Mass services as a job creation engine

They create large new markets through low prices and rapid employment opportunities; needed policy interventions to tap their potential

Industrial technologies such as assembly lines and flexible packaging drove the growth of mass manufacturing in the 20th century. As a result, products became available at more and more affordable prices, driving mass consumption of a vast array of consumer durables and packaged goods. Similarly, in the 21st century, digital technologies are transforming the cost-price equation for services and driving the growth of mass services. Telecom, financial services and aviation services are now being packaged into consumption units and are becoming affordable for billions of consumers. With more services available at a lower cost, consumption goes up, jobs get created rapidly and the economy is positioned for sustained, long-term growth.

Mass services can be defined as the process of packaging services into discrete consumption units (service units) that can be priced and delivered at affordable prices to hundreds of millions of frugal consumers. Service units can be minutes of talk time, a plane ride, visit to a doctor, TV serial episode, and so on. A service unit is the equivalent of the fabled shampoo sachet, the single candy in a wrapper, the 65 ml juice pack, a tiny packet of chips.

India has been at the forefront of mass services starting with the growth of the telecom sector post liberalisation in the mid-1990s. At that time, the price of a phone call was about Rs 16 per minute and the total subscriber base was just above one million. Telecom providers soon realised they needed to sell talk time in prepaid service units for as low as Rs 10. As cost per minute fell to Rs 1, consumers began buying as little as 10 minutes of talk time through prepaid cards. Talk time affordability massively expanded the market so that India now has more than 900 million subscribers. The same phenomenon is now playing out in mobile data services, with prices plunging 95 per cent from Rs 1,000 per GB to about Rs 10 per GB. India now has the lowest mobile data prices in the world and has become the world’s leading consumer of mobile data, far ahead of the US and China.

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The financial services and aviation sectors in India are now seeing the rise of mass services. We have analysed how these mass services are developing and how competitive strategies and business models are evolving. Mass services are delivered by assembling a service value chain that integrates together physical and digital layers at the consumption moment. Integration requires agreeing on the definition of a standard service unit; ensuring technical interoperability across all the participants in the value chain; developing technology-based payment arrangements to share revenues; and capturing customer experience so that services can be improved through a continuous feedback loop. An integrated service value chain massively drives down transaction costs, unlocks experience curve effects and dramatically increases scale economies by improving utilisation. 

Mass services create large new markets through dramatically lower prices and enable rapid job creation. To tap this potential several policy interventions may be considered. Technical standards can be established to enable seamless interoperability in selected industries. The India Stack — linking together a unique digital identity, a bank account and a mobile number — is an excellent illustration of how technology standards can drive market creation. Building on the India Stack concept, digital standards are now being established that enable seamless digital air travel. A passenger can voluntarily link their air ticket to their Aadhaar number, thus enabling access to their biometrics. The airport operator can use their Aadhaar number and biometrics to authenticate the passenger when they reach the airport. It will then be possible to provide fast airport access, a digital boarding pass and rapid security clearances. The melding together of physical and digital layers with appropriate technical standards and payment arrangements will make it possible for an Indian air traveller to travel in digital comfort.

Another important policy intervention for mass services is to ensure that regulators enable market-based pricing and revenue sharing in an equitable manner. For instance, in both the telecom and aviation sectors, regulators have decided that certain tariff elements will be regulated and other elements left to market forces. Moreover, regulators have to ascertain how to allocate revenues among various value chain participants and handle contentious issues such as surge pricing. The government can also play a major role in jump-starting new markets for mass services by acting as an early adopter or by providing financial incentives. This is already happening for electric buses, e-rickshaws and in regional aviation.

Finally, the government may also consider playing a lead role in establishing service value chains that can provide major societal benefits and which require both government action and participation from the private sector. For example, it might be possible to create a set of technology standards and revenue sharing arrangements to provide distance learning to college students around the country so that they can get the benefit of the best teachers and the best courses in their own institutions.

The time has come for us to evaluate sector by sector how today’s digital technologies can be harnessed to provide world leading services at massively low prices. The telecom, aviation and financial services sectors are showing the way. Each of these sectors is growing quickly, adding jobs and generating significant wealth for investors. Similar service value chains can surely be created in health care, education, tourism, media, hospitality, transportation and other sectors. Mass services in these sectors can also take off and create millions of new jobs.

Arindam Bhattacharya is senior partner and director, BCG Henderson Institute. Jayant Sinha is minister of state for civil aviation and a member of Parliament from Hazaribagh, Jharkhand. Views are personal