Turning your Business ‘Outside In’
By Dr David Butcher, Programme Director, Cranfield School of Management

It is a common
mantra that innovation is the only true source of competitive advantage, and
that most new thinking comes from outside one’s own industry. But if by that we
mean a vibrant R&D pipeline or the much vaunted ‘blue ocean’ strategy, the
pickings may be slim. Best-selling products and breakthrough innovations that
take us into uncontested waters are rare. 
Real ‘innovation’ means acquiring a critical, thought-provoking perspective
on the fundamentals of your business model, market practices and core
processes.  Such a detailed analysis of
your organisation can lead to rich possibilities which can be turned into
performance enhancing advantage.

Put it to managers that an external
perspective is essential to the success of their business, they will always
concur.  Ask them how much time and
energy they invest in creating that ‘outside in’ view and the answer is usually
‘not enough’.  What does this tell us
other than that we sometimes say one thing and do another? Our research at
Cranfield demonstrates that businesses need to have clear answers to two key
questions: how much of an external view is needed, and what are the best
methods of creating this perspective? Once we have the answers, deciding who in
the business should be offered what development opportunity naturally follows.

Consider the
question, what breadth of external perspective is needed? For managers, it is
important to distinguish between three levels: ‘business’, ‘industry’, and
‘extra-industry’. A business level perspective takes us beyond the functional
boundaries of many managerial roles into the world of the customer, the market
and the financial issues facing our business; in other words,
towards an understanding of the underlying drivers of the business.  The result? Better quality operational
decision-making enhanced functional core competence, and improved contribution
to business strategy.  These are all
possible, once managers have a business level perspective.

In contrast, an
industry level perspective demands that we consider the impact of factors
beyond the boundaries of your own business, taking us towards a wider knowledge
that extends the range of possible business solutions and performance levels.  The prize is 
‘new to organisation’ ideas leading to increased business performance
together with greater ‘within sector’ competitive advantage.  At a broader level still, the extra-industry
perspective contains the potential to create a sophisticated strategic
understanding of the business lifecycle: ‘what leads to what’ in the business
environment; and a leadership mindset that may change the ‘rules of the
game’.  Managers who have an
extra-industry view bring to their business ‘new to industry’ ideas, innovative
solutions to old industry problems, and over time, altogether new strategic
directions.

As one would expect, each of these levels of external
perspective requires different development approaches or processes. All of them
demand managerial time and commitment. Developing a
perspective beyond functional managerial boundaries requires initiatives such
as cross-functional career moves, cross-functional networking, and company
specific (customised) development programmes. Creating an industry level perspective
is best achieved through such opportunities as: inter-company career moves;
exposure to the supply chain and other key industry components; attending
industry forums and networks or benchmarking industry competitors.

In terms of
development commitment, the extra-industry level is the most demanding for
managers.  To be effective it requires
initiatives such as cross-industry career moves, doing an MBA or attending a
business school open programme.  Any of
these development routes hold the potential to be nothing short of a
fundamental personal challenge and a true eye-opener.

So for those who want to introduce and sustain
innovation into their business, an external perspective is a key ingredient. That is not in
question, but how to create it certainly appears to be problematic. The
immediate and sustained demands of running a business absorb our full
attention, representing a major time barrier, and opportunity cost that
managers can ‘ill afford’.  As with the
fundamentals of all management activity, a disciplined approach helps. In terms
of the framework outlined here, a starting point is to ask what level of
exposure to an external perspective is required and what development approach
or process would be the most cost effective.
Ignore
these questions at the peril of your business.

For further information
contact d.butcher@cranfield.ac.uk

11 May 2010