Most organizations are designed from the top down: determining the management structure first, typically using traditional silo roles; divvying up among silos responsibility for classes of activities next; then letting silos determine specific activities (processes). Things have worked this way seemingly forever.

Today, however, competitive pressures are driving more and more companies towards more customer-centered business models. And the most successful approach to implementing the change from “inside-out” (company-centric) to “outside-in” (customer-centric) has been redesigning processes around customer needs and preferences. Sounds innocuous from an O.D. standpoint, except outside-in process redesign relies on determining who best should do what activities from the customer perspective, which usually clashes with current-state organizational structures and responsibilities. Plus, implementing outside-in process requires heavy and unaccustomed collaboration among functions – and potentially placing an enterprise-wide customer advocate above the silo tops. Two more conflict points.

These clashes are only starting to occur, but will grow in number and intensity as pressures to conduct business “the customer’s way” mount. Do you think your organization, for example, or your clients’, are willing to reorganize to better support customer-driven process? Or are we about to see “irresistible force meets immovable object?”

Based both on a macro view of today’s markets plus lots of ground-level observations, I’d estimate 95% of companies say they put customer interests first; 10% understand what that means; and perhaps 3% actually do so. With potential competitive gain in migrating from company interests first (inside-out) to customer interests first (Outside-In) dangling like a carrot in front of business, why is there so little movement?

Putting it plainly, migrating from I-O to O-I is much harder than it looks. It’s change. Lots of change. And to answer the title question, disruptive change, especially at the organizational level. Yes, line employees do struggle with having to learn new skills or working with different people in different roles. But when making the I-O to O-I migration, resistance at this level usually pales in comparison with the fights going on overhead―struggles to protect silos, gain new turf, rule over the largest number of employees and even have the largest office (or largest sunroof on the company car).  

So we have irresistible force (customers) versus immovable object (corporate silos). And buyers are at worst in a punishing mood, or at best quick to leave when seller operations start going south. Just ask GM, Ford, Chrysler, the ghosts of Circuit City & CompUSA, Sprint, Nortel, Bearingpoint, etc.―all of which lost ground or went under because they ignored customer needs and preferences, not because of the recession.

Does anyone see any give on the corporate side? Or will fear of change and change avoidance create lots more casualties?

The latest McKinsey Quarterly reports new data that should upset those designing organizations and managing operations in O/S (office/service) settings. While manufacturing managed to reduce its expense-to-sales ratio by 2.7% over the past year, despite 90& 0f cost-cutting initiatives failing to last beyond 3 years, the SG&A (sales, general % administration – which is basically front and back offices) remained flat.  And these outcomes defy reason, because office “bloat” is virtually endemic to business and is rarely addressed, while most manufacturing operations had already been streamlined to some degree by year 2000, the starting line for data aggregating.

A quick and spurious retort might be, “Hey, we’re just taking better care of customers.” Wrong. When redesigning office organizations and process Outside-In (starting with customer needs), we routinely find clients can – and should – reduce overall office FTE count by 20%, and often more. All these extra people are standing in the way of delivering what customers want most, second only to quality products backed by quality service – dealing with well-trained, empowered employees. Also, the more hands touching work without adding value the greater the number of “fumbles.”

But those are just the facts (and the McKinsey data is corroborated by heaps of empirical evidence). Whose responsibility is it to streamline O/S workplaces? And considering at least some efforts are underway, why aren’t they improving the overall numbers, which empirical evidence also supports?

Lior Arussy from the Customer Experience side of business just relayed an interesting observation in a Customer Experience Group (Linkedin) post―that executives frequently claim only new organizations can go customer-centric because you can’t change the DNA of more mature companies. He was asking for contrary examples, and I fed him a bunch (Best Buy, UPS, USAA, most upscale hospitality chains). And I actually forgot among the toughest environments for migrating to customer-centricity―retail car dealers―where multiple regional networks have now successfully crossed the threshold from inside-out to Outside-In.

 But Lior’s question started me thinking about commonalities among companies adopting O-I versus starting that way. And after cogitating more than a bit on this question, including revisiting many years’ worth of clients―some who crossed the threshold, others that got part-way before flinching, I believe I did find the “secret sauce:”

The recipe is: one part steely-eyed recognition that customers now hold the upper hand in buyer-seller relationships; one part shrewd assessment of how to take advantage of this customer empowerment; and one part dispassionate willingness to redesign their organizations from top to bottom―and from the customer in―regardless of where the bodies fall (or fly). And BTW, not one ounce of goody-two-shoes empathy for customers. O-I is a cold, calculated business choice for companies that successfully migrate from inside-out to Outside-In.

Companies that try to go O-I because “it’s the right thing to do” don’t get far. While leaders are empathizing with customers, they’re also empathizing with employees and dithering over decisions about which people and what silos have to be moved around, aside or out to make way for a customer-in designed organization―which needs fewer employees, supervisors, managers and executives than an inside-out company, not to mention greatly shrunk silo walls.  

Other views?

Companies that achieve a significant measure of Outside-In, customer-centricity are at constant risk of “organizational memory” snapping them back or pulling them back to bad-old company-centric operations. And it’s not just internal organizational memory, but new management only familiar with inside-out settings pulling their function or new companies back inside their individual comfort zone. We just saw that happen with Continental Airline and their new CEO. 

Best Buy is another example. After all their efforts to become customer-centric, they’ve now set draconian (to customers) customer service policies that reek of inside-out. The combination of these “customers-last” policies―plus the Geek Squad, which is becoming a parody of itself―has the potential to eventually unravel all the company’s good O-I work, and if service isn’t turned around it might not take long.

Hey – I’ve been through this entirely too many times. At the start of the relationship marketing movement; when B2B database marketing got serious; when “micromarketing” started; with TOC (Theory-of-Constraints); and in spades with CRM. All sure bets practitioners could take to the bank. All supposed slam-dunks coopted by parochial economic interests – whether by advertising agencies, media outlets, Six Sigma & Lean, CRM software companies, etc.. Looking back on this history makes me fear O-I is ready for a face-plant.

We’re hearing too much ungrounded exuberance, too many excessive claims, too many ungounded predictions about O-I. And saying that market conditions will force business to go Outside-In  ignores history. Let’s face it straight up. O-I will succede if we make it sufficiently attractive to companies, not because the market “forces” companies to go O-I. And accomplishing this will require much more from the O-I community than the community’s yet prepared to give.

We’re changing market phases now from “Innovators” to “Early Adopters.” To get there, we have to do more than prosletyzing the O-I concept. And to reach some of the penetration levels O-I aspires to, we’re going to have to move on to “Early Majority” clients – which will require an execution level the movement’s not yet close to.

To get O-I into the meat of the marketplace, I believe we have to accomplish four, difficult tasks:

1. Do it right:  Migrating from inside out to Outside-In is a three-step journey: a.) aligning strategy to customers (which requires finely honed planning skills); b.) aligning process to strategy (which we’re best at); and c.) aligning technology to process (which the movement often ignores). Sure we can accomplish quick wins with process change or a customer experience initiative - provided the company already leans O-I, like Best-Buy, Fed-X, Trader Joe’s and USAA . But delivering Outside-In enterprise-wide, to its fullest capabilities requires all three alignment elements, not just one.

2.  Train O-I practitioners across the alignment spectrum:  We have lots of O-I practitioners trained in aligning process to customer strategies. Almost none trained in aligning strategies to customers. And way fewer trained in aligning technology with process. We need to provide training in all aspects of O-I. We’re not doing it.

3.  Focus on the steak. not the sizzle:  It’s easy to toss off claims that O-I is the greatest thing since sliced white bread. It’s another thing to make it work. And making it work in organizations not already O-I of their own volition demands properly and persuasively framing the long-term benefits of the inevitable organizational change required to migrate to O-I, rather than pumping the bellows. We need to stop discounting organizational change requirements and start confidently justifying them.

4.  Over-deliver instead of overpromising:  Overselling sweeping, non-specific benefits or offering growth, profitability or expense-reduction bromides hurts Outside-In in the long run. Face it, helping clients achieve broad-based O-I success requires a “grind it out” mentality. We create value incrementally, step-by-step. Enterprise-wide, O-I does not create whopping revenue gains, profitability gains or expense reductions in a flash – or even a year. Double-digit improvements? Very often. But not quantum leaps. Puffery destroys credibility. Remember, our clients are customers. Overselling them on the benefits of Outside-In is very inside-out.

Outside-In has cleared the “Innovator” phase. But we’ll need to change what we say and what we deliver to make substantive progress penetrating the “Early Adopter” segment of companies. And then we’ll have to make even more dramatic changes to enter the mainstream and penetrate the “Early Majority.” As a community, I believe we have a whole lot of hard work ahead of us before we can  bring Outside-In to the corporate masses. Are we ready?

What do you believe?

 I’ll be uncharacteristically direct expressing my opinion.

Here’s an example of why you can’t. A new financial services client had invested lots of effort improving process one function at a time. But the whole place was running out of sync with high defect quotients they wanted us to fix…one function at a time. So we had to explain to them “one function at a time” was actually causing the problems. Here’s the gist of what we said.

O/S flows are highly interdependent. Change one and you readily create unintended consequences affecting downstream flows – plus often you can’t change what needs changing without going upstream. Manufacturing process does experience some of the same issues, but nowhere nearly as many as in the O/S.

They got that part, so we went to work. However, despite our pleadings to not “fix” anything until we’d redesigned the entire flow structure, after every meeting they insisted on going out and “taking care of” issues we’d just unearthed in cross-functional team meetings. When we’d finished and prepared our comprehensive recommendation, complete with comprehensive change management approach, the devil in me made me ask our sponsor, “How many of those ‘quick fixes’ you folks made right after meetings stuck?” She admitted, “Less than half.”

Tons of wasted time and effort, not to mention pointless burning of “change capital,” resulting from their irrepressible impatience.

Do you agree?

We’re all schooled to think of culture as something instituted top-down – just as we’re schooled to think that our inner psyche drives our behavior. But some psychologists are now using a “what if behavior” model that doesn’t start with the psyche, but first changes behavior as a means of rewiring the brain. And the approach is considered mainstream rather than exotic or experimental. So what about changing work behavior in order to back-feed new values into business culture? 

Although we’ve only realized the implications of what we’ve been doing for many years over the past several, we’ve experienced instance after instance where instituting customer-centric work behaviors at primary and secondary points of contact changes culture far faster than using the top down approach. 

Of course, C-level management first has to make and back a business decision to migrate from inside-out to Outside-In, but good intent, great leadership, all that don’t get companies to Outside-In unless without redesigning work early in the transition and letting the cultural impact percolate up.

 Have you had similar experiences?

They sure think they can. Many a company tries to become more customer-centric by:

• Retraining current staff in the niceties of customer interaction
• Motivating staff to deliver great service
• Hiring new staff more inclined to “play nice”

But doesn’t the right person doing the wrong work – or doing the right work the wrong way -produce the same negative effect as customer-unfriendly people interacting with customers? Shouldn’t we start down the road to customer-centricity by changing what work we do and how, first?

And BTW, changing what work we do, coupled with optimizing who does what work, shuffles the deck organizationally. So what I just called “first” is really second. Making requisite organizational shifts has to lead off.
So can we please put aside the bellows we’re using to inflate employee enthusiasm for customers long enough to get the right people doing the right work the right way – and with the proper technology support?

Isn’t this just common sense? And if it is, why aren’t more companies taking steps in proper sequence?

Okay, I pulled 2% out of the sky. But at least I was generous!

Company after company tries to “get closer to customers” by taking incremental routes. And company after company fails to accomplish much permanent change (and often not much temporary change).

But is business paying attention to these bad outcomes? Nope. In fact, reminds me of a true, “you betcha” Minnesota story. A flock of domestic turkeys (who can drown in a rainstorm) were standing in a feedlot when a downpour started. The leader marched right up a running auger to hide, only to become cornmeal additive. Then, the rest of the flock followed.

 Found any feathers in your cornbread lately?

 Seriously, what’s up? Lack of education? Wishful thinking? A “we can beat the odds” mentality? Not really wanting to become customer-centric but wanting to claim it? Other?

 I’m polling for answers on Linkedin, but I’ll share my best hunch. None of the above. Instead of these possibilities, I sense that most C-level execs think of “process” as a means to save money. They’re unaware of the consequences of either good or bad process on revenue. So they fail to associate “process” with “customer.”

Perhaps the only remedy is an increasing number of smart execs and companies creating new, customer-centric strategies then successfully reedesigning process to align with strategies and execute them. That’s the formula for improving customer experience and delivering new value to customers. And that could raise the question from not as smart execs, “What are they doing that we’re not?”