A service is owned,
delivered, or sold but cannot be turned over by the service provider to the
customer like the goods. It is an intangible commodity. Practically every
product is associated with some type of service to it. The service delivery is
commissioned by service provider to render service to the customer. The old
dichotomy of product and service of the understanding that service provider
referred to as only specific third party organizational sub-units and/or
outsourced suppliers is being replaced with the new business model known as
servitization of products. The servitization refers to the innovation of
organisation’s capabilities and processes to better create value through a
shift from selling products to selling product-service combination.
Let us take an example of truck tyres. Instead of buying tyres, truck owners pay for the use of tyres (owned by tyre dealer) by kilometer tracked using GPS tracking units. Since the tyre is still owned by the tyre dealer, the truck owner returns the tyre to the dealer once the productive life of tyre is over. The truck owner need not worry about investment in, retreading and disposal of tyres. The business model aligns closely the interests of truck owners and tyre dealers. So it is servitization of tyres: the truck owner is paying for service not for the product. More classic example is the Rolls-Royce, the manufacturer of aero engines, selling by hour the power generated by their engine providing all support services including maintenance. The Rolls-Royce treats its business as service business, not seller of the aero engines. The service innovation moves on. Is our service sector moving forward or backward?
In
developed nations, services represent 70, 75, 80 percent of GDP. The service
economy in developing countries is mostly concentrated in human services,
hospitality, retail, health, education, telecommunication, information
technology and financial services. Even in China, which we mostly think about
manufacturing, infrastructure, mining and construction, services represent about
50 percent of the economy. In a low income country we can safely say it would
be at least 50 percent of GDP. As the economies continue to develop, the
importance of services grow because of the exponential increased demand for
faster, more and better services.
Even though service sector’s contribution to the overall economy is heavy, it is neglected and abused, and given low priority in most countries. And, when we talk about innovation, people typically think about product innovation, not innovation in providing services. Here, I can safely say that services have not changed at all over several decades. For instance, brick & mortar banks still provide services that are about 10 years behind time. The auto service sector is in dilapidated condition. The construction sector seems in back-gear. I see no change in retail experience in 1994 versus 2014. But twenty years ago, we were perfectly fine with “I’ll deliver it to you in a month, plus or minus a week.” Today, the clients expect you to deliver it in few days, plus or minus few hours. The quality and delivery of services count, and it will matter more as the economy develops further.
We have to have business models that are effective and smart for efficient delivery of services. While we may be far behind the level that is required for servitization, the straightforward service efficiency has to come from not only business operation and management but also from business model that scales up or down: the service level has to adjust to the highly flexible demands. In a small country service market fluctuates at unprecedented level and is highly unpredictable. So service efficiency has to take account of high as well as low demands adjusting quickly and efficiently. Thus, when we start thinking about innovation, there is an instinctive reaction to consider adjusting the business model that changes with market, in other words it scales up or down quickly adjusting with the changing market demands. In the case of products the concept of scaling up/down through production levelling by volume through longer-term average demand works, but not in services.
Unfortunately the government is too far behind to take cognizance of the need for rational support to the service economy enabling efficient private sector service delivery. Their mind is attuned to the idiotic pre-conceived notion that service sector makes money through unfair means. So its approach and attitude is limited to the practice of refuse-and-abuse as means for pursuing mainly their lead on what-is-there-for-me (and other category civil servants is busy fishing training abroad as almost a full-time job). Petty bureaucrats becoming tyrants (generally lead by immigration, revenue & customs, construction and other sectors) are not uncommon. It looks as if those bureaucrats know the weaknesses of their supervisors and therefore they treat themselves out of the supervisors' control which beget more greed for 'rewards' through corrupt practices. For those service providers who carve this-is-for-you slices for officeholders, the quality and delivery of services are non-issues because they are too preoccupied looking for mean means to make, without investing, money -- in coalition with corrupt individuals -- as quick as possible. It is a very counterproductive rogue private-public coalition that is almost impossible to apprehend.
For instance, government invites tender for the product/service rates that should remain valid for one full financial year and does not mention the quantities of goods/services to be procured to suit themselves well. The government pool vehicle may go for repair with a work-order to a workshop whose arbitrary rates have been accepted for a year by the government tender committee. The vehicle may remain overnight in workshop and return next day with the repair bill. The workshop does nothing (neither mechanic nor spares are needed) but the repair bill is prepared, paid and shared. The workshop does not need to keep its book of accounts because it is covered by the exception (but generalized for the convenience of self-serving individuals, another major misplaced calling) under Rule No. 4.2 of General Provisions of Rules on Income Tax Act of the Kingdom of Bhutan (where lies, in my view, the root cause of corruption). No audit/anti-corruption unit can catch it. So why would you need time limits and quantities for submitting arbitrary product/service rates in the government tender?
On works, the procedure for awarding contracts to lowest priced bid, treating technical and financial bid capacities at same footing once certain threshold is crossed, has failed. It has helped dubious contractors with questionable integrity to interface with shady bureaucrats for favours. As a result technical standards and specifications are sacrificed, technically qualified persons became redundant, institutions are weakened and sound investments in construction sector are eluded.
So the service economy is a hotchpotch of policy muddle, capacity cocktail of national and non-national workers, operational imposture (aka fronting), corruption plinth, decayed milieu and/or shambolic bazaar. The service sector has to have credible capability to provide the customers best value for their money. It is devoid of new initiative, ideas, knowledge, innovation, sound policy/regulatory support and investment ingenuity for heading in the right direction. “If we are in the right direction, all we have to do is keep on walking,” says Zen Proverb. Nurturing service economy into the right direction is the issue, the BIG issue!
The doctors, engineers, lawyers, accountants, managers, sales representatives, teachers, and other skilled professionals together serve as the engine of the service economy. If the service economy is disorganized from the core and the system undermines their value and technical knowledge, the professionals do not find enough functional space to perform with dedication and integrity. So where would the transformational driver of workforce change, away from present “casual culture”, come from? I wonder. I am not under foolish illusion that a chain is as strong as its strongest link. No sir, a chain is only as strong as its weakest link!
