Failure Demand Elimination: Systems Thinking at Work

There are two types of demand that can occur at the point of transaction.  Value demand and failure demand.  They are distinguished by the nature of customer demand and simply are those demands we want (value) and demands we don’t want (failure).  So what exactly is failure demand? 95 wrote that “failure demand is demand caused by a failure to do something or do something right for the customer.” If you miss or show up late for an appointment, the follow-up with one or more calls, poor service, forms or websites poorly designed or other activities that could be prevented we have failure demand.

Failure demand is often overlooked because command and control thinking has most service organizations focusing on productivity which relates to how fast we can process something.  We take the phone call or other encounter as something to do an activity if you will and not necessarily something that can be prevented.  Failure demand changes this thinking, so I encourage organizations to know this percentage with the numerator being the number of failure demand contacts and the denominator being the total number of contacts.

Probably the best place to conduct this exercise is with the call center where metrics are easily gathered, just don’t use your existing call data or your number will be tainted.  You must work with the front-line and listen to the calls with them to discern failure demand.

Here is what I can tell you about what you may find.  Our consultants have found that failure demand runs between 25 – 75% in private industry and in the public sector it can be as high as 90%.  So, any number you get in that range is typical, but it presents a tremendous opportunity to improve.

There is more to improving your organization with systems thinking than just knowing the failure demand percentage.  However, this will arm you with a new metric to help size up the possibilities for business improvement.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at  Reach him on Twitter at or LinkedIn at

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