How Understanding Failure Demand Can Transform Your Product Into a Fit-For-Purpose Value Proposition

The typical narrative surrounding growing businesses is that, when the demand starts rising, they find they are struggling to cope. With a tremendous amount of customer requests constantly coming your way, you would probably assume that with the growth of your customer base, your customer issues grow as well. Is that normal? Is it your customers’ fault that they don’t understand your product? Or, is it due to a pile of inconsistencies coming from all over? It’s never the customer’s fault and the problem is bigger than that.

If the demand is rising, chances are it is happening due to increasing failure demand. High failure demand would not only consume most of your time and efforts, but it would also damage your brand name. Certainly, it is really discouraging when your customers feel that your value proposition is not reliable. Failure demand could ruin your reputation, generate high costs for your business, decrease your efficiency and have a tremendous impact on your workforce motivation. 

There is no business without failure demand, probably with the exception of those that don’t actually bother to listen to their customers. If businesses are not seeing their demand from the customers’ perspective, chances are that backlogs are piling up with assumptions without coverage and overall efforts are focused on delivering something that no one might find useful. Our work should be driven by the needs of our target clients. The main goal of any business should be to fit into their customer’s expectations.

We, as vendors, all want to deliver more value, achieve a fast return on investment and maintain low operational costs. We strive to provide outstanding products that are constantly being improved. But when 70% of the work we handle is caused by failures to do something right in the first place, it becomes a challenge to expose a fit-for-purpose product to the market. 

What if there was a way to reduce failure demand? What if we could reduce our costs, improve performance and relieve team overburden all at the same time?

What Failure Demand Is and What It Isn’t

The concept of failure demand can easily be misunderstood but, once comprehended, it makes a whole lot of sense. Failure demand is not just the number of bugs you catch in production – it is much more than that. Failure demand is the requests you’re handling due to the inability of your target customers to achieve their goals using your product. It includes defect fix requests, rework due to usability problems, rework due to misunderstanding of customer requirements, and features requested by the customer because another functionality didn’t work, just to name a few.

Here are a few examples of what demands could look like from a customer’s point of view:

It is the customer who decides whether a request is value demand or failure demand. When evaluating whether something is failure demand, ask yourself: Would the customer be willing to pay for this request? 

The customer accepts that they are already paying for an agent to be available 24/7 to take their calls if they have a problem. The call for assistance is thus value demand. On the other hand, would they be willing to pay you to fix a problem with a product they’ve already paid for? If the answer is no, it is failure demand. As a rule of thumb: If you are in doubt, it is failure demand.

Understanding Your Failure Demand

For many businesses, failure demand is an invisible problem. And it is highly underestimated.

Teodora Bozheva Co-author of the Kanban Maturity Model "Companies think that they do not have failure demand until they get a careful look into their work requests. Understanding failure demand is key for improving customer satisfaction, workflow efficiency and business economics."

To understand the failure demand on your system, you need to study what kind of demands customers make and analyze how many of these are caused by failure to do something right in the first place.

Visualize Failure Demand vs. Value Demand

Define explicit work item types for failure demand. For example a Low-Impact Issue and a High-Impact Issue. On your Kanban board use a label or a custom field to indicate failure demand items. Then use different colors to make them clearly differentiable.

Analyze the Failure Demand on Your System

The Throughput Breakdown chart helps you evaluate what kind of requests are demanding most of the time. In the diagram below, this team has accumulated almost 70% failure demand in their system in the past 6 months. This chart is especially effective when you want to emphasize the high volume of failure requests that you’re handling.

The Throughput Run Chart displays the throughput of your team on a daily, weekly or monthly basis and compares these values over time. Each bar consists of colored sections representing the different types of completed work.  

Use the Throughput Run Chart to filter your work by failure demand and track how the levels change over time. The green line illustrates how failure demand trends have developed. Ideally, the line should decrease smoothly – this means you’ve been effectively reducing failure demand in your system.

Turning Failure Demand into Value Demand

Identifying failure demand is not the most difficult part. The challenge manifests itself when you need to reduce it to a healthy level for your organization.

React Quickly 

If a customer needs to ask for the same thing twice, chances are there won’t be a third time. Even though failure demand is not going to go away overnight, while it exists, your main goal should be to remediate each problem as rapidly as possible. With all of the failure demand that you choose to resolve, the essential customer-focused measurement is your lead time. The Cycle Time Scatterplot is an invaluable tool when it comes to cycle time and lead time analysis. You should measure it and work to improve it, by any means necessary. 

Try to minimize your customers’ pain by fixing their problems as quickly as possible. Strive to meet their expectations and make sure that the same problem doesn’t occur again.

Put a prioritization system in place that will help you handle failure demand with a priority. Managing your backlog using Classes of Service is an approach that will enable you to classify failure demand above your standard work without constantly reordering your backlog items.  

Your customers will really appreciate your personal attention and fast reaction. That’s the best way to communicate to your clients that they matter and they are the driving force behind your business decisions.

Pay Attention to Your Capability

Very often teams simply don’t have the time to verify their work properly. Being quick is an advantage but only as long as you don’t trade speed for quality. Failing fast is still failing. Make sure your team has the capacity to handle the demand and that they are not overburdened with more work than they are capable of doing at once.

When your team has more on their plate than they are able to handle, they will be forced to constantly switch between contexts, trying to work on all requests at the same time. Constant context-switching comes with a fee – it is called The Cognitive Switching Penalty and it costs at least 10% per switch. To both prevent work from being rushed and eliminate multitasking, try to keep a balance between demand and capacity. 

To assess how your customer demand affects your team capability, use the Cumulative Flow Diagram to track your arrival and departure rates. You need to monitor how the arrival and departure lines move over time. If your demand is aligned with your capacity, the arrival and departure lines will grow in sync and the distance between them will remain equal.

If the arrival rate is higher than the departure rate, the distance between the lines will expand. This means that there is a bottleneck in your system and your team is struggling.

Implement a Defect Management Process

Most defects end up costing more than it would have initially cost to prevent them. Defects are expensive when they occur, in terms of both the direct costs of fixing the defects and the indirect costs caused by damaged relationships and lost business.

Nevertheless, each failure is an opportunity for improvement. Regardless of the underlying causes of defects, they call into question the effectiveness of our current development practices and help us learn how to build better, high-quality, cost-effective solutions. 

The Kanban Maturity Model describes the general practices of reducing defects to help you improve your business outcomes. By visualizing, tracking and analyzing the defects in your workflow, you will be able to increase the consistency, predictability and effectiveness of your development efforts.

Define User-Oriented Goals

Even if your workflow is consistent and your results are also consistent, that still doesn’t necessarily mean you’re delivering customer value. Output does not equate to outcome. You can still end up producing solutions that don’t solve your customers’ problems.

If you have recognized signs that your customers are struggling to see value in your product, it is time to put some tough questions on the table: 

Did we spend enough time understanding the problem domain before jumping in and building something?

Did we define the requirements well enough so we don’t have to change the product because it’s not right for the customer?

Did we use the perspective and the expertise of the team to come up with the best possible solution?

Some teams jump into the implementation mode prematurely, forgetting to dig deeper into the problem they’re trying to solve. Put yourself in your users’ shoes – what do they need? What is the value they seek? As a product manager, you’re in charge of making everyone understand what and why, while your team figures out the how part. This means that you need to bridge the gap between your customers and your delivery team.

User stories play a fundamental role in filling that gap. Your user stories should represent a piece of customer value. You should resist the temptation to think of them as features. They’re not features, nor are they solutions to your customers’ problems. The main purpose of user stories is to frame the idea of how your customers will benefit after the story has been completed. To uncover a problem, a need or a necessity of your users.

All of your team members should contribute to the evolution of a user story. Everyone should chip in their perspective on the problem until the most feasible, useful option has been sourced. This way, you will end up with the most valuable user story and prevent potential failure demand. You will also spark engagement and motivation within your team, with people joining forces to better understand those they’re ultimately serving.

Failure Demand Has a Positive Side

Failure demand takes time and effort to deal with something that should have been sorted out earlier. Rigorously looking for, exposing, discussing and reducing failure demand can have an extremely positive effect on any organization. Analyzing your failure demand will help you understand how to develop products that bring value to your clients. As a result, your costs will fall dramatically. But that’s not all. The wider consequence of providing a solution that fits into your customer’s expectations is that you wipe out the strangling effect of high failure demand, and fewer people experience problems. Most importantly, you increase your customer satisfaction.

With product development, there will always be times when you need to resolve customer issues and improve user experience. The big question is at what level does natural change cross over into failure demand? Before you jump into setting targets, remember that metrics are here to measure your improvement efforts. The only target you need to work towards is better services and the eradication of failure demand will come naturally as a consequence. That’s the key to enabling a reliable fit-for-purpose value proposition.