Build vs Buy Tradeoffs as Managers

Cultural Tradeoffs
A lot of the companies in the valley have a strong sense of purpose backed by a mindset of innovation and research. Fear of being outmaneuvered by the next startup or not being able to on top of the latest industry trends may be some of the underlying deep rooted reasons. This spurs innovation, new research keeps happening, engineers and scientists keep publishing papers and patents. Like any completion funnel, some of these research ends up getting productized leading to revenues and the virtuous cycle of investment on in-house research keeps going on. Some other advantages of building in house and open sourcing

• Brand building
• Leverage open source community
• Engineering recruiting
• Innovation and product development
• Strategic value development

This is all great. But there are always two sides to the same coin. Taken too far, this leads to the Not Invented Here(NIH) syndrome. The deep rooted fears behind this may be ingrained in the organization : defensive mindset, lack of objectivity, tribal territorial fear, touch of arrogance, complacency. NIH has several side effects like : "re-inventing the wheel", huge recurring maintenance costs, loss of focus as an organization, weak prioritization and goal setting, increasing costs.

Corporate Examples
At the time of this writing(2019-early 2020), companies blinded by "Capital as a moat" strategy pursued by VCs(read softbank), are subject to these states of dysfunctions. The typical path of misfortune while building for the wrong problems looks like : founder raises ton of money -> head count -> hiring ramps up to show growth and progress to the VCs -> NIH syndrome -> build everything -> engineers love this as they have opportunity to grow -> more senior engineers needed -> team grows -> managers get bigger teams -> becomes senior manager. This kind of bloat doesn't end well. As Warren Buffet calls it, "Only when the tide goes out you know who is swimming naked".

From internal conversations with Googlers, I feel Google was also plagued by NIH from 2010-2014. During this phase, there was a culture of arrogance that Google has the best technology and scale and they didn't even treat AWS as meaningful threat. They practically missed the essence of AWS and software as a service. This is why AWS had a huge headstart even though this was playing out in the public markets and everyone was aware of what AWS was building.

What can manager's do
As managers it is super important to be aware of the state of the company/organization/team relative to both external and internal technology/products. We need to make sure that the pendulum doesn't swing too far in either direction. As managers, raising capital(VC money/head count) is important, but it is also super important to ruthlessly prioritize and build the right products and the right culture within the teams.

Exercise for the readers : Often times companies make big acquisitions. Only some of the times are these acquisitions successful and the acquired company is successfully integrated into the mothership. What are strategies behind these successes with examples. Please leave your thoughts in comments.