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Outside-in or Inside-out Examples

Recent developments at Dell

As I wrote in the book, Dell built its initial success with an impressive outside-in focus.  More recently, however, the company has encountered some bumps in the road.

Michael Dell explained some of the problems in an interview in 2006 (Fortune, September 18, 2006).   He said that the company had overemphasized costs and prices to customers, while neglecting relationships with customers, customization and the customer experience.

For example, in 2005 Dell had emphasized the measure of how quickly its support staff handled calls from customers.  That’s an inside-out measure;  it ignores the critical question of whether the support staff has really helped the customer.  In their rush, apparently the staff had failed to solve too many customer problems.  Dell explained that the company had returned to a better measure:  how well its staff in fact solves customer problems.

Michael Dell returned to the company as CEO in 2007 to try to fix the problems.  Two years later, an article (BusinessWeek, October 15, 2009) reported that Dell was still determined “to change almost everything about the company.”  In the middle of 2010, the company was reportedly not recovering from the economic slowdown as rapidly as were competitive technology companies;  it relied more heavily on purchases by large companies than its competitors did, and the large companies were not eager to buy new PCs.  (New York Times, May 21, 2010)

In summary, Dell Computer slipped into some bad inside-out habits.  Getting back to outside-in has proven very difficult for the company.  We’ll have to see how they do in the future.  In the meantime, the company provides an example of how hard it is to maintain an outside-in perspective – and of how hard it can be to regain that perspective after it’s been lost.

Customer focus in the design of Wii

The initial success of Nintendo’s Wii stunned much of the videogame world.  An article in Fortune provided some insights into the design philosophy behind the Wii.

Satoru Iwata, the president and CEO of Nintendo, explained, “‘We are not competing against Sony or Microsoft.  We are battling the indifference of people who have no interest in videogames.’”  Shigeru Miyamoto, Nintendo’s key videogame designer, described some of the customer insights that led to the design of the Wii controller.  He believed that average consumers were not deterred from videogames because they were afraid of all electronic gadgets.  “‘TV remotes are always sitting out on a coffee table or on the sofa, but videogame controllers – people don’t want them lying around.  In that sense we thought we were losing to the TV remote.  So we thought, What kind of controller can we create that won’t make people afraid to touch it?’”  (By contrast, according to Fortune, “Sony views the world through the eyes of an engineer.”)
(Jeffrey M. O’Brien, Fortune, June 11, 2007, pg. 82.)

In the terms of The Outside-in Corporation, Nintendo’s picture of the average consumer described someone who was not afraid of technology per se but who valued technology only if it provided real, accessible benefits.  The picture said that many customers would in fact get benefits of enjoyment from videogames, provided that those games were not just lots of fun but also easy to use and non-intimidating – if dealing with them were comfortable in the way that using TV remotes has become comfortable.

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Bringing Xerox “Back from the Brink”

A 2006 interview in the Wall Street Journal described CEO Anne Mulcahy as the “chief executive who led Xerox back from the brink.”  In that interview Mulcahy stressed the importance of not focusing only on a financial crisis, even a financial crisis as serious as the one she faced at Xerox.  She advised managers facing serious financial problems to “‘make sure you’re focused on what’s going to make you valuable to your customers.’”

Mulcahy explained that she had begun the effort to achieve better customer focus by going out herself to meet with customers, acknowledging Xerox’s problems, explaining what the company was doing, and giving the customers her personal commitment that Xerox would not let them down.

She then began a program, called Focus 500, in which Xerox’s (roughly 200) top executives were assigned to meet with the company’s top 500 customers.  Mulcahy commented, “‘They were fearful of going out and calling on customers.  They really didn’t want to hear all the stuff that wasn’t going well.  But then it became meaningful in terms of their jobs, this connectivity to customers.’”

She also began a program called “officer of the day.”  Each senior officer of Xerox was assigned one day a month to take incoming calls from key customers.  The officer of the day was required to give the customer calls top priority;  for example, s/he had to leave a meeting if a call arrived.

The Journal gave Anne Mulcahy’s five tips for saving a troubled company.  The first is “Spend most of your time with customers and employees, not bankers.”  The second is “Make every executive deal with some customers;  buy out executives who don’t buy in.”  (William M. Bulkeley, “Back From the Brink,” Wall Street Journal, April 24, 2006, pg. B1.)

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Sometimes customers can tell you

Although customers aren’t always able to express their needs and preferences well, sometimes they are both able and willing.  Managers at the Canadian company Shane Homes tried asking.  The company’s head of sales and marketing heard a speech about the buying power of women and was prompted to set up “listening groups” to get women’s reactions to the houses the company built.

Shane got very specific input.  For example, participants said that they needed a window at the kitchen sink so the adult at the sink could monitor kids playing in the back yard.  They objected to combining mudrooms with laundries because they didn’t want muddy floors and clean laundry together.

Shane incorporates such suggestions into its designs.  It subjects new designs to reviews by listening groups.  A Shane executive said the company was spending several times longer on design than it did a few years ago, but the result has been better designs and substantially higher sales.
(New York Times, October 29, 2006)

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