Innovating a product is one of the most difficult things product managers face. Knowing how to innovate can make that even more difficult. Do you buy? Do you build it? Or do you Partner?
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Buy Build or Partner: Choosing the right inovation Strategy
1. Common Sense into Common Practice
Build. Buy. Partner.
Choosing the right innovation strategy
2. What you’re trying to solve
How to innovate?
Create competitive differentiation
Fill gap in product technology
Offer a complete solution
3. What you’re trying to solve
BUILD vs. BUY vs. PARTNER
provides a convenient framework
for assessing the options
available to you when pursuing
a Business Development
opportunity.
5. Commitment Tradeoffs
Build
Going down the “Build” path requires an investment of:
Do you have
the resources
to pursue this
opportunity
in-house?
Is it the best
use of your
company’s time,
money, and
people?
Will pursuing
this opportunity
cannibalize from
other higher
priorities?
Can “building”
your way to this
opportunity allow
you to realize its
value faster / better
/ less expensively?
Time Energy
7. Buy
Knowing when a “Buy” decision
makes the most sense for a given
opportunity comes down to
an assessment of your company’s
core competencies and priorities.
8. Buy
ASSESSMENT OF COMPETENCIES & PRIORITIES
Is this opportunity out-of-scope for what you do best?
Would utilizing another company’s solution enable
you to retain your focus on higher priorities?
Do you trust that the solution someone else can provide
will be good enough for your needs?
10. Partner
Partnerships can often be the best, fastest,
cheapest way to create value for customers
and enter new markets.
But it’s also important to recognize
the inherent compromise of a partnership…
11. Partner
PARTNERSHIP COMPROMISES
Any deal struck between two companies requires
one or more parties to give up some amount of two
precious commodities – money and control.
Understanding the balance of these pros and cons
can determine whether a partnership is, in fact,
the best path.
13. Determining Factors
Is it a novel problem?
How many people do we have?
What level of expertise do we have?
How much time do we have?
Does the rest of the team understand?
Do you have in-house skills to support
a custom solution?
Does an off-the-shelf solution really fit your needs?
14. More Factors
Validate the need for technology
Managers need to focus on validating
that a business need exists.
Identify architectural requirements
It is extremely important to identify
any architectural requirements or
standards that a solution must support
before determining if an off-the-shelf
or custom solution is the best choice.
Identify core business requirements
A core business requirement is one that
must be supported by the solution to
continue. If a requirement can be only
partially met or not addressed by a
solution, it is not a core requirement.
Examine existing solutions
Businesses will often implement
solutions only to discover that another
system within the organization could
have supported the solution with little
to no modification.
15. Build — ☐ Pros✓
Most product control
Own the IP
Best opportunity for profit
16. Build — ☐ Cons
Longest time to market
Risk in market shifts
High development costs
Highest switching costs
✓
17. The Logic of Build
Building custom software can unlock a host of
benefits, but companies should only pursue
that strategy if:
Better software can provide
a competitive advantage relative
to your competitors.
You are building a large business that
can spread the cost of a proprietary
system over a large number of clients.
18. The Logic of Build
If a product is core to your business, you
need the control that comes with owning
the intellectual property and determining
its future course.
Owning the IP gives the most control
and also the most profit opportunity
if you have the time to get to market
competitively.
19. Shorten time to market
Own the IP (maybe)
Buy — ☐ Pros✓
21. The Logic of Buy
Think Speed, Ownership.
When technology/product is core to your business and you
want to own the intellectual property, yet you don’t have the
expertise in-house, and time is of the essence, buying
makes sense if there are other companies who have already
spent the time and resources developing the technology.
The success of the acquisition will rest on your ability to
realize all the cost savings and revenue opportunities that
looked so appealing on paper
22. Partner — ☐ Pros
Shortest Time to Market
Conserves Resources
Try before you Buy
Lowest Switching Costs
Credibility and Access
✓
23. Partner — ☐ Cons
Least Control
Integration Costs
Shared Gross Margins
Least Profit Opportunity
✓
24. The Logic of Partnering
When speed is important and the technology enhances
your product, rather than being core to your business.
To claim space in a market or establish a competitive
positioning while you build or evaluate a buy.
To reduce risk – especially if industry standards are
in flux and you are not a standard setter.
When market leaders are not clear and it is risky
to make an acquisition bet.
When you may have to join with “competitors” to satisfy
customer buying preferences and to reduce customer risk.
25. Build Buy Partner Decision Scale
FACTORS
Time to Market RiskLeadership Core to Business
26. Build Buy Partner Decision Scale
Build
FACTORS
Time to Market RiskLeadership Core to Business
27. Build Buy Partner Decision Scale
Buy
FACTORS
Time to Market RiskLeadership Core to Business
28. Build Buy Partner Decision Scale
Partner
FACTORS
Time to Market Risk AversionLeadership Core to Business
29. Build~Buy~Partner Scale
Partner
Buy
Build
Risk Level
Speed of
Expansion
Required
Resource
Availability
Similarity
Change
in the
Environment
Slow
Moderate
Fast
High to
Moderate
Low to
Moderate
Low
High to
Moderate
SameHigh Slow
High
Similarity
Moderate
to Low
Different
Moderate
Extensive
30. Rule of Thumb #1
Don’t enter into strategic
partnerships that you do not think
will not have a lasting evolution.
Don’t partner … and then compete later.
31. Rule of Thumb #2
Companies
that use both
acquisitions
and alliances…
grow faster than
rivals do.
32. Rule of Thumb #3
Collaboration internally
and externally with
customers and partners
is essential for
innovative leadership
going forward.
To be useful, a market segment must be:
Measurable
Accessible
Substantial
Differentiable
Actionable
Measurable examples include the size, purchasing power, and profiles of the segments
Accessible refers to the fact that the market can be effectively reached and served
Substantial refers to the fact that the markets are large and profitable enough to serve
Differentiable refers to the fact that the markets are conceptually distinguishable and respond differently to marketing mix elements and programs
Actionable refers to the fact that effective programs can be designed for attracting and serving the segments