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Successes & Surprises

IBM built its initial marketplace success outside in. It got into trouble, and conventional wisdom in the early 1990s was that IBM was in dire straits. New CEO Louis Gerstner set out to save IBM. He said that he found a company that was focused internally, on a series of intramural competitions. In his words, he told “virtually every audience ... that we were going to rebuild the company from the customer back.”

An outside-in approach transformed the U.K. grocery chain Tesco Plc from a mediocre performer that was losing share each year to the leading grocer in the country, known for its strong focus on customers. Press coverage reported that mighty Wal-Mart had a tough time in the U.K. because its Asda stores were bested by Tesco.

Dell Computer built its initial marketplace success with a strong outside-in perspective.  Conventional wisdom says that big, powerful customers provide lower profit margins precisely because they are so big and powerful. But Dell earned higher margins from its large “relationship” customers -- because it used an outside-in perspective so well.  (Yes, Dell has had problems recently. We’ll have to see whether it will reemphasize outside in and solve those problems. Maintaining an outside-in perspective can be difficult for successful companies.)