Build vs Buy Decisions

Every operator will eventually face a decision like this – “Should we custom-build this technology or should we buy something off the shelf?” There is no catch-all answer to this question, and like most things, the truth lands somewhere on a contextual spectrum.

But to help navigate through the options, here are a few mental models that can be helpful when making this decision.

1. Make ecosystem-level decisions not product-level decisions.

A common trap occurs when you make decisions that make perfect sense in the short term but damage your ability to execute in the future. Understanding how data moves throughout your business will enable you to make better decisions, but mapping how all of the information connects is rarely done. Here is quick exercise on how to determine your ecosystem in 20 minutes or less. Write down all of the core technology in your business on Post-It notes and place them on a whiteboard (e.g. ERP, CRM, intranet). Draw lines between them to illustrate how data flows from each platform to another. Most of these “flows" will be manual processes, and that’s OK, but it's critical to understand how decisions you make now will affect your ecosystem later.

TAKEAWAY

Avoid 'walled garden' products were you are unable to get data in or out when possible. When faced with a major technology decision, bias towards open-source platforms or products that have extensible API’s so that you can connect your systems and ensure it supports a broader ecosystem.

2. Aim to satisfice, not over-optimize

The economist Herbert Simon coined the term “satisficing” back in 1956. Sometimes the best decision is the faster one, so don’t get sucked into the decision quicksand.

Gretchen Rubin sums up the concept well:

"Satisficers are those who make a decision or take action once their criteria are met. That doesn’t mean they’ll settle for mediocrity; their criteria can be very high; but as soon as they find the car, the hotel, or the pasta sauce that has the qualities they want, they’re satisfied. Maximizers want to make the optimal decision. So even if they see a bicycle or a photographer that would seem to meet their requirements, they can’t make a decision until after they’ve examined every option, so they know they’re making the best possible choice.”

Aim for reversibility and adaptability over robustness. There is usually an even chance of completely replacing a technology versus doubling down on it in the future. If it's hard to reverse the decision, do the work to maintain control; put your own systems in front of the technology to allow for the most extensibility long term.

TAKEAWAY

Most decisions don’t require you to be a maximizer. Hone in on what matters and move forward once your criteria have been met. Technology decisions are business decisions, so they should be made by senior leadership in the company, not delegated to an IT department.

 3. The right answer is usually “both”

Most technical projects rely on either buying or leveraging an open-source platform followed by layering in custom, company-specific integrations. We refer to this process internally as “creative assembly”. When in doubt, choose custom whenever it positively impacts the experience for your customers. If it's internal, things can be a bit clunkier and manual. Another rule of thumb: In either case, it's essential that you assign a person to manage the new technology, or you risk it withering on the vine.

TAKEAWAY

Recognize when and where it makes sense to build custom but always prioritize customer-facing experiences first.