

By Tim Hanley - October 17, 2014

Ind_man_glb_ho_2071_300 X 200I had a very interesting week in Mexico recently and met with some of Deloitte Mexico’s manufacturing clients in Mexico City and Monterrey. One of my significant impressions from the visit was the visible amount of investment that is occurring by multinationals in this increasingly promising economy, which is often outshined by talks of the BRIC markets. As you read this article, I hope to share some of the interesting facts I learned about Mexico that explains why it is currently such an attractive place for investment.

Mexico reportedly drew a record $35.2 billion in foreign direct investment (FDI) last year. Not surprisingly, the automotive sector is a magnet for investment with automakers (and their suppliers) including Kia, Nissan, Honda, Volkswagen, and Mazda signaling plans to invest in Mexico over the next few years. Many of the major automakers already have a significant presence there. In fact, Mexico is currently ranked 8th among 40 countries by the International Organization of Motor Vehicle Manufacturers (OICA), producing over 3 million vehicles in 2013. What is perhaps a little known fact is that Mexico is the fourth leading car exporter, behind Germany, South Korea, and Japan. An export-orientated economy, the country has more free-trade agreements than any other country, building agreements with 44 countries over the years. The North American Free Trade Agreement (NAFTA), for example, introduced two decades ago in 1994 has helped to pave easier access for Mexican goods into the U.S. and Canada.

Mexico continues to be challenged to stay globally competitive to rival manufacturing nations such as China and Brazil. The automotive sector again, as an example, has been a growing area of capability for Mexico employing some 40 percent of all of the automotive workforce in North America.1 A major factor is the lower labor costs with Mexican autoworkers earning around $8 an hour, according to the Center for Automotive Research, compared with the U.S. average of $37.2

Besides the automotive industry which has flourished, Mexico is also trying to expand its high-tech industrial manufacturing and aerospace manufacturing with multinationals also looking at the country as a manufacturing base. To sustain and indeed evolve its future manufacturing competitiveness, however, Mexico will likely need to look at its talent needs. As cited in Deloitte’s 2013 Global Manufacturing Competitiveness Index report, talent-driven innovation will be the leading driver of global competitiveness. Global CEOs we surveyed ranked Mexico 12th in terms of industry competitiveness and expect that its position may drop slightly to the 13th spot by 2018. To bolster competitiveness, Mexico could seek to improve its capacity for innovation and quality of higher education and training. The country ranks in the middle of the pack in these areas based on the 2014-2015 World Economic Forum Global Competitiveness Report.

Finally, as I was concluding my visit, the Mexican government announced a landmark energy reform. With energy being a significant cost to manufacturers, the announcement caught the attention of multinational companies and other stakeholders worldwide. It will be interesting to watch as things unfold to see if this energy development will help to bolster future interest in Mexico as a place to invest.

Have questions or comments? Share your thoughts with me @TimPHanley.

1New York Times. 18 November 2013.
2Los Angeles Times. 24 February 2014.


Tim HanleyTim Hanley is the Global Leader of the Manufacturing Industry group of Deloitte Touche Tohmatsu Limited (DTTL). In his global industry leadership role, he directs strategic initiatives and investments to grow Deloitte member firm market share within the manufacturing industry. During his distinguished 35-year career, Hanley has led teams serving all business aspects, including consulting with top management regarding organizational financial strategy development and execution, acquisitions, and market development.

Manufacturing, innovation, and the youth of India

By Gary Coleman - October 09, 2014

INDIA VISIT BLOGIn his recent Independence Day speech, India’s Prime Minister Shri Narendra Modi proclaimed that “the youth of India has completely transformed the identity of India in the world.” He appealed to the youth of India to continue this trend—by enhancing their skills, seeking out new business ventures, and striving to achieve his vision of a “Digital India.”

Having visited India only a few days after Modi’s speech, I was intrigued by this idea of the younger generation’s impact on the economy. I was particularly interested in its relation to manufacturing and innovation, two topics that came up repeatedly in my discussions with colleagues at Deloitte India, their clients, and the media. With India seeking to take its place in the world as an innovation and manufacturing hub, this demographic—particularly millennials—will play an increasingly important role. 

According to Modi’s speech, 65 percent of India’s population is under the age of 35 years—the largest number of youths of any country in the world. How this demographic participates in the workforce could be the single most influential factor for India’s economy over the next decade. How these individuals are educated, where they choose to work, and what kind of career path is open to them will impact the trajectory for both manufacturing and innovation in India.

First, building manufacturing is a goal to which India is committed. Modi emphasized in his speech that the world should come and “Make in India.” A formal campaign to support this effort launched across the country last month.1  It is the youth of India who will be expected to occupy these new manufacturing jobs. But, according to estimates from the Confederation of India Industry and the National Skill Development Corporation in India, over 70 million manufacturing jobs in India over the next 15 years could go unfilled due to a skills gap. To cultivate the pipeline of workers needed to support today’s high-end manufacturing, the government must actively invest in education and training now.  

Second, India must invest in building a culture of innovation. With its strong base in IT, India’s strength in this area would seem like a given. But India recently fell 10 notches in the 2014 Global Innovation Index to 76th--the worst performer among the BRICS nations.2 Again, India must look to its youth to help remedy this deficit in innovation. Millennials in India clearly are looking for innovation—a reputation for innovation is important for roughly 90 percent of millennials in India when they choose an employer, according to Deloitte’s Millennial survey. And with entrepreneurship a vital factor in building innovation within an economy, it should be heartening that 87 percent of India’s millennials said they see themselves working independently someday rather than being employed within a traditional organizational structure.

It’s not unusual for a country’s leader to deem its youth the key to the future. But in India, which enjoys a demographic advantage over much of the world’s developed economies, this mantra is more than rhetoric and holds incredible potential if properly cultivated.

1FirstBiz, 18 September, 2014.
2Cornell University, INSEAD, and the World Intellectual Property Organization.


Dttl_garycoleman_56x56Gary Coleman is Managing Director, Global Industries, of Deloitte Touche Tohmatsu Limited. He is a member of Deloitte’s Global Markets Committee and is the lead partner in Deloitte’s strategic relationship with the World Economic Forum. Follow him on Twitter @gcoleman_gary.

Public Policy: innovation’s underrated enabler

By Gary Coleman - September 24, 2014

AMNC POST-EVENT BLOGAt the World Economic Forum’s Annual Meeting of the New Champions (AMNC) this year, Tianjin Mayor Huang Xingguo (pictured) discussed some key drivers of innovation—ideas, entrepreneurship, convergence. But he also brought forward what might be considered an underrated contributor: public policy.

Public policy—if not business-friendly and irresponsibly administered—can stifle an economy. But, if well-crafted and executed, public policy can just as easily enable a culture of innovation. It may be the unglamorous side of innovation—but a side that is critical all same and proving to be especially impactful in China.

Take entrepreneurship. For innovative ideas to be nurtured, entrepreneurs need to have a level playing field on which to launch their businesses and compete against large, established entities. That is, public policy must allow equal access to credit, fair competition, transparency of information for all, and the capacity to set up a business without excessive bureaucracy. But in China, entrepreneurs still face steep hurdles in this regard. State-owned enterprises have easier access to funding and continue to skew the competitive landscape1. In addition, setting up a business remains challenging: China ranks 158 on the World Bank’s 2014 Ease of Doing Business indicator on starting a business. In response to this, China has been streamlining business registration processes and, according to Premier Li Keqiang’s remarks at the AMNC, this has led to more than 8 million new businesses in 2014 so far.

Convergence is also an area in which China is seeking to improve. Collaboration among institutions of higher learning, private industry, and a free flow of information are key to encouraging innovation—as clusters such as Silicon Valley demonstrate. China has made concerted efforts to build clusters and special economic zones that promote the convergence innovation needs to grow. One of the first of these, the Shenzhen technology cluster—which includes companies like Huawei and Lenovo, a range of universities, and is located next door to Hong Kong—is now rivaling Silicon Valley in terms of international patents2.

To keep this momentum going, however, public policy must promote local and foreign direct investment in growth sectors of the future, such as advanced manufacturing, e-commerce, IT sciences, mobile technology, and life sciences. Part of this will involve China continuing its significant emphasis on promoting research and development: the Chinese government has steadily increased its targets for science and technology in its five-year plans (FYP), going from a target of 1.5 percent of GDP in its 10th FYP to 2.2 percent in its latest FYP (12th)3.  But part of it will also involve stronger IP enforcement. Even Premier Li acknowledged that IP protection is critical to “stimulate the enthusiasm for innovation.”   Listening to both Premier Li and Mayor Huang at the AMNC, it is clear that the Chinese government sees the value in business-friendly policy that enables innovation. If successful, China’s public policy may very well become an important conduit and, in the words of Premier Li, “the blood of innovation will flow unhampered.” 

 

1 Foreign Affairs, 16 December 2013; 2 The Age, 30 December 2013; 3 Manufacturing Competitiveness Study, Deloitte China


Dttl_garycoleman_56x56Gary Coleman is Managing Director, Global Industries, of Deloitte Touche Tohmatsu Limited. He is a member of Deloitte’s Global Markets Committee and is the lead partner in Deloitte’s strategic relationship with the World Economic Forum. Follow him on Twitter @gcoleman_gary.

Cross-sector collaboration: essential to protect Brazil’s rainforest

By Eduardo Oliveira - September 22, 2014


ForestBrazil’s Amazon is famous worldwide for its natural resources and environmental importance. Yet its preservation is being threatened by the social challenges faced by people in the region.

This was the scenario addressed by an unprecedented study, “Social Progress Index in the Brazilian Amazon.” The research was conducted by the Imazon research institute in partnership with Social Progress Imperative, and the Avina Foundation. The study was prepared by #Progesso Social Brasil, a network organised by Deloitte Brazil and Avina, focused on bring different sectors of society together to drive social progress and wellbeing.

The 2014 Amazon Social Progress Index report showed that social progress in the region is significantly lower than the rest of the country. It shows that the region has a general Social Progress Index score of 57.31, lower than the national average of 67.73, based on a range that goes from 0 (worst level of social progress) to 100 (best). In the evaluation 772 municipalities in the region, 98.5% had a Social Progress Index score lower than the average of Brazil.

Knowing the challenges facing people in the Amazon region is the first step--a lack of opportunities was found to be the most pressing problem Amazon residents faced--but addressing these issues is the next step and this requires all our efforts, including businesses.

At Deloitte we believe that business has the power and responsibility to help build a robust and prosperous society. Business serves human needs and desires, creating vital products and services, which drive social and economic development. Thus a thriving society requires thriving businesses and for business to thrive over a sustained period, it needs to operate in a prosperous society.

Yet, the complexity of the big societal challenges demands collaboration. At Deloitte, we are working as part of #Progresso Social Brasil, to bring different sectors of society together--different businesses, but also civil society and philanthropic organizations, government bodies and academia, to better drive social progress. Collaboration is essential if we are to tackle complex problems such as deforestation and communities with too little opportunity. Regardless of sector, it is imperative that all of us begin to ask ourselves what societal problems we our best positioned to tackle and how we can work with others to drive change.


OLIVEIRA EduardoEduardo de Oliveira is a Financial Advisory Partner and the Public Sector leader for Deloitte Brazil. He has 24 years of experience working for Deloitte, leading teams focused on valuations, acquisitions processes, fixed asset strategic management and privatization.

Talent: the next high-tech innovation

By Gary Coleman - September 08, 2014

PRE-AMNC BLOGThe theme of the World Economic Forum’s Annual Meeting of the New Champions 2014 (AMNC), “Creating value through innovation,” brings to mind some of the amazing advances in technology that has allowed companies to minimize bureaucracy, tap new markets, and extend their supply chains the world over. But how has innovation had an impact on one of their most valuable resources—talent?

It may not be entirely clear that innovation has a role to play when recruiting and retaining employees. And no wonder: many companies are still struggling with just how advances in technology can be used to innovate in the talent space. More than 40 percent of executives surveyed in Deloitte’s 2014 Global Human Capital Trends report said their companies were “not ready” to address talent as it relates to technology. But with aging populations, an increasing demand for a more select set of skills, and knowledge growing out of date at an alarming rate, the pressure to use technology to innovate is more critical than ever.

Digital technology can play a powerful role in both attracting and keeping employees. The most significant impact, of course, has been through the rise of social media. In 2013, more than 67 percent of internet users around the world used a social network at least once per month. The figure will rise to more than three out of four internet users by 2016.  And worldwide, more than one-third of workers use social media for career and employment decisions. That jumps to 51 percent in the Asia Pacific region. 

This trend is particularly prominent among millennials. For this demographic, living with digital technology is not a new reality—it’s the only reality. In almost every country, people under age 30 (and those with a college education) are more likely to engage in social networking and use a smart phone, according to a Pew Research poll.  This access and connectedness has shaped millennials’ views of work. Nearly three-quarters, according to Deloitte’s millennial survey, see themselves working independently, rather than for a company. Forty-five percent will choose workplace flexibility over pay.

Companies need to adjust their recruiting and work models accordingly. Many are already using social media extensively—more than 60 percent of HR executives say they rely on social tools for sourcing and advertising positions . But social media can do much more. With blogs, targeted ads, stories, and word-of-mouth, social media can raise a company’s profile, building appeal before ever even advertising a position.

Keeping employees also requires an innovative approach; 60 percent of millennials will leave their companies in less than three years.  Open talent networks, in which companies tap the right talent as needed, allows workers the flexibility they are seeking. Open talent networks encourage work to be designed on a project basis—a model that appeals to many millennials. Work can also be broken down into discretionary parts that can be farmed out over the network—freeing up the time of employees for more productive and challenging work.

To be sure, digital technology is still making its mark when it comes to talent. But with so many of the AMNC’s participants comprising the employers and employees of the future, the value to be created by innovating in this space couldn’t be more relevant.


Dttl_garycoleman_56x56Gary Coleman is Managing Director, Global Industries, of Deloitte Touche Tohmatsu Limited. He will be moderating the panel “Got Talent” on 11 September at the World Economic Forum’s Annual Meeting of the New Champions 2014.

Farnborough Airshow showcases 100 years of aviation

By Tim Hanley - August 01, 2014

Ind_man_glb_ho_2033_300X200One of the best ways to see innovation in the manufacturing industry is to attend the Farnborough Airshow. This year, the public airshow, which rotates between Paris and Farnborough each year, showcased aircraft innovation and technology from every decade in the last century. I had the privilege to once again attend this premier event and met with many senior executives from leading Aerospace & Defense (A&D) sector companies. For the A&D industry, this airshow is where deals are made. The show organizers estimated $201 billion in contracts were committed during the week and media reported the top aircraft makers signed around $115 billion in jet deals.

During the airshow, Deloitte released a new thought leadership report, 2014 Global aerospace and defense sector financial performance study. The report indicates that the overall global A&D sector growth is slowing – the revenue growth rate declined from 5.9 percent in 2012 to 3.1 percent in 2013. While growth continues in the commercial aerospace segment, contraction in defense spending continues to be impacting the pace of revenue growth. I encourage you all to have a look at this report which is recognized by many as a scorecard for the industry.

As I listened to executives across the industry, I heard a sense of optimism at a higher level than in 2013. Many of the companies appear to be looking to grow through acquisition. For suppliers, this may be necessary; in part to gain scale to help them better manage the demand for pricing targets set by the original equipment manufacturers (OEMs). Interestingly this year, the defense companies seemed to have a much more positive view of the landscape, as they continue to navigate the realities of tight defense spending.

One of the high points of our week was a reception that Deloitte co-hosted with Skadden Arps, a leading law firm serving the A&D industry. General Wald, Federal Practice Senior Advisor with the Deloitte U.S. firm (Deloitte Services LP), shared a few of his insights on the growing importance of technology to the U.S. military today, and also offered a few examples from his distinguished years of service.

Finally, please read some of the perspectives shared with the media about developments in the industry by Tom Captain, Deloitte Touche Tohmatsu Limited Global A&D Sector Leader: Airbus Deliveries Rise but Trail Boeing; Company Delivered 303 Planes in First Half (Wall Street Journal) and Weapons-makers The case for defence (The Economist).

Have questions or comments? Share your thoughts with me @TimPHanley.


Tim HanleyTim Hanley is the Global Leader of the Manufacturing Industry group of Deloitte Touche Tohmatsu Limited (DTTL). In his global industry leadership role, he directs strategic initiatives and investments to grow Deloitte member firm market share within the manufacturing industry. During his distinguished 35-year career, Hanley has led teams serving all business aspects, including consulting with top management regarding organizational financial strategy development and execution, acquisitions, and market development.

Talent, urbanization, and energy underpin Asia Pacific dynamics

By Tim Hanley - July 07, 2014

Shanghai_300X200A few weeks ago, I had the privilege to host an Asia Pacific Regional Manufacturing Summit and could not have asked for a better venue than Shanghai, China – a vibrant and important marketplace for Deloitte member firm global manufacturing clients. The event focused on the evolving industry themes impacting the region.

Talent was one of the first themes discussed. A guest speaker from the US-China Business Council, highlighted the rising cost of talent in China, citing an average of eight to 10 percent increases in annual salaries compared to the average rate of three percent in markets like the United States. As Chinese manufacturers aim to move up the global value chain (read Deloitte China’s report “Transforming from world factory to smart manufacturing”), wage inflation will continue to be a challenge for both local and international manufacturers. However, it does not appear to have significantly dampened investment interest in China.

Urbanization was another theme highlighted and an important trend to watch. It is just one of the factors attracting investment into China. A speaker from The Economist Group provided the audience with fresh insights on the urbanization patterns occurring in China. Did you know that China’s urbanization rate is expected to increase to 61 percent of the country’s total population by 2020 (up from around 50 percent today), and to 67 percent by 2030? That translates to an urban population of around 940 million people by 2030 (up from 670 million in 2010) with most of the growth in mid-size cities like Guangdong, Henan, Hebei and Shandong. While significant due to the size of the population, China’s urbanization rate actually falls behind the average urbanization rate across OECD economies of just below 80 percent in 2010. Understanding this megatrend will likely be important for multinational and local manufacturers alike as they consider how and where to grow their business in China.

Harnessing alternative sources of energy was another theme highlighted at the event. The energy agenda, as an example, is a topic of interest to Japanese manufacturers as the country strives to find sustainable alternatives to nuclear power with a view to renewables including solar and hydrogen fuel. During the event, I also learned that Japanese manufacturers are driving increased investment in research and development in an effort to build technology leadership and grow its domestic market. Long recognized as leaders in globalization, Japanese companies are continuing to seek growth in emerging markets such as China and Southeast Asia.

As always, I am interested in exchanging perspectives on industry and market trends and developments, so please do not hesitate to leave your comments below or tweet me @TimPHanley


Tim HanleyTim Hanley is the Global Leader of the Manufacturing Industry group of Deloitte Touche Tohmatsu Limited (DTTL). In his global industry leadership role, he directs strategic initiatives and investments to grow Deloitte member firm market share within the manufacturing industry. During his distinguished 35-year career, Hanley has led teams serving all business aspects, including consulting with top management regarding organizational financial strategy development and execution, acquisitions, and market development.