Outside-In is a business imperative

What are the challenges of succeeding in business in the 21st century?
Ask major companies and you would come up with the same list:
> Competition is fierce and global.
> Customers have become rebellious.
> Customers have expectations like never before.
> Customers demand choice, comprehensive information and the best price. 

Former IBM boss Lou Gerstner called this “commodity hell” and that is pretty much the nightmare for every business. With a list like this many businesses would claim to be already embracing the challenge and becoming customer centric with ‘voice of the customer’ initiatives. This is simply a collective delusion and is the root cause of why so many are failing the customer, the shareholder and their hardworking employees.

The delusion is easy to understand. Businesses have created departments that claim customer focus and extensively poll customer wants, seek feedback and then try to act on the information. While this creates an illusion of progress it is to a large part a futile exercise focused on fundamental misunderstanding of 21st century customers. Asking internal questions based on customer data results in such questions as “how do we improve service?”, “how can we reduce non value added work?”, and “how can we standardise?” . This thinking stems from a time when the world turned more slowly and is more appropriate to the 1950’s then this centuries new business reality.

To orientate to long term business and customer success we need to look at the enterprise from the Outside-In (OI) rather than inside-out. It is now about understanding customer needs (not wants) and eradicating all the things that do not contribute to achieving Successful Customer Outcomes (SCO’s).  

It is this Outside-In philosophy that leading global IT retailer Best Buy utilised to lead and dominate the consumer-electronics market in the US. In doing so Best Buy’s programme ‘customer centricity’ took the time to understand customer needs and accordingly align for the SCO, while long time competitors Circuit City and CompUSA struggled and ultimately went bust. Circuit City, previously successful in the 1980’s and 90’s did not understand the shift to Outside-In and continued to focus on reducing costs through laying off its highest-paid hourly employees, including salespeople, and replacing them with cheaper workers. At the same time (2007), then CEO Philip Schoonover rewarded himself with $7 USD million in compensation . Customers don’t like that old style way of managing business and voted with their feet.

Best Buy meanwhile moved to understanding the customer needs and directed their attention organising themselves accordingly. Early research suggested that men look for a specific product at a discount price so hence,  arranging stores around fast moving products, geared to guys worked in areas where the majority of shoppers were male. Alternatively in stores frequented by women the stores focussed on ‘bundles’ as women were shown to need say a digital camera with accessories such as cables, printer and other ‘value adds’. This was more important to that type of customer than discounted prices. As the Outside-In maturity grew audio-visual experiences were grouped together and themed as with the Magnolia theatre. Family oriented areas are now a familiar feature coupled with additions such as techie savvy Geek squad means Best Buy dominates a previously fragmented market. Their success is now being extended to Europe.

Making the leap from understanding to action requires a shift in perspective. Instead of functional specialist silo’s organised around division of labour and specialisation, enterprises rethink their centre of gravity. In what we call a Copernican shift the customer becomes the centre of the universe, rather than the legacy model were business organises itself inside-out as a pyramidal, left to right, top down structure.  In these legacy structures it is sometimes difficult to actually include the customer on the map – they are relegated to the extreme left or right, or into warlike metaphors such as ‘the frontline’. No great surprise that people working in these structures can be working very hard doing things right (following procedures, delivering projects, meeting departmental objectives) but really the customer isn’t their job. That surely belongs to someone else in marketing, sales or customer service? In the Outside-In world the customer touches everybody’s  job and the emphasis shifts to doing the right things and doing things right.

Breaking out of the straight jacket imposed by the inside-out organisation structure requires a different level of thinking, an incisive set of new techniques and tools, and a willingness to link every element of activity with SCO’s. A new focus embracing the customer experience as the process requires a renegotiation of partners, a realignment of relationships and investment in staff to ensure they can think and be customer centric. Reward structures become linked to customer success, rather than paying staff for turning up and following procedures.

Best Buy have broken the mould of their sector, as have others including Zara in fashion retailing, Southwest airlines, FedEx Office, Emirates, Chinamobile, Disney and many more. These companies are the leading success stories of the 21st century and understand the game has changed forever.

For most businesses today, adopting an Outside-In approach is a necessity for survival — the only sure way to ensure the organizational resilience that will keep a company out of the death spiral of inside-out commodity hell. The path finders have set the standard and established a winning set of approaches, tools and techniques readily accessible by all. Make that move now, before it is too late.