In this QuickRead, we take a look at Failure Demand, exploring what it is, where to find it, how to remove it, and why eliminating failure demand will help you reduce operating costs and increase both customer and employee satisfaction.
Where did the concept of Failure Demand originate?
Failure demand is a concept initially used in service organisations, first discovered and articulated by Professor John Seddon as ‘demand caused by a failure to do something or do something right for the customer’.
The concept and application of failure demand is now popular across many different functions and sectors.
What is Failure Demand?
Failure Demand is a customer centric concept that focuses on the root cause of issues in a given business process. When we look at processes from a customer viewpoint, we can separate them into two categories:
- Value Demand: Delivers exactly what the customer wants or needs. These are products and services the customer is happy to pay for; an efficient service, right products first time etc.
Value Demand enhances the customer experience, creates loyalty and drives a positive brand.
- Failure Demand: Poor service that does not deliver what the customer wants or needs. These are products and services that the customer does not want to pay for; waiting, receiving the wrong product, missing items etc.
Failure Demand will only ever add unnecessary additional costs, disappoint the customer, and impact company brand.
Simply put, failure demand is something that would not exist in a perfect or flawless process.
What are the benefits of applying the Failure Demand concept?
Removing Failure Demand will increase capacity, improve performance, enhance both customer and employee satisfaction, and significantly reduce cost. In addition, financial savings and benefits are often realised quickly through simply stopping or eliminating a process step.
How can I Identify Failure Demand in my Organisation?
Failure Demand is typically caused by failure somewhere else in the process – so it is vital you focus on the root cause of the issue. There are many tools and techniques for identifying failure demand and we will list some of our favourite ChangeWise concepts here:
A demand chart focuses on how work flows into your organisation. This will help to highlight any existing rework for the demand which can be classified as Failure Demand.
Once you understand the demand and its flow, it is useful to categorise the work into 3 types (let’s use the expenses process for an accounting department as an example):
Runners = frequent demand that happens daily (matching expenses claimed with receipts)
Repeaters = demand that happens regularly and consistently (running monthly expense reports)
Rarities = demand that rarely happens (expenses claimed do not match receipts)
Typically, rarities account for a small proportion of overall demand, but require heavy processing time and employee effort. This is often where we can identify excellent opportunities for removing failure demand.
Value Stream Mapping:
Creating a Value Stream Map (VSM), is a great way to study the current ‘as is’ process state, rather than looking at traditional process maps which will not include the non-value processing. They also help you view your organisation as a value stream from your customer’s viewpoint, as opposed to silos (Marketing, Finance, IT, HR etc). Silo thinking is another common cause for failure demand. See our QuickRead on Value Stream Mapping for more information.
Customer Journey Mapping:
Customer Journey Mapping is a visual tool to help you gain a better understanding of the buying experience from the customer’s perspective, it focuses on their pain points and actions to specific needs. The idea is to find and map out all the possible touchpoints/interactions, as the interaction with the lowest experience defines the overall level of customer satisfaction at the end of the journey. See our QuickRead on Journey Mapping.
Identify value through assessing each process step and categorising as follows:
8 Wastes Analysis (and 7 service wastes)
The 8 wastes include Transportation, Inventory, Motion, Waiting, Over-production, Over-processing, Defects and Skills. These add unnecessary cost and time to your business, but are easily identified once you have a value stream map. See our QuickReads on The 8 Classic Wastes of TPS and also The Seven Service Wastes.
The fishbone diagram is a particularly useful, visual tool when assessing Failure Demand. It focuses on cause and effect in order to get to the root cause of a problem. The issue is displayed at the mouth of the fish, with possible contributing causes listed under the bones. The facilitator identifies the root cause through continually asking ‘why’.
For example, consider a customer complaint to a marketing agency;
Issue Statement: The customer is unhappy because we (the agency) post special offers too late. This statement would appear at the mouth of the fish, with various areas identified for discussion:
Possible causes are then listed, asking the team ‘why’ until a potential root cause is identified for each:
Cause: The posting team post late
- Why do the posting team post late?
- Approval of copy takes too long to get back to the posting team
- Why are the copy team approving/checking work?
- Approval/checking is required because the posting team make mistakes
- Why are the posting team making mistakes?
- The posting team do not know the client well enough?
- Why do the posting team have limited knowledge of the client?
- The posting team are made up of temporary staff who do not have time to get to know the client.
We have now identified a possible root cause where we can begin to discuss solutions etc.
Failure Demand is a customer centric concept that focuses on the root cause of issues in a given business process. Removing Failure Demand will increase capacity, improve performance, enhance both customer and employee satisfaction, and significantly reduce cost. In addition, financial savings and benefits are often realised quickly through simply stopping or eliminating a process step.
Want to know more about how Failure Demand Analysis could improve your bottom line? Contact us at email@example.com
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