Looking for new ways to create value? Reduce failure demand

Failure Demand definition was coined by John Seddon after several years of not finding a good way to define it: “demand caused by a failure to do something or do something right for the customer”. 

I learned the term around two years ago having lunch with Helen Macqueen. She told me: “No company should start any value demand initiative until failure demand has been eradicated”. I was not ready to understand it. I thought it was a nice way to make a point but I was sure she did not mean to be literal. I was wrong but I needed months and some rounds of experimentation until I was ready to understand her.

Failure Demand has been extensively used in services and linked to contact center activity. However it is easily applicable to digital experiences either for selling or servicing.

If some of these symptoms are familiar to you, you are probably surrounded by opportunities to reduce failure demand: 

• siloed organization with strong functional orientation,
• order taking dynamics between business and IT teams,
• decision making comes from hierarchy and not from data and
• focus on maximizing the use of resources instead of maximizing the flow of value
• a generalized lack of systems thinking skills.   

If you ask anyone to choose between getting deposited 10k on their bank account or having a debt of 20k disappear they will choose the 20k. If you ask a team to prioritize between a story of value demand creation and a story of failure demand reduction many teams will say: value demand first. Wrong! It is not about deposits or debts, it is about the value behind them, regardless whether it is a deposit being created or a debt being cleared.

In the digital space failure demand has often been confused with technical debt but the intersection of the two concepts is small having many examples of FD that does not come from technical debt and also technical debt that does not create FD. Failure demand is about the customer creating demand to the company because of a previous failure. 

Teams might be initially reluctant to embrace a shift towards failure demand reduction. Many will fear that they are downgraded to “maintenance teams” or that there will only be space for bug fixing. This is normal at the beginning, the concept according to Seddon is as easy to understand as it is also easy to misunderstand. 

Furthermore conventional organizations have fostered cultures in which the only praise goes to people creating new shiny features, regardless of how much failure demand they created and how much pain was suffered in the back office. 

If we want our teams to embrace the idea it is key to communicate it well, over and over, until everyone understands the why behind the shift and the potential value that can be unlocked. And it is also crucial to praise and recognize the results of those who reduce failure demand with the same energy with which we used to praise those who brought value demand through new shiny features.

One of the best explained examples of the amazing impact that can be created in the digital space by reducing failure demand happened at Paypal. They came up with a brilliant idea to flag every Failed Customer Interaction and to track it down to the first offender service. It resulted in four nines of successful customer interactions and more than 100MM in additional revenues. 

When you shift a shop that has always been value demand oriented and you lean slightly towards failure demand reduction a beautiful transformation sparks among the teams. They become more customer centric as they start to think about eradicating customer interactions that fail, they develop data driven behaviors that were less often seen before, they are able to generate their own backlog, justify its value and position it above less valuable value demand stories and they end up building superior products. 

And, as a consequence of it all, conversion, transactions, revenues and CSAT soar.

#FailureDemand #Value #CustomerCentricity #SystemsThinking