Lean / Systems Thinking
Firstly, let’s look at the nature of demand in Service industries. In looking at what ‘comes in the door’, the distinction between ‘value demand’ and ‘failure demand’ is very useful. Value demand is for the services that the organisation exists to deliver. Satisfying this demand should generate value to the customer and revenue to the organisation. Failure demand is generated when the business fails to do what it was supposed to do or has committed to do. Examples of failure demand include public queries about services not offered, customers calling to check on progress on a delivery, and customer complaints. In Pathfinder’s experience, services that do not proactively seek to reduce it show levels of 30% to 40% failure demand as a percentage of total workload. Typically in these organisations failure demand is indistinguishable and is treated as business as usual.
Another useful Lean distinction is the idea of Capacity as either Value Added or Non value added. Value Added Work refers to the activity which is strictly necessary to respond to workload. Non Value Add or Waste refers to the activity which makes no difference to the quality of product and service perceived by the customer. For repetitive processes, this distinction allows continuous refinement of the processes to eliminate waste. Service processes as we have seen need to be flexible and in this context it is not as easy to define what is non-value add in a deterministic way. What is needed is some way of defining value add on a case by case basis, and as we will see, Commitment based Management offers us a real possibility.