When you face a challenge and are looking for the answer, you often end up, consciously or not, with the make-or-buy dilemma. It is a classic puzzle in the world of operations and decision-making. Many people’s first instinct is to take the make-way and try to solve the problem using available resources. They may start right away and save money for consultancy fees. But is it a good strategy? On the other end of the solution spectrum, some consultancy firms would comprehensively support you with their paid advisory and full services.
You may think you must play chess at the master level to predict many steps to find the optimal solution with minimised costs. But actually, you don’t have to. Let’s delve into the Make or Buy decision puzzle together.
A Common-Sense Decision-Making Algorithm
Look at the common-sense decision-making algorithm below. It is no rocket science. Yet, its purpose is to systematically guide you to consciously answer whether you need consultancy options. In the first step, we split this general question into a few specific questions, which are easier to answer, and then we confidently follow the rest of the decision path.
Please note that the algorithm is generic. It doesn’t matter what kind of challenge in detail you have. The algorithm is universally applicable as long as you focus on the best overall performance of the solution and don’t cut corners to justify your gut feelings.
Dictionary
In case you might be wondering the meaning of the keywords used in the decision-making algorithm, you will find their definitions below:
Know-How — Know-how is the practical knowledge, skills, and expertise of individuals or the collective workforce within the entity. Know-how involves applying information effectively in real-world situations, often gained through hands-on experience, problem-solving, and a profound understanding of the specific processes, methods, or technologies relevant to the project or organisational goals.
Complexity refers to the intricacy, interdependence, or difficulty of understanding and addressing a particular issue or challenge. In our case, something which requires fewer expert steps to complete is less complex. Complexity is quite tricky to describe quantitatively, is regularly judged subjectively, and is underestimated 99% of the time.
Resources — Resources, generally speaking, represent the available means and strengths that can be strategically employed to overcome obstacles and successfully reach your goals. Strictly speaking, know-how, as well as time, is also a resource, but here, we deliberately keep the know-how separately to highlight its pivotal role in decision-making. Typically, when discussing resources, we think about financial means or workforce.
Consulting refers to providing expert advice, guidance, and support to help address specific challenges or make informed decisions. Consultants typically possess specialised knowledge, experience, and tools that clients may not have in-house.
Services — services encompass various activities to satisfy customer needs. Usually, service providers act like company’s team extensions to fill the expertise or workforce gap in reaching the project objectives.
Reuse
Let us consider an easy decision path in the discussed algorithm. You know that you have enough available know-how, enough time and other resources to spend on a new challenge or issue to solve. Hence, no consultancy is needed. An individual, a project team or an organisation is self-sufficient and can process an issue organically. Reuse is your best option.
Make or Buy
However, in real-life situations, we need to evaluate many factors, some of which are unknown. The key question is whether you have enough know-how to process the issue. In doubt, a recommended way is to engage external support to evaluate the missing puzzle pieces. Gaining the required know-how alone is more resourceful since you pay for all your time, material, and human mistakes.
Looking again at the decision-making diagram, you see there is no difference in asking yourself whether you have enough money or workforce and then whether you have enough time — or vice versa. Only the double yes answer leads to the conclusion that the recommended option is to proceed independently.
Caution: There is a temptation, especially in engineering, to prefer make approach over buy. Although from the technical perspective, it might be satisfying, but from the business perspective, reinventing the wheel is a good choice only very occasionally.
Examples
Imagine you have a leaky kitchen sink in your home. What do you do? First, you evaluate whether you know how to fix the leakage and whether you are willing to do it. OK, it appears to be easy. Next, you check the required tools and fitting gaskets. Unfortunately, you have some, but you need more suitable. The last decision is whether you have enough time to go to a convenience store to find appropriate materials and do everything else. Eventually, you made it alone. The kitchen sink is not leaky anymore, but you may have second thoughts about whether the job was done correctly since you are not an experienced plumber. It would be bad if it started to leak again during your holiday. Well, it is impossible to be an expert in every field, after all.
Why this personal situation should be different from the challenges at your work? Imagine new legal regulators related to income taxes with which your company must comply. Your back-office team is finally aware of the change, but corporate tax law is not trivial and requires specialised professional experience. Hopefully, your team is skilled and can handle the issue with the assigned resources confidently and timely. However, when much is at stake, a targeted consultancy with external professionals is recommended to minimise an implementation failure risk. The earlier an error is discovered, the lower the damage recovery costs.
Lastly, here is a more sophisticated example. If you are not familiar with the modern IT world, don’t worry. You can skip this paragraph. You have already got the point. Suppose your company plans to launch a new product or service to satisfy the business objectives. It is a new variant of what the company already offers, but with additional functionalities to keep the competitive edge of the product portfolio. For example, a company wants to connect its product (a dishwasher or a heavy-duty truck) to the Internet of Things for real-time monitoring or to process chunks of big data using adaptive Artificial Intelligence algorithms. The AI is supposed to improve the product’s predictive maintenance. In this example, the company knows how to make their products. However, the new functionalities surpass the current company’s know-how. They are not fully settled as industry standards. How to proceed? Let’s go back to the decision-making diagram. If you are unsure how to start or how complex the challenge is, the recommended way is to ask external consultants for a preliminary evaluation. They will apply their field expertise to clarify the suitable course of action jointly with you.
Mission-Critical Issues
Whenever you feel that your challenge may have something to do with your company’s foundations, ask yourself what the impact of the issue you have is. Unless the solution implementation deals with the company’s core, such as the fundamental business model or core technology, choose the buy-option, not make. After aligning your needs and listing all relevant requirements, a professional service provider will implement a solution efficiently. However, when the solution development is mission-critical, you have to find enough resources to gain at least the required know-how to proceed with the implementation. You can’t rely on externals in the core of you are doing. Yet, the most efficient way to gain the required know-how is to buy it whenever possible.
Implicit Benefits of Engaging External Professionals
Based on the situation analysis, you already know what you require from the external professionals. It will be either their solution know-how for the challenge you have or the implementation of the solution. These are explicit benefits.
However, it is easy to miss that there are also implicit benefits of engaging external professional consulting and service providers, not apparent from the first, above-the-water-level glance:
- Objectivity: Consultants can offer an unbiased and objective view of the challenge
- Cost-efficiency: Consultants are goal-focused with expertise and knowledge. Hiring them for specific projects only when needed can be much more cost-effective than maintaining a full-time, in-house staff, even with the same level of expertise.
- Flexibility: Consultants can adapt quickly to changing business environments and project requirements because they are used to it.
- Source of Professional Knowledge: Working with consultants provides an opportunity to transfer knowledge that is hardly accessible. They can share their expertise with the internal teams, helping them build capabilities and enhancing the organisation’s overall skill set.
- Networking Consultants often have extensive professional networks that can be leveraged for your benefit.
- Strategic Guidance: Consultants can assist in strategic planning and decision-making, offering valuable perspectives on market trends, industry benchmarks, and potential opportunities or threats.
Wrap-up
Your environment is changing constantly, and there are numerous needs for deliberate decisions daily. Consider the algorithm discussed as a guideline for your decision-making process whenever you encounter a make-or-buy dilemma.
The most important question is the know-how required to solve the issue. Always make sure that you have the required know-how for doing your mission-critical operations. Next, double-check whether you have enough resources to complete the task within the time you have. Don’t be overconfident. It constantly happens for various reasons that people overestimate their knowledge and underestimate the complexity of the challenge. In case of doubt, ask independent professionals for advice. Unprepared rushing to the solution leads to mistakes, which can be costly. Still, when you are sure you are self-sufficient, choose the reuse strategy with your resources. You will go through the process unrestrained and be in control according to your needs and capabilities.
In other cases, when a reuse plan is not directly possible, and the issue doesn’t deal with the company’s business core, prioritise buy over make. Buy recommendation is counterintuitive because external services are additional costs. It also takes some of your internal resources to cooperate with these companies. But remember that such companies are experts in the field you are probably not, and they will either guide you or do the work for you — efficiently with specialised knowledge, experience, and tools. At the end of the day, it will cost you less than finding the right solution alone for the issue, which highly likely somebody has already had.
Systerion is a professional consulting and service provider in systems engineering and management.
Our experts will support you in systematically analysing your technical or business case. We will also guide you in turning your needs into the solution design ready for an optimised, cost-efficient implementation.
