This blog post is about something very trivial, but at the same time highly challenging. It is a trivial fact that a company has to earn money to survive. The company does so if it can sell products or services to a higher price than it costs to produce and deliver. For customers the price should be less than the value of the product or service. This is trivial facts to which no one argues. The challenging part is to design internal structures to enable customer satisfaction in the most effective way, for all parties except competitors.

Too often companies have ways of working fully designed to satisfy internal needs. This may result in cumbersome interaction between customer and company. It may result in long delivery schedule, incomplete service offerings, products lack functionality, etc. As a customer you would of course choose another supplier if that was possible. In the company it may unfortunately result in an attitude where customers are seen as close to stupid, as they do not understand how complicated it is to deliver the product or service.

If you ask such a company why they work as they do, managers most often highlight internal efficiency as the reason. But I would argue that often companies work like they do because they have always worked like they do. And when the market changes the simplest way to increase efficiency is to decrease costs and try hard to maintain the same way of working. The cost constraints become the reason for the way of working when it is actually the other way around. The company did the cost redundancy because they did not understand how to change the way of working.

But the challenge is that these companies are not all wrong. It is not possible to just change everything in a company, to completely work differently. There is internal logic that may be important to maintain. There are knowledge, assets, tools, physiological laws, etc. than cannot or should not be changed. Ask any top manager how willing he or she is to drastically change the way of working. He / she would say there are too high risks involved, the level of uncertainty is not known.

I argue that you can decrease level of uncertainty if you better know what parts in the management system to change, and for what reason, and with identified expectations on outcome for the change. This is about designing the management system and it is about thinking outside in and inside out. Outside in is to identify how the company and its products & services best support customers. The characteristics of interaction and offering should be feed in as requirements to the management system. From an inside out perspective you have to identify what assets the company controls and how these are developed and used in the best way. Characteristics from this internal ways of doing things should be seen as constraints in the design work.

Outside in - Inside out

During the design work you have to challenge characteristics behind each requirement or constrain. Layer by layer in the architecture of the management system you have to identify requirements and constraints as well as challenge the characteristics behind each one of those. Have we chosen the best external environment, are we part of the most rewarding business logic, are the value creation flow efficient for both customers and the company, do we have an efficient organization structure or do we govern operational activities to with relevant control and speed.

This simple concept of “outside in, inside out” thinking in the design of management system offers most companies challenging opportunities to increase value for all stakeholders, except competitors.

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