This time last year we published an eBook which challenged readers to ask themselves: ‘Am I the right type of person to own a business?’
The free eBook, Pros and Cons of Owning Your Own Business, was created for anyone considering buying or starting their first business, and it has proved very popular with our readership. It includes a checklist of 10 common attributes we tend to find in people who successfully build and run businesses.
One of the most important attributes in the list is self-awareness – awareness of both your own strengths and weaknesses, and those of your business.
Which brings me to the inside-out principle.
What is the inside-out principle?
The inside-out principle is the ability of a business owner to consistently operate in two (or more) spheres of perspective in relation to their business. It means:
- being deeply aware of the inside mechanics of the business and closely involved with its value and performance drivers
- being able to regularly and spontaneously step out of the engine room and look at the business from the point of view of a customer, supplier, financier, team member, competitor, and so on.
At JPAbusiness we deal with business owners across a raft of industries including agribusiness, mining, food processing and warehousing, business services, logistics, wholesale, manufacturing, IT and digital services and retail.
The inside-out principle is the one constant we see in all successful businesses, regardless of the industry in which they operate.
Does the inside-out principle mean ‘working on the business, not in the business’?
The short answer is ‘no’.
We often hear business coaches espousing the need to work ‘on the business’ rather than ‘in the business’ in order for a small business owner to be successful.
From my experience, however, this approach can be a bit simplistic and doesn't necessarily contribute to a business building and sustaining real value.
I advocate doing both, while focusing explicitly on the business’ value drivers.
Self-awareness is a key ingredient of the inside-out principle; in particular, awareness of your business’s strengths and weaknesses in fulfilling its value proposition to the market.
You need to spot weaknesses and monitor them before anyone else and to do this well, I believe, you need to be working ‘in’ the business, as well as on it.
So how do you get good at the inside-out principle?
To apply the inside-out principle you need to practise switching perspective when looking at a problem, issue, risk or opportunity.
For example, if you owned a manufacturing business and were considering making and selling a new product, you would need to look at the risks and opportunities from the point of view of:
- your most feared or most similar competitor
- your sales representatives
- your raw materials supplier
- your manufacturing team
- a selection of potential customers
- your financier
- and so on…
This ability to switch perspective and ‘role-play’ allows you to calibrate decision making and design a competitive response to any challenge.
It gives you intelligence well ahead and as preparation and decision support to assist you in making the vital calls that will impact business success and value.
How big brands use the inside-out principle
The best inventions – those developed by global brands like Ford, Google, Apple, Amazon, IBM and Nike, with billions in market capitalisation – have usually had a significant period during their growth track where the senior leadership had an astute ability to perform the inside-out principle.
Those leaders demonstrated a celebrated ability to:
- foresee the market
- foresee the customer need or problem (sometimes one that didn’t even exist at the time!)
- figure out the best way of matching or solving that need or problem.
Interestingly, often a start-up business or an inventor of an awesome product or service has difficulty practising the inside-out principle.
Inventors tend to be very focused people – creative, but deep in their area of expertise – and it’s often the people close to them who provide the inside-out insights that help ‘make or break’ the idea.
In our experience, the value of a new product or service to the end customer is diminished in proportion to the distance the business owner is from the customer’s perspective.
Hence, the great value that the inside-out principle has in grounding the business to its customers’ needs and desires.
If you would like advice about buying or starting a business, or developing your skills as a business leader to grow the value of your enterprise, contact the team at JPAbusiness for a confidential, obligation-free discussion.
James Price has over 30 years' experience in providing strategic, commercial and financial advice to Australian and international business clients. James' blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.