If you want to be a bad product manager, make your decision about whether to buy, build, or partner on a product one in the same with your decision about whether to create the product at all. Maybe the market isn’t particularly attractive, but you can get into it pretty easily by partnering with a company. Or maybe you have a good idea for a product and you think it will be to difficult to build it, so the idea should get “shelved.” After all, you have to figure out how the product will get created at some point, so you might as well figure that out before you decide to go forward with it at all.
If you want to be a good product manager, do not let your buy vs. build vs. partner decision unduly influence your go / no-go decision. Ultimately, the decision about whether to launch a product is a serious one, and the build / buy / partner decision is just one that needs to be taken into consideration.
Unfortunately, sometimes good product ideas can get stopped in their tracks because of a feeling that it will be too hard to build or partner for it, even though truly the investment would be worthwhile. Conversely, bad products can be brought to market because “it would be easy to do” by building or partnering, when the product maybe should not be launched regardless.
Think about when when you are planning a vacation — you usually think first about your destination, and then consider your mode of transportation for getting there. For example, if you live in Maine and want to take a vacation in January to a warmer climate, you would look at your different options for travel — plane, bus, train, car, etc. You would review your options to consider whether there is an affordable one which can fit with your schedule, and that may influence your decision on where specifically to travel, when, and whether you can go at all. However, if you found a bargain on a flight to Alaska, that would be irrelevant since your goal is to go somewhere warmer.
Unfortunately, this is the opposite of what often happens with product development. To build off the travel metaphor, even though a company may want to go to Florida, they find a partner who can get them to Wisconsin easily, so they decide to go there instead, even though that’s really not where they want to (or should) go.
The go / no-go decision for a product should not be made in a vacuum. There should be some consideration about whether the company is able to build the product internally, or whether there is potential for it to be created using a partnership, or whether there is an opportunity to buy a company or technology to enter into the market. Especially with the latter two options, this can definitely help improve speed to market, address areas which are not in the organization’s core competencies, and may present a more favorable cost structure at times.
However, ultimately the go / no-go decision should be based mainly on market-based considerations, such as:
- whether the market conditions are attractive (e.g. size, growth)
- whether there are unresolved problems which the product will address
- whether these problems are urgent and pervasive, and whether there are buyers who are willing to pay to have them resolved (to paraphrase the excellent book Tuned In: Uncover the Extraordinary Opportunities That Lead to Business Breakthroughs
)
- whether the product fits the strengths and competencies of the organization
- whether this product could provide the organization with a sustainable competitive advantage
Product managers need to make sure they do not “put the cart before the horse.” Focus on the market need and the buyer problems, and then consider the different options for solving it. Whether you build, buy, or partner could have some influence on your decision, though it should not be the predominant factor.
Jeff: you touch on a key point: long-term product strategy. The product that you are considering offering to your customers today (iPhone) is really just a stepping stone to the product that you really want to offer to them tomorrow (iPhone 3G).
Sometimes you just have to do whatever it takes to get that first product out there, because the real payoff is when you roll out the next product.
– Dr. Jim Anderson
The Business of IT Blog
“Discover The Secrets Of Making Your IT Department An Indispensable Profit Center”
This is an important portfolio management decision. I think there are two steps. First we need to identify market opportunities based on market needs or demand. I agree with you that this should have nothing to do with buy/build analysis. Once the market opportunity is defined for a product idea, then I think buy/build decisions are important to help with the ROI analysis and determine if a business opportunity exists for your organization to solve this market need. Without knowing how well aligned the product idea is to your core-competencies or how feasible it is technically it is hard to determine if their is a business opportunity. For this go/no go gate there are typically five types of selection criteria used: Market Attractiveness, Strategic Alignment, Core-Competency Alignment, Technical Feasibility, and Competitive Advantage. These criteria combined help to identify the product ideas that have the best business opportunity, in that they are aligned to longterm strategy and core-competencies, they are attractive to the market place (demand exists), they are technically feasible, and they provide you with a competitive advantage.
Good point, but maybe the headline should be “Don’t Let Build/Buy Decision Color Your Evaluation of the Market Opportunity” because you need both good, cold-blooded data for the numerator and denominator of ROI. If that is true, you can work on both in parallel if doing so is more efficient.
When you position your technology as disruptive or radical, the make or buy decision is eliminated. You will end up making, as you will drive adoption with the making. Buying will create a competitor. You will eventually need a competitor, so maybe buying at a point before that isn’t a bad idea. Still, it is a very long road with revenues to be had along the way. Stick with “make.”
As for the go/no go when you do not yet have a market to provide you with a reality to measure, find a client, and measure their vertical. If the vertical is too small, say no go, or reframe and redefine the vertical, but get to a large enough vertical before you go. At that point, the numbers will drive the same analysis that you would do for sustaining or continuous innovation.
You cost structure should be smaller in the disruptive case. If not, put the commercialization effort in its own company with its own cost structure and policy base. Then, evolve. Do the analysis with your newly reframed cost basis. Don’t pay for common services. Don’t contribute to the parent. Otherwise, your smaller cost basis is just an analytical mirage.
Also depends on whether the company has the work force to carry out the build itself 🙂
You start with whether a market opportunity exists in the first place. So, you research the market, understand the customers and evaluate their needs, among other things. If you come away from your assessment with the validation of your earlier presumption of market opportunity, then you can start to roadmap to seize the day. To build on Jeff’s analogy, you may want to end up in a Florida resort, but on the way there you may have to make stops in South Carolina and Georgia. The path you take to your final destination will be influenced by your buy/build/partner considerations, which are, nevertheless, made after the preferred destination has been considered.
In IT/e-commerce, where markets are evolving at breakneck speeds, it makes sense to make the necessary pit stops to refresh and reconsider. Because by the time you make it to Georgia, Florida may not be where you want to end up.