There seem to be two ruling schools of thought about how to approach running a small business: Inside-Out or Outside-In, as coined by George S. Day and Christine Moorman in their book Strategy from the Outside-In.

With the Inside-Out model, the company assumes that everything should be done in-house — from marketing and sales to R&D and innovation. With the Outside-In model, the company assumes that certain business functions should be sourced from outside the company, often crowd-sourced, and consumer trends and customer demand drive innovation.

Inside-Out businesses focus on internal processes, efficiencies, talent and organisation to move toward success. Outside-In businesses, on the other hand, are focused on providing solutions to customers to generate success.

In short, the Inside-Out model is company-centric, while the Outside-In model is customer centric.

What’s interesting is that people from these two different camps can often see very different paths to success even when faced with the same problem.

Take, for example, market strategy.  An Inside-Out business would look to its own internal marketing or R&D departments to decide what new products to bring to market and when. It might consider what resources it has and how to streamline operations. But an Outside-In business would rely on consumer trends to make decisions about what products to bring to market.

The problem is that many small businesses in particular can fall into the trap of Inside-Out thinking. They get focused on internal metrics for growth and lose sight of the true goal of improving customer value.

Are you Inside-Out or Outside-In?

If you’re wondering where you fall on this spectrum, ask yourself the following questions:

1. Do you know who your target customer segments are?

2. Do you know what their needs are?

3. Can you identify their behaviours?

4. Do you know how to solve their most pressing problems?

5. Do you know the value you provide for them?

6. Is there a strong correlation between your customers’ needs and your value proposition?

7. Would you say you have a customer-oriented organisational culture?

8. Is your business focused on creating value for your customers?

9. Do you feel that being customer-centric is a fundamental necessity of a successful business?

If you answered YES to most of those questions, you have an Outside-In approach to business. If you answered NO to most of those questions, you have an Inside-Out approach.

If you find you fall in the Inside-Out camp, I would challenge you to question your thinking. Many times, Inside-Out thinkers fall into the “this is how it’s always been done” trap. They believe what’s worked before will continue to work in the future, no matter what.

Alternately, Inside-Out thinkers may be so focused on the business aspects that they are neglecting the customer side of things. This is a dangerous place to be. Businesses that focus on efficiency or cost-cutting, for example, often find themselves with a customer service or satisfaction problem.

With data on customer trends, preferences, and behaviour easier than ever to access and analyse, I believe all small businesses would benefit from more of an Outside-In philosophy, allowing what’s really happening in your market to dictate your next moves.

What do you think?  Is your business operating on an Inside-Out or Outside-In model, and how is that working for you? I’d be interested in your thoughts in the comments below.

Find out more about our Hiscox business insurance