Production Line Approach to Service

Production-Line Approach to Service
The service sector of the economy is growing in size but shrinking in quality. So say a lot of people. Purveyors of service, for their part, think that they and their problems are fundamentally different from other businesses and their problems. They feel that service is people-intensive, while the rest of the economy is capital-intensive. But these distinctions are largely spurious. There are no such things as service industries. There are only industries whose service components are greater or less than those of other industries. Everybody is in service. Often the less there seems, the more there is. The more technologically sophisticated the generic product (e.g., cars and computers), the more dependent are its sales on the quality and availability of its accompanying customer services (e.g., display rooms, delivery, repairs and maintenance, application aids, operator training, installation advice, warranty fulfillment).

In this sense, General Motors is probably more service-intensive than manufacturing-intensive. Without its services its sales would shrivel. Thus the service sector of the economy is not merely comprised of the so-called service industries, such as banking, airlines, and maintenance. It includes the entire abundance of product-related services supplied by manufacturers and the sales-related services supplied by retailers. Yet we confuse things to our detriment by an outdated taxonomy. For example: The First National City Bank (Citibank) is one of the biggest worldwide banks. It has about 37,000 employees, over half of whom deal directly with the public, either selling them things (mostly money and deposit services) or helping them with things they have already bought (cashing checks, taking additional deposits, writing letters of credit, opening lock-boxes, managing corporate cash).

Most of the other employees work back in what is called “the factory”—a massive congeries of people, paper, and computers that processes, records, validates, and scrutinizes everything the first group has done. All the corporate taxonomists, including the U.S. Department of the Census, classify Citibank as a service company. IBM is the biggest worldwide manufacturer of computers. It has about 270,000 employees, over half of whom deal directly with the public, either selling them things (mostly machines) or helping them with the things they have already bought (installing and repairing machines, writing computer programs, training customers). Most of the other employees work back in the factory—a massive congeries of wires, microminiature electronic components, engineers, and assemblers. All the corporate taxonomists, including the U.S. Department of the Census, classify IBM as a manufacturing company. Something is wrong, and not just in the Bureau of the Census. The industrial world has changed more rapidly than our taxonomies.

If only taxonomy were involved, the consequences of our contradictory classifications would be trivial. After all, man lives perfectly well with his contradictions: his simultaneous faith, for instance, in both God and science; his attachment to facts and logic when making important business decisions, but reliance on feelings and emotion when making far more important life decisions, like marriage. I hope to show in this article that our contradictory notions about service may have malignant consequences. Not until we clarify the contradictions will companies begin to solve problems that now seem so intractible. In order to do so, they must think of themselves as performing manufacturing functions when it comes to their so-called “service” activities. Only then will they begin to make some significant progress in improving the quality and efficiency of service in the modern economy.

Field Versus Factory

People think of service as quite different from manufacturing. Service is presumed to be performed by individuals for other individuals, generally on a one-to-one basis. Manufacturing is presumed to be performed by machines, generally tended by large clusters of individuals whose sizes and configurations are themselves dictated by the machines’ requirements. Service (whether customer service or the services of service industries) is performed “out there in the field” by distant and loosely supervised people working under highly variable, and often volatile, conditions. Manufacturing occurs “here in the factory” under highly centralized, carefully organized, tightly controlled, and elaborately engineered conditions.