How do you drive significant business improvement when you have already optimised using traditional techniques? Part 3
Who’s Doing this?
There are some people out there who know this, e.g. Apple, Google, IBM,
McDonalds, Coca Cola, AT&T, Marlboro, China Mobile, Disney, Microsoft are
starting to see the light too. In fact in 2011, 8 out of the 10 world leading
companies are classed as Outside-In, Microsoft have a mixed model so we don’t
count them but if we did it would be 9 out of 10. You would think that more
people would take notice of this. The problem is there are some people who have
made very successful careers on this old industrial age thinking and therefore
are not willing to accept that everything has changed and they need to as well.
Funny thing is, they will have to change sooner or later, it’s their choice how
they change however.
A) Go Outside-In.
B) Go Bust.
Don’t get hung up on the name
‘Outside-In’ lots of people call it different things, and it’s not the name
that’s important, it’s the philosophy behind it.
How are they doing this?
So what do these guys know that I don’t? Let’s look at a few key points
to start thinking Outside-In and actually drive significant business improvement
even when you have already optimised using traditional techniques.
1) Everything is process.
There is not a single thing that happens in a company that is not process. ‘I’m in
Marketing, I don’t do process’ that’s a process. ‘I’m in Finance, I don’t do
process’ It’s all process and the faster you realise this, the better.
2) The Customer Experience is the Process.
Forget about departments, forget about functional specialist silos,
when looking at process, treat the customer experience as the process, also
redefine where the process starts and finishes, this gives you a whole load more
scope than before and opens you up to a whole new world of
3) Align all Process to a
Successful Customer Outcome (SCO). If you are doing something that does not
contribute to customer success most of the time there is no need to be doing it.
Figure out what the customer need it and align to this. You will find there are
big chunks of process that will disappear overnight.
4) Drive out Points of failure.
'Moments of Truth' happen whenever there is a customer interaction, the less of
these the better, they cause work and are the places where things can go wrong,
figure out how to ‘Remove or Improve’ these. 'Break Points' are the internal
handoffs and interactions, again these cause more work and can start to mess up
what’s going on, if the internal work isn’t directly contributing to the SCO get rid of it, why do it? 'Business
rules' are the rules that have been put in place to make sure you keep things as
they are these usually cause a lot of the internal handoffs and customer
interactions and most of the time there is no need for them to be there, ask
yourself ‘Why do I have to do it this way?’ and if there isn’t a good enough
reason to back up the rule, chuck it out!
Looking at things in a different way completely changes how we do business, driving out Points of Failure
improves customer experience, and reduces cost, this paired with looking at the
customer experience at the process (that gives you more opportunity to make
money) will grow your revenue. Achieving these three things simultaneously is
known as the Triple Crown and only Outside-in companies can do this because the
old Industrial age way of thinking only moves the pain about and improving one
(Revenue, Cost or Experience) will directly affect the others in a detrimental
Innovation by Design
In conclusion, thinking this way makes innovation a natural by-product and having
an Outside-in company with every one knowing these techniques and philosophy is
the only way to foster a culture of innovation throughout a whole organisation.
So how do you drive significant business improvement when you have already
optimised using traditional techniques? Dump the traditional industrial age
‘classical’ thinking techniques and think Outside-In.
How do you drive significant business improvement when you have already optimised using traditional techniques? Part 2
There has been a seismic shift in the world and it has changed beyond
belief since 1776: The way we communicate, the way we make music, the way we
make television and films, the way we travel, the places we can travel to and
technology has changed with this to keep up with our ever evolving demands. The
one thing that hasn’t changed is how we do process and how we organize our
business. Now I can hear some of you scoffing and remarking ‘Er, yes we have
changed how we do process, look at TQM, BPI, BPR, Six Sigma, Lean, BPM…you’re
talking rubbish James’ and where as I agree we have changed techniques around
process, we have not changed the foundation that they were based on.
It’s like we have had a house for a very long time and we
keep having more and more kids. We expect the house to be able to handle this
so to make living conditions better we decide to keep paining the walls
different colours and saying ‘Look guys, its completely different.’ We need to
fundamentally evolve how we think to keep up with the massive change that’s
happened and wake up to the fact that everything has changed except how to do
process and organise ourselves.
Lean, Six Sigma and the Glass Ceiling
Now let’s look at the traditional ways to drive business improvement. Six
Sigma was all the rage and still is the ‘only way to go’ for some process
professionals, especially after Jack Welch’s success using this at GE. The thing
is, if a big company is in a big mess then Six Sigma will make things look
better. It may seem like there has been significant improvement however you will
tend to find that the technique will have been applied to one process, or a
process in one area and rather than fixing the cause of the problem it will fix
the effect. If you fix an effect it will only happen again or move the pain
elsewhere as the cause is very much still there. Also listening to ‘The Voice of
the Customer’ is a waste of time, we don’t need to provide what they want, we
need to provide what they need. We as customers are inept at conveying what we
need, it just doesn’t happen. For example I didn’t know I needed an iPhone or an
iPad before they were invented…I very much need them now. The easiest way to
think about it is if you ask a child what they ‘want’ to eat, imagine the
responses you will get. Rather than doing that we figure out what they ‘need’ to
eat and provide that, however we don’t translate this ‘want vs. need’ thinking
to business. GE’s inside-out
thinking is causing them to be overtaken by the smarter Outside-In companies as
are Toyota, Toyota in fact have moved from 14th in the world
down to 27th in the world
in brand value[i] but apparently that doesn’t matter let’s still use their techniques, that’s a
smart idea. If we look at Lean we
talk about ‘waste’ and how to eliminate it. This is still very much industrial
age or ‘classical’thinking. If I was making a table in a factory there would
physically be‘waste’ wood to eliminate however in a service, for instance a
Mortgage application, the ‘waste’ that is talked about does not physically exist
so we are focusing our efforts on an imaginary entity applying manufacturing
process techniques to a service company. Ask yourselves now, How much of my work
is manufacture? Why do I think
about it all‘left to right’ like a production line? Using these techniques you
will get improvements, definitely, no doubt whatsoever. However using these
techniques you will quickly hit a glass ceiling where you can go no further,
definitely, no doubt whatsoever. This is all Inside-Out thinking. There’s every
chance you are optimising a process that doesn’t need to be there. You might be
doing things right…but are you doing the right
Part 3 Soon...
[i]Millward-Brown Optimor Annual Brand Survey 2011
How do you drive significant business improvement when you have already optimised using traditional techniques?
Origins of Traditional Techniques
Let me set the scene and take you back to the year 1776 and a small Pin Factory in Scotland and a man you will most likely have heard of: Adam Smith. Adam Smith was a social philosopher and a pioneer of political economy and on the 9th of March, 1776 published the book that has formed how we do business to this day ‘The Wealth of Nations’roughly 4 months before Mozart’s first ever performance of the Haffner Symphony. Adam Smith had gone into this Scottish pin factory and noticed some extraordinary things, one being that the pin factory’s productivity was largely dependent on what employee was in work on any given day. Smith looked deeper into the workings of the pin factory and created what is described as the ‘division of labour’ (and later the subdivision of labour) where individual tasks were clearly defined and each person was assigned and trained up to effectively complete their task. This revolutionized manufacture and production, he increased productivity by 2400% and his book was mentioned in the declaration of independence.
Most of us in business now still follow what was published in ‘The Wealth of Nations’ in 1776. If you think about your organisational structure, what shape are you in? A pyramid, where the CEO is at the top and it rolls down to the guys at the front line, or in the trenches (It’s not a war by the way) This pyramid shape doesn’t physically exist it is an abstract illusion, it is however an abstract illusion that shapes and forms how we do work. Have you ever stopped to wonder where the customer is in your organisational structure? If the customer gets a mention at all they are usually shoved off to the sides and this again creates its own problems, ‘Hey! I’m in operations, look at the chart, the customer is 8 steps away from me in my value chain, I don’t deal with the customer’ The only reason that Mr Operations thinks that he doesn’t deal with the customer is because of the collective abstract illusion created by industrial age thinking being applied in today’s vastly different world. Earlier I mentioned that ‘The Wealth of Nations’ was published 4 months before Mozarts first performance of the Haffner Symphony, look at the comparison. We consider Mozart to be ‘classical’ music but do we consider the ideas born of a Scottish pin factory by Adam Smith in 1776 ‘classical’ thinking? No, not many of us do, and not many of us will for a long time. Put it this way some people didn’t accept that we lived in a Heliocentric universe (the sun being center of our solar system) until 1998.
Part 2 soon...
Whether it’s their free advertising, their ability to help your reach pretty much everyone in the world, or their ability to help your customers tell everyone in the world if you screw up or do great, whether you like it or not, Facebook has changed how we all approach business. We will have all heard about Facebook’s imminent IPO planning to raise $5 billion however what you might not have realised is Facebook is actually worth $100 billion.
This is a little section I’d like to call ‘Facebook is worth more than…’
Facebook is worth more than… 50 Naval Submarines (they cost about $2 billion each to build)
Facebook is worth more than… Brazil’s 2011 Travel and Tourism Budget ($74 billion)
Facebook is worth more than… The Gulf war (that cost $96 billion)
Facebook is worth more than… 6 years of US Breast Cancer Treatment ($16.5 billion per year)
Facebook is worth more than… The Hurricane Katrina clean up (that was $81 billion)
Facebook is worth more than… 2 and a half Olympic games (Beijing Olympics were $40 billion)
Facebook is worth more than… Coffee (the worlds coffee industry is worth just under $100 billion)
Facebook is worth more than… 120 Eiffel Towers (about $820 million to build one in today’s market)
…and last but not least, Facebook is worth more than… Qatar (their GDP is about $98 billion)
Thanks to Mashable for the cool facts, and thanks to Bono (he owns 1.5% of Facebook)
Outside-In company McDonalds ran a Twitter campaign recently to help people get to know their local farmers better, 2% of the thousands of Tweets they received were people moaning that they became obese because they eat McDonalds every day or that they didn’t like a burger once 18 years ago and this campaign was considered a disaster. I just wanted to remind everyone of the massive success of McDonalds, not just after they turned Outside-In and coined their successful customer outcome, ‘I’m loving it’ and aligned their process towards achieving this but the lasting legacy that they have created.
Here are the facts.
McDonalds serve 1% of the world’s population every day, that’s around 68 million people…that’s more than the entire population of the UK.
McDonalds serve over 75 burgers a second, that’s about 6.5 million a day (that doesn’t count nuggets and salads)
McDonald’s $32 billion revenue makes them the 68th biggest economy in the world…just above Ecuador.
If you gathered up all of the McDonalds employees from the USA only, there would be more people than the combined population of Iceland and Luxembourg .
The Queen of England owns a McDonalds franchise.
Over the next 3 years McDonalds will be opening a new restaurant in China…EVERY DAY!
Americans alone eat 1 billion pounds (weight) of beef at McDonalds every year.
One of the questions that Outside-In companies ask themselves is ‘What business are we REALLY in?’. If you think that McDonalds is just a fast-food joint think again, McDonalds is actually the world’s largest distributor of toys…bigger than Toys ‘R’ Us, bigger than Hamleys, bigger than Schwarz, even bigger than Santa! Now who would have expected that from a fast-food joint?
So remember, creating our successful customer outcome (SCO) and aligning everything we do towards achieving it and asking ourselves ‘What business are we REALLY in’ extends our scope, transcends the enterprise boundaries and stops us from thinking the same old way.
I recently saw some stories about how Apple are planning to provide American schools with iPads so that the old, expensive, outdated, dog-eared, back breaking text books could be condenced to iBook format to make learining easier and more interactive and not to mention more cost effective.
There was a lot of talk about this being a charitable dedication towards a nations education. This may hold some truth, however I disagree that this is the main reason for doing this. I personally think it may be one of the biggest game changing plays of the decade.
In Ouside-In companies, like Apple, we ask ourselves a number of questions to reframe how we think and drive innovative ideas. One of these is: ‘Where does the process REALLY start?’ I think that this is a brilliant stratagy to sell more Apple Macs and MacBooks and well and truly sink Windows.
So lets ask ourselves, when we buy a computer – where does the process REALLY start?
When we walk into the shop? When we browse online for reviews? When we first discover the need for a computer? Or even further back – When we first start to use computers on a regular basis…in school.
So you may be thinking, ‘WOW, great insight James! How does this help me sell more Macs?’
Lets think this through, most school computers are on Windows so most kids get used to Windows operating systems from an early age and so when buying a computer later in life for themselves (or when their parents do) they will stay with what they know - Windows. So… if Apple can get a whole generation and generations to come hooked on Apple’s operating systems from the start, then when they make the decision to buy for themselves they will go with what they know – Apple!
On top of this there has been talk of giving every kid in America a free iPhone 3, another ploy to get the future generations hooked on Apple (they don’t make their money from phones anyway, they make it from the app store) This proves grim news for Nokia too but ill talk about this another day.
So in summary, on one hand a charitable dedication to the advancement of learning on the other hand possibly one of the biggest game changing business moves we are likley to see this decade.
What do you think?