A Copernican Shift in Creating Business Success

The shift from production mindset (producing goods) to customer centred business (delivering services) has disrupted global business in fundamental ways, writes columnist Steve Towers. Here's how.

During the steady economic expansion of the late 20th century leading companies grew via a simple formula: Grow the top line (through expansion and acquisition), then grow the bottom line through disciplined application of operational excellence, including Lean approaches, Six Sigma and process improvement. The quality revolution, driven by the inspiration of Deming and Juran and incorporated into GE, Motorola and Xerox spread rapidly from the manufacturing sector into the service world. However early gains and double digit growth of the 1980's declined and previous industrial giants became moribund and locked in a cycle of diminishing returns.

Meanwhile the emergence of the always on world produced a new breed of customer, connected, demanding and promiscuous (see for instant Richard Branson's Business as Usual l). Previous production based business (left to right, silo functional) struggled to keep pace and are now being supplanted by a more flexible, immediate customer centred view of business. The subsequent realignment of business continues apace with increasing emphasis on 'Outside-In' - looking at the processes of a business tied to Successful Customer Outcomes, rather than a factory based manufacturing mindset. The shift in terms of economic value is dramatic (see Figure 1) with leading firms deriving revenue and profits from service orientation. Freed from the shackles of production left to right thinking companies such as Amazon, with their 'working backwards' ethos have reconceived business and put the customer at the centre of everything they do.

Many firms have been able to build on earlier Lean and Six Sigma success and grown to embrace this different mindset with recent examples including IQPC's award winning firms PolyOne and LSG.
The transformation isn't however limited to 'for profits' though as public sector and non-profits benefit from the reframing such as the Nature Conservancy in Arlington, Virginia.

A stark warning exists for companies not making the move to Outside-In if they continue to rely on 'inside-out' production based thinking. Previous giant Nokia, who in 2007 rated the 10th most valuable brand in the world, is now in free-fall at 81. Shareholder value and revenue has been slashed as the firm struggles to cope with the new order. (See Brand X survey 2011 and 10 brands that won't be around in 2012).

Meantime companies such as McDonalds continue to transform their business model. In doing so they establish new rules and approaches suited to the 21st century. So whether your business makes cars, sells insurance, cooks burgers or publishes e-books we can all embrace the new Outside-In mindset and in doing so truly put the customer at the centre of our business process world.

Sir Richard Branson describes the shift underway: "The upcoming transformation of our society presents one of the greatest business opportunities of the next 100 years. This will require patience as well as perseverance; to anticipate what’s next and plan for that situation as well as taking advantage of what’s immediately before you. Our efforts in this field are part of our (Virgins) strategy for this future. What’s yours? "

So where are you heading?

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References:

Customer Expectation Management, Towers-Schurter, 2006
Outside-In The Secret of 21st centuries leading companies. Steve Towers, 2010.(http://amzn.to/OutsideInBook)
Working Backwards, Jeff Bezos, Amazon, 2009.
Millward-Brown Global Brand survey 2011.
IQPC PEX Best BPM Projects 2009-2010 (Europe - LSG, USA - Polyone)
Outside-In Strategy, Professor George Day, Wharton Business School, 2010.
Reorganise for Resilience, Professor Ranjay Gulatti, Harvard Business School, 2010.
Screw Business As Usual, Sir Richard Branson, 2011
BP Group Annual Surveys (http://www.bpgroup.org )