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?

I confess – I often don’t. But responding to emergencies requires thoroughly thought out process that mobilizes the right resources the right way at the right time. If you don’t plan out responses beforehand you get BP in the gulf coast or Toyota stomping all over its meticulously crafted brand.

But these disasters didn’t trigger me writing this. Instead, it was a superbly well-executed emergency response that still has me shaking my head in appreciation.

In the U.S., we have many, many people contracting salmonella from eating eggs. First, one egg-producing company had to recall about 350 million eggs. Then, a second producer had to recall 150 million more. This second producer supplied Costco, where we buy eggs.
Within scant hours of the recall, I received a well-produced robo-call (so well-produced I didn’t hang up) telling me I’d purchased eggs at Costco that could be carrying salmonella and had been recalled. I was instructed not to use the eggs but bring them back to a store for a full refund.

Can you imagine identifying a gazillion egg purchasers with their phone numbers from membership records and calling them in very little time with a cut-through” message? Yes, good intent towards customers is ultimately responsible. But executing the plan took exceptionally well predefined process and following it to a tee. Kudos to Costco, which I frequently include in my short list of Outside-In, customer first companies.

How about sharing some examples, good or bad, including the process or lack thereof apparently behind them?

Giving customers what they want the way they want it often does them no favors. In particular, providing customers immediate gratification often comes at a cost to actual value delivered.  Customer empowerment complicates this issue. Not that I would ever say a bad word about customers (or clients), but they can be incredibly short-sighted at their own expense. Nonetheless, they’re really feeling their oats, and many take an “our way or the highway” stance.

Should we strike a balance between placating/satisfying and delivery maximum value―or go all one way or the other?

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?

Believe me, I’m not trying to use Wells Fargo as a whipping boy. But when customer service gets this intolerably bad, someone in San Francisco needs to wake up. Or are they dead?

My wife & I had an HSA (Health Savings Account) with Wells Fargo. I won’t bore you with all the customer-unfriendly stuff they pulled, but recently and for unknown reasons they decided to change our account number and issue a new card with a new PIN, despite our old cards being valid until 2011. Only they sent only my card, without one for my wife. Hey, not more than a minor inconvenience no? No. I tried calling them, got into a waiting queue, and waited and waited and waited. For over an hour.

While I was waiting I tried to reach HSA customer service over the web. You can’t. Then I tried to access general customer service but faced drop down fields for questions giving no appropriate answers. Should I call an HSA account an “auto loan?”Guess where that e-mail would wind up. So I tried their general “call a banker” service for telephone banking. Got through in about 10 minutes. The first question the “banker” asked? “What’s an HSA?” She finally agreed to try contacting HSA service using their internal phone numbers, and I made her promise not to transfer me back into the same queue.

I don’t have to tell you what she did. So, right now, I have no means of getting a second card. Their contact center is that understaffed, despite skilled people galore on the streets, many willing to work for whatever paltry wage they offer phone reps. And I’ll bet most already know what an HSA is. As a customer, I am disgusted WF lets customers stew on the phone for over an hour (maybe multiple hours, who knows?) without dipping into the endlessly deep unemployment pools to put more agents on the phone. Just one more example of how they put customers last.

Why are we still with them? Actually, we used to be 100% Wells Fargo – two businesses and all our personal banking. Private banking, even. We shifted our accounts to a smaller, regional bank two years ago, but forgot to transfer our HSA. When we started having trouble – as in having our HSA debit cards rejected when we had more than ample funds in the account (you know, we used the card too many times in one month, or went over our “limit,” which happens to be less than what’s in the account), we were sort of stuck. As impending empty nesters we’re city-bound, but we don’t know where exactly so don’t know where we’ll bank. But this is so over the top that I’m going to get my wife a card by switching our HSA to a different bank, any bank.

A couple years ago, when we pulled all our other business from Wells Fargo, I posted a blog in CustomerThink titled: “Wells Fargo, 50 Ways to Leave Your Customer.” It drew over 16,000 hits – a near record. Guess lots of others have similar stories.

PS: I wrote this while on hold the second time. When I finished, I needed to go out for lunch. So I decided to leave the call on hold while I was out. When I cam beck, guess what greeted me? “Your call is important to us…”

PPS: A half-hour after the initial post someone did pick up the call. They switched to a new data system that can only generate one card per account. Brilliant, eh?

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?

When business conditions and contexts change in ways that require significant professional adaptation, most managers go in one of two directions, with a small minority taking a third path:

1.  DISPUTE:  They acknowledge change but claim their training & skill sets are immutable. What worked before will work in the future (with enhancements). We’re already there” is a common line of defense.
2. DENY:  They ignore change, believing their environment is immutable. “Process works by a fundamental set of rules and always will” is a catch phrase.
3. ACCEPT:  In early stages of change, a minority comprehend that neither their skill sets nor their work environments are immutable, and they can’t be married to anything but success.

 Why is this question relevant? Fundamental economic changes, demographic changes, technology advancements and globalization together have radically changed our business environment―with buyers big winners and sellers both short- and long-term losers. Consequently, business is fast losing its ability to act independently of customers, and customers are more and more proactive in demanding business be done “their way.”

Process: 

 Process, which creates perhaps 80% of customer experience, must respond. Not by being nice to customers. Not by trying to give them most of what they’re asking for. But more fundamentally by letting customers drive the “what,” “who,” and “how” of process design, just as they’re already starting to drive business strategies. Outside-In Process is the first significant process response to change. Others may come along. But regardless of where process people go, they need to go “somewhere else,” and soon.

Marketing:

The new emphasis on customer experience discounts the importance of  creativity, promotional communication (including promotional branding), customer analytics (including databases) and lots of other traditional marketing stuff. Hence, lots of marketrs will have to leave their comfort zones before their comfort zones leave them. Outside-In overall, which fuses customer-centric planning with process design, is one escape route. There may be others. But marketers too need to act fast to avoid being very dis-comforted.

Which path will you take? 

Will you dispute? Deny? Or adapt?