The Inside-Out Paradox

Inside-out…
Responsive organizations have a strong focus on their people and relationships. They emphasize that it is the people in the company who create value – not the strategy. In other words: effective teams build strong companies. Growth happens from the inside-out.

…or outside-in?
Regularly, we are asked whether this contradicts the notion that a business must be focused first and foremost on its customers – ‘the outside’? Are their requirements not the starting points for change and innovation?

The paradox
It’s a very good question and it points to what could be called the ‘inside-out paradox’. Steve Jobs once pointed to it when he said that ‘people don’t know what they want until you show it to them.’ What the statement emphasizes, is that people know what they want, based on the known options. Whether as consumer or industrial buyer, they know what they want based on what they have seen and experienced in the past. They generally are not in a position to understand the full range of innovative possibilities of all products and services they use.

And that is where the expertise and creativity of your company comes in.

Case in point…
Market research – which is an ‘outside-in’ process – done before 1880 on lighting would not have revealed that people would want electric light bulbs. They would probably have asked for candles that lasted longer, produced less smoke and maybe smell less. Of course this is a classic and compelling example. Yet there are numerous other examples, big and small, where the thinking and collaboration of people in an organization created something better and compelling for customers. Think about examples like the internet, harvesting machines, industrial cleaning services, medical devices or accountancy services. In every market segment there have been instances where the perspective on the customers’ problem, along with the creativity and persistence of people in the organization, resulted in innovations and solutions ‘beyond the customers’ demands’.  

Similarity of competition
Why is it that in many markets most competitors look similar? This is, among others, because in the outside-in approach, the emphasis is on delivering what ‘the customer wants’. Or on promising what the company thinks ‘the customer wants to hear’. Although it can be tempting, it is not genuine. Authenticity gets lost and competitors start to look alike. If this happens, the only differentiator becomes the pricing of products and services. A differentiator that eats away at long-term competitiveness.

Although knowing what customers want is relevant, focusing too much on it risks that companies overlook their own expertise and creativity. The reason they were founded once, was because of the belief that they had something special to offer. As every company is unique, this most likely is still the case and should not be forgotten.

The ultimate differentiator
Working ‘inside-out‘ deliberately deploys the ultimate differentiator of any organization: its people. This leads to stronger relationships within the organization. Information is shared better across teams, enabling them to better sense signals from the outside and use these creatively for new solutions.

In responsive organizations, problem solving capacity and creativity are better mobilized. Among others through better collaboration across departments, geographical areas and different layers in the organization. Significant value is added to ‘what the customer wants’. As a result, better solutions emerge that the customers weren’t aware of. What is delivered becomes more genuine and different from the competition. Working from the inside-out improves the relationship and interaction with the outside world.

Growth from the inside-out will be more gratifying for the people involved and, ultimately, delivers a stronger brand. And this is just what happens in responsive organizations: they have a better sense of what their customers need, because of their strong self-awareness (see the blog: Vision and Mission) and strong collaboration – internally and externally. They ‘sense’ beyond customers’ requirements and have a deeper understanding of their needs than those customers might have themselves. As a consequence, they make better use of the unique problem solving capacity of their whole organization. They respond better and more creatively with products, services and innovations. Ultimately, this improves the experience of the market ‘outside’.

Case in point...
A manufacturer and distributor of industrial equipment worked with us to improve their strategy. The whole company was involved. One of the behavioral principles that was introduced, was that ‘every customer interaction should be proof that we are better than the competition’. The CEO asked of every department that they consider how they could improve customer interactions in that spirit.

Within the whole change process, the Accounts Receivables department was in the process of improving working capital by resolving delays in customer payments. Getting your money in time from customers can be a delicate balancing act. The people of the department came up with an original approach: they would call up every customer that was late in their payments, kindly explain that they appreciated the relationship, yet needed timely payments for their cash flow. With every customer it was discussed and agreed when payment would take place. As soon as any customer had made their payment according to the arrangement, the Accounts Receivables department would send them a small present as token of appreciation along with a letter, stating how much they valued the customer’s business and relationship.

This surprised the customers in unexpected and positive ways. The initiative by the department had a significant effect on the brand reputation and the relationships with the customers. Not to mention the effect it had on the engagement of the people in the Accounts Receivables department.

This case demonstrates that the creative potential of an organization increases when people are truly engaged and connected.

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