In Part One & Two of this six part article we reviewed the factors driving transformational change and how the old ‘inside-out’ approach to business is about as useful as a steam engine in getting to the moon.
In Part Three we’ll look at how some of the world leading trend setter companies are embracing the new outside-in challenge and creating new powerful business models driven by advanced forms of Business Process Management.
This third of a six part article describes the size of the challenge and how some world leading trend setter companies are achieving dramatic success in this new order.
Alignment that achieves the Triple Crown
The ultimate success of any commercial business is its ability to generate returns for its shareholders. Achieving healthy and sustained returns requires a deep and broad understanding of customer’ needs and wants and the enterprise capability to turn these into profitable services and products. The easiest way to express this requirement in corporate objectives is through triple crown capability – the ability to increase revenues, reduce costs and enhance service simultaneously. Inside out organizations often behave as if these there ultimate objectives are mutually exclusive so, for instance enhancing service increases costs. Increasing revenue also increases costs. Service becomes worse when we cut costs.
Change in perspective
Why is this so? We need only look back to the 1970’s and 80’s which saw a flourishing of Total Quality Management (TQM) and its offspring (still with us – Six Sigma and Lean). Our attention is drawn to the inside-out activities that seemingly contribute to delivering a product service. We then examine these activities and seek to streamline them and in doing so create an illusion of control and ‘process excellence’. This misleading adventure has led many to an ultimate dead-end of diminishing returns and ultimately the search for a new formula, which unfortunately is often an extrapolation of the previous approaches, again destined to fail.
What’s required here is a change in perspective, a new way of looking at things and seeing them for what they are. This perspective shows us that fixing effects (what we thought was the process) leads eventually nowhere. We actually need to fix the Causes of Work and in doing so we change forever the underlying set of activities that deliver Successful Customer Outcomes. This new process perspective opens our eyes to previously unthought-of possibilities and begins a journey that leads to greater gains the more we learn.
South West airlines, now one of Americas largest and most consistently profitable passenger airlines, made this change to their perspective resulting in a quantum shift that is evident in their financial results. Initial ‘outside-in’ success leads to progressively more gains as the people and company have grown an understanding unrivalled until recently on the US airline industry. Despite the volatility of world markets, terrorism, globalization and the politics of their industry (much of the US airline industry has to be supported by the US tax payer and lurches from one state of bankruptcy to another) South West stand head and shoulder above the crowds with 57 successive quarters of profit.
Virgin America are ‘Outside-In’ newcomers to the US airline business. Starting from the ground-up (which somehow seems very appropriate for an airline) they have completely designed their enterprise on outside-in principles, under pinned by Successful Customer Outcomes and Customer Expectation Management. After a difficult birth (the US authorities are lobbied strongly by the existing moribund players) VA emerged to the world in 2007. It is still early days however already the increased competition on key internal routes is changing the market. As VA expands and knits its hubs with those of Virgin Atlantic and Virgin Pacific the industry changes forever. VA understand the reality of the 21st century – If you are not making your customers’ lives simpler, easier and more successful, your competitors will.