Managing from the Inside Out
It is pretty easy for companies to be consumed by what is happening in the outside world. As professional strategic planning facilitators, we preach the need for constant evaluation of external forces.
Yet the value delivered by a company comes from within. It is perhaps even more important to understand an organization’s core competencies than to focus on the activities of customers and competitors.
Too often, managers are focused on what they do, as opposed to the value they deliver. Some companies take value from others (i.e., steal market share), while others create value through business model innovation.
At the heart of clarifying how to create value is to understand why your best customers (or clients) do business with you. These relationships can be better understood through a value circle. Draw a circle and list your most valuable clients and the attributes that make them top drawer. From there, draw additional circles around the first one (as in a universe) to depict several types of clients who are less valuable with their corresponding attributes.
This differs from the tired approach of ranking customers by their financial value. While lifetime value (as measured by revenue) is an important component, such indicators cannot stand alone. It is likely that your business model resonates with your best clients because of some deeper alignment in terms of operational efficiencies, or buying behaviors. Replicating clients with these attributes may be more meaningful than finding new ones in a particular industry or who buy a particular service.
For example, our best clients are those who view strategic planning as a cycle, not as an event. Planning becomes ingrained in their culture and is part of their monthly routine. You can’t buy a list of such clients; you have to identify them through trial and error. It is through such an analysis that an organization can decipher how to deliver greater value, and move lower clients up to higher profit goods and services.
The inside-out value proposition applies to employees as well. A company has to find their inner strength the way that they serve employees and use that as a key tenant in the way they work. This begins with clarity around a set of values, which also drives behavior with customers.
To be inside-out, may require that you say no to prospects or fire clients. When clients do not align with your core competency, price can become the lone consideration. Every moment wasted with clients on the outside of the circle has an opportunity cost that robs a company from doing what it does best.
So focus on your core competencies, and those customers and clients who value them.