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REPOST: Business Strategy: Are You Inside-Out or Outside-In?

This article from Business Insider by Elizabet Lagerstedt, CEO and Executive Consultant at Inquentia Group, writes about two types of business strategies that can be found in the industry today.

Image Source: businessinsider.com

An ideological gulf has opened in today’s business world, between companies that look outward for long-term value and those relying on internal resources.

“Look at Steve Jobs, he didn’t ask the customer. It’s no use, people don’t know what they want.”

That was the reaction of a former colleague of mine during our monthly management team meeting, after I suggested that we try a more structured approach to understanding our customers. This was a fairly normal, fairly successful international business, focused on operational excellence, product leadership, and meeting monthly sales targets.

At this meeting, we discussed our future innovation plans, which led to a debate about the cost and benefits of obtaining customer insights. It wasn’t the first time. In fact, we had already sponsored a few lead users (customers who are the early adopters of methods and technologies) as part of repositioning our brand. They had also taken part in a few innovation projects, but the outcome of their rich feedback had so far been modest and purely cosmetic: some cool stripes and a new colour on the original products. We lacked the time and budget to explore deeper changes.

But I felt it was tremendously important that we emphasise customer insights before entering the next phase, especially since we were starting to meet a more active international competition.

This made a few of my colleagues look very uncomfortable. Almost in unison, they objected to the idea of spending additional resources on customer insights, especially in relation to innovation.

“We have a history of showing good results with the resources and specialized knowledge we have internally. Our R&D people know what works,” went one response.

Yet another colleague chimed in, “I just don’t believe in it.”

To me this sounded extremely ignorant. Regardless of our own experiences, different studies have shown that 40-90 percent of innovations fail. Studies have also shown that innovation processes involving customers, especially lead users, are more likely to succeed in the market place since they just have better and more creative ideas than internal product developers.

Looking back at the situation, I see status-quo thinking played a major role, especially since I was fairly new to the organisation when this happened. However, the disagreement somehow also came down to our individual backgrounds, experiences, and beliefs in how to run a successful business.

Inside-Out vs Outside-In

Put simply, there seem to be two ruling paradigms in business today: the Inside-Out approach and the Outside-In approach. George S. Day and Christine Moorman called them the two paths to strategy in their book Strategy from the Outside-In from 2010. In business the overarching goal is to create [long-term] shareholder value. These two approaches use very different means to achieve that end.

The Inside-Out approach is guided by the belief that the inner strengths and capabilities of the organisation will make the organisation prevail. The Outside-In approach is instead guided by the belief that customer value creation, customer orientation and customer experiences are the keys to success.

From an Outside-In approach, long-term shareholder value is a consequence of listening and providing value to customers and helping them get their jobs done better than the competition while providing a seamless customer experience. The ideal organisational culture is market- and customer-oriented and the targeted customer segments – buyers as well as users – are the source of inspiration and development. There is also a strong belief that if the customers aren’t satisfied with the solutions offered, the business will suffer and the shareholder value will diminish.

With an Inside-Out approach to business, you would likely see effective use of company resources and core competencies as the main driver of shareholder value. Inside-Out strategists believe that a company achieves greater efficiencies and adapts more quickly to changing circumstances with this approach.

From Ideology to Immunity

I would, however, go even further and call these two approaches belief systems, or even business ideologies.

Let’s define a belief as something one accepts as true or real. A belief system is then a whole set of mutually supportive beliefs. And an ideology can finally be described as being a set of conscious and unconscious ideas and beliefs that guide and influence one’s visions, goals and actions.

What specifically made me think about the Inside-Out and Outside-In approaches as ideologies was reading Strategy – A History by Lawrence Freedman. His impressive historical journey shows that strategy is not only about analysis, positioning, clever planning and effective implementation, but also about the experiences, convictions and beliefs of the people behind it. It is built on mental constructs, belief systems and ideologies, that are used to make sense of the world, and that determines visions as well as the way goals are pursued (i.e. different strategies to meet an end). Consequently, committing to one ideology almost makes you immune to the arguments at the other end of the spectrum, and even immune to change.

It is illuminating to interpret the dynamics of the management team meeting that I started telling you about from this point-of-view. Neglecting other possible perspectives, we had simply developed different beliefs systems and business ideologies over the years, which made us see very different means to an end, even though we had exactly the same challenge in front of us. Hence, awareness of our own business ideologies could be a first step to a more flexible approach to business and business strategy, rather than one based solely on unquestioned beliefs. Understanding the dominating ideology of your peers and of your organisation may also help you understand everyday conflict.

What’s your approach?

There are two simple questions you could ask yourself to evaluate whether you and your organisation lean more towards an Inside-Out approach or an Outside-In approach:

  1. Do you know which your targeted customer segments are, what needs and behaviours they have, how to best solve their relevant problems and what kind of value you provide them? 
  2. Is there a strong fit between your target segments’ needs, your value proposition, your overall business model, internal processes and a customer-oriented organisational culture, with focus on creating value for your customers? And do you feel that it is a fundamental necessity of running a successful business?

If the answer is yes to the questions above, there is a high probability that you and/or your organisation lean towards an Outside-In approach. If the answer is no, it’s more probable that you and/or your organisation lean towards an Inside-Out approach.

My own approach to business? That I’ll leave for you to guess.


Learn more about the different kinds of business strategies by subscribing to this Bertrand Management Group blog.

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REPOST: Business tips: it’s good to talk

This article from The Telegraph shares valuable business tips for start-up businesses.

Business as usual: it is common to see a creative ‘ideas person’ team up with someone with business skills Photo: © T Barwick | Image Source: telegraph.co.uk

Setting up and running a fledgling enterprise can be tough and intimidating. Many enterprises begin as tiny operations run by one or two people in a back bedroom or small office, with costs kept to the minimum. However strong the initial idea, many entrepreneurs secretly feel that they are “winging it”, in at least some aspects of their new business.

It is for this reason that successful entrepreneurs are often highly developed networkers, skilled at drawing on the talents, advice and expertise of others. A third of entrepreneurs in a recent Amazon survey* said that they associate the idea of “entrepreneurship” with being collaborative, compared to just a fifth of businesses in general.

Sometimes collaboration takes place with co-founders who, ideally, will have complementary strengths. In start-ups it is common to see a very creative “ideas person” team up with someone with business skills: in online enterprises, there may be someone with a technical or software development background, too. When finding business partners to collaborate with, this mix of professional skills is key but just as important – and often harder to assess – is compatibility on a personal level. You are going to have to work long hours in stressful conditions with this person, building a business that you hope will last for years. Can you trust each other? Will you be able to get on?

For Mel Sherratt, a bestselling author who has now created a publishing company, the initial connections she made with agents, publishers and other writers when she self-published her first book through Kindle Direct Publishing, proved invaluable. “I got a lot of help and advice,” she admits. Mel has now employed her best friend of 25 years to be her business manager – the existing relationship the pair had make their working life far easier.

Numerous friendships have formed the bedrock for successful entrepreneurial businesses. Carphone Warehouse was co-founded in 1989, by Charles (now Sir Charles) Dunstone and Julian Brownlie working in Dunstone’s rented flat. Dunstone quickly brought in his school friend David Ross as finance director, sealing the partnership that built a huge and successful business. Ocado too was founded by three colleagues who’d worked together in banking.

This personal connection can be an important consideration for early hires: what do potential new colleagues bring to the table both on a professional and personal level? If these relationships work, they can be the key to a successful business. In the survey, 54 per cent of entrepreneurs cited co-founders and colleagues as the most influential people in their professional life (compared with 43 per cent for businesses generally).

Many entrepreneurs look for a mentor – someone with a long background in the business world who can provide experience, advice and wise counsel. For over a third of entrepreneurs in the survey a mentor had been their most influential figure, compared with 26 per cent of businesses, generally.

A good mentor can prove his or her value even at the very beginning of a venture, by helping the entrepreneur to think through the initial idea, draw up a business plan and suggest sources of finance. A well-connected mentor will also be able to provide important introductions.

For many entrepreneurs, the relationship with a mentor can be one of the most important in their business lives. The mentor plays the role of trusted friend, who can be relied upon to provide sound, informed advice and it is a relationship that may last for many years. Mentors aren’t in it for the money: they’ve usually been very successful in their field and are happy to share their experience and knowledge. The former government support programme for mentoring still provides training and resources for new businesses looking for mentoring support.

Successful entrepreneurs such as Richard Branson stress the importance of networking, even before a business is launched. Business groups, industry events and associations can all be fertile ground for fruitful professional relationships. These days, of course, social networks are assuming great significance: It is no surprise that the Amazon survey showed that entrepreneurs are enthusiastic users of LinkedIn, Facebook and Twitter.

Bertrand Management Group caters to businesses in need of organization and employee training and seminars. For more information on this, visit this Google+ page.

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