Specific belief systems: Inside-out and outside-in

Having explained why the shared beliefs of an organisation are the dominant determinant of its behaviour and that of its individuals, we return to the two very different systems of belief that relate to being customer-led - what we term inside-out and outside-in.

  • • Inside-out beliefs are conventional and not customer-led - they start with the business and what most obviously matters to it and to the people associated with it. They reflect the way people working in the business see the world - literally from the inside looking out, with colleagues close and customers distant, and with lots of assumptions about the way things are done that don’t get challenged.
  • • Outside-in beliefs start outside the business. They begin with what matters to customers and with ways to do a better job for them, only then moving on to how the business can achieve these outcomes in ways that will be commercially successful as well.

We found that inside-out belief systems have two competitive advantages over outside-in belief systems, making these sets of beliefs the default setting in any organisation.

An inside-out way of defining success might be to sell more. And the way it might be assumed that this success will be achieved is to set higher sales targets, to promise people lots of money if they hit them, and to shout at them if they don’t. The first advantage this way of seeing things has is that it sounds like common sense. This is what everyone does, right? The second advantage is that it works ... for a while. The focus, effort and alignment will produce results for a group, but eventually, as the sales targets rise, behaviour becomes ‘pushier’ in order to hit them - high pressure sales tactics, promotional marketing, obfuscation of a deal in the eyes of customers, and eventually mis-selling, cheating and regulatory if not legal trouble. The short-term success hides the long-term trouble, as we’ll see later in the chapter when we analyse two inside-out examples - Wells Fargo and the Australian banking sector.

Another good example comes from a housing association. Under financial pressure, the organisation decided to stop mending fences on its housing estates. Fences don’t need mending very often - there is a continual, slow flow of an issue here and then an issue there. This means the money-saving is immediate and ongoing and it is only years later that the customer cost starts to become clear in run-down neighbourhoods, diminishing pride, and as a consequence a spiral of other issues such as vandalism and graffiti. The business cost benefit was definite and immediate, the way it hurt what customers value was hard to spot and in the future. Putting it right costs a lot, but the people who made the original decision have long since moved on, no doubt believing they made a smart move.

In contrast, an outside-in way of defining success is to serve customers in some way, with the business seeing profit only as a means to that end, still crucial but not the ultimate goal. This already sounds like it might take more explaining than its inside-out alternative, and it gets harder when you look at outside-in initiatives as ways of achieving success. Often what matters to customers can’t directly be linked back to what leads to sales. For example, Tesco’s observation that customers didn’t like to queue: an unarguable conclusion, and yet the business activity that would improve the situation is tricky to make a case for. The One-in-Front queuing promise cost £60 million, definitely and immediately. But, the customer response could only be determined by actually spending the money and seeing what happened. So, while costs are definite and immediate, benefits are probable at best and in the future. Outside-in initiatives usually have these characteristics, making them a hard sell in a business with inside-out beliefs.

Table 3.1 Outside-in versus inside-out beliefs

What does success look like?

Inside-out

Higher sales, profit or shareholder returns

Outside-in

Greater value for customers - solving problems or achieving outcomes people care about in new and better ways

How is success achieved?

Inside-out

Setting higher sales targets, rewarding employees for hitting them, penalising or berating them for failing

Outside-in

Innovating, leading the market with initiatives for customers that end up paying back for the business

Given the insight into this skewed playing field, let us get back to the Sky story to see how the broadcaster managed to make its belief system outside- in, against all odds.

 
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