Are you Inside-Out or Outside-In?
Do you frequently struggle to step back from operations to see the big picture? You aren’t alone. Even for those who have managed to allow themselves some time to be ‘On the Business’ it’s almost certainly not enough. It’s only the first step in ensuring business sustainability. So what is really stopping you?
Preoccupation on Costs vs Value
Don’t get me wrong, understanding what activities cost is one of the most fundamental things any business leader must do. But so often cost reduction becomes an end in itself. I cringe when I read declarations of productivity improvements or cost reductions without putting it into a value context.
Similarly, I find it astounding that so many senior executives still think the purpose of Continuous Improvement (CI) is just to reduce costs. Having introduced Lean Thinking into a number of organisations I find so many organisations who have, usually with an army of consultants, imposed cost reduction onto an organisation without thinking it through. We can reduce costs to zero. We just won’t have a business any more. And way before that, we won’t have any engagement from our workforce.
It needn’t be like this. Tough decisions can be supported by a workforce when it is not a management edict, but seen to be actually driven by what the customer values. In fact, the only way that value can be defined is through the eyes of the customer. And that means you have to go and ask them!
Peter Hines has increasingly focused his research on the cultural aspects of continuous improvement and Lean. He concluded that organisations that focus on ‘whole of business’, value driven, continuous improvement at least doubles the impact in terms of profitability than just focusing on cost productivity. Eli Goldratt, in ‘The Goal’, demonstrated the need to look at the whole system – not just individual departments.
Short Term Profit vs Long Term Sustainability
We still see examples of divisional VPs / MDs incentivised to share a significant percentage of the profits in excess of budget. This would have been accepted best practice a few years ago. But how do you think the VP might behave?
‘Tell me how I am measured and I will tell you how I will behave. Tell me that’s also how I will be rewarded and that’s all I will focus on.’
Strategic investments become ‘costs’. Investments in diversification, in reinvention, always marginal and fragile in the early stages get dumped in the focus on core activities. Jonny Ive said Steve Jobs’ real strength was in protecting fragile, ‘Dopey Ideas’. This short term behaviour, still prevalent in 2016, not only prejudices sustainability but completely demotivates the emerging leaders who want to make a difference. Short term performance if not completely framed in a long term context stifles innovation, drives out talent and exposes the incumbent to disruptive threats.
In the business vs On the business
There can be almost a badge of honour as to how busy we are – how full our calendar is with ‘important’ meetings. At start-up phase or in turnaround situations it’s of course hard. But both these situations are temporary and are not sustainable.
Most of my CEO TEC members pride themselves in being On the business by regularly attending whole day meetings with their peer group. The discipline of spending a whole day a month to reflect on what they are doing and how and why they do it is a habit they have forced themselves to do. Other habits can include allocating one day a week to ‘out of office’ or strategic meetings.
But being On the business is not enough – we need to look from Outside-In as well.
Inside-Out vs Outside-In
A couple of years back the threat of Disruption and the term VUCA (Volatile, Uncertain, Complex and Ambiguous) was seen as a bit of a fad. But as Bill Gates said:
‘We will always overestimate that change that will occur in the next two years and underestimate the change that will occur in the next ten’
Now we are beginning to feel it. Monash University research has found 72% of business leaders believe their business model will be under threat in the next five years. It’s a leader’s job to have a strategy for the future, one that ensures their organisation can adapt and evolve.
Matt Tice provided my group members with a typically robust challenge. While they had robust plans, they were almost all too Inside-Out. Plans, yes. Truly Strategic, generally no.
Outside-In is about being completely focused on the customer and the market. Matt reminded us it is about Winning, about Positioning and being Distinctive in terms the market understands. This reflects Michael Porter’s seminal work in the 1980s and his five forces.
While most leaders have come across the great models, templates and canvasses shared in best sellers, they have lost sight of when and how to use them. Models are only useful if there is a conversation that goes with them. Mike Richardson, another TEC / Vistage speaker on Agile bellows ‘you will have the conversation, it’s just whether it’s now or when it’s too late’. Visual templates force you to have a discussion on how you compete.
Why do we really have to be more outside in? It’s simple really, it is a precursor to true innovation. Without true innovation we will not truly change. W Edwards Deming’s famous quote has never been more valid:
‘It is not necessary to change. Survival is not mandatory.’
Useful models to develop with your team
- Blue Ocean Strategy Canvas – draws out dimensions of how you compete encouraging new dimensions to create value
- Business Model Canvas – makes you much more explicitly describe how you compete and provide value
- Horizons chart – Matt introduced a horizons chart which recognises it’s not just product and market innovation but also completely different business models that need to be considered.
How to get more Outside-In
1. Get an External Perspective
- Join a peer group with a speaker program such as a TEC / Vistage group. This way you not only get CEO peer challenge, you get speakers such as Matt and Mike to add real steel to the debate.
- Have a quarterly discussion to discuss what is challenging your organisation’s position in the market, best with an external facilitator to avoid ‘group think’
- Create diversity – Boards need to increasingly bring a range of backgrounds and mindsets.
2. Challenge your team to be forward looking and outside looking
- Review your vision and mission statement – Do they make a compelling statement of how you will truly be different? Why try to constrain your vision to a one liner? What’s your ‘winning aspiration?’ – see if you can share it in a 2 or 3 minute soundtrack.
- Realise that you’re not immune to disruption – Ensure that your business (and management team) is agile enough to react accordingly. Listen to the conversations. Are you talking about the right things?
- Invest in resources to develop and create customer value, rather than cost reduction.
3. Spend more quality time with customers
- Gain insight as to what customer values – Satisfaction surveys won’t always reveal this information. Discuss their priorities, their challenges, their ideals.
- Look beyond internal processes – have joint process meetings where you understand your customers’ operations and their innovation processes.