Should you wait or innovate?

How to decide when to buy or build tech when there is no market solution available yet. 

Technology is a means to an end, a tool that can help you deliver value to your customers, employees, and shareholders.  

But how do you decide whether to use existing technology solutions or build your own? 

There are many buy-versus-build frameworks available and most primarily address two common scenarios. First, when tech is commoditized, use off-the-shelf options. And second, in the case that tech can be a long-term differentiator, build it in-house and hold the intellectual property. 

However, reality is more complicated than this. Non-differentiating technology that is not available off-the-shelf may be worth pursuing if it offers increased medium-term revenue streams or enhanced brand benefits. 

In this article I’ll explore the complexities of buy-versus-build decisions beyond clear cut cases and delve into the critical scenarios within intricate business decisions. I’ll analyze trade-offs and outline a suggested framework that could help guide your decision making. 

Revisiting the traditional build versus buy framework  

In Figure 1 we can see a typical buy-versus-build framework.        

It’s important to remember that for technology to be differentiating and offer an advantage, it needs to do something that existing competitors and market participants can’t. And for that advantage to be sustainable, the technology must not be readily available for competitors to use. If a similar solution exists in the market, building solely for differentiation is redundant.  

While both buying and building technologies have their place, the choice to build focuses primarily on the need for control. We should build the technologies that we need to control. As we can see in diagram below, this control enables two key benefits: 

• Control for business improvement: Controlling the technology behind your core business empowers you to not only tailor it to your unique needs but also continuously adapt it for maximized efficiency. This helps ensure your organization stays competitive in an ever-changing landscape.   
• Control to create and sustain differentiated advantage: Today’s landscape moves fast and static technology itself isn’t a sustainable differentiator. Controlling technology’s evolution allows you to continually improve processes and maintain a unique edge over competitors. Remember, low barriers to entry in technology development mean staying ahead requires constant refinement. 

Therefore, you could consider the alternative decision tree shown here in Figure 3. 

You want to buy, but there is no market solution yet – should you wait or innovate?  

Now let’s explore the scenario highlighted in Figure 4. This shows an example of when the technology does not need to be controlled and is not available on the market yet but offers a solution that can be an accelerator, value generator and temporary differentiator. Should you wait or innovate? 

Here are some factors to consider before deciding on whether to build or buy:  

What are the interim benefits?  

• How much interim revenue growth and advantage can this technology generate?  
• Will it temporarily strengthen your brand or technology image? A clear overarching business, technology and brand strategy will help with decision making. For instance, building aligns better with the goal of becoming a category leader in this technology area. 

How fast and fierce is the market evolving?   

• How long will it take for your preferred supplier to catch up?   

• How much time and investment will it take to build the solutions in-house?   
• What happens if your competitors build this solution in-house?   

How reliable are the timelines provided by the supplier / in-house development team?   

• Consider any past significant delays in delivery timeline to gauge reliability and risk of timely development.   

Beware of hidden integration and customization costs  

• Ask yourself how much integration and customization are required once the market solution is ready. How much will that cost? Remember that most software that can be bought is not turn-key.  

Will the market solution you need require any buy-in from the supplier?   

• If the supplier needs to develop custom features, assess your priority compared to their other customers.   

Consider the workload and capacity of build teams:   

• Building software will divert the attention of product, design, and tech resources from other initiatives. Identify what alternative projects might be delayed or scrapped due to this investment.   

The decision to wait-or-innovate is common particularly in multi-national conglomerates requiring solutions at scale that can handle significant complexity and heterogeneity. It’s also a scenario frequently seen in underserved sectors where existing tech solutions may not meet specific industry requirements. So, let’s look at some key strategies your organization can implement today to be well-equipped for future 'wait-or-innovate' decisions:   

• Systems architecture: Design your tech stack with flexibility in mind.  This allows you to easily exchange or integrate an off-the-shelf solution once it becomes available.  
• Talent: Build a badged cross-disciplinary team consisting of product, design, and tech expertise. who can build solutions. This will provide you with optionality on whether to buy versus build.   
• Culture: Foster a tech team that is focused on value generation, is outcome driven, and is agnostic towards buy-versus-build. The combination of technical design documents and open discussions of trade-offs of the above-mentioned dimensions can help encourage this. 
• Leadership traits: If you are a leader, take guidance from your in-house technical experts or independent technical advisors. They will understand critical nuances and will give you advice on what vaporware is, what is reality and what is feasible within a given timeframe.  
• Organizational or industry sector default: Be mindful of your organization's or industry's default approach to acquiring technology. If your initial decision aligns with the usual practice, pause and critically evaluate whether it's based on a thorough analysis or simply following the common trend.     

As with all complex business decisions, choosing when to buy or build tech solutions is not simple or straightforward. There is no single right answer, and it ultimately hinges on your company's unique needs and ambitions. Remember, your decision should always prioritize the best interests of your customers, employees, and shareholders. 

The views expressed in this article are solely those of the author.