In this blog from our Lean Methodology Series,
we explore the topics of failure demand and value demand and discuss how continuous improvement necessitates change management.
Learn more about our consultation services that fuse people, technology, and performance to create harmonious, human+ workforces, or read on to discover how to fight failure demand.
Author and business philosopher John Seddon coined the terms value demand and failure demand in 1989. He defines failure demand as ‘demand caused by a failure to do something or do something right for the customer’, he originally called it ‘the demand we don’t want.’
Imagine that you run a restaurant. During quiet periods your restaurant wins accolades and awards and has some of the best reviews in the press. However, whenever the restaurant is busy, the quality of food coming from the kitchen takes a steep nosedive. Dishes are overcooked, undercooked or the wrong food is sent to tables. As a result, many of the customers reject what they are given. At peak times as many as half the dishes that leave the kitchen are sent back for one reason or another.
You are lucky enough that your reputation is not in tatters, but in order to produce 100 plates of food for customers, your kitchen may need to cook 150 plates of food.
This imaginary example is a good way to demonstrate that when a system works, we assume nothing is wrong, but not all systems are scalable. The same team cooking food during quiet periods cannot necessarily produce the same results at scale.
This example also highlights that system issues and inefficiencies can also scale up exponentially too. Just as we seek to scale up efficiencies or beneficial processes that produce ROI, scaling up issues and inefficiencies is dangerous if not managed carefully.
As our imaginary kitchen must produce more dishes to replace the bad ones, this increases the pressure on the already stretched team. This leads us to the subject of this blog, fighting failure demand.
When value demand (the desire for a delicious dish) is met it creates customer satisfaction. When a dish fails, this creates customer failure demand. Failure demand adds an extra diversion to the process of pleasing your customers and increases the scale of pressure and error on the rest of your business.
Take a moment to think about your recent interactions as a customer and consider how many of them were avoidable. You might imagine or remember these scenarios:
These are all examples of Failure Demand.
Nobody wins in these situations – it significantly increases customer effort, negatively impacts their perception of the organization, and drives up operating costs. In many cases failure demand within a business is so common that there are whole customer service workflows dedicated to resolving it.
However, if we know these issues exist, why are businesses so slow to fix them? Why does failure demand make up so much of the overall demand in service-based organizations?
Generally, we see it as a lack of analysis.
Organizations are reliant on the service delivery metrics in place to understand the work and to determine things like resource requirements. Consider the restaurant kitchen again, perhaps the available data here comes from the POS system and tells us things like how many dishes were sold, but it does not show how many were sent back.
To understand the issue in an imaginary restaurant kitchen we need resources (employee time or an external auditor) to check the stock and inventory levels. Then we can see that we are serving 1.5 x the food we are selling. This scenario is also expensive. The restaurant may not have been factoring the cost of the additional, replacement food stock and chef time into their pricing and their bottom line could be getting hit.
It’s often even more abstract than that, too – the method and metrics in place for the analysis and recording of failure demand data might be very old legacy systems in some businesses, where failure demand data is not logged simply because there isn’t a form field or drop-down to record it.
Employees will only use the platforms and procedures they are given by management, leading to a loss of information that would otherwise be useful to fix failure demand problems and inefficiencies.
How can businesses combat this issue?
We advise leaders to observe the work where it happens; relying less on the standard (and often arbitrary) metrics that are in place and actively seek a fresh perspective. This means leaders must understand this will provide them with insights about inefficiencies and failure demand issues. In many cases they may be confronted with issues that they may not have previously realized were occurring.
Returning to our imaginary restaurant, the manager hires Roboyo to provide consultation, advice, and a hyperautomated technological solution. Quite quickly it becomes apparent the main issue is that the restaurant is understaffed (and that is only one of several major impediments to scalable performance).
Senior members of kitchen staff are also doing a large proportion of the unskilled preparation work. Due to the reputation of the restaurant, they are also regularly called to tables to be complimented on the dishes which were well-received. A great problem to have but a problem none the less.
This data begins to build a picture of the problems that are causing the errors and the failure demand. Gathering data is the first step to understanding how to implement continuous improvement. Within a business environment, whether your company is B2C or B2B, failure demand is an unfortunate inevitability.
The skill of minimizing failure demand and maximizing value demand comes down to taking the time and investing the resources to identify the causes.
What, Where, Why, How, Who, When?
Here are some example statistics for a bank:
This information is useful, but the missing part of the puzzle is why. Often businesses collect data like the above examples but don’t investigate the causes of the failure demand and implement lasting solutions that change processes to remove obstacles and delays.
Where customers are experiencing delays for reasons outside the control of the company, customer communications that manage their expectations can be added to the user experience journey to address this.
For example, if a customer expects a bank account to be open instantly, making it clear within their user experience for account opening that it takes 3 – 5 working days and thanking them for their patience can reduce the number of calls chasing the account opening delay.
Every business has different challenges and different procedures, which is why a detailed analysis of your business is the best way to fight failure demand.
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