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.

The Road Not Taken

Strategy is fundamentally about choice. Unfortunately, every choice we make requires us to forego something else. This is the nature of tradeoffs and what make choice so difficult. This poem by Robert Frost captures the essence of that dilemma - notice also how Robert Frost draws out the importance of differentiating rather than following the crowd in the final couplet:

The Road Not Taken

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
    I took the one less traveled by,
    And that has made all the difference.

Source
photo credit: Eric Vondy via photopin cc