The Upside of ‘Outside-In’
Organizations have embraced an 'inside-out' view of the world for as long as ... well, for as long as there have been organizations.
With an inside-out perspective, organizations expect to originate all innovation and knowledge within themselves and to push it out into the world as they see fit. Owning and controlling assets are top priority. The needs of customers often are determined secondhand or even guessed at. Some of the most successful businesses of the past century worked this way.
But technologies such as mobility, cloud storage, social media, data analytics and others are rendering the classic inside-out view insufficient. Successful modern enterprises must flip the old formula on its head and internalize an 'outside-in' mind-set, one that emphasizes open processes, collaboration and the needs of customers — as determined by customers.
"In the Information Age, the focus has to be on the customer, whether that's a consumer, client, member, patient or user," says Ralph Whittle, a strategic business/IT consultant and co-author of the book, Enterprise Business Architecture: The Formal Link Between Strategy and Results. "Customers can be reached by anyone, anytime and anywhere. That obviously means competitors can reach those very same customers, anytime and anywhere as well."
This means that customers have more power than ever before, and the world outside an organization now has greater influence on what happens inside it.
In the DXC Leading Edge Forum (LEF) paper Building Your Firm from the Outside-in, LEF Global Research Director David Moschella writes, "Virtually every aspect of the modern firm — strategy, innovation, production, recruitment, customer relationships, brands, pricing, service, and the buying process itself — is now being reshaped by powerful outside-in digital forces. The challenge is no longer just listening; it's sensing, anticipating and leveraging [emphasis added] marketplace developments, often in real time." It's a formidable challenge, and one that traditional inside-out corporate and IT structures simply aren't built to meet.
Inside the bunker
Moschella identifies several characteristics of an inside-out organization that make clear the mismatch between traditional structures and processes and the needs of a modern outside-in enterprise. The inside-out operating model features:
- A company- and supplier-centric view
- An emphasis on control and rigid management
- Market intelligence (which often can be broad and dated)
- High value placed on internal expertise
- A focus on intellectual property
- Internally generated marketing materials
- A fixed, internal IT department
Talk about an 'us against the world' fortress mentality! And no part of an enterprise is more insular and inside-out than IT. In contrast, outside-in enterprises feature:
- A customer- and community-centric view
- Real-time data analytics
- Ecosystems/vertical clouds
- Open-source collaboration
- Customer-generated content
- Scalable cloud, public IT
The differences are so stark that it's hard to believe the two operating models can co-exist in one enterprise. But as Moschella writes, "longstanding inside-out principles are certainly not going away."
Rather than outside-in practices replacing traditional inside-out, Moschella writes that "companies must find a way to merge the best of their in-house capabilities with a much deeper engagement with external marketplace possibilities."
Implications of outside-in for enterprise IT
As noted earlier, no enterprise department is more inside-out than IT. But unless IT departments would like to be responsible for the failure of their enterprises, they have no choice but to adapt to and embrace outside-in.
The technology part of that is relatively easy. From mobile devices to cloud storage to Software as a Service (SaaS), modern technology is geared toward enabling outside-in organizations. A far greater challenge for enterprise IT is changing its architecture and culture to leverage outside-in. Moschella cites five areas where IT infrastructure is shifting to meet modern enterprise needs:
- Servers and storage (cloud computing)
- SaaS and internal software development
- Public networks such as 4G and fiber optics
- Bring your own technology (devices and apps)
- Social media management
This level of comprehensive change is absolutely necessary to meet modern business needs, but it would be unrealistic to expect it to happen overnight. In his paper, Moschella suggests a practical starting point.
"While changes of this scale might seem daunting, a simple way to start is to make the cloud the default strategy for new projects," he writes. "If this principle is adhered to, firms will steadily migrate toward a more outside-in organization."
In an email, Moschella elaborates: "Organizations that do not move to the cloud will struggle to match the agility and efficiency of those that do," he writes. "Too many firms still have a deep-rooted bias toward doing things the way they have in the past. Making the cloud the default strategy for new applications forces traditional practices to be seen as the exception, not the rule."
The importance of going 'soft'
This gets to perhaps the most important factor in successfully transitioning to an outside-in organization: evolving the culture. "Significant as the business-side changes are, the soft skill changes required from enterprise IT are in many ways more fundamental," Moschella writes in his white paper.
This is not surprising, given that IT traditionally has been the most 'inside' of inside-out enterprise departments. And that IT is in a unique position to steer the business units toward a modern outside-in approach, by communicating the value of collaboration, open systems, cloud-based storage and application delivery — all of which can help enterprises become more agile.
The goal of an IT department shouldn't be to replace inside-out with outside-in across an organization. Rather, Moschella argues, "Enterprise IT should seek to position itself at the point where external market activity meets the core systems and capabilities of the firm. In this realm, business and IT change are inseparable (co-evolution), and double-deep employees (equally versed in the business mission and the relevant IT) are most needed. It's where inside-out and outside-in meet, and perhaps even merge.
CHRIS NERNEY is a writer for DXC’s digital marketing team.