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[Music]
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Okay. The the unique features of our our
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new book on uh strategy from the outside
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in uh is actually embodied in the
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subtitle profiting from customer value.
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Uh the concept of outside in inside out
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has
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been around for a long time uh but in
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very different ways. The uh original
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outside in view was in fact the old
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Porter 54 structural analysis of
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industries which looked at forces of
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competitive rivalry and the aim was to
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find a defensible position. Uh the role
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of customers in this was really
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fascinating um as embodied in the notion
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of the bargaining power of customers. So
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customers were viewed as another
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competitive force and it was a zero sum
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game. uh that view still by the way
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still has a lot of validity. It
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recognizes markets are segmented and
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complex uh but it's been increasingly uh
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supplanted almost by the dominant inside
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out view of organizations respecting the
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resource-based view. And this idea is
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that you've got resources and job of
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management is to not only uh manage them
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but exploit them and leverage them. Uh
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and this is really inside out uh because
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it it's looking for efficiency
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improvements and finding ways to use
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those resources. We uh build on a whole
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other stream of research uh based on the
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notion of a markettoriented organization
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or a marketdriven organization in which
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uh you start with a customer, you stand
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in their shoes and look at how they make
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choices. Uh so it's all about your
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relative position in the customer's mind
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and how much value uh each of the
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alternatives is delivering. So we we
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build on that and from that vantage
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point we look at the organization
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through the customer's eyes and what are
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their competitive choices and then we
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from that derive uh four customer value
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imperatives but everything is focused on
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customer value and that's where the
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uniqueness comes in as as we look at
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companies that have done this uh well
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and consistently over time versus poorly
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I'm actually uh reflecting back on the
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uh story of
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McDonald's and uh they did both which is
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really fascinating in uh uh about 2001
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McDonald's frankly had lost their way uh
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their performance was awful share price
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down by twothirds and uh it was known
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basically as a fast food fuel depot uh
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and service was terrible uh food was
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uninteresting
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customer satisfaction ratings way down
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and and essentially what they had done
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is they had focused uh on this strong
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brand and how they could leverage it by
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expanding the number of franchised
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outlets. So they were all about growing
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by adding outlets i.e. from the inside
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out. Well, they just totally lost track
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of the customers.
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uh
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20045 a new management team came along
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and said wait a minute we've had uh this
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deteriorating position let's start back
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and take an outside in view at our
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strategy and uh focus on improving the
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customer experience which they did in
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many many ways and I'll just give you
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one instance of the sort of things they
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were looking at uh they discovered u and
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through through some phenomenally good
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customer insight research
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that mothers would bring their kids to
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have lunch at McDonald's and the mothers
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wouldn't organ order a thing. They'd
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just stand there, have a glass of water,
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watch their kid eat the Big Mac. Uh so
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based on that insight, now that data had
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been around, but if you're an inside
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organization, if you're looking at the
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world from the inside out, you don't
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necessarily have those deep insights,
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you're not even thinking that way. They
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said, "All right, uh let's understand
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better what's getting in the way. What
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do they think about our food?" and then
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let's get creative about adding menu
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options that are appealing, including
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that was the genesis of the salad
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option. Now, you could say in
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retrospect, well, that's pretty
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straightforward, but the fact of the
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matter was the previous management team
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had not uh gone down that path because
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they were so compelled to add more
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franchises, but which by the way uh
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angered their existing franchise
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holders. There's been a long stream of
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research on uh market orientation and
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the effect on uh profitability and
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revenue. Uh in fact there was a recent
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uh analysis that uh pulled together the
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results of 114 different studies on the
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impact of market orientation which is uh
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variously defined as superior skills in
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understanding attracting and keeping
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customers or uh looking at the uh
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organiz looking at the business through
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the customer's eyes. So various
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definitions having to do with the use
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and dissemination and application of uh
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information on customers and markets. Um
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there's a very solid correlation between
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market orientation and revenue and
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profit. Um that is uh important uh as a
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as a touch point for us. I've also done
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work on the notion of peripheral vision
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of organizations their ability to see
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sooner and uh we find again businesses
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that are vigilant that is scanning their
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horizons standing out there at the
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periphery really outperform those that
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are purely focused on efficiency
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management and uh so we've uh built upon
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those two streams of research. The
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difference is we've taken the market
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orientation uh uh concept and have asked
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okay how is that going to help us build
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and manage better strategies better
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competitive strategies. So, we've taken
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that whole stream of research quite a
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bit further down the road.
