It is interesting that Steve Jobs demonstrated Inside-Out thinking when he said, “It’s no use asking the customer, they don’t know what they want!” This all very well when you have the most talented futurist, designers and engineers to call on, most companies do not have this luxury.
Traditionally companies would create a product and marketing would create a market demand for the product and then sales would sell it to the market. It is certainly the behaviour of many sales operations that see it as their job to sell. Many successful and international companies still focus on selling what they make, believing that they can control revenue by achieving operational excellence, product leadership, and meeting sales targets. These companies have not realised that the market has changed and inside-out thinking will only take you so far for long.
The difference between the two business models is the way they provide shareholder value:
- The Inside-Out approach is guided by the inner organisational strengths, its effective use of company resources and the core competencies.
- The Outside-In approach is guided by the belief that the company achieves greater efficiencies and adapts more quickly to changing social, environmental and economic circumstances. By creating customer value being customer orientated and creating superior customer experiences as the key to their business success.
George S. Day and Christine Moorman wrote the book Strategy from the Outside In: Profiting from Customer Value. Day states outside-in strategies are achieved through 4 customer value imperatives:
- Be a customer value leader.
- Innovate new value for customers.
- Capitalize on the customers as an asset.
- Capitalize on the brand as an asset.
Why companies guided by outside-in thinking deliver better long-run performance?
Many studies have shown that between 40%-90% of innovations fail and that innovation processes involving customers and users, are more likely to succeed in the market. My own experience bears this out that customers and users have a broader more solutions focused and creative problem-solving ideas not limited by internal product development and operational structures.
Outside-in companies always know what delivers value to their customers. They build valuable brands and customer assets that are leveraged to maximise returns to their bottom line. Their actions are targeted more precisely at customer valued adding strategies rather than wasting resources on unfocused strategies. Outside-in companies are ready sooner, responding quickly to market trends and delivering superior growth by pursuing strategies that deliver customer value.
The paradox is that successful companies turn their backs on the customer, the very same customers that contributed to their success. Instead, they chase volume and efficiency, cost cut and exploit what they can do and control internally.
I have certainly fallen into this trap in a previous business, being customer centric from the venue design fixtures and fittings to the focus and frequency of staff training. However, when the pressure was on whether that pressure came from internal business operations or external economic conditions, the focus would move from investment in creating customer value to cost saving strategies. So, I know when managing a growing business, it is difficult to maintain consistent customer centric outside-in thinking and operational strategies.
I am not the only one to lose focus, as mention in Forbes The Value Of An ‘Outside-In’ Strategy, “Toyota is a company that fell into this trap. After an impressive string of successes, the company focus shifted away from meeting customer needs toward the internal goal of beating General Motors and maximizing growth. This caused Toyota to lose sight of customers and consequently quality suffered.”
Contrary to Steve Jobs, Amazon’s Jeff Bezos clearly demonstrates Outside-In thinking when he said in an Newsweek interview: “Rather than ask what we are good at and what else we can do with that skill, you ask, who are our customers? What do they need? And then you say you are going to give that to them regardless of whether we have the skills to do so.”
4 Steps to Move Your Company to Become an Outside-In Customer Centric?
- Establish your current approach of where you lean Inside-Out or Outside-In?
- It is more important than ever to know and understand your customers.
- When revenues are down, it is natural to focus on short-term strategies that eliminate costs. Understand that an inside-out internally focused approach can debilitate your business in the future. Knowing this will help you to avoid this short-term strategy and to look beyond the current challenge.
- When revenues are down this is an indication of a lack of anticipation and focus on outside-in external trends. You can find external trends through the PESTLE analysis, understanding customer behaviours and an awareness of innovative technologies, these social and global trends will help you to stay ahead of current challenges.
This is the way to not only to move forward but avoid the pitfalls and develop longer-term revenue generating customer centric outside-in strategies and business operations.
How to Establish your Current Approach?
Answer 9 simple questions to evaluate whether you and your company lean more towards an Inside-Out approach or an Outside-In. Do you know:
- What are your targeted customer segments?
- What needs and behaviours your customers have?
- How you best solve their relevant problems?
- What specific value you provide them?
- How strong the fit between your target segments’ needs, your value proposition and your business model?
- How your internal processes orientate to gather customer feedback?
- If you have a customer-oriented organisational culture?
- How you focus on creating value for your customers, and measure it?
- If you feel that customer centricity is a fundamental necessity of running the business successful? How is this demonstrated?
It is highly probability that you and your company lean towards:
- An Outside-In approach, if the answers are YES.
- An Inside-Out approach, if the answers are NO.
If you would like to understand more about creating customer-centric business model. A great start is to listen to my Facebook page live recordings. Like my Facebook business page and join my weekly live insights and training where I will be talking about more customer-centric business growth strategies. Alternatively, contact me for a consultation.