The fallacy of building vs buying

It didn’t happen once or twice, that I fooled myself into thinking that I can build the very thing that I aka my organization needs. Even when I in fact was able to, it doesn’t mean I should’ve done so.

See, when you’re growing an organization and you happen to have your own software engineering team, it’s easy to push more work on them. It’s easy to assume that they can build something in a week to fit the needs of your particular usecase, which will save you a few $thousands/year on a subscription to the 3rd party service. Building your own toolkit is great and is often the right thing to do. But at a certain point, you need to start more thoroughly evaluating the question of – will this investment be sound if I look back at it 9 months from now?

There is a bunch of tools every IT company needs to have tailored to their needs. Scripts, one-off programs, orchestration software capable of dealing with the custom nature of you infrastructure and all that. Then, there is software which appears to be cheap to build and relatively cheap to maintain and extend. But as your organization grows, so grows the needs of that software to fulfill more duties.

Initially you’re happy that you’ve saved your budget a $3k spend on third party tool, by utilizing your in-house engineers who’ve built it for $1k. The misery kicks in, when you get attached to the investment you’ve made in building that piece of software. Your company grows, and you need one more functionality to the original program, so you decide to add it, because you’ve already built the core framework and you won’t kill the project to buy 3rd party solution – current parity of core features doesn’t justify replacing the thing that your engineers built.

And so it goes, week by week, month after month, and ultimately you get to the point where your spend on this single piece of software already matched the pricetag of 3rd party solution. You’ve spent much more time of your engineers, yours, your project managers and product owners than it was reasonable. There was a point where you should have stopped but you haven’t because you couldn’t step back and see what is going on.

I myself am an engineer by heart. I love building things, I love to bring my creations to life and create my own little piece of art.
All that needs to be put aside, when you’re working for a business, you need to focus on what’s best for the company both in the short and long-term. Your ambition is often the reason for unnecessary waste of resources. You feel like it’s beneath you to delegate responsibility of building a tiny program to 3rd parties, because you can roll up your sleeves and build it yourself.

Leaders in startups that have to manage growth with limited resources really need to learn how to disassociate their ego from their decision making process. If you aren’t able to detach yourself and see through things objectively, you’re at risk of wasting the most scarce resource every startup has – time of your engineers. You can’t just put a market value as an hourly pricetag for an engineer who’s been working on your systems for a year. The reality is that if you’re spending an hour of an engineer who’s paid $50/hour, then it’s actually costing you 10 times that number. That’s how much you’re losing not letting them do the work they’ve been trained to do. In that sense, each individual who’ve been trained with your systems is in a sense irreplaceable, when you consider the cost of them being distracted. The opportunity cost is real.
Now consider the lost focus, that you could’ve invested into the things that actually matter. And the perk of using 3rd party solutions, which can sometimes surprise you with great features you didn’t event know you needed til they built and gave it to you.

If you still believe you need to build it, so be it. Hire a bunch of contractors to do that work for you instead of pulling your resources from their daily work which immensely contributes to organization’s bottom line.

In the early days of my career, I’d pick build nine out of ten times we were evaluating a solution. Now, a decision to buy is what I usually end up doing, because when you take into consideration the hidden costs of building, extending and maintaining the solution, it just doesn’t make sense to follow my ambition to build it.

At the end of the day, it’s not my ambition which will be staying long hours on weekends to debug the custom system we’ve built accruing a lot of technical debt along the way.
It’s my people who’ll be dealing with my lack of thoughtfulness and I don’t want that for them.

When your startup needs to scale – the execs

It’s been over a decade since I joined my first startup. During that decade I’ve certainly learnt a lot, and one of the biggest takeaways is that at different stages of startup life you need to bring different people on board.

In my experience the biggest blocker for startup’s growth is a stagnant mindset of its founders, who resist making changes in their leadership team. Often, it’s exactly an ability to make tough calls of this nature that differentiates startups who thrive and the struggling ones.

It is super tough to part ways with the people who helped you get to the place you’re at now. Even working with them on transition to different roles and responsibilities is tough. After many wins and losses, after years of grind people get accustomed to their position and you get accustomed to working arm in arm with them.

Yet as a startup founder, an executive or a board member, you need to do the necessary and make peace with the truth being that what brought you here won’t take you to the next level. And it’s always about the right people in the right roles.

I myself stay away from early stage startups for exactly this reason. I’ve realized that having had spent most of my career working on startups who have already found their market fit and needed people to coordinate startup’s accelerated growth, I should stick to my guns and work with startups which are already there.

It’s easy to fall for an idea that if you grew organizations to hundreds of employees, then managing the early-stage startup from the ground up is going to be nothing but a peanut. I’ve met many wildly successful executives who made this exact mistake. They overestimated their ability to adapt and underestimated the nature of challenges bothering early-stage startups.
You could say that if I’ve seen other people fail I’d grow wiser, right? Yet there you go, I’ve made this very mistake myself.

See, it’s hard to operate on a very tight budget, even more so if you’re used to being more relaxed with money. Just because you grew one organization from 14 to 70+ employees, another from 80 to 120+ employees doesn’t mean you’ll be as capable when you join a startup having 6 employees and able to hire maybe one or two employees per quarter.

While the middle-management can adjust quite easily, the people in senior leadership positions often have built a certain mindset and skillset which allows them to repetitively achieve success while joining organizations of the same level; at the same time being the reason for their crash and burn situation at startups on a different level of maturity.

Your first software architect could’ve been the greatest technology leader even when you were starting out, but it doesn’t mean she/he will be able to manage the technology organization which grows fivefold – which is when you need to bring in a seasoned CTO.
Your CMO who helped you find your market fit, may not be a leader you need if your ambition is to expand globally and build a product for tens of thousands of users vs current hundreds.

Next time you find your organization stuck with seemingly no ways to grow, look at your leadership team, including yourself. It’s easy to miss the right moment in which you should re-evaluate your team, because you may trick yourself into thinking that any growth is good and even tho slow, you’re moving forward so you’ll somehow make it all work out in the end. You may or may not and hope has never been a good strategy.

That’s why I recommend startup operators to evaluate the leadership team on at least quarterly basis. It’s unusual that your needs in terms of staff would change drastically over 3 months, and that’s why it’s valuable to have this process in place because it allows you to take action and react to a situation which could become a problem few more quarters down the road. When you know that your startup will be in need of leaders capable of exploiting new market opportunities, you can start coaching them or have them work with someone who’s been there and learn how to prepare for what’s coming. Being prepared has never been a bad strategy.

Still, it’s easier said than done. It’s hard to change people’s habits. It’s even harder to change people’s mindset. And nine out of ten times it’s completely unnecessary, because people who’ll be struggling in a forced transition could be working on a success of a different early-stage startup. Letting people go sometimes is just the only right thing to do, for the benefit of all of you.

So, bring in the experts. Bring in the seasoned professionals who’ve been there and done that.
It’s never too early to start thinking about challenges of this nature, because changes in top leadership team will affect the culture, stability of your company and overall atmosphere.
You need or will need to make the necessary changes, so don’t leave it to a chance. Embrace the startup nature and know the necessary.