Eco-systems: Make, Buy and Partner
Establishing an economically healthy win-win solution can boost an entire sector or business vertical. Teaming up with suppliers can be like an open invitation (think Android) to contribute for the overall growth of the niche, or by defining a walled garden for special invitees (think iOS).
Make or Buy
A traditional R&D-driven company will often tend to develop and manufacture entirely new equipment for a new business endeavour. However, the value returned from creating own digital solutions cannot keep up with the pace of the outside world refining already mature instances of almost same capabilities. While writing line by line of code for a system component driver, someone else is creating value exponentially from COTS equipment and integrating modules in SDKs for business relevant experimentation.
Instigating organic growth to catch up on a new domain – such as a mailbox manufacturer developing electronics and internet controlled locks – will be outsmarted and outnumbered by existing external knowledge. Strategic supplier partnerships or M&A would boost the experience within the domain required for a faster market catch-up.
Between internal R&D teams sets of APIs (Application Program Interface) specify how software & hardware components should interact. Subsequently different teams can work with functional modules of clearly specified transfer of parameters and functional logic. Further, a strategic approach to sharing and licensing access to certain business-enhancing APIs can manage how external developers contribute to, expand, or utilise otherwise internal and proprietary functionality.
A web service like Yelp did not consider developing maps and update services in-house. Yelp displays their local business reviews on top of a generic map service, provided initially by Google Maps. The ability to add functionality on top of existing digital maps is made possible due to well defined APIs to integrate the two sets of functionality. Later Yelp switched their API compliance to Apple Maps, a late market entrant, for a co-branded partner strategy strengthening their presence. Multiple companies can benefit from eco-systems – like the entire PC manufacturing sector – from developing services based on common sets of APIs.