Outside-In Process: The New Path to Customer-Centricity

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Peter Drucker famously opined that the greatest risk to organizations was neither doing the right work wrong nor doing the wrong work but not seeing or reacting to profound change occurring around us. Today, we’re in such a period of transformational change, with a powerful confluence of forces driving up the power of customers in buyer-seller relationships—and correspondingly depressing the potential for sellers to stay competitive while putting their own interests ahead of customer interests.

That this change is occurring is almost beyond debate. But how to effectively respond to this sea change is not only a matter for debate, but a source of great frustration for sellers. Fortunately, a growing number of companies are showing the way by proactively treating the rise in customer power as an opportunity rather than a threat—and using an approach becoming known as “Outside-In Process” or just “Outside-In” to build bridges extending out to customers.

Profiting from putting customers first

Since 1996, when it brought its first commercial product to market, Gilead Sciences has been among a group of companies providing pharmaceuticals to treat medical problems resulting from HIV-AIDS. But in 2006, Gilead leapt ahead of the pack by introducing a new drug developed not just for medical efficacy, but to improve quality of life for AIDS sufferers while also increasing patient compliance with following what had been an extraordinarily complex drug regimen.



A growing number of companies are showing the way by proactively treating the rise in customer power as an opportunity rather than a threat.

Gilead stepped outside of outcomes data and all the standard product development protocols to see medication through patient and physician eyes. And what it saw was patients taking its own “drug cocktail” in 17 different daily doses that required exact sequencing, including some via IV. And what Gilead also saw were patients unable to follow the regimen and falling off their medication as a result. Classic Outside-In vision through customers’ eyes. And classic Outside-In customer problem identification that lead to both a medical breakthrough and a customer breakthrough.

In 1996, Gilead introduced a “next phase” AIDS medication patients could take in a single daily dose. The new drug, Atripla, vastly improved patient quality of life. It vastly improved compliance. And it has given Gilead an 80% market share of medication prescribed to newly identified AIDS and HIV positive patients, despite introduction of directly competing, single dose products from larger competitors.

Atripla has dramatically grown Gilead’s revenue, along with producing near 40% profit margins. Plus, manufacturing one medication is far less expensive than making 17, matching revenue gains with cost reduction. But Gilead was not finished. Since 2006, Gilead has introduced single dosage treatment for hepatitis-B patients, who had to follow a similarly complex medication schedule, and has initiated development of a similar medication for hepatitis-C.

Achieving customer-centricity

Through Outside-In, Gilead has become a customer-centric company specializing in quality of life and compliance as well as quality efficacious treatments. However, a common first reaction might be, “How obvious.” And a second might be, “Nothing much to it.”

Gilead did experience a blinding flash of the obvious. But untold numbers of “obvious” solutions to major customer problems go unnoticed because companies can’t see through customer eyes–or are afraid to. Outside-In forces the issue by starting with the customer–not the product or the company or sales goals or profits.

“Nothing much to it?” Au contraire, there was a whole lot to it. Having helped many a company through this type of transformative change, I can reel off a list of likely barriers Gilead faced: reorganizing R&D to focus on drug delivery, a very different discipline than traditional pharmaceutical research; changing support staff roles; laying off manufacturing staff and management; repositioning the company; and that’s just for starters. What Gilead achieved required transformational change, which stresses organizations and often tests their resiliency? No surprise that so many organizations limit themselves to incremental change.

What’s new here?

As you’ve almost certainly recognized, some organizations have employed Inside-Out thinking since their inception, as has U.S. department store chain Nordstrom’s, or at least for many years. But two things have changed.

First, Outside-In today extends far beyond identifying opportunities. While full scale OI starts by aligning strategy with customers,it continues by next aligning process with strategies and then technology with process. In that order. More specifically, following opportunity identification OI determines “what” work has to be done by “who” in order to turn opportunity into reality. This strategic step defines organizational change as well as changes to workflow and information flow. Then OI defines “how” the work should be done and the technology enablement required, the tactical side. Not only does Outside-In expand the scope of customer-centric thinking to include implementation; but it also stretches traditional boundaries of process to include the “what” and the “who” plus technology support–beyond just addressing the “how.” And that’s why we call it “Outside-In Process.”

The second change is the volume of Outside-In occurring. A number of organizations have already completed the migration from “inside-out” (company-centric) to Outside-In (customer-centric). Others are opportunistically starting to migrate. And some laggards within their own industries have moved or are moving defensively, to avoid the fate of Circuit City, CompUSA, WAMU (Washington Mutual Bank), General Motors and Northwest Airlines–all notoriously inside-out companies insensitive to customer needs.

Proactive Outside-In companies



I also want to touch on the hurdles these companies using OI as their route to customer-centricity faced or are facing. While achieving customer-centricity is a noble goal—even a necessity for many companies—it’s not easy. It requires transformational change. On the flip side, sticking to incremental change doesn’t get you there. Not even close.

Amazon.com may have achieved Jeff Bezos’s dream of becoming the world’s most customer-centric company. And Amazon had the advantage of starting from scratch with nothing preexisting in the way, except for a pervasive business culture that believes companies went broke by trying to be too nice to customers and became successful by rigorous cost control and a laser-like focus. But Bezos understood the comfort level customers would feel with Amazon sourcing whatever they need to buy (almost) instead of dealing with scores of online merchants, including some not trustworthy. He also understood that the best way to keep customers is by continually finding new ways to offer them value. These were hardly popular concepts when he started Amazon. And for straying from conventional “wisdom,” Bezos and Amazon took a pounding from pundits and analysts before proving them wrong.

Best Buy senior execs banked on their understanding of how customers really wanted to buy electronics.

Best Buy made a major shift from a “cash and carry” electronics discounter to a combined product/service provider that supports every facet of customers enjoying high-tech electronics, with some appliances thrown in for good measure. To get there, Best Buy had to re-staff the stores with better trained, higher paid employees; bring in substantial new management expertise, redesign stores from the ground up, go to store plans that flexed with local demographics and take a huge financial risk on a then untested concept of “higher touch” electronics retailing. Best Buy senior execs banked on their understanding of how customers really wanted to buy electronics. Customers rewarded them by leaving competitors in droves, until the two primary U.S. competitors collapsed.

Fed-X has been an Outside-In company from the day the first Dassault Falcon flew off from Memphis back in 1971, and it has reaped the rewards. But in 1998 Fed-X chose to break its own air courier business model by acquiring the parent of both Roadway trucking and RPS (Roadway Parcel Express, formed to compete against UPS). The customer problem the acquisition solved was visible every day at hundreds of thousands of shipping docks–one pile of small parcels for priority air shipping by Fed-X; a 2nd pile of small parcels for routine ground shipping by UPS; and a 3rd pile of larger shipments, including single packages over 60lbs., to be picked up by various LTL (less-than-truckload) carriers that serviced varying city pairs.

For logistics managers this meant: multiple types of waybills and manifests to complete; multiple tracking systems (or no tracking); angst and errors from trying to price shipments to attach shipping charges to invoices; and three different pick-up vans, often jockeying for space at a single loading dock at the same time. But once Fed-X melded the three service into one, logistics could have just one pile of shipments for ground and air, including packages up to 150lbs.

UPS, a totally inside-out company at the time, never saw the opportunity, despite seeing the three piles every day, because they were seeing the piles from their point of view, not the customer’s.

All these cases represent achieving customer-centricity through transformational change from inside-out business practices–plus, overcoming inertia and defying yet more conventional “wisdom.” In the CRM space, there’s a pejorative term, “boiling the ocean,” to describe asking companies to change too much. Supposedly, attempting “excessive” change leads to certain failure and death by firing squad. Yet any company striving to achieve customer-centricity has to switch from the inside-out perspective to Outside-In. And that takes “boiling the ocean.”

Feeling the urgency for change will help some companies clear the hurdles. Not feeling the urgency for change will cause others to take face plants on the track—or wither away at the starting blocks.

Reactive cases

UPS was forced Outside-In (or else it would have gone upside down) by Fed-X’s ground transportation acquisition. For an extraordinarily routinized and standardized company, that meant adopting a new business model requiring disruptive process change.

More recently, Sprint was on the slippery slope, put there by inside-out thinking, including deplorable customer service. Its new CEO is taking an Outside-In view of the business to try to dig out of the hole. Too late? Maybe, maybe not. Forgiveness doesn’t always come easy. Sometimes it doesn’t come at all.

And speaking of forgiveness, General Motors is struggling for life after bankruptcy—and trying to overcome an almost impermeable inside-out culture. Getting to Outside-In is a prerequisite for winning back customer trust. So far, reports coming out of GM have been mixed.



What are you waiting for?

Sure Outside-In takes work. But don’t wait for an industry competitor to go there first. Forced change is so much harder than proactive change. And don’t wait until it’s too late and suffer the ultimate change. The Outside-In train is leaving the station, likely populated by a competitor or two or four. It’s time you hopped on board for the journey to Outside-In.

For more information about Outside-In visit www.h-ym.com. For global OI training opportunities visit http://www.bpgroup.org/services.html.

12 COMMENTS

  1. Hi Dick

    What exactly is Outside-In thinking?

    It’s one thing writing about ‘aligning strategy with customers,… aligning process with strategies and then technology with process’ and so on. But there must be more to it than that. And there must be more to it than just strategy, process and technology too.

    I looked at the Linked-In group on Outside-In but it was full of poorly thought through waffle.

    What exactly is Outside-In thinking?

    Graham Hill
    Customer-centric Innovator
    Follow me on Twitter

    Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.

  2. Dick Lee – Graham, just because you don’t agree with Outside-In doesn’t make contributions to the Outside-In Process linkedin Group “waffle thinking.” There are some global thought leaders posting up there (such as Steve Towers and John Corr)who have helped high-visibility companies through transformational change leading to vastly increased customer-centricity – using Outside-In.

    If you’d like to know more about the topic, just visit our new website, http://www.h-ym.com. The site is content rich, not promotional. Lots of other people are getting O-I, and the BP Group, which formalized the concept, has already trained 7,000 CPPs worldwide just over the last everal years. NHow that we have a global network of trainers, that number will increase nationally. In fact, you should take a BPG certification course yourself, if you want to get deep in the weeds.

    PS: Make sure you relook at Visual Workflow on the site. We’ve now rolled all phases of our O-I consulting into VW. And as it turns out, Visual Workflow was the first, formal, Outside-In process methodology.

  3. Dick Lee – Graham, I want to amend my comment to more directly address your “waffle thinking” comment that dismisses globally respected thought leaders and a groundswell movement.

    Given your words about your affinity for process, I’m sure you’re aware of the London-based IQPC Business Process events, held globally and the largest in attendance of traditional process (Six Sigma & Lean) conferences worldwide.

    The Chicago conference is coming up late this month (http://bit.ly/57dxN ). All the presentations over four days but one involve Six Sigma and/or Lean. The outlier is my presentation representing the BP Group on “Outside-In.” Steve Towers and I are also presenting at the IQPC event in Miami in February giving both individual presentations and a full workshop, plus an “Outside-In evening.”

    IQPC recognizes that process is moving in a new and different direction, and they’re willing to incorporate the new movement into their conferences. While I can understand your difficulty understanding “what’s new” after practicing holistic CRM for years, because “Outside-In” resembles what CRM should have matured into, but O-I also differs significantly from even holistic CRM.

    O-I can produce transformative change as well as incremental change. In fact, it’s much more likely to lead to transformational change, rather than incremental. By starting with customer-centric strategies, being willing to change, even radically, “what” work is done to support strategies; being open to changing “who” does the work – before looking at “how” work is done, which represents 90% + of Six Sigma and Lean’s focus. Plus, O-I then aligns technology with process, not part of either 6S or Lean’s focus.

    CRM has been supported (or better, unsupported) by three types of process: 1.) Six Sigma; 2.) Lean; or as Bob recently posted here; “window dressing process.” O-I is a very different animal, with its equal focus on the “what,” the “who,” the “how,” and enabling technology. And if you’ve been providing all four elements in your consulting, you’re already practicing Outside-In, so pleae just sit back and relax.

  4. Hi Dick

    My comment about poorly-thought through waffle was squarely aimed at all those process practitioners who were talking about process-insider stuff. You know what I mean. Should we use BPMN or BPEL. Should we use Post-its or BPM tools. etc.

    The only ones of the 50 or more posts that I read that were talking about customers were yours and Steve Towers’. All the rest were talking about process as though process reengineering is all about processes, rather than improving the processes to increase the co-creation of value with customers.

    It could just as well have been a genetecists group talking about ‘mutational analysis of the protein tyrosine kinase family in cutaneous metastatic melanoma’ or a lawyers group talking about ‘remedying duplicative antitrust review of telecomunications mergers’.

    Maybe it is time the process community started to become more outside-in. You and Steve Towers excepting of course.

    Graham Hill
    Customer-centric Innovator
    Follow me on Twitter

    Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.

  5. Hi Dick

    I agree wholeheartedly with the notion that processes should be designed with customers in mind. This was Michael Hammer’s original intention when he wrote Reengineering the Coropration and it is the approach I have followed over the past 15 years of hands-on process reengineering work.

    I sm still at a loss to know what Outside-In really is. I re-read a handful of comments at the BP Group discussion. There were lots of arcane posts about different process languages and so on. But no clear definition of Outside-In. I look at at your nicely reworked HYM website. No clear definition there either. I even looked at some of Steve Towers slides from a recent BPM conference we both spoke at. Still no joy.

    I just want to know what Outside-In is, how it is different from other approaches and then I can learn it for myself, if it really is all that different.

    Graham Hill
    Customer-centric Innovator
    Follow me on Twitter

    Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.

  6. Dick Lee – Graham – I agree with you about the “mapping” thread. I was sorely disaapointed to see so many participate, but that’s the traditional process world. Say, if you’ll e-mail me your direct address ([email protected]), I’ll reply back with the Chicago “Process Excellence” presentation that describes O-I in tables and bullet points. It should be done by Tueday.

  7. Graham,

    I totally understrand where you are coming from. When I first heard about Outside-In a thought it was a “no-brainer” (and I openly said so on the forums). In some ways it is, but it is remarkable how quickly organisations lose sight of the customer and turn inward.

    I didn’t really get the concept until I did the CPP course, now I totally get it. It’s really the method and the approach to process that is fundamentally different. It forces you to think about process in a way that you have never thought about it before. As an innovator I think you would be amazed at the innovative thinking that it can stimulate.

    I think that really the only way that anyone will “get it” is to do the course. I’d really recommend that you try to experience it for yourself – even for just 1 day.

  8. Hi Dick: Outside-in is hard for me to explain too. I’ve tried a few different approaches, and here’s the one that works best, at least so far:

    Imagine two separate gears spinning in counter-rotation. One is a sales-process gear, and the other is a purchase-process gear. Sometimes–many times–the gears don’t even mesh. They’re just spinning independently in space. Other times they mesh, but poorly. In both of these situations, there is much wasted energy. But the biggest expense is opportunity cost.

    When the gears mesh poorly, there is noise and stress. Sometimes they mesh, but at widely different speeds. Metal grinds and teeth get broken. The gears might even stop spinning–for a moment. In the real world, this is what happens when phone calls and lead inquiries are not returned in a timely manner. When website pages provide irrelevant information–or worse, end up in information and process “dead-ends,” from which prospects must lead themselves. Many times they never get the “gears” back on track, and the sales opportunity is lost.

    When the gears don’t mesh at all, the root causes can be harder to assess: “we’re just not getting enough leads in the pipeline,” or “we’re spending more on marketing than ever before, but our close ratio isn’t improving,” or “marketing is sending us absolute junk for leads–when will we get to call on a prospect that’s truly qualified?”

    Outside-in processes help to match these gears so that reciprocal customer-vendor processes operate synchronously. This takes more than a customer-centric view, and it requires more than simple collaboration. It requires a detailed understanding of how value is transferred within and between organizations, along with a process mindset that can knit the efforts of sometimes-disparate teams into a single workflow.

    It’s a great challenge, but as the saying goes, “a problem well stated is a problem well solved.” Thanks for taking the first step!

  9. Hi Dick

    Steve Towers of the BP Group has just posted a new presentation on Outside-In at

    http://www.customerexpectation.com/MomentsofTruth_Perth2009.pdf

    Having looked a little more at the CEMMethod over the past few weeks, it would appear to be an intelligent combination of BPM, service management and CEx management. Interesting? Certainly. Useful? Most certainly. New? Not really.

    It is certainly a step forward from traditional inside-out approaches to BPM used by 95% of the current BPM practitioners (if the LinkedIn BP Group is anything to go by), but it is hardly revolutionary to anybody involved in service design, experiental marketing or CEx design.

    Graham Hill
    Customer-centric Innovator
    Follow me on Twitter

    Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.

  10. Hi all, another famous Drucker quote is “marketing is your whole business from the point of the view of the final result, the Customer.” (Or something like that).

    At any rate, why all the fuss about Outside-In? It simply means putting yourself in the Customer’s shoes, to see your business/organization from their point of view.

    It’s true that’s not new. The concept has been around for a long time. Merchants of the 17th Century took care to buy only the best materials because they ‘knew’ what their patrons/Customer expected.

    What is new is the application of that idea to the design and structure of organizations – particularly today’s large-scale enterprise, government and not-for-profit firms. The innovation is that what to ‘make’ is based on the choice of who to serve. It’s been the other way around ever since ‘mass-production’ was ‘invented’ in the late 19th Century. Even though it’s been around for over 150 years, the anomaly is product-focus.

    Not to take anything away from the power of what Dick has created – Outside-In is at its’ core a mindset, a way of doing business that puts Customers at the core of everything you do. There are countless successful organizations realizing sustainable growth because they compete on what they know about their Customers – be it a hospital, food bank or online pharmacy.

    Einstein opined that insanity is doing the same thing over and over again and expecting a different result. With product-based business models showing obvious signs of serious fatigue, O-I and its attendant approaches offers much needed relief and clear-headed thinking to decide what to do.

    Greg Kelemen
    Founding Partner
    Customer Insights, LLC

  11. Dick Lee – Greg, you’re correct, putting yourself in customer shoes is not new to O-I. What’s new is fusing planning and process design into an integrated activity. In our case, we start by analyzing as-is process, using it as a lens to closely see the customer experience. Then we progress to planning, which includes: incorporating all available customer knowledge; exploring further; and going beyond what customers can/will articulate – and then creating customer-driven strategies. Then we design to-be process to carry out the strategies. And finally we add technology enablement for redesigned process. Of course, we’re standing in customer shoes through all the steps.

    I have a current post up on this subject: http://www.customerthink.com/blog/outside_in_is_a_customer_centric_sandwich_ready_for_a_bite

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