Smart Ecosystems & Product Development: Buying Off-the-Shelf vs. Developing Your Own?
As the world of the Internet of Things (IoT) advances and consumer and companies alike adopt new technologies, many non-traditional corporations are looking for smart technology solutions and products that can help them enhance consumer and customer experiences, improve their ecosystems, or collect and use data to increase their revenue streams.
When it comes to smart ecosystems and electronic product development, the question for the C-suite becomes: do you buy off-the-shelf (OTS) or do you develop your own? Certainly generic, cookie-cutter, one-size-fits-all products and materials are available in the marketplace and they serve a purpose. There are, however, numerous advantages for a company to develop their own smart products in order to generate new revenue streams, grow the brand, push innovation and improve the customer’s overall experience.
After 25 years of developing products for Fortune 500 companies such as global leaders Amazon, Apple, Broadcom, Cisco, Dell, Dolby, Fitbit, Google, HP, Intel, Microsoft, Motorola, Oculus, Pepsi, Plantronics, Qualcomm, and Tesla, plus several startups, I’ve learned a thing or two about the benefits of both options. Here are a few things to consider:
Looking Past the Shelf
Just like at the grocery store, there a lot of pre-made options to choose from when you’re looking to develop a new product. Companies can pick something that’s already established and force their brand into a generic off-the-shelf product, melding together with it. Sometimes this is an expedient way to get something up and running. From a CFO’s point of view, it may seem to be the most cost-effective strategy. It is important to note, however, that doing something “fast and cheap” can also have many drawbacks.
What many business executives end up asking themselves in the end is whether they really got what they needed from the practice. Off-the-shelf products come with many inherent issues. For companies looking to develop a specific product with specific functions and unique outcomes, executives will often come to realize the limitations of off-the shelf products.
For example, by taking something off-the-shelf such as a Smart Room, you may have to get 10 or 20 different solutions to work together in your ecosystem. It’s a large effort that may not be accurately achieved. These devices must be integrated and work with a variety of other systems. I have walked through a lot of these demos only to find that many don’t play well together. In order to create a uniform experience that reflects best on your brand, you really need to be in control. In order to obtain that control, it’s better to develop your own products. Even for a single product, off-the-shelf can have limitations regarding what features are present or will create links to your software or broader ecosystem.
Keep in mind, the depth of the value for the end customer is tied out through software features and cultivating the data. The off-the-shelf solution might only hit one point quickly and seriously lack much of the follow-through value-add over time. Another piece of the puzzle to consider is how your smart device fits into the larger existing ecosystems; iOS, Android, search, online stores, and content like music or videos can all play a major factor in adoption and total end-user experience. When you take something off-the-shelf and try to plug it into someone else’s existing ecosystem there are many possible modes of failure.
Another challenge executives face when buying off-the-shelf is that these products are hard to customize to meet a company’s specific needs. Many products are typically designed to do X when what it needs to accomplish is really X and Y. The company providing the off-the-shelf product does not really want to get into the business of customizing it for every B2B customer. Additionally, such a task is not always easy to do and the company likely does not have the specific market expertise that your business has in place. Thus, they will not be helpful in the effort.
More Than Just Getting What You Want
Certainly, when you are in control and you design and create your own product, you get what you want. Exactly what you want. That’s one of the best results of such an investment, but there are many other benefits.
If you pull something off-the-shelf and you can’t exactly get all the pieces to work during development, you face the real possibility of missing important time-to-market milestones, having to increase your budget or facing cancelation. These are large and very real risks to consider. When you create your own product, you also create your own clear process to follow. A talented product design & development (PD&D) team will properly navigate the risks to stay on budget and meet expectations as charted.
Businesses cannot make the mistake of approaching product development as if it were manufacturing. They are not the same. The tasks associated with product development can be constantly changing. The PD&D team must have the knowledge to handle the unexpected. The unexpected almost always occurs, especially if you try to integrate with parts that are not your own and were not made specifically for you.
When you dig deeper into how the process works, you will also find off-the-shelf products are not always cost effective in the long run. The odds that the product can deliver the experience and engagement you really want are close to zero. Over the years, I’ve had many clients ask us to customize off-the-shelf products to do what they want it to do. This approach may work for prototypes or early demonstration concept vehicles, but is often lacking for production level experiences. The lesson we have learned over time is that in most cases it would have been less expensive to start from scratch.
Product Development Costs
One of the first considerations regarding any investment is cost. Everyone associated with the project is worried about the bottom line and rightly so. Yet, there’s an incorrect assumption that anything that is uniquely created will require a much bigger budget than anything you can pull off-the-shelf. This simply is not true.
Planning, execution and evaluation are all important parts of product development projects. When you aren’t creating your own product, there often is a series of unknowns you’ll have to engage with as you work to adapt the pre-existing parts. Sometimes what you get off-the-shelf has a bug or other issue. You just don’t know. We’ve found that frequently it simply just doesn’t work quite the way our clients want it to work and converting it to perform the way they think it should work ends up being a significant effort. Thus, the time to navigate these unknowns can be costly and unpredictable.
As I mentioned, off-the-shelf products are being created for a reason. They are developed for a broad business (B2B customer base) and the focus for many of these companies is to get the product in the marketplace in significant volumes.
For these businesses, their ability to provide technical support, customer support or customization is often severely limited. Often it is much easier to invest in front-end sales than to get OTS customers in the door and to not worry much about customer retention and support.
Additionally, it is quite often the case to see these kinds of companies drop or diminish support once engaged rather than double down and work toward optimization for any given customer. This can lead to a lot of variable hits to schedule and budget, the most critical typically being delays to getting to market. Even worse, this could lead to bad end-customer experiences when you choose to adopt an off-the-shelf solution.
Throughout the design and development process, there are always high expectations. When dealing with unknowns, it’s possible that the OTS team will not hit milestones or deliver poor quality. Then there is also a question of reliability for the finished product and the cost of sustainable maintenance. When the experience is not successful, what’s the cost associated with fixing it? More drastically, what is the true cost of trying to restore your brand’s reputation if something does go horribly wrong with the product, creates that bad end-customer experience and it’s due to a product or system that you did not create but you pulled from the shelf?
In the end, the experience and brand that you are striving for requires the insights and customizations to achieve the outcomes you want. It is a vertical integration of experience going from the “hook” that is hardware, through the software stack that delivers the experience, engages and retains the end customer.
Selecting something off-the-shelf may appear as an initial savings but is typically more costly and certainly is more unpredictable. Businesses that weigh the pros and cons will find that making the investment in their own products deliver some of the best results overall and over time.
I’m just scratching the surface on the many factors companies must take into consideration when deciding to create new products. It’s not always that simple and that is why you need to talk to people who know how to mitigate risks, assess opportunities, and have a history of delivering product to market.
In my next blog, I will explore the types of companies and verticals that should consider developing their own products and why.
Your feedback is welcome.