Strategy & Best Practices

Answering the Digital Platform “Build vs. Buy” Question for Hardware and Device Makers

By Ideas @ AppDirect / August 23, 2018

The manufacturing industry is rapidly approaching a tipping point. By 2020, just two years from now, the majority of hardware and device makers will rely on digital platforms to boost their investments in ecosystems and experiences. Moreover, these platforms will support nearly a third of manufacturers’ overall revenue.

With near-term forecasts like these, it’s clear that digital platforms are becoming a must-have for hardware and device makers. Platforms not only bring together a range of stakeholders—suppliers, partners, and customers—in one central ecosystem, but they can also accelerate innovation.

Digital platforms can only succeed if they are supported by strong technology.

However, digital platforms can only succeed if they are supported by strong technology that can seamlessly monetize, distribute, and manage devices and software. That’s why the “build versus buy” question for digital platforms has become more urgent than ever before. Here are some high-level questions to ask before choosing a path for your manufacturing business.

The Build Approach: Questions to Ask

Before you do anything, you need to determine whether or not your organization has the internal resources and expertise—time, budget, staffing, etc.—to build a platform solution. Ask:

• Does your organization have the internal resources to not only build and launch a platform, but also scale and maintain it?
• A follow up: Can your internal team also adapt your solution to new business models and customer needs?

If the answer is no, or if you’re not sure, talking to a platform specialist is a good idea. The same holds true if you’re not convinced your platform will need to change. A qualified partner can help you issue-spot and raise concerns that may not seem apparent at the start of your project.

Next, focus on the area of billing. Ask:

• Does your organization have the internal capabilities to handle complex billing, including pay per use, subscriptions, time-bound trials, etc.?

For a digital platform to succeed, your organization needs to be able to bill customers in ways that meet customer demands. These methods are constantly evolving, so the ability to change pricing on the fly is also critical. If you are not confident that your internal staff can accommodate scenarios like these, then you should consult with a specialist.

The ability to change pricing on the fly is critical.

After billing, you should consider ecosystems. Ask:

• Does your organization have experience building and supporting a developer community around your hardware, devices, and existing digital products?

To make your digital platform a success, you need to not only grow your customer base, but also attract developers to build innovative software around your solutions. The only way to build an ecosystem that accomplishes this is by making it easy for developers to join. Be sure that your internal teams can build a dedicated developer center that provides onboarding and support tools to scale your platform.

The Buy Approach: Questions to Ask

If identifying or hiring the internal resources you need to build a digital platform is too complex, time-consuming, and expensive, then “buying”—or working with a third-party provider—is probably better suited to your needs. However, the buy approach brings with it a different set of questions that should be top of mind.

When researching vendors, think about complexity, or more accurately reducing it so you can focus on your business. Ask:

• Does the vendor provide a solution that removes the complexities and resource-intensive management elements of running a digital platform?
• A follow up: Can the vendor do this while putting your company and brand first, and aligning with your overall strategy?

Digital platforms take a lot of work to manage, scale, and adapt, so you want a provider that can handle the behind-the-scenes technology so you can focus on new opportunities to engage customers, offer promotions, and cross-sell digital products with your hardware.

Next, flexibility should be front and center. Ask:

• Does the provider offer sophisticated, flexible commerce capabilities?
• Specifically, are you able to bundle, cross-sell, and upsell digital goods, and change pricing when you need to?

Digital platforms simply cannot generate revenue without flexible commerce capabilities that reduce friction during the sales process. Avoid vendors who can’t offer commerce flexibility and that can’t provide a solution that meets your vision for your digital experience.

Digital platforms cannot generate revenue without flexible commerce capabilities.

Finally, in the digital economy, experience is everything. Ask:

• Does the provider have notable customers in your industry that showcase its expertise?

It is important to partner with a third-party provider that has experience with the types of challenges you may face and understands the nuances of your industry. This helps to ensure that the specialists can help you identify and avoid any potential pitfalls.

Each business is different, so the process of making the build versus buy decision will be unique to your organization. Regardless of what option you choose, it’s important that your business is aligned around your manufacturing 4.0 initiatives and that your team has clear KPIs for your digital platform. With this information in hand, it can still be a good idea to discuss it with a digital platforms specialist. That way, you’ll be aware of any information you may have missed and help ensure you don’t encounter any issues as you go deeper into your strategy.

To learn more, you can download our recent eBook, “Build vs Buy: Making the Right Choice for Your Digital Platform.” Or visit our Getting Started In Manufacturing 4.0 online resource guide.

Ideas @ AppDirect is a leading source for trends, statistics, best practices, and other information related to the digital economy.