Outside In and Inside Out Strategy

Outside In and Inside Out Strategy

Thu, 14 Oct 2010

Where does your business sit on the continuum? Are you utilising an Inside Out or an Outside In strategy?

Outside In

The Outside In strategy takes customer value as its starting and end point. Companies using this approach are focused on creating and nurturing their customers by providing high calibre customer value. They put themselves in the position of their customers, and view themselves from their perspective. It's also about having a firm vision that drives you forward; there's no room here for looking behind your shoulder.

Inside Out

In contrast, the Inside Out perspective begins with a focus on the company's own capabilities and strengths. With this approach a business will take account of its resources and look at providing them more efficiently.

The problem with the latter approach is that by nature it's limiting and demonstrates slowness in adopting changes in the market place.

Shareholder or Customer Value?

Comparing these two approaches suggest a conflict between two fundamental stakeholders businesses need to deliver to: customers and shareholders.

If incorporated appropriately, pleasing and keeping customers will increase profits, which will feed shareholder returns. However it does suggest a shift in emphasis away from directly trying to deliver to shareholders. Having a chief focus on shareholder value can lead to short-term thinking, and an Inside Out approach to business.

The key is understanding that the customer is the source of value, and the market will reward a better value proposition. This is a realignment of values that places shareholder value as an outcome of customer value: customer value should be the primary focus.

Outside In Case Study: Amazon

Amazon has set a new standard for Outside In strategising. They began as an online bookshop, and built an incredibly strong brand around that. But they put themselves in their customer's shoes and asked what else their customer base wanted. This allowed them to expand into the Kindle, and then into cloud computing, web services for their channel partners, and massive online retailing of a range of products outside their initial offering. Rather than dwelling on what they were good at (selling books), they asked 'Who are our customers and what do they need?' By shifting their focus, they were able to leverage their brand to seize opportunities in other areas.

Barriers to This Approach

Executives and CEOS face a number of challenges that keep them focussed on an Inside Out focus. Focussing on annual budgets, outsourcing, day-to-day management etc. are the typical concerns that continue to lose focus from a bigger perspective. Without effective and visionary leadership, it can be hard to rise above these matters. Without an emphasis on innovation, experimenting, and taking a step outside the corporate framework and into the minds and hearts of customers, a business will not be ready for that moment when markets open and their opportunity to outperform competition and increasing market share and brand loyalty arrives.

Outside In Strategy

There are three ways to ascertain whether your business is oriented more towards an Inside Out or Outside In approach. The first place to look is your competition and channels. If you're continually surprised by new competitors, your own poor results, or the appearance of new product categories from out of nowhere, this is probably a strong indication you're reactively focussed, rather than setting the pace in the market.

The second question concerns your customers: do you know who they are and what kind of value you're delivering them?

The third matter to examine is whether your brand stands up. Are you viewed as credible? Do your customers understand you? Are insights from the market and foresight driving the organisation? Are your marketing efforts aligning with your core values and strengths?

How Can Brands Reach Out?

Customers buy the expectation of benefits they will receive from forming a relationship with a brand. Buying from and interacting with a business is guided by a businesses brand. An Outside In strategy means a change of focus and entering into a collaborative relationship with the customer.

 

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