'Customer in' means thinking from the customer's side,
'Market in' means thinking from the standpoint of present demand. Also
'Technology out' means finding an exit for fine technology into the market, under the philosophy that 'the essence is ultimately technology' —
the form being a product. Meanwhile,
'Product out' means putting into the market products that you can realistically produce.
These subtle differences produce big differences.
Companies that are achieving remarkable results with a distinctive product-market strategy hold to a 'customer in, technology out' posture. These companies 'assert' and 'propose' toward the market. They refine their essentially superior, fine technology and propose it to customers. (p. 86)
From Itami Hiroyuki's 'Becoming a Manager' (Yein).
At the core of business strategy lies the 'customer'. This is a story about how to decide the key issue of what to sell and to whom.
Prof. Itami Hiroyuki, considered a leading scholar in Japan's business world, says, "What matters is not the demand that shows up in the market or the customer's currently voiced requests, but standing in the customer's place and thinking about the customer's needs." The posture needed is to think a step — or even half a step — ahead of the customer, and to think through customer needs more deeply than the customer himself.
In other words, the customer — not the market — is the core. He calls this posture 'customer in'. 'Customer in' is thinking from the customer's side; 'market in' is thinking from the standpoint of present demand.
Prof. Itami also emphasizes the difference between 'technology out' and 'product out'. 'Product out' means making and selling a product that your current capability can produce, not the best product. You must not do this. Instead of 'technology out' — meaning making a product you can realistically produce matched to your technology level — you must try to make a product matched to the customer's needs.
Ultimately, Prof. Itami says, the royal road of business strategy is the 'customer in, technology out' posture.
A related report came out recently from the LG Economic Research Institute — 'Looking at Amazon, you see Outside-in' (Hwang Hye-jung, 2013-12-23).
It introduces the concepts 'Outside-in' and 'Inside-out'. 'Outside-in' means viewing everything the company does through the customer's eyes, from the customer's position. The opposite, 'Inside-out', is the approach of asking what we're good at, what capabilities we have, and how to use those to raise revenue or market share. Similar to Prof. Itami's thinking.
The report says inside-out thinkers tend to use competitors as their reference, while outside-in thinkers use customers as reference. And it stresses that businesses should run the outside-in way — don't stare at competitors; focus on the customers outside the company, predict market change, and prepare quickly.
Amazon is the flagship case of setting business strategy this 'customer in, outside-in' way. In the mid-1990s, when harsh customer reviews appeared on Amazon's site and publishers complained, Jeff Bezos replied, "Our standard isn't making money by selling products, but making money by helping customers decide what to buy."
Bezos also said, "We are not a book company, a music company, a video company, or an auction company. We are a customer company."
Amazon is reportedly coming to Korea next year. I'm curious about what shape it will take in Korea.
As Prof. Itami advises, it's important to hold the 'customer in, technology out' posture and think 'outside-in' like Amazon.
Source: Ye Byung-il's Economic Notes
▶ Ye Byung-il's Economic Notes — Twitter: @yehbyungil / Facebook: www.facebook.com/yehbyungil
