As a business leader, developing new products is essential for growth and staying competitive. However, deciding whether to build a new product yourself, acquire a new product capability or partner with another business can be a challenging decision. Each option has its advantages and disadvantages, and it's crucial to assess your situation carefully before investing.
Here are some important considerations when deciding whether to build, buy or partner for a new product:
The cost of building a new product yourself can be significant as it requires time, resources and expertise. Acquiring an existing product capability may also come at a high price tag depending on the market demand and valuation. On the other hand, partnering with another business can save time and money in terms of research and development costs, but you’ll be dependent on another organization for your offering.
Do you have the necessary expertise in-house to build or acquire a new product capability? If not, acquiring this expertise may take time and money that you might not have. Partnering with another business can provide access to specialized expertise without requiring additional investment, but partnering successfully often requires management attention and adds a cost of goods to your product line.
If speed-to-market is critical for your business, building or acquiring may not be the best option as they both require more time than partnering with another company that already has an existing product offering.
Building a new product from scratch carries inherent risks such as uncertainty about market acceptance and potential flaws in the design process. Acquiring an existing capability also presents risks such as integrating it into your current systems or cultural differences between companies. Partnering with another business reduces risk by allowing you to test market demand before fully committing resources. Conducting market research is imperative to holistically understanding your risks.
In conclusion, the decision to build, buy, or partner for a new product requires careful consideration of several factors. Cost, expertise, time-to-market, and risk are all critical elements to evaluate before making a final decision. Ultimately, the best approach will depend on the unique needs and circumstances of your business. Careful analysis, market research, and a clear understanding of your goals can help you make the right decision that will lead to growth and success for your business. Whether you decide to build, buy or partner, remember to always keep the customer at the center of your decision-making process.