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?

Please, no comments like “You can’t manage what you can’t measure.” That’s bunk. Always has been. Always will be. And to support my harsh stance on this ridiculous statement, I’ll cite none other than Albert Einstein, who kept a sign on his Princeton office wall saying:

“Not everything that matters can be measured. But not everything that can be measured matters.”

In many cases, trying to measure growth in share of customer stemming from improved customer experience triggered by introduction of Outside-In process quickly becomes a fool’s errand. We can get halfway there by measuring improvement in customer experience (although doing so requires a very high level of research expertise, beyond simple NPS scores). But even these measures are subject to influence from contextual changes. And freeing changes in share of wallet from contextual changes defies research. Hell, we can rarely measure the thickness of the wallet, so how do we calculate the share?

So what are the alternatives to direct measurement? Or does anyone want to argue with Einstein?

Based on our experience, the most effective way in most situations is establishing intuitive “cause & effect” relationships where certain actions well-performed will enhance customer experience in ways that should broaden relationships – or directly trigger additional business from customers, as should be the case for new products/services. While research can’t statistically measure the effects in most cases, they can validate the connections using Kano studies (not VOC, C-Sat or especially not NPS).

Not precise enough for you? Then you don’t belong measuring anything to do with people, customers included.

So what should O-I implementers do instead?

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?”

Companies are accustomed and even comfortable keeping internal process opaque to customers―and often to co-workers as well. “Lack of cost-effective technology” has served as a convenient excuse for shutting out customers and blocking communication across silo boundaries – although we know “technology” is just an excuse.

All that’s about to change. A new technology named CBPA (communication-based process automation) is about to tear away the fig-leaf excuses. CBPA will track typically opaque internal processes including: mortgage and loan processing; insurance claim processing; technology support beyond one-call resolution; special orders; back orders; custom fabrication; incident research; and a host of other high-frequency events – each of which generates high volumes of expensive-to-handle customer calls and e-mail, not to mention endless internal e-mail and even face-to-face conversations.

Because it’s all IP-based and outside corporate firewalls, companies will now be able to let customers access CBPA for self-service – and let internal folks track progress across silo walls as well. Gazillions of dollars could be saved, IF individual companies are ready to “bare their process.”

Several industries have already developed vertical fixes resembling CBPA. You no longer have to call Fed-X or UPS to track a package, just hit the web. Likewise for medical test results. But business-at-large continues to spend gazillions of dollars on people and communication infrastructure to handle customers’ “Where is it?” questions and similar internal queries.

Because it’s IP-based, companies will now be able to let customers access work-in-process data themselves – and let internal folks track progress across silo walls as well. Gazillions of dollars could be saved, IF individual companies are ready to “bare their process.”

I’m excited about this because it’s classic Outside-In. Think of a solution to customers aren’t yet asking for; create customer delight; and grab a lead on competitors. But I’ll admit, it’s also Outside-In because implementing this solution will require organizational redesign, staff redeployment and shedding the traditional “protect ourselves from customers” perspective. Well-led, forward-thinking companies can effect these changes. But many others can’t and will suffer customer consequences as a result.

To be fully transparent myself, I got so excited by CBPA’s potential that I’ve partnered with the software developer’s largest partner to launch a process/technology partnership we’re calling “Enterprise Collaboration.” And I’m presenting a free Avtex-sponsored webinar on March 23^rd from 10:00 to 11:00 Central Time (that’s GMT minus 6 hours). You can register @ http://tinyurl.com/yfunttu.

In his great new Book, “Reorganize for Resilience,” Harvard B-School Professor Ranjay Gulati describes how and why companies should be moving from inside-out to Outside-In (he uses Outside-In as a surrogate term for customer-centricity). From his organizational dynamics perspective, he describes four “stages” of this transition. But most marketers aren’t trying to reach the end stage or even the third, but instead are content with stages one or two. Why?

[I’m excerpting from Gulani’s descriptions]

Stage one: Thoroughly inside-out: “(Companies) view the world entirely through the lens of their own goods and services.”

Stage two: Think they’re customer-centric but remain company-centric: “Though they (companies) understand customer needs, they still focus on their products, viewing the customer through the lens of the company’s offerings, focusing on customers’ experience with their purchase while ignoring the larger problems customers may be trying to solve.”

Stage three: Think they’re customer-centric and they are, but not all the way: “They focus first on the problems their customers are trying to solve, only then turn to their products, configuring their offerings to address those problems.”

Stage four: Outside-In (customer-centric) to the core: “A level four firm is more attached to producing solutions to those problems than it is to the products and services it offers. This intellectual, structural and emotional transition means it is no longer concerned whether the inputs it uses to solve customers’ problems are its own or assembled through a network of partners.”

What stage does your marketing support?

“Everyone,” you say? Then what you’re really saying is “no one.” 

Here’s an interesting exercise to prove the point. Build a simple grid with all customer MOTs  listed vertically in likely order of occurrence. (MOTs or “moments of truth” identify customer interactions with sellers that significantly affect customer experience). Next, horizontally list all the functions interacting with customers either directly or indirectly. Finally, in the grid portion identify which internal functions control process and policy at each MOT. 

What does the grid tell you? In 90% + organizations, you have a range of functions, each largely responsible for its own process and policy―without strong central oversight. Inevitably, each unit will have a somewhat different view of what customers should experience and how much to “give” to please customers. And some will have very different perceptions. A classic example is sales wanting quick shipment of orders to meet customer expectations and Inventory Management cutting stocks to the bone to reduce cost. 

Companies presenting multiple faces and voices to customers in this manner or even more subtle ways rarely create sufficiently positive customer experience to minimize churn―and suffering churn in low-demand economic times just multiplies negative effects. 

Since process design and execution (and process-level policy) create virtually all customer experience, should the task of overseeing process consistency fall to process leaders? And if so, what does marketing have to say?

BusinessInsider.com just released this list of abusers – not only of customers but of stakeholders, employees and the general public. While the selection process factored in data from Consumer Reports, JD Power, the MSN/Zogby poll, Vanno, and the University of Michigan American Customer Satisfaction Index plus indexes reflecting public perception, obviously some subjectivity crept in, but the list resonates very strongly with me.

 I’ve included links to this list and two other relevant compilations at the end of the post, but before sending you off I’d like to offer several observations.

• Customer relations played a key role:  12 of the 15 companies were cited for poor customer relations.
• So did employee relations:  the same 12 of 15 companies were cited for poor employee relations. While 12 out of 12 is not a bulletproof statistic, the inference is too strong to ignore.
• Stakeholder approval was on a par:  10 of the 15 were cited for providing poor shareholder returns, but three of the 15 are private companies. What I believe is so important here is that the Ross School’s ACSI has clearly demonstrated that companies with high CSAT numbers perform financially better than competitors with standard or lower scores.

I also cross-referenced this list against MS Money’s “Customer Service Hall of Shame” nominees for 2009. Three companies made both lists, but the “Hall of Shame” list focused heavily on financial services whereas the “15 most hated” included only Citi.

What struck me after reviewing both lists is the 22 separate companies named all operating “inside-out” by putting company interests ahead of company interests. In fact, several of these outfits are frequently cited for showing the futility of trying to operate inside-out in today’s marketplace. In contrast, when I reviewed MS Money’s “10 Companies That Treat You Right” selections, all 10 are commonly cited as examples of how “Outside-In” thinking produces successful customer and business outcomes both. For more information on Outside-In visit: http://tinyurl.com/yd6rrdf

Here are the links:

15 Most Hated Companies:  http://tinyurl.com/yzkn6cm

2009 Customer Service Hall of Shame:   http://tinyurl.com/larogw    

10 Companies That Treat Your Right:  http://tinyurl.com/ml57oj

Traditional process design approaches, including LSS, Lean and Six Sigma, assess as-is process, then design to-be process, often with an eye to improving customer experience. Guess you could call this the “two slices of bread” approach – as-is process spread across one, to-be spread across the other, not much in between.

 O-I is the whole sandwich. First the as-is assessment. Last the to-be design. But in the middle the “meat” of customer-centricity.

 Once current state process is defined and documented, O-I goes from tactical to strategic, from process to planning. Informed by as-is process assessment, O-I digs beneath obvious customer needs and expectations to fundamentally understand what customers are really after and how and why current constraints prevent them from getting it.

 Now the sandwich making starts. Developing a 360°understanding of customer aspirations requires careful planning that gathers all the inputs; synthesizes them; processes them; and generates “ah-hah” moments of discovery. Here’s where new product/service ideas, new approaches to market; new definitions of a company’s business; and ultimately customer-centric strategies emerge. And here’s where transformative change originates.  

With the meat in the middle, the to-be process slice can go on top.

Hungry? Ready for a bite?