Whats Wrong With Our Reforms Picture

Written by Subhash Agrawal | Updated: May 22 2003, 05:30am hrs
After 10 years of erratic and half-hearted liberalisation, perhaps the single most important item that has been excluded from the Indian agenda is improving service quality. But you will not know this from reading our press or listening to consultants and industry captains who talk the talk very well in all the right places and in all the right words. The designation of Relationship Manager has become common in most client-based firms, while terms like lasting customer value or even customer delight have become frequent in slick Power Point presentations.

Even though good service is not an exact concept, we all pretty much know when we get it. It means politeness and responsiveness, or designing systems, procedures and work-flow around those who pay for it, or doing all those small things that will make a customer like you and want to do business with you. Most crucially, it means the right attitude and behaviour and not just loud rhetoric and more training workshops.

There are many columnists who do a far better job chronicling our daily dose of shoddy service from all quarters, especially Bibek whose travails at the bank, petrol pump or local electricity office read like a personal Friday the 13th serial. But there are two key questions remaining.

First, why is service so important The answer to this is that services, whether formally or informally, have always been a large and in fact pivotal part of any economy. In India, it is the service sector, which includes banking insurance, transportation, healthcare and tourism, which has been the fastest growing sector in the last 10 years. Moreover, official statistics grossly underestimate reality and there is a large hidden service sector which is unaccounted. For example, software written by manufacturing companies in-house is accounted under manufacturing, but if the same were to be sub-contracted to an outside firm it would come under service category.

There is an old myth among manufacturers that goods have high value and services have low value, but the actual facts are just the reverse. The pure cost of production of most products, whether a carpet, car or industrial machinery, is generally in the range of 20 to 30 per cent of final price, and the remainder 70 to 80 per cent is represented by making the complex delivery system work. Thus it is perhaps more correct to speak of service activity v/s manufacturing activity, and not service industry v/s manufacturing industry.

But most crucially, the answer is that customers remember your attitude, and not how your product performed. Study after study confirm this, more so in this age of global economy and worldwide sourcing opportunities. I once met a senior Japanese executive who simply got tired of his Indian supplier and moved elsewhere. Why Because the supplier would not even communicate to him the name of the ship the cargo was on.

So the next question is, if good service is so darn important, why dont we care Why is it that while we celebrate the revitalisation of Indian manufacturing, there is still that terribly misplaced sense of priorities The answer to this is more complex, and covers our unique Indian social mindset which shows an amazing lack of respect for each other. The caste system is merely the highest point of this symptom. And related to this is the huge amount of inflexibility and bureaucracy in our thinking, not just in government but even among private citizens.

But I suspect another reason is that India suffers from too many economists who, if you study academic journals or doctoral theses going back 50 years, have paid scant or no attention to this subject. Why Because service quality is part of the weightless economy which mixes very poorly with the Indian data-crunching tradition. Goods and commodities are tangible items which can be seen, touched, stored, counted, ANOVA-ed, beta-ed and regressed. Hence, they can be slotted as wealth, assets, reserves or future contingencies. There is that reassuring physical manifestation to them. Service on the other hand is an ungodly and heretic outsider, intangible and ethereal.

This intangible is now becoming real, with poor service quality taking a toll on domestic GDP and lowering Indias image to a point where the country loses billions worth of opportunity abroad every year. Improvement in all areas is required of course, but common sense suggests that improving service quality is far cheaper than improving product quality or continuous product innovation. Only, we have to first get our attitude right.

The author is an analyst of Indian political and business trends and the editor of India Focus, a political risk report for international investors