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?

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.

4. BUILD ~ ~

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

6. ~ BUY ~

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?

9. ~ ~ PARTNER

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.

12. The Fourth Option

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✓

20.  Acquisition costs
 Integration costs
Buy — ☐ Cons✓

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.

33. Thank you!