Monday, 18 August 2014

Understanding Failure Demand

Failure demand is what causes good solutions to problems to destroy value.

Let me explain by way of example. I regularly stay in a particular hotel when travelling for business. I like to stay there because, amongst other things, the service is both good and quick. However, during a particularly busy season, I and a colleague noticed that queue to be seated at breakfast time had started to grow considerably longer. So instead of being seated quickly on arrival, guests were forced to stand in a queue for several minutes at a time.

As I said, this hotel has a good service ethic, and a few minutes later we noticed that they had place a table with fruit juice, fruit and croissants in the area where guests queued to be seated for breakfast (I took a picture of it).

An elegant solution to the problem, you may think. But this is a great example of failure demand: guests don't want a better waiting experience, they want a shorter waiting experience (or not to wait at all).

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

In order to reduce or eliminate failure demand, you need to:

  1. understand and focus on what the customer wants at each interaction (in this case, to be seated at breakfast quickly). In a more complex business, this usually requires you to document each customer interaction in the process and to describe for each 'what good looks like' from the customers' point of view.
  2. invest in delivering this and only this, removing all other waste from the process.
Over the last few weeks I've noticed that the there is no longer a queue to be seated at breakfast. Either the conditions that caused the queues have gone away, or they have found some way to solve the queuing problem. The table of fruit, fruit juice and croissants is still there, but not longer enjoyed by anyone. This only serves to demonstrate how pernicious the effects of failure demand can be.