The concept of failure demand was first described by John Seddon in his book “I Want You to Cheat”, published in 1992. It was initially called “demand we don’t want” and later, after much careful thought, re-named “failure demand”. Since then, it has become widely known by people who work in service organisations. But do they understand it and do they know what to do about it?
What is Failure Demand?
It is demand caused by a failure to do something or do something right for the customer. Customers come back, making further demands, unnecessarily consuming the organisation’s resources because the service they receive is ineffective.
In order to understand demand:
- Note how it is defined in customer terms.
- Imagine what service would be like if every customer got whatever they needed… Seddon sets a high bar.
Failure demand stands in contrast to value demand. The latter consists of customer requests that are a normal part of providing a service.
In conventional command-and-control service organisations, failure demand routinely runs at 40 – 60% of total customer demand. In some organisations, particularly health and social care and utilities, it can be as high as 80% or more. It is astonishing burden on capacity and an astonishing cost.
Failure Demand Analysis
To find out how much failure demand there is you need to study: What demands, in their terms, do customers make? How many of these are caused by failure to do something or do something right?
- Study demand as it arises, at the points where your customers transact with your organisation. Do not translate the demand into an internal definition, record exactly what the customer says/writes.
- Classify demands in customer terms, develop a customer typology. What types of demand and with what frequency? How predictable is each type?
- What proportions are value demand and failure demand?
Identifying failure demand is the easy task. Reducing and removing it is the more difficult part. Command-and-control thinkers assume that the problem is caused by failures of people and processes. But tinkering about with those won’t achieve much, because failure demand is systemic. To remove it, you have to change the system; to even contemplate that, a significant shift in management thinking is necessary.
How to Remove Failure Demand
The only solution is to redesign the organisation. To design it as a system whose purpose is to achieve each and every customer’s purpose, articulated and measured in customer terms. It means:
- Rethinking all organisation controls
- Designing services from the outside-in
- Redefining job roles, including managerial roles
An overhaul of the entire organisation is required – front line services and supporting functions.
Following the redesign, not only will you provide a better service and have happier customers, but you will reduce the cost of delivering the service. It is not uncommon to reduce costs by as much as 50%. The increase in capacity can now be spent in more productive ways, to drive growth.
|Value management||Activity management|
|Design against demand||Specialisation of work|
|Measure actual times||Impose standard times|
|Design to absorb variety||Standardise work|
|Derive measures from customers’ purpose||Derive measures from budget|
|Decision-making integrated with work||Decision-making separated from work|
As John Seddon says, “the concept of failure demand is easy to understand and easy to misunderstand”. The misunderstanding occurs when the idea is taken out of its system thinking framework and grafted on a command and control mindset.
The most common mistakes in tackling failure demand are:
- Buying software to measure it and report it.
A complete waste of time and money. Failure demand should not be a permanent measure. It is a temporary measure that sends a clear signal of ineffectiveness. Measuring and reporting failure demand takes management’s attention in the wrong direction.
- Setting targets to reduce it
A target is a goal without a method. Setting targets will only lead to cheating. The only target you need is to work towards perfect services, the consequence being eradication of failure demand.
- Focusing on people and processes, allocating blame
We often see organisations – encouraged by consultants who know no better – setting up “governance” units to allocate blame to functions or processes and work across boundaries to resolve poor processes. Achieving marginal falls in failure demand hoodwinks them into believing they have the right solution. It is to fail to realise that failure demand is systemic and can only be eradicated by a change to the system.
These kinds of initiatives will achieve modest improvements at best. The purpose is eradication.
Many service organisations have achieved Seddon’s high bar, where failure demand is negligible. The design of the system coheres people around a common purpose as all performance measures rise, so does morale.
Are you interested in developing practical skills in system redesign and giving customers what they want while lowering costs? Explore Vanguard’s Know How Transfer programme.
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