In discussions with product managers, I often hear things like: "Anselm, the problem with us is that we have a strong inside-out culture".
(tldr: Inside-out leads to bad investments and loss of market share)
In the following, I will briefly explain what is behind this term and what frustrates product managers and how this can affect the company's sales and market share.
The inside-out mindset describes an approach in which companies focus primarily on their own internal ideas, skills and resources in order to develop innovations and products. A more technology-driven and engineering-heavy culture in which external influences such as customer feedback or current market trends are often neglected or only considered late in the development process.
The reasons for such a culture in technology companies can usually be traced back to the company's founding history. In most cases, the company founder was active in a specific industry and invented the first products himself. Even if he had his customers and users right in front of him, to the outside world he was seen as an engineer or inventor. After the first successes, the culture of invention that emanated from the engineer became firmly established. This is often confirmed in established companies by a) the technological niche in which they operate, b) leadership culture and risk aversion in management and c) organizational isolation.
Many hidden champions benefit from a very strong culture, which, however, often revolves strongly around the headquarters. People do not necessarily talk loudly about their own work and fear that competitors could quickly copy their own innovative ideas.
One advantage of a corporate culture with a strong focus on technological niches can be that groundbreaking innovations are actually created through extensive basic research or intensive pre-development.
On the other hand, the disadvantages of an inward-looking (innovation) culture are obvious:
- Inefficiency: Relatively small innovations can often generate great added value for customers. However, if you develop the technology and product first and consult the market too late, you have to make corrections at a late stage of development in order to adapt the product to customer requirements. As the costs of product development projects increase exponentially over time, any corrections required later are extremely expensive and time-consuming.
- Innovation risks: Developing products in an isolated environment increases the risk that the innovation will not resonate with the market. Inside-out companies focus too much on technical feasibility instead of actual applicability and market demand.
- Failure to recognize trends: Industrial companies that live a culture of inside-out innovation are slower to recognize and respond to industry trends and changes in consumer behavior. Companies that miss important trends in the market or respond too late lose market share very quickly.
- Resistance to change: Inside-out is not an innovation method. Rather, it is an unconscious aspect of corporate culture. There are hardly any companies that openly communicate in their corporate values "We isolate ourselves" or "The user is not as important to us as our own ideas". The inside-out innovation culture is more a consequence of other values or patterns practiced by the company, such as a more hierarchical culture or a very isolated development area.
The reason why product managers in particular are frustrated by an inside-out innovation culture is that it is the task of product managers to strengthen the market orientation in the company in relation to a product or product portfolio. The core function of product management is to aggregate the best market knowledge about the product's market and make the smartest decisions about the product's characteristics.
An inside-out culture ultimately limits the product manager in the performance of their job. In an extremely engineering-driven organization, the product manager is often "demoted" to a technical project manager.
And I am not writing this article today to show empathy with market-oriented product managers, but to shed light on the fatal consequences of an implicit or explicit inside-out culture.
Even if customer-oriented innovation often has the preconception that it takes place more on the surface, the customer-oriented innovation process is ultimately the safest innovation approach, as the added value of the user is considered from the outset and constant contact with customers in the product definition process ensures that the product actually meets the added value of the customer.
The problems of the inside-out culture described above have the following impact on the success of the company:
- Lower sales AND lower profitability: If you develop ineffectively and inefficiently, you sell less on the one hand and have to incur higher development costs on the other.
- Loss of market share: As the inside-out approach means that new trends are missed and development is slower, faster and more agile competitors have an easy time gaining market share.
- Loss of innovative and market-oriented employees: It is not easy to find good product managers and business developers with a strong market orientation. These are people with a high level of energy, knowledge of the industry, a willingness to learn and an attitude of uncompromisingly addressing customer needs despite greater effort and expense. If you frustrate these employees and they leave the company, a downward spiral is set in motion.
The fatal consequences of a corporate culture that is too inside-out are difficult to recapture.
Whether your company works inside-out or not should be analyzed in a very honest analysis. A company structure that is very customer-oriented in terms of sales and service can also conceal a culture of innovation that favors inside-out.
To clarify: inventions and innovations are great things, and the more technical they are, the more fascinating they often are. Development and research often produce far-reaching innovations.
However, success comes from a constant dialog between market insights, i.e. customer-oriented development, and technology. Material innovations or technologies are often imperceptible to users and customers - users can sense whether the application is simpler or more time-saving.
Users pay more for greater added value or switch manufacturers for greater added value. Added value that is seen by the user is ultimately the only lever for retaining or gaining market share.
With Evolute, we create a customer centricity infrastructure with which you can anchor customer surveys as a recurring process in your company. Because nothing is worse for product managers if they want to work in a customer-centric way and don't have the resources to do so. With the resources and an infrastructure, you can not only enable an outside-in culture but also anchor it.
