Industrial tin soldiers get their marching orders: A new book says that a service mentality will soon be indispensable in business. Roger Trapp reports

AFTER flourishing in the heady days of the 1980s, the service sector has fallen out of favour during the recession. 'Why not go back to making things that can be sold as a means of boosting national wealth?', cry the doubters.

But to Sandra Vandermerwe, the faculty member at the International Institute for Management Development in Lausanne, Switzerland, this is not an option. In her book From Tin Soldiers to Russian Dolls, she writes: 'The inroads made by services will continue into the next millennium. In fact, they are likely to be even more predominant, bringing success to those corporations which have made the transition from tin soldiers to Russian dolls - from an industrial to a service ethos.'

But how can she be so sure? By assuming that 'every high-value enterprise is in the business of providing services'. In other words, one can no longer differentiate between traditional industry and the modern 'people business'.

Helpful as this academic assumption sounds, it has its difficulties. In particular, moving towards a service mentality requires finding ways to put a value on what, after all, are intangible assets.

But that is no reason to avoid striving for the new world, she suggests. After an exhaustive (and exhausting) journey through the results of extensive interviews with senior executives and academic texts, Ms Vandermerwe concludes that customer service is not an optional extra, as it was in the recent past.

Then, the 'tin soldiers' of her title profited by knowing what to do rather than how to do something. However, 'in a world made of Russian dolls, interdependent and connected, the currency that matters is know-how'.

This might seem a rather nice differentiation. After all, wasn't successful manufacturing built on a combination of know-how and knowing what to do? But at a time when environmental and other concerns are beginning to play a large part in business, it is hard to argue with the notion that a company out of touch with its customers is doomed.

'Whereas the service ethos is now the competitive differentiator, it will become a condition for corporate survival in the future . . . Never again can the material matter as much as the immaterial, or matter be as important as no matter. The only question is: who can be best at it?'

'From Tin Soldiers to Russian Dolls' is published by Butterworth Heinemann, priced at pounds 25.

(Photograph omitted)