It is very likely that you are involved in the services sector as a service provider, now the largest part of the world economy accounting for over 70 % of global Gross Domestic Product (GDP) or approximately USD 55 trillion in 2014 (World Bank Development Indicators 2015). But it is absolutely certain that you are a services consumer – each time you have your hair cut, see the doctor, book a holiday, choose a restaurant, follow a training course, make a phone call or use a business consultant, you are on the receiving end of service delivery. The sector is expanding dynamically. For example, not long ago, online services such as e-banking and shopping were unknown. Now they are an essential part of daily life for many of us.
The service economy embraces large international organizations such as airlines, banks, insurance companies, telecommunications providers and hotel chains, and also the millions of small locally owned service enterprises such as restaurants, laundries and dentists, and countless business-to-business services.
No surprise, therefore, that the provision of services, or “intangible” goods, has outstripped the industrial sector in most developed and developing countries as the worldʼs fastest-growing part of the economy, and the largest employer. The services or “tertiary” sector is essentially characterized by the production of services instead of products, be they manufactured, grown, fished or mined. A “service” can be defined as the result of at least one activity performed between the supplier and customer that is generally intangible.
Even industry is being transformed by the concept of “servitization”, with many manufacturing organizations building the service component into their product offerings to create added value throughout the supply chain and remain competitive. Manufacturers realize that it is no longer enough simply to make products, they must sell solutions and services wrapped around those products to meet the latest customer expectations.
Faster than industry
From the worldʼs major economies to many of the smallest, the story is the same – the services sector is growing at a faster pace than industry. According to US sources, the sector was responsible for 90 % of all the jobs created in 2015, and is projected to account for about 79 % of total employment by 2018. An article in the Financial Times revealed, for the first time last year, that services represented more than half of the Chinese economy, and the sector is now seen as the key to growth in compensating for a slowdown in the manufacturing sector. Today, Africaʼs services sector contributes to almost half of the continentʼs output, and grew at more than twice the average world rate during 2009-2012, according to a report published by the United Nations Conference on Trade and Development (UNCTAD). The sector was the most important driver of growth in 30 out of 54 African countries during that period.
Europe is no different, with over 70 % of the economic activity of the European Unionʼs 28 member states being generated by the services sector . This is the reason why the creation of a single market for services has become a top priority for the old continent, the aim being to remove barriers for companies looking to offer cross-border services and make it easier for them to do business, the European Commission (EC) believes.
“The Commission recognizes that businesses and professionals still face too many difficulties operating across borders within the Single Market. There are differences and inconsistencies in the regulation of professions, unnecessary regulatory barriers to the provision of services, and a lack of clarity in the requirements to be fulfilled by organizations providing those services. However, standardization has already been proven to enhance the safety of, and trade in, goods. Its potential to make a similar contribution in support of the services sectors is just beginning,” says Javier García Díaz, Chairman of the European Committee for Standardization (CEN) Strategy Advisory Group on Services.
Importance of standards
While the statistics underline the service revolution taking place in the world today, the big changes rocking the sector present their own set of challenges. With international trade in services now the driver of economic growth in developed and developing countries, come the dangers inherent in any dramatic market expansion – lack of controls, consumer exploitation, opacity, poor quality, inefficiency, questionable business practices and other obstacles to good service provision.
In parallel with such growth, the services sector is in vital need of standards to establish good practice, encourage consistently high service quality, and build consumer confidence. Standards for services can cut the business costs of poor service and reduce customer complaints. They underpin trust, provide safeguards, enable compliance with laws and regulations, and offer protection for the customer.
The rapidly evolving service sector and the urgent need for standards has also spurred many divergent approaches to standardization at national and regional level around the world. ISO is responding to calls from the EC, the World Trade Organization (WTO) and others, to unify and harmonize these efforts at an international level, with the objective of avoiding unnecessary technical barriers to trade (TBT).
A prime mover in this endeavour for trade in products is the WTO TBT Agreement, which obliges governments to use international standards as a basis for promoting greater regulatory alignment on a global scale, for improving the efficiency of production and facilitating international trade, as well as encouraging the development of such standards. Similar principles for services are applied by the WTO General Agreement on Trade in Services (GATS), requiring each of 140 WTO member economies to have a Schedule of Specific Commitments regarding, for example, the implementation of specified standards.
Standards for services
ISO and CEN lead the way in the development of standards for services. Their work covers both horizontal standards, having broad application across the services sector, and vertical standards, those applied to specific service domains such as tourism, finance, market research, etc.
“CEN has wide experience in developing standards for services, and has been supported at the political level by a clear reference to the potential of standardization to help improve the provision of services within the internal market, both in the Regulation on European Standardization 1025/2012 (aimed at improving the European standardization system, empowering CEN and CENELEC to develop standards for services and not only products), and in a recent EC Communication ʻUpgrading the Single Market: more opportunities for people and businessʼ that foresees the establishment of a ʻJoint Initiative on Standardizationʼ between the Commission, the industry concerned, European standardization organizations and the standardization community in general,” says Javier García Díaz.
The whole point of these initiatives, he says, is to modernize the existing partnerships and speed up the standards-setting process. This support has materialized in a request for standardization of horizontal standards (Mandate M/517) for any type of service such as procurement, contracts and performance assessment.
An ISO priority
Developing standards for services and ensuring they make a positive contribution to the globalization of the services sector is one of the priorities of the ISO Strategy 2016-2020. The Strategy pinpoints ISOʼs major strategic directions, a key objective of which is to eliminate global barriers and prejudices by making sure ISO International Standards can be used everywhere by government, business and society.
This is particularly topical right now as momentum builds for using ISO International Standards as a key means to facilitate international trade. ISO has already published more than 700 standards that apply to specific services, and has also developed ISO/IEC Guide 76 addressing consumer issues. The guide enables standards developers to prepare standards for any service via a checklist that considers all matters of consumer interest, including the needs of children, older persons, persons with disabilities and those from different ethnic and cultural heritages.
“Guide 76 is written from the consumer perspective with the aim of helping business representatives on standards committees to better understand consumer needs, and help them to consider issues that may not be in the forefront of their minds when developing standards for services. Hence, application of the guide should result in delivering more widely encompassing and robust standards,” says Arnold Pindar, Co-Convenor of the ISO/COPOLCO Services Group.
ISOʼs workshop, “Global services – ISO standards as solutions”, held in Geneva, Switzerland, on 13-14 June 2016, highlights the worldwide potential for services standardization with participation by WTO and many ISO member bodies, and looks particularly at the needs and expectations of all interested stakeholders, including companies, consumers, governments and developing countries, concerning ISO standards that support services. It focuses on how ISO International Standards can best help design, assess and measure service excellence to benefit businesses and customers.
With so much happening in the world of ISO and service standards, this issue of ISOfocus throws a spotlight on the globally important services sector and looks closely at the work ISO technical committees are doing in developing standards for IT service management, consulting, tourism and training.
Challenges to standardization in the services sector…
Much of that committee work on standards for services is aimed at addressing key service market trends and challenges, in addition to the principal objective of developing the right standards, at the right time, with the right participants. García Díaz cites a recent report developed by AFNOR, ISO member for France, that identified the following main obstacles:
- Changes in the way services are delivered: e.g. “Business-to-Business” or “Business-to-Consumer”, locally or offshoring, face-to-face or electronically, etc. Also, new business models are appearing such as the collaborative economy, which force service providers to innovate constantly.
- Increases in technological and organizational complexity: including outsourcing of support functions and activity-related services, improving internal processes to allow for benchmarking (measurement & evaluation) with other services, etc.
- User-oriented trends: i.e. a greater need to consider the specific needs of different users and provide tailored experiences, and demands for more transparent information from the services concerned.
- Development of human capital: i.e. new skills are required from service staff and organizations with the aim of achieving complete customer satisfaction.
- The impact of digital technologies: these radically influence every field of activity, contribute to all of the above challenges, and provide tools such as “big data” that facilitate the capture and use of data to better understand and define customer expectations.
Although the report also found that service providers faced challenges in improving their market position, business performance, the service provider-suppliers relationships and the service provider-clients relationship, García Díaz pointed to a 2011 study by the Technopolis Group on the implementation of service standards and their impact on service providers and users indicating some very positive benefits of using service standards. The findings were ranked by percentage of interviewees as follows:
- Ability to demonstrate improved service quality to customers (95 %)
- Improved customer satisfaction (89 %)
- Advantage of common definitions/terminology (86 %)
- More transparency in services provided (86 %)
- Improved contractual relationships (83 %)
- More able to compare different service offers/providers (77 %)
- Increased market share (52 %)
- Increased profitability (51 %)
- Ability to export services (50 %)
Servicing cultural differences
Standards developers also have to take regional and national characteristics into account when designing truly international standards. Arnold Pindar sees some fundamental cultural differences between countries and in attitudes to the provision of services, especially in the language used. “For example, in Japan the word for customer, if translated literally, means ʻhonoured guestʼ. This is why you are greeted on entering shops in Japan, and thanked for your visit as you leave. The Russian language does not really have a word for customer. The nearest word means ʻreceiver of my outputʼ – a very different approach.”
“Mentioning this at an ISO COPOLCO/DEVCO training event1) in Africa, participants from some 35 mainly African countries indicated that they had similar differences in their languages that translated into better or worse services provision. I believe these different basic attitudes also occur between different trades and services within countries. Overcoming these fundamental differences is a long-term issue, as we have seen in the years it has taken to establish a relatively small number of standards for services,” he explains.
“Making a huge difference in Africa”
Hermogène Nsengimana, Secretary General of the African Organisation for Standardisation (ARSO), and Chairperson of the Pan-African Quality Infrastructure (PAQI), reports that service standards are most often used in the tourism and finance sectors in Africa where they have made a huge difference.
“These are the two fastest-growing sectors, attracting substantial external investment. But standards have also influenced the development of the media, especially newspapers, electronic media and digital information,” he says, adding that while the service sector is expected to surpass other sectors as the driver of the African economy, there is a clear need to engage stakeholders more broadly in the development of service standards.
Hermogène points to the prevalence of various regulatory and policy shortcomings which impede Africa from fully capitalizing on its services sector potential. For Africa to better harness the potential of its service economy, regulations and policies for infrastructure services need to target existing market failures more effectively, including issues of accessibility, quality, affordability and competition.
Standards are seen as catalysts to spur better access for consumers and businesses to services that are cheaper and provide a wider variety than those currently available, and to untapped opportunities in cross-border trade in services.
He cites a growing awareness of the need to benefit from trade in services opportunities at bilateral, regional and multilateral levels in Africa as the reason for recent training workshops sponsored by the Department of Trade and Industry of the African Union Commission (AUC) in collaboration with the United Nations Conference on Trade and Development (UNCTAD), and also for strategy brainstorming in preparation for the important African Union Continental Free Trade Area (AU-CFTA) negotiations on services.
1) Training event run jointly by the ISO Committee on consumer policy (COPOLCO) and the ISO Committee on developing country matters (DEVCO) to help national standards bodies and consumer associations work together more effectively in including consumer interests in standards.