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Developing an Outside-In Perspective

What does it mean for a business to be outside-in – to really be driven by marketplace signals, needs and dynamics? It’s a question we have been thinking about a lot recently, as digital technology creates new ways to listen to the market and rapidly respond to change.

Outside-in

What firms publicly say and how they actually behave are often very different things.

Of course, for literally decades companies have claimed to be market-driven, customer-driven, solutions-driven and the like. To say otherwise would be almost scandalous. But what firms publicly say and how they actually behave are often very different things. Most companies we work with struggle to see past their own internal company perspectives; their long-standing systems, silos and cultures are still the dominant business realities. This is particularly true for Enterprise IT organizations.

It’s not enough for companies just to listen to their best customers. Most firms do this quite well. But Clayton Christensen showed many years ago how this can prevent firms from sensing and responding to a truly disruptive change (such as consumerization). RIM and its BlackBerry is just the latest example. Only a broader, external market orientation can detect and respond to the early market signals that eventually transform a firm’s core business.

But let’s not exaggerate. Internal company capabilities will always be a critical part of the value creation process. We don’t have to look any further than Apple to see that firms can achieve enormous success by following their internal vision and culture – if they can think clearly and execute effectively. CEOs in most firms are confident that their firm’s technical, managerial and cultural talent is fully capable of knowing what customers will really want and how it should best be delivered.

But whereas internal know-how was once virtually synonymous with the value proposition of the firm, today a significant rebalancing is under way. As shown in the figure below, for every major type of traditional internal value creation activity, there is now an increasingly powerful external counterpart. When we talk about companies becoming more outside-in, we are essentially urging clients to put more emphasis on the right-hand side of the figure.

The figure itself is largely self-explanatory. Technology now enables firms to see what consumers are doing in real time; it makes it possible for products and experiences to be customized, even personalized, as never before, and it supports extensive business partnering and collaboration. From a consumer perspective, today’s web, mobile and social technologies make it much easier to develop community content and participate in co-creation activities. All of these trends will strengthen greatly over the rest of this decade, and by that time outside-in forces may rival or even exceed the importance of internal capabilities in many firms.

How is your firm doing?

Is your firm moving in this outside-in direction? While most companies can map their own position onto the figure above, it’s primarily the leading web companies such as Google and Amazon that embody the most aggressive outside-in approach. For more traditional firms, the changes are likely to be partial, as the answers to the questions below often reveal:

  • Are business decisions mostly made by gut feel, or are they based on hard data?
  • Does your firm have an integrated view of the customer, and is this view easily available to your customers online?
  • Is your firm sufficiently leveraging its wider ecosystem, or is there still a ‘not invented here’ syndrome?
  • Can your firm effectively listen to, understand and rapidly respond to relevant marketplace conversations?
  • Are external sources of information about your firm and market becoming more insightful and timely than your internal data sources?
  • Does your firm react and move with the speed of the market, with minimal internal friction?

These questions raise issues well beyond the traditional remit of Enterprise IT, but they also have many IT-specific implications. For reasons we all understand, Enterprise IT is often the most internally focused part of the company, with employees and business units routinely referred to as IT’s customers. Similarly, IT networks have been designed to wall off the outside world; IT projects are managed according to internal company timetables, and outside IT services and information are often viewed with suspicion. We recommend that our clients think carefully about each of the questions above from an IT perspective, and be willing to take a strong stand where necessary to move their organizations away from an excessively internal focus.

Adopting an outside-in perspective can help business and IT better communicate about the issues of most pressing importance to the firm.

More positively, adopting an outside-in perspective can help business and IT better communicate about the issues of most pressing importance to the firm. This is why our recent expansion into Digital Business Leadership – which focuses on the IT needs of non-IT business leaders – will be rooted in an outside-in approach. Similarly, we have long recommended that Enterprise IT should try to adopt the end-customer’s perspective as much as possible.

The bottom line is that technology now enables us to leverage external market resources as easily as the resources inside our own organizations – and sometimes more easily. The implications of this shift will be increasingly profound, and will be one of the principal drivers of future business change.

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AUTHORS

David Moschella
Research Fellow
David Moschella, based in the United States, is a Research Fellow for Leading Edge Forum.  David's focus is on industry disruptions, machine intelligence and related business model strategies.  David was previously Global Research Director of the programme. David’s key areas of expertise include globalization, industry restructuring, disruptive technologies, and the co-evolution of business and IT.  He is the author of multiple research reports, including Disrupting the Professions through Machine Learning and Digital Trust, 2016 Study Tour Report: Applying Machine Intelligence, There is Now a Formula for Machine Intelligence Innovation,  Embracing 'the Matrix' and the Machine Intelligence Era and The Myths and Realities of Digital Disruption. An author and columnist, David’s second book, Customer-Driven IT, How Users Are Shaping Technology Industry Growth, was published in 2003 by Harvard Business School Press.  The book predicted the shift from a supplier-driven to today’s customer-led IT environment.  His 1997 book, Waves of Power, assessed global competition within the IT supplier community.  He has written some 200 columns for Computerworld, the IT Industry’s leading publication on Enterprise IT, and has presented at countless industry events all around the world. David previously spent 15 years with International Data Corporation, where he was IDC’s main spokesperson on global IT industry trends and was responsible for its worldwide technology, industry and market forecasts.    

CATEGORIES

21st Century
Adaptive Execution
Assets/Capabilities
Identity/Strategy
Proactive, Haptic Sensing
Reimagining the Portfolio
Value Centric Leadership

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