Outside-In or Inside-Out Strategy?

Do you develop your strategy outside-in or inside-out? Learn the difference between strategy-as-fit and strategy-as-stretch and why the best starting point may be different than you think.

One of the fundamental questions in strategy is that of where to start: inside, or outside your organization. It matters because the answer implies different philosophies about the nature of strategy.

Outside-In Perspective – Strategy-as-Fit

• Takes the outside world—the market, industry, world at large—as a given starting point.
• Strategy starts with an extensive analysis of the market, the competitive landscape and ongoing trends and derives implications for what to do given the circumstances.
• The core job of the strategist is to understand what happens around the organization and choose how it can best FIT in.
• The key strategy question to answer from this perspective is: What SHOULD we do in order to fit in?

Inside-Out Perspective – Strategy-as-Stretch

• Takes the organization itself—with its assets, competencies, people and partnerships—as a malleable starting point.
• Strategy starts with an in-depth understanding of your organization’s core resources and competences to identify strengths and weaknesses as the basis for your strategy.
• The core job of the strategist is to understand the organization’s strengths and identify how to STRETCH them.
• The key strategy question to answer from this perspective is: How CAN we leverage and stretch our greatest assets?

With these two perspectives in mind, the question is: where to start?

The easy answer would be to combine both ends. After all, both are important. But, practically speaking, you need to start somewhere.

The traditional starting point, which has almost turned into a dogma, is outside-in: one first needs to develop a thorough understanding of the customer, market, industry and general trends and then align one’s strategy with that.

I always start the other way around, inside-out. With every client I work with, I first look inside, at their resources and competences, at their unique strengths and weaknesses. And then we look at how these can be leveraged and stretched toward the future.

Of course, we also keep an eye on the outside world. But only in second place. This approach gives more focus and makes the analysis of the outside world more useful. Because, once you know yourself, you can much better assess the potential meaning and impact of everything around you.

Do you also start inside-out like me, or do you follow the more traditional outside-in approach?