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Do You Really Need to Build That?

Tyler Hilker
March 17, 2021

The story of a pitch, a new tool, and a client rethinking how to spend hundreds of thousands of dollars on software initiatives

A couple of years ago, Crema received an RFI to build a new piece of software for a non-software company — let’s call them Heavy Tech Industries. They had built an in-house platform over a decade earlier and were planning to update that offering with something more technologically modern and functionally powerful. After that was shipped, they planned to build additional products & IoT-type solutions to help manage internal operations and to serve their customers better. All of this was right in Crema’s wheelhouse.

And yet, we recommended that they start with not building anything at all.

The model

The short version: as we did our initial research, the kind of software they wanted to start with was readily available for a fraction of building new. Furthermore, this software wasn’t closely related to the strengths of the healthy business they had built, nor was it in line with the overall business’s strategy. Based on what we knew, we couldn’t recommend that they build a new product. So in the spirit of good partnership, we wanted to make a conversation of it and, in a way, show our work.

So we designed this model to assess a portfolio of projects or initiatives according to how they fit the organization, not on self-referential factors like revenue, budget, or anticipated ROI.

core / support / peripheral / drag model

At the root are three key questions to ask of each initiative.

How “close” is this initiative to the core offering or competency? Does your organization understand its core competencies? In many cases, the core competency might be represented by the bulk of revenue, but not necessarily. 

 

How does this initiative support overall success? Has the organization done the hard work of mapping the dynamics between different activities, initiatives, and departments? Have early projects maintained alignment with the organization’s growth and its market’s demands & opportunities?


What is the overall value (however defined by the organization) of the initiative? Revenue can be a misleading measure of value in the same way the stock market is a poor indicator of economic health: the signals don’t always match the fundamentals. There’s something else in the mix. 


Tip: This could also be used by a group to build a sense of shared context using a tool like Miro: each participant gets to place each initiative where they believe it fits best and discussion follows.

Some simplified quadrant summaries: 

Mapping the portfolio

Stepping away from our Heavy Tech example towards a simpler, more common scenario: in a hypothetical model of an online retailer, various programs might be mapped as such (dot size indicates ROI).


Some context for this mapping.

eCommerce

They’re working with a (highly) highly-customized version of a popular eCommerce platform and many integrations on top of that. They’re an online retailer, so eCommerce is obviously significant to the overall function of the business; it is the business. Ongoing investment is crucial to overall success; investment simply depends on the differentiators that make them unique (Selection? Marketing? Fulfillment?). 

Customer support

They’ve adapted support workflows to suit a software suite that the team really likes. Support is also crucial, but at this point in time, it doesn’t represent a core aspect of the business in terms of driving commerce. Custom software would allow them unique control over their customer relationships, of course. Is that control worth the investment or can they absorb some inefficiencies through process, people, or partnerships?

Affiliate program

There’s a small affiliate program on a third-party platform, as well as significant manual effort. The program helps drive meaningful revenue, but requires management of hundreds of affiliate relationships, meaning the leverage necessary for healthy affiliate systems isn’t there yet.

Product education

As an online retailer, they receive many product-related questions, but they currently leave it to users to find product information from manufacturers & other sites. 

Deciding what matters

Now that we can see each of these areas in relation to each other and the business as a whole, we can more clearly discuss the goals and tradeoffs for each within the overall business strategy. There’s always a cost involved, of course, and that cost usually involves discussing variations on the following.

Context

What’s the playing field for these decisions?

Aligning on an overarching strategy, a general budget for overall spending, current cost structures, opportunities, & available resources.

Questions to ask: What are the trade winds (large, external market changes) we could take advantage of? What do we already have (e.g., annual product contracts, relationships, talented people) but aren’t currently making the best use of? What kind of information would help us make this decision with more confidence?

Factors

What really matters to us in these decisions?

The decision group should also align on the criteria for making these judgments. Lack of progress is frequently due to a misunderstanding about the role and value of factors among a team.

Questions to ask: What does the company need to learn in order to do more? What factors matter more than others? Can the company sustain ongoing variable costs beyond a given amount, or would a known, fixed, and up-front cost be more tenable (for now, if not long-term)? Does it make more sense to own this internally (and everything that comes with that) or to “rent”/buy a solution managed by someone else? What are the second-order effects?

Options

What can we do?

Now that the group has a set of shared context & values, options could be mapped for each initiative. Options should include internal & external options; additive, augmentative, and subtractive variations; and process, people, and/or product considerations.

Questions to ask: What are the existing tools in the market that are doing this kind of work for others? What are a few different directions the company could go with a custom product? Do we need to do this at all?

Mapping a way forward

Strategically, our fictional e-commerce company wants to increase the good in what they’re already doing, which means getting more out of the exceptionally strong relationships they’ve built: affiliates & customers. 


“The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.” - Richard Rummelt, Good Strategy/Bad Strategy


Given that, we can start to map out options (dotted lines) that align investment with strategy.



  • The eCommerce product needs additional investment in the custom platform (blue) to stay ahead of the competition: they’ll update some technology, but also upgrade some fulfillment systems. When each initiative becomes too big to properly map here, it should easily be broken down into component initiatives like supply chain, fulfillment, marketing, etc. 

  • The customer support team currently uses a third-party product (green). After gathering some input and considering an internal custom product, they decided they could continue using the same product while changing some processes & content to create more sales opportunities while also improving customer satisfaction. 

  • Product education, while outsourced in the past, provided a similar opportunity to improve the content and migrate to a new technology. Instead of spending money on a new tool, they could invest in the great people they already had. And yet, they were comfortable with not being a product content company; they wanted just enough improvement.

  • The affiliate program was called out as the most significant leverage opportunity to make a long-term difference in the business. Though they would be taking on the additional costs of a dedicated team, a custom product would allow them to close up some major inefficiency gaps and better serve that user base.


Importantly, this mapping provides the context and options to the entire team so that, if an unexpected opportunity or hitch pops up, the team has what they need to make decisions in the best interest of the whole. Everyone knows where everyone else is going. 


Tip:If you’re looking for more tools to help you understand various initiatives in your organization, the Business Model Map is an invaluable asset for evaluating innovation investment decisions. 


Similarly, in Heavy Tech’s case, we were able to show how, from what they had told us, certain initiatives were more in line with the overall strategy than others. For those that weren’t in line with the strategy, there were several options, but they took our recommendation: the option to go forward when it feels like going backward, from custom to off-the-shelf software. 


It’s so incredibly easy to get distracted by the “what we’ve always done”, “a huge prospective client asked for this”, and “we can’t not have this” projects. When taken at face value, it’s difficult to say no to such apparently obvious potential. And yet a coherent strategic mapping of organizational initiatives will make everyone more successful as energies & resources are focused on the activities that matter, not just the ones we like.


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I’d love to hear any feedback! @ or DM me on Twitter at @thehilker.


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