Tag Archives: outside-in

Layoffs – Where’s the Learning Curve?

One touchy subject inevitably arises when we design customer-centric process. And I hate to see it happen.

Redesigning process from the customer inwards produces an ancillary “benefit,” which to many execs becomes their short-term ROI justification. While new process designs are adding new value to customers, they’re also streamlining the organization, which can dramatically reduce front and back office FTE requirements, raising the specter of layoffs.

While we always consul clients to first consider using temporary functionless staff for special projects, then reabsorbing them to create “no hire growth,” some layoffs inevitably occur. One of our clients, post process redesign, eliminated 600 front office positions, and our process reworking contributed to the eventual closing of multiple plants. Worse yet, overall demand in their industry was declining, leading to very slow growth.

Two things really bug me about this situation. First, too many companies practice “boom or bust” staffing. They lurch from overstaff to understaffing, because they don’t have a clue how to avoid either excess. Second, necessary layoffs often cut people but not their functions or positions. Process streamlining should reduce functions and positions and does not target specific workers. And in neither case are they learning anything from experience. They just keep repeating their destructive practices.

Not a pleasant topic at all, but I just read an excellent post an excellent post by Ron Ashkenas (co-author of “The GE Workout”) that spot on addresses both things that bug me. If the subject’s relevant, I strongly suggest reading it (link below).

http://tinyurl.com/c329on8

Customer-centricity is irrevocably changing IT. What other disciplines are being reshaped?


Used to be enterprise technology was designed for finance and/or manufacturing first – and all other functions, especially those directly affecting customer experience, as an afterthought. Still today finance and manufacturing technology needs are typically taken more seriously than other functions requirements. But that’s changing.

Increasingly, the business community is viewing technology’s first obligation as enabling and improving process.  When process design starts out at the customer end, rather than deep in the bowels of the company, technology must start there too. Otherwise, process and technology inevitably wind up misaligned. Plus, as it turns out, supporting finance in particular with technology is much less demanding than supporting customer-affecting work. So why would any systems architect let the less demanding functions dominate systems design and decisions? For example, we’re working now with a client that hired us to redesign process and then help select a new ERP system to support process. But they now realize that managing service operations is their major challenge, while they have tons of accounting and finance options. So we’ll design around the application layer.

This customer-driven turn of events turns systems architecture and IT overall on their respective ears. But we would do well to step back and look at other functions to anticipate customer primacy turning them outside-in as well. Your observations?

Reverse Engineering the Organization, Starting from Customer Process

What customers want from companies is becoming a common “conditioner” of organizational design and change management – but rarely a driver. That’s unfortunate, because empirical evidence shows the best way to build customer-centricity AND streamline companies is by starting with customer experience and redesigning the work (process) of the company from the customer in. Plus, putting customer interests first also greatly mitigates resistance to change by giving employees a much more palatable goal to work towards than “making more money for the company” (although that’s what ultimately happens.

But going “outside in” also involves serious change: changing work; who does it; how it’s done; and the underlying technology – all of which in turn require organizational change. Is that why companies continue designing change from the executive level down? Or is it more that management doesn’t like taking direction from customers.

Frankly, I suspect it’s the latter, although we always have to respect management resistance to change. “Taking orders from customers” flies in the face of the long-held belief that companies can manipulate customers into doing their bidding, buying into their brand, etc. And when you step back and considers how out of sync with today’s reality this belief is – you get a sense of how desperately senior management continues clinging to it.

If good process design simplifies work, why are most approaches so complex they detract from process’ “customer-first” mission?

Not only should good process design simplify work, it should also appeal to workers who must intuitively understand the method before they’ll embrace significant work changes that result from redesign – instead of fighting them. The Outside-In approaches – Visual Workflow, CEMM, IDEAS & Process Experience – all do the job.

So why are traditional, inside-out process design approaches complex, requiring special training to understand? And why apply them in front & back offices and service settings where knowledge workers not grasping “what’s being done to them and why” will almost automatically generate resistance to change? For the benefit of the change management industry, I guess. The growing interest in business process redesign has greatly expanded the change management community.

Of course, many approaches address these issues by deliberately not going far enough to “rock the employee boat.” But taking this tack doesn’t get companies remotely close to customer-driven process that adds significant new value to customers.

So far, the process industry as a whole seems unable to answer these questions. Which may be why interest in O-I process is growing.

Customer-Centric Process Design is Clashing with Organizational Design: Which is more likely to “give?”

Most organizations are designed from the top down: determining the management structure first, typically using traditional silo roles; divvying up among silos responsibility for classes of activities next; then letting silos determine specific activities (processes). Things have worked this way seemingly forever.

Today, however, competitive pressures are driving more and more companies towards more customer-centered business models. And the most successful approach to implementing the change from “inside-out” (company-centric) to “outside-in” (customer-centric) has been redesigning processes around customer needs and preferences. Sounds innocuous from an O.D. standpoint, except outside-in process redesign relies on determining who best should do what activities from the customer perspective, which usually clashes with current-state organizational structures and responsibilities. Plus, implementing outside-in process requires heavy and unaccustomed collaboration among functions – and potentially placing an enterprise-wide customer advocate above the silo tops. Two more conflict points.

These clashes are only starting to occur, but will grow in number and intensity as pressures to conduct business “the customer’s way” mount. Do you think your organization, for example, or your clients’, are willing to reorganize to better support customer-driven process? Or are we about to see “irresistible force meets immovable object?”

Is Putting Customers First Disruptive Change?

Based both on a macro view of today’s markets plus lots of ground-level observations, I’d estimate 95% of companies say they put customer interests first; 10% understand what that means; and perhaps 3% actually do so. With potential competitive gain in migrating from company interests first (inside-out) to customer interests first (Outside-In) dangling like a carrot in front of business, why is there so little movement?

Putting it plainly, migrating from I-O to O-I is much harder than it looks. It’s change. Lots of change. And to answer the title question, disruptive change, especially at the organizational level. Yes, line employees do struggle with having to learn new skills or working with different people in different roles. But when making the I-O to O-I migration, resistance at this level usually pales in comparison with the fights going on overhead―struggles to protect silos, gain new turf, rule over the largest number of employees and even have the largest office (or largest sunroof on the company car).  

So we have irresistible force (customers) versus immovable object (corporate silos). And buyers are at worst in a punishing mood, or at best quick to leave when seller operations start going south. Just ask GM, Ford, Chrysler, the ghosts of Circuit City & CompUSA, Sprint, Nortel, Bearingpoint, etc.―all of which lost ground or went under because they ignored customer needs and preferences, not because of the recession.

Does anyone see any give on the corporate side? Or will fear of change and change avoidance create lots more casualties?

Do we pay enough attention to emergency processes involving customers?

I confess – I often don’t. But responding to emergencies requires thoroughly thought out process that mobilizes the right resources the right way at the right time. If you don’t plan out responses beforehand you get BP in the gulf coast or Toyota stomping all over its meticulously crafted brand.

But these disasters didn’t trigger me writing this. Instead, it was a superbly well-executed emergency response that still has me shaking my head in appreciation.

In the U.S., we have many, many people contracting salmonella from eating eggs. First, one egg-producing company had to recall about 350 million eggs. Then, a second producer had to recall 150 million more. This second producer supplied Costco, where we buy eggs.
Within scant hours of the recall, I received a well-produced robo-call (so well-produced I didn’t hang up) telling me I’d purchased eggs at Costco that could be carrying salmonella and had been recalled. I was instructed not to use the eggs but bring them back to a store for a full refund.

Can you imagine identifying a gazillion egg purchasers with their phone numbers from membership records and calling them in very little time with a cut-through” message? Yes, good intent towards customers is ultimately responsible. But executing the plan took exceptionally well predefined process and following it to a tee. Kudos to Costco, which I frequently include in my short list of Outside-In, customer first companies.

How about sharing some examples, good or bad, including the process or lack thereof apparently behind them?

Reverse Engineering Process from the Customer In

Never doubt the power of an outside observer. We often share observations with clients that leave them dumbfounded they hadn’t this or that prior. But last week, I had the tables turned on me. A participant in a Change Management thread directed a comment about Outside-In Process to me saying, “So what you’re really doing is reverse-engineering process from the customer-in.”

Wow. Why didn’t I think of that? Fourteen years ago, when we launched Visual Workflow, why didn’t I think of that? When I look back on the gazillion words I’ve expended attempting (often futilely) to differentiate O-I process from Lean, LSS, Six Sigma et. al., I want to smack myself upside the head.

And just as O-I process reverse engineers work, Outside-In overall reverse engineers the whole company from the customer in. Perfect description…almost. Just one minor flaw. A preposition’s a horrible thing to end a sentence with. :-)

When Jules Verne Wrote “20,000 Leagues Under the Sea,” Did He invent the Submarine? (and we really are talking about Outside-In & customer-centricity)

Through my travels across Linkedin groups, I’ve read (and received) innumerable comments saying this approach or activity or that was started by ____________ in year ____ because they wrote about it in their book, “______________.” I even had someone seriously claim our Visual Workflow approach to Outside-In didn’t exist until 2002 because there was no “academic literature” describing the underlying principles until then – despite HYM and others deploying it regularly since 1996 (actually, I had written a book describing the principles in 2000, but that didn’t count because I didn’t write it during my 10 years teaching graduate B-school). These comments come from marketing, HR (and its related components) but especially from process thought leaders regarding the starting points for customer-centric process. 

So here are the real questions:

 If an academic or a process theorist or even a heady practitioner writes about something they can’t make happen at street level with any frequency, should they lay claim to it? If so, I should lay claim to all of Don Peppers and Martha Roger’s work initiating “One-to-One Marketing” in the 1990s, because I’d been writing about it in the 1980s – without, unfortunately, popularizing it.

 Or if someone writes about customer-centricity in a Lean, Six Sigma or LSS book, has customer-centricity been part of that approach since then? 

 I say “No” to both questions. We don’t practice theory. Concepts to me are only real when there’s empirical evidence they’re being practiced and popularized both. For all the words written about customer-centricity now being integral parts of Lean, 6S and LSS, we still don’t see real world, customer-driven implementations. And when I’ve asked Linkedin commenters/readers (repeatedly) for examples of Lean, 6S or LSS taking companies from inside-out (company-centric) to Outside-In (customer-centric), I’ve heard deafening silence. Except for Toyota examples.

What do you say?

Are Outside-In Practitioners Becoming Overconfident of Their Future?

Hey – I’ve been through this entirely too many times. At the start of the relationship marketing movement; when B2B database marketing got serious; when “micromarketing” started; with TOC (Theory-of-Constraints); and in spades with CRM. All sure bets practitioners could take to the bank. All supposed slam-dunks coopted by parochial economic interests – whether by advertising agencies, media outlets, Six Sigma & Lean, CRM software companies, etc.. Looking back on this history makes me fear O-I is ready for a face-plant.

We’re hearing too much ungrounded exuberance, too many excessive claims, too many ungounded predictions about O-I. And saying that market conditions will force business to go Outside-In  ignores history. Let’s face it straight up. O-I will succede if we make it sufficiently attractive to companies, not because the market “forces” companies to go O-I. And accomplishing this will require much more from the O-I community than the community’s yet prepared to give.

We’re changing market phases now from “Innovators” to “Early Adopters.” To get there, we have to do more than prosletyzing the O-I concept. And to reach some of the penetration levels O-I aspires to, we’re going to have to move on to “Early Majority” clients – which will require an execution level the movement’s not yet close to.

To get O-I into the meat of the marketplace, I believe we have to accomplish four, difficult tasks:

1. Do it right:  Migrating from inside out to Outside-In is a three-step journey: a.) aligning strategy to customers (which requires finely honed planning skills); b.) aligning process to strategy (which we’re best at); and c.) aligning technology to process (which the movement often ignores). Sure we can accomplish quick wins with process change or a customer experience initiative – provided the company already leans O-I, like Best-Buy, Fed-X, Trader Joe’s and USAA . But delivering Outside-In enterprise-wide, to its fullest capabilities requires all three alignment elements, not just one.

2.  Train O-I practitioners across the alignment spectrum:  We have lots of O-I practitioners trained in aligning process to customer strategies. Almost none trained in aligning strategies to customers. And way fewer trained in aligning technology with process. We need to provide training in all aspects of O-I. We’re not doing it.

3.  Focus on the steak. not the sizzle:  It’s easy to toss off claims that O-I is the greatest thing since sliced white bread. It’s another thing to make it work. And making it work in organizations not already O-I of their own volition demands properly and persuasively framing the long-term benefits of the inevitable organizational change required to migrate to O-I, rather than pumping the bellows. We need to stop discounting organizational change requirements and start confidently justifying them.

4.  Over-deliver instead of overpromising:  Overselling sweeping, non-specific benefits or offering growth, profitability or expense-reduction bromides hurts Outside-In in the long run. Face it, helping clients achieve broad-based O-I success requires a “grind it out” mentality. We create value incrementally, step-by-step. Enterprise-wide, O-I does not create whopping revenue gains, profitability gains or expense reductions in a flash – or even a year. Double-digit improvements? Very often. But not quantum leaps. Puffery destroys credibility. Remember, our clients are customers. Overselling them on the benefits of Outside-In is very inside-out.

Outside-In has cleared the “Innovator” phase. But we’ll need to change what we say and what we deliver to make substantive progress penetrating the “Early Adopter” segment of companies. And then we’ll have to make even more dramatic changes to enter the mainstream and penetrate the “Early Majority.” As a community, I believe we have a whole lot of hard work ahead of us before we can  bring Outside-In to the corporate masses. Are we ready?

What do you believe?