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Failure demand arises when service organisations are structured and measured with the logic of industrial production

June 30, 2021

Failure demand is a common but at the same time an unknown phenomenon in service organisations. Failure demand is often associated with poor service availability, dissatisfied customers, rising costs, and increased workload for employees. In this blog post, we’ll talk about how Aiwo identifies the failure demand from customer communications before you even knew it existed. In addition, at Aiwo Studio we had the opportunity to discuss about failure demand and its affecting factors with Hermanni Hyytiälä, a leading expert in failure demand. Hyytiälä actively talks about the failure demand both at work and in public. From the blog post, you can read about his thoughts on the topic and how Aiwo can be utilized when identifying failure demand.

Imagine a situation where you call your service provider’s phone service. You are well prepared to listen annoying queuing music. However, you have decided not to let the wait ruin your day as you understand that the service provider receives thousands of calls every day. The customer service answers after a 15-minute wait. You are surprised how quickly they answered this time since the last time took half an hour.

“I have a question about my company’s bill,” you tell the customer service representative.

A friendly voice replies, “You have called our customer service line for personal customers. Unfortunately, we don’t handle our business customers’ affairs here. I will connect you with the business advisors.”

Again, the familiar queuing music starts playing. Even though you thought that you wouldn’t let the queuing music ruin your day, you get a little irritated. This time it takes a few minutes for the business line to respond and finally get your case moving forward.

At the same time, the personal customer service advisor takes the handsets off and says to the colleague, “I have received several calls today where a business customer calls. Why do you think that the business clients won’t find the service established for them?”

The answer is failure demand

The phenomenon presented above is a typical example of failure demand. When customers can’t find the right service, or they receive the wrong kind or partial service an organization receives failure demand.

At Aiwo Studio, we discussed about the failure demand with Hermanni Hyytiälä who is a leading subject-matter expert in the topic. Hyytiälä is known as an expert in modern management and organizational development. For him, failure demand is a familiar phenomenon, which he talks about a lot when working with different organizations:

Failure demand is often an invisible phenomenon, especially for service organization decision-makers. The failure demand arises when the customer re-applies for the service due to the wrong type of service, partial service or a complete lack of service, Hyytiälä tells.

Failure demand can be difficult to identify if an organization’s operations are driven by industrial production-driven logic. From this point of view, operations cannot be customer-oriented in a way that seeks to truly understand customers’ experiences of products and services. The service organization often doesn’t know how to utilize all incoming customer communications, such as customer feedback or calls, so that they can comprehensively understand what the customers are talking about the service. The amount of phone calls, emails, chat conversations and customer feedback in the organizations is so huge.

To intervene failure demand, it must first be identified. This in turn requires a holistic understanding of the organization’s customer experience. Often, the customer experience is measured only by numerical methods, leaving a large part of the customers’ verbal communication in the dark.

Go to read our blog post, where we tell you about the five issues with most likely the best-known Net Promoter Score tool, which numerically measures the customer experience. In the blog we’ll tell how Aiwo responds to those challenges: 5 Ways How AI Is Revolutionizing NPS Feedback Analysis.

Read more how Aiwo CX helps organizations to utilize all customer feedback in any data source for business developing.

Meeting the customer needs is important

Hyytiälä feels that the greatest impact on organizations and working life in general in his work is, when he manages to help the companies to create better-functioning organizations through a different way of thinking. This can mean, for example, making the failure demand visible:

In service organizations we have learned to manage the operational activities through three questions: how much work we have, how many employees or resources we have, and how long will it take to get the job done. If an organization has more things on their to do list than employees that can handle them, we think that there is a resource or capacity problem. In this situation, managers and experts consider how things could be done more efficiently, and often start to do the wrong things more correctly. A good example of this is to agile practices or digitize processes by directing customers to the digital channels. In this case, we do things effectively that, in principle, should not be done at all. Because what if most of the work that’s done is just failure demand that the customers bring to the organization? Hyytiälä emphasizes.

Hermanni Hyytiälä is known as an expert in modern management and organisational development and as the leading Nordic expert in failure demand.

At Aiwo Studio, Hyytiälä points out that it’s important to look the service organization’s operations from a completely new perspective. In his work, he seeks to change the norms of organizations and thus help the decision-makers do fundamentally better things, rather than doing existing things better. Hyytiälä says that the disruption demand phenomenon is strongly related to how we perceive the service organization’s performance:

Often performance is based on productivity and efficiency thinking: the more we produce or do something, such as answer calls “the better”. The traditional production-based economy doesn’t work in the field of services when talking about the link between needs and supply. Even if the things are done seemingly efficiently, the accuracy of the hits is still poor, which creates failure demand. If we don’t know how to meet the customer’s need, the traditional concept of economy will crumble. It’s important to learn to look at organizations from the customer’s perspective and not from a production perspective based on the three questions I mentioned earlier, he adds.

Hyytiälä also highlights the concept of value demand, which is the demand brought by the customer – the demand that makes the service organization exist in the first place.

Imagine that half of all the workload of an organizations is failure demand due to organization’s service structure. In this case, we haven’t been able to look at the workload that the organization receives from the customer’s point of view. So, through which value demand is created. Thus, the total amount workload consists of both, value demand and failure demand. We easily think that we need to do all the work that’s coming to the organization, although the organizations should be able to reduce the failure demand from the customer’s point of view.

Aiwo identifies failure demand from all customer communications – bringing savings and a better customer experience

Aiwo can create a real-time updated situation picture of service organization’s all customer communications. The situation picture enables refreshing understanding of the themes and trends from the customer encounters that the customer service receives. In Aiwo’s user interface the organization can also drill deeper into selected communication channels or a specific theme. Aiwo allows for longer-term review, which enables the organization to see the effectiveness of taken measures to its customer communications and provides comparability between different time periods.

As Hyytiälä says, the priority in organizations is to generate value-generating demand and reduce failure demand. Aiwo’s COO Jani Jokela agrees:

Failure demand causes huge costs in organizations. For example, the cost structure of customer service in service organizations increases when the failure demand is not identified. Aiwo can identify the failure demand from any customer communication source amazingly fast and form an overall picture of what thousands of customers are saying. This facilitates the work of decision makers enormously when action can be taken immediately based on the findings that Aiwo has produced. In this way, measurable financial savings can be achieved, and, above all, the customer experience can be improved, Jokela rejoices.

Hence, Aiwo divides incoming customer communications into clearly understandable themes, from which you can see immediately and in real-time what the customers are saying in telephone services, chats or customer surveys, for instance.

Any unstructured data that used to be hidden behind the huge number of contacts or was outdated due to slow manual human eye review, can now be utilized for better customer understanding and tackling failure demand. If there is a theme that appears to be very negative in the data, Aiwo enables the user to delve deeper into the root causes of the customer feedback. All the way to individual customer messages.

Aiwo’s COO Jani Jokela.

Does your organisation receive daily an enormous amount of customer messages or phone calls?

Would you like to know how Aiwo can identify failure demand from your organisation’s customer communications?

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