Failure Demand – are you ignoring one of the greatest levers you have for improving performance?

Wednesday 9 August 2017

Article by David Joyce

Whenever we meet executives, worldwide, and talk to them about failure demand, we get the same response,

“I haven’t heard of failure demand before, I’ve never thought of the world like that… but I can see the opportunity to improve my organisation is immense.”

It is such a simple concept, yet understanding it, and acting on it, is one of the greatest levers you have for improving performance. However, until you learn about failure demand, and more importantly its causes, it is an invisible problem.

What is failure demand?

Failure demand is demand caused by a failure to do something or do something right for the customer.

We found this definition works in every type of service organisation, although each type of service can create its own distinct kinds of failure demand.  Defining failure demand this way is to recognise that it represents a failure of either commission or omission from the customers’ point of view.  In either case, it means that the customer is obliged to contact the organisation again if he or she wants to get the service as desired, the corollary being that service provision costs more (rectifying mistakes, duplication, etc).

You might be surprised to learn that in financial services failure demand can account for anything from 20 to 60 per cent of all incoming customer demand, and in utilities as much as 80 per cent.  In the public sector it is generally as high as in utilities; in local authorities and police forces as much as 80 or 90 per cent of contacts are avoidable and unnecessary.  Imagine the impact of turning it off: better service, increased capacity, and much lower costs.

Removing failure demand

When we study the efficacy of ongoing change programmes in organisations, we find that they do not address the fundamental issues causing failure demand, which is unsurprising, as failure demand isn’t even recognised as a problem to solve.  Instead these programmes of change simply lock in the enormous invisible cost of failure demand.

Through the application of the Vanguard Method, failure demand can be designed out in months, not years.

“What I found really powerful with the Vanguard Method is it taught me how to take out failure demand.”

    - Katharina Hasse, Chief Operating Officer, Barclaycard

Organisations have seen significant improvement in performance through applying our methods. To give just one example: for a financial services client, within 6 months, failure demand reduced from 76% to 4%, customer satisfaction (as measured by NPS) went from -5% to +36% and customer complaints decreased by 89%.  Better service equated to better sales with sales increasing by 30%.

Ignoring the nature of demand is to ignore one of the greatest levers you have for improving performance. Removing the strangling effect of high failure demand has a dramatic impact on customer satisfaction, capacity increases and costs plummet. Why not pull that lever?

 

Article by David Joyce, Founder of AmCham member company Vanguard Method.
Author | Transformation Executive | Vanguard Method Expert | Customer Centricity | Process Improvement |

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