‘Build or buy’ choices are everywhere; from ordering take-out to business acquisitions. Bob Iger started to ‘buy’ when he noticed that the most popular parade characters weren’t from Disney but from Pixar.
The first-level question may be ‘build or buy?’ but each has an important second-level angle.
Build – what do we hope to learn from this experience? In Acquisitions Anonymous #148, Jesse Pujji talks about a supplement brand.
Successful DTC brands have a successful product, distribution, and marketing system.
Most of the product innovation, Pujji explains, is gone. Supplements are an established part of many production facilities. You could start one in thirty days. That part of the learning advantage is gone.
So too is the distribution thanks to Amazon, Shopify, and 3PL
Common products delivered in the same way make it a game of good messages to profitable niches. That’s something a person learns by doing. The only built solution is social ads – which have become expensive. So rather than buy a supplement brand, Pujji suggests, to build one because you can’t buy the knowledge.
Buy – what are the opportunity costs? Humans are generally bad at considering what else? Ask people about not buying a Ford and they say they’ll buy a Honda. It’s part of our mental accounting.
Hack this system by making the choices explicit. Think like The Price is Right. It’s a choice of this or that. Did Disney debate their options? To be a fly on those walls….
Bob Iger had to buy Pixar, Marvel, and Star Wars because Disney could not build those things. Though many brilliant people could work on that project, Disney faced the innovator’s dilemma. Creation is rowdy, rambunctious, and most important to Disney – unprofitable.
We’ve the tendency to think this or that and if this is good then that is bad. Life’s far more complicated. The opposite of a good idea may be another good idea. So ask why, ask about the second level aspects, and what else might happen here.