In the fast-paced world of digital business development, the "make, buy, or ally" decision is a pivotal one. This decision refers to the choice a company faces when determining how to obtain new capabilities, technologies, or expertise to fuel growth. Should they build the solution internally (make), purchase it from an external source (buy), or collaborate with other organizations (ally)? Each approach has significant implications for business strategy and requires careful consideration of people, process, technology, and finance. Let’s explore these factors and how they align within the broader digital business development process.
1. The "Make" Decision
Building in-house solutions (make) offers control, customization, and the potential for proprietary advantages. However, this option can be resource-intensive.
Key Considerations:
- People: Does the organization have the talent and expertise required to build and sustain the solution? The decision to make requires investing in your people through recruitment, development, and retention of technical talent.
- Process: Internal processes must be optimized for agile and iterative development. The organization should assess its project management capabilities and ability to manage timelines, communication, and delivery milestones.
- Technology: This decision is technology-driven. The ability to make hinges on having the necessary infrastructure and tech stack in place. Does your current technology environment support in-house development, or will significant upgrades be needed?
- Finance: Building in-house can have high upfront costs, though it could potentially offer cost savings in the long term. The financial strategy should factor in not only the cost of development but also ongoing maintenance and scalability.
Aligning the Make Decision:
For businesses committed to digital transformation, making in-house solutions can align with long-term strategy. The goal should be to ensure that the people, process, and technology investments provide a competitive advantage that is worth the financial commitment. In industries where differentiation through unique digital capabilities is critical, the "make" approach often shines.
2. The "Buy" Decision
Buying external solutions can provide faster time-to-market, reduce development risk, and offer access to best-in-class technologies. However, it often requires compromising on customization and flexibility.
Key Considerations:
- People: Even when buying, people remain crucial. The company will need teams that can integrate and operate the new systems, train others, and ensure smooth adoption.
- Process: The processes around integration become critical. Can the business effectively onboard and integrate third-party solutions into existing workflows? This includes addressing compatibility with existing systems and ensuring the solution aligns with your operational needs.
- Technology: When buying, you must assess whether the external solution fits within your existing digital ecosystem. Compatibility with current platforms, cybersecurity, and the ability to scale are major concerns.
- Finance: Buying typically involves lower upfront costs than building but may come with ongoing licensing or subscription fees. There are also hidden costs related to integration, customization, and potential future upgrades. Conduct a thorough cost-benefit analysis.
Aligning the Buy Decision:
Buying aligns best with businesses seeking a rapid solution to meet immediate needs. It's ideal for companies that lack the internal expertise or resources to build solutions from scratch or that want to focus on core business areas without getting distracted by technology development. For digital businesses with evolving requirements, this option allows for greater flexibility and faster execution.
3. The "Ally" Decision
Partnering with other organizations can provide access to expertise, markets, or technologies through alliances or joint ventures. This approach is a middle ground between making and buying, combining strengths of two or more entities.
Key Considerations:
- People: Partnerships require strong collaboration skills. The success of an alliance often hinges on how well teams from both companies can work together. Cultural alignment, clear communication, and shared goals are essential.
- Process: Clear processes for collaboration, decision-making, and problem resolution must be in place. Each partner's role and contribution should be well-defined to prevent misalignment.
- Technology: Technology integration between partners can be complex. Both companies need to evaluate how their platforms, data systems, and security protocols will work together.
- Finance: Financially, alliances can reduce costs since risks and investments are shared. However, profit-sharing, governance, and return on investment should be clearly outlined in any partnership agreement.
Aligning the Ally Decision:
Alliances are most effective when there is a strategic fit between partners, where each party brings complementary strengths to the table. For businesses looking to expand their digital reach, break into new markets, or gain access to cutting-edge technologies, forming an alliance can be a powerful move. The challenge lies in maintaining alignment of goals over time and ensuring a mutually beneficial relationship.
Aligning People, Process, Technology, and Finance for Strategic Digital Growth
The decision to make, buy, or ally is a critical one that impacts every dimension of digital business development. To align this decision with your business strategy, it’s essential to evaluate the interplay of people, process, technology, and finance:
- People: Ensure that your workforce has the capabilities, or can be developed, to support your decision. If you choose to make, invest in your people. If you choose to buy, ensure they can integrate and operate the new technology. If you ally, make sure your teams can collaborate across organizational boundaries.
- Process: Optimize your internal processes for innovation and execution, whether that means agile development for internal projects, integration processes for new purchases, or collaboration frameworks for partnerships.
- Technology: Align your decision with your technological capabilities and digital roadmap. Building in-house may require investing in your infrastructure, while buying and allying involve evaluating how well new technologies will integrate with your existing stack.
- Finance: Balance short-term costs with long-term gains. Making has high upfront costs but can offer proprietary advantages. Buying allows for quicker solutions, but with potential ongoing expenses. Allying helps spread the cost and risk, but profit-sharing must be carefully managed.
Making, Buying, and Allying are All Viable Strategies for Collaboration and Partnerships
Ultimately, the right approach depends on your digital business goals, market positioning, and the capacity to execute. Making, buying, and allying are all viable strategies for collaboration and partnerships, but success comes down to how well your organization aligns these decisions with its people, processes, technology, and financial resources. A well-executed strategy can drive digital innovation, transform operations, and unlock new growth opportunities in today's competitive landscape.
About Rowdy Bijland
Rowdy is a strategic and creative thinker. He acts as a digital business partner with the mission to support leaders, their teams and organizations, to drive digital business strategy, innovation and transformation execution, with the aim to maximize potential and to contribute to the creation of sustainable value and meaningful impact. He released his first publication “Digital Disruption: A leader’s Guide for Business Development in the Digital Age” available both as paperback and eBook in the shop. In addition, he released a digital masterclass “Leading Digital Disruption” on Udemy. He is facilitator, moderator and keynote speaker for companies and organizations. Furthermore, Rowdy offers 1:1 digital business coaching for leaders worldwide.
To connect with Rowdy, please follow him on Linkedin.