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D. Murali

Don't compete for links in the chain, compete for the chain itself. This is useful advice to survive in a climate of industrialisation of services.

Words such as offshoring and outsourcing scare readers from front pages of newspapers, but they miss something important, says Uday Karmarkar in his article "Will you Survive the Services Revolution?" in the latest Harvard Business Review. "The real issue is the loss of service competitiveness," he writes, because "we are now riding a tidal wave of change that we can think of as industrialisation of services."

While the US has been seeing its manufacturing sector shrink from 34 per cent - in terms of share of employment - in 1950 to 12 per cent in 2003, and losing more than 2 million jobs to offshore outsourcing and global competition between 2000 and 2003, an ongoing research estimates that "roughly 10 million service jobs could be lost." The cause is not some `love affair with the o words"; technology is the "primary change driver." If you look beyond the much-hyped info highway, Moore's Law, and wireless wonders, you would see how technology creates "an information assembly line" where, as Karmarkar puts it, "information can be standardised, built to order, assembled from components, picked, packed, stored and shipped, all using processes resembling manufacturing's." When information can be industrialised thus and canned as easily as pickles, "costs of logistics and storage are minimal, only labour and intellectual property matter."

Diagnostic imaging is one of the illustrations that the article discusses. With technology, you can think of scanning a patient in a mobile trailer, and send images electronically to the diagnosing radiologist who uses voice recognition software to transcribe. "The same phenomena that forever altered services like simple data entry and credit card processing are now affecting more interactive, complex business services," observes the author, listing a host of such, including market research, content management, accounting, tax returns, billing and so on.

To save themselves, service companies have to "take a good, hard look at their strategy, beginning with a careful scan of their own end-to-end information chain." Don't compete for links in the chain, is a useful clue. "Compete for the chain itself", exhorts the author, emphasising end-to-end, as in the case of Virgin Atlantic Airways providing complimentary limousine service for business-class ticket holders. Using data mines, "everyone from the limo driver to the housekeeper knows what newspaper you read, what wine and snacks you prefer in the minibar, and how many pillows you like on your bed."

Where does the info chain end? "In an appliance or tool that directly affects consumer behaviour," answers Karmarkar. With personal digital assistants (PDAs), phones, TVs, PCs and such competing for attention, "service companies have an opportunity to dominate the screen and the appliance closest to the customer". Focus on the design of the service rather than the appliance, he suggests. A success story in this sphere is NTT DoCoMo's iMode servers. It has 40 million subscribers and commands "a disproportionate degree of power and control over other players in the information chain." Thus, banks and online magazines "pay for favourable placement of their content on the iMode screen."

The `three Rs' for the service companies are: Realign, redesign and restructure. Realigning can be painful when long-established businesses find a sudden challenge that threatens their very existence. The article narrates the story of how Thomson had to realign when its forte - of distributing paper-based information about US court decisions and law - got a knock with courts starting to publish material electronically.

Redesign can involve pushing to front-office greater automation, as IndyMac Bank did: "On the front end is an automated, rule-based platform called e-MITS, which allows customers and brokers to apply for mortgage online and automates certain tasks of application evaluation, risk-based pricing and rate-lock guarantees."

Restructure demands organisational change; such as `a third organisation', apart from front office and backroom, "for dealing with partnerships - suppliers and co-producers". No watertight compartments, but these groups "have to live with some fuzziness in their task definitions". Technology experts cannot afford to remain cloistered in their towers, but have to be "distributed throughout the organisation". So, don't be bogged down by oh-s; they are only `part of the revolution', Karmarkar would conclude.

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