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Bagged Salad: What You Don't Know About Your Customers

In his excellent new book on customer focus, Reorganize for Resilience, Harvard Business School professor Ranjay Gulati notes that even though most companies claim to put customers at the center of the business, few do.

Too often we look at customers using an "inside-out" perspective -- namely by asking what products can we sell them. Instead, Gulati says, we need an "outside-in" view that asks what problems can we solve for them.

Take, for example, bagged salad.

With our traditional inside-out view of market research, we ask customers about what they like or don't like about a particular product, say lettuce. How much would you pay for it? Where do you prefer to buy it? But we don't ask the basic outside-in questions, such as, how does the making and consumption of salad relate to your busy lifestyle?

If you asked THAT question at the right time, the answer would have been, "I wish I did eat more salad, but I'm too busy to make them." And you would have been shown the need for a new market in ready-made bagged salad, which today is a $2.5 billion business.

"Answers like that one are almost impossible to uncover when the inquiry is inside-out -- when the questions start with the product and then moves to the customer," Gulati writes.
Outside-in companies such as Fresh Express (the bagged salad company) and Best Buy (which redesigned stores to appeal to women) are not only more profitable, they are more likely to do well in a downturn.

Describing a four-step process that companies follow to get to outside-in, Gulati says the real moment of power comes in step 3, when companies stop pushing products and instead solve customer problems.

Some of his key findings:

  • Customer-centric companies delivered shareholder returns of 150 percent while the S&P 500 delivered 14 percent between 2001 and 2007.
  • Even if companies are relentless listeners to customers, corporate silos often prevent them from doing anything with that data.
  • Talented and empowered employees on the frontline are critical for exploring, comprehending, and meeting customer needs.
Read an interview with Gulati on HBS Working Knowledge, then come back to tell us whether your company views customers from the inside out, or the outside in.

(Salad image by moria, CC 2.0)

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