Proactive Outside-In companies (James Dodkins)

Part of the Process Miracle course > 

 I also want to touch on the hurdles these companies using OI as their route to customer-centricity faced or are facing. While achieving customer-centricity is a noble goal even a necessity for many companiesit’s not easy. It requires transformational change.On the flip side, sticking to incremental change doesn’t get you there. Not even close.

Amazon.com may have achieved Jeff Bezos’s dream of becoming the world’s mostcustomer-centric company. And Amazon had the advantage of starting fromscratch with nothing preexisting in the way, except for a pervasive businessculture that believes companies went broke by trying to be too nice tocustomers and became successful by rigorous cost control and a laser-likefocus. But Bezos understood the comfort level customers would feel withAmazon sourcing whatever they need to buy (almost) instead of dealing withscores of online merchants, including some not trustworthy. He alsounderstood that the best way to keep customers is by continually finding newways to offer them value. These were hardly popular concepts when he startedAmazon. And for straying from conventional “wisdom,” Bezos and Amazon took apounding from pundits and analysts before proving them wrong.

Best Buy senior execs banked on their understanding of how customers reallywanted to buy electronics.

Best Buy made a major shift from a “cash and carry” electronics discounterto a combined product/service provider that supports every facet ofcustomers enjoying high-tech electronics, with some appliances thrown in forgood measure. To get there, Best Buy had to re-staff the stores with bettertrained, higher paid employees; bring in substantial new managementexpertise, redesign stores from the ground up, go to store plans that flexedwith local demographics and take a huge financial risk on a then untestedconcept of “higher touch” electronics retailing. Best Buy senior execsbanked on their understanding of how customers really wanted to buyelectronics. Customers rewarded them by leaving competitors in droves, untilthe two primary U.S. competitors collapsed.

Fed-X has been an Outside-In company from the day the first Dassault Falconflew off from Memphis back in 1971, and it has reaped the rewards. But in1998 Fed-X chose to break its own air courier business model by acquiringthe parent of both Roadway trucking and RPS (Roadway Parcel Express, formedto compete against UPS). The customer problem the acquisition solved wasvisible every day at hundreds of thousands of shipping docks­one pile ofsmall parcels for priority air shipping by Fed-X; a 2nd pile of smallparcels for routine ground shipping by UPS; and a 3rd pile of largershipments, including single packages over 60lbs., to be picked up by variousLTL (less-than-truckload) carriers that serviced varying city pairs.

For logistics managers this meant: multiple types of waybills and manifeststo complete; multiple tracking systems (or no tracking); angst and errorsfrom trying to price shipments to attach shipping charges to invoices; andthree different pick-up vans, often jockeying for space at a single loadingdock at the same time. But once Fed-X melded the three service into one,logistics could have just one pile of shipments for ground and air,including packages up to 150lbs.

UPS, a totally inside-out company at the time, never saw the opportunity,despite seeing the three piles every day, because they were seeing the pilesfrom their point of view, not the customer’s.

All these cases represent achieving customer-centricity throughtransformational change from inside-out business practices­plus, overcominginertia and defying yet more conventional “wisdom.” In the CRM space,there’s a pejorative term, “boiling the ocean,” to describe asking companiesto change too much. Supposedly, attempting “excessive” change leads tocertain failure and death by firing squad. Yet any company striving toachieve customer-centricity has to switch from the inside-out perspective toOutside-In. And that takes “boiling the ocean.”

Feeling the urgency for change will help some companies clear the hurdles.Not feeling the urgency for change will cause others to take face plants onthe trackor wither away at the starting blocks.

Reactive cases

UPS was forced Outside-In (or else it would have gone upside down) byFed-X’s ground transportation acquisition. For an extraordinarily routinizedand standardized company, that meant adopting a new business model requiringdisruptive process change.

More recently, Sprint was on the slippery slope, put there by inside-outthinking, including deplorable customer service. Its new CEO is taking anOutside-In view of the business to try to dig out of the hole. Too late?Maybe, maybe not. Forgiveness doesn’t always come easy. Sometimes it doesn’tcome at all.

And speaking of forgiveness, General Motors is struggling for life afterbankruptcyand trying to overcome an almost impermeable inside-out culture.Getting to Outside-In is a prerequisite for winning back customer trust. Sofar, reports coming out of GM have been mixed.What are you waiting for?

Sure Outside-In takes work. But don’t wait for an industry competitor to gothere first. Forced change is so much harder than proactive change. Anddon’t wait until it’s too late and suffer the ultimate change. TheOutside-In train is leaving the station, likely populated by a competitor ortwo or four. It’s time you hopped on board for the journey to Outside-In.

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