Charlie Bucket and his adventures in a chocolate factory may be fantasy, but anyone watching realizes that the Oompa-Loompas provide most of the innovation and work at the factory. Yet in today’s service companies, the emphasis is less on the Oompa-Loompas and more on the Willy Wonkas.

Manufacturing has it easy. Identifying waste could be measured in the amount of rework done and scrap accumulated. We used to call this the “hidden factory.” There are two factories at work—one that produces good products, and the “hidden factory” that produces the waste.

Service industry has different issues. Waste can’t be seen. John Seddon came up with “failure demand” (i.e., demand caused by a failure to do something or do something right for a customer) to help us measure waste in service. Yet this waste is almost wholly achieved from a different kind of factory—one that my company refers to as a “management factory.” It’s a factory created to control the organization.

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