(This is a business case study. It will be used to guide discussions during the session: “What does leadership mean for me?” at the Vendo Partner Conference in Barcelona on September 16th.)
It was late on a warm Friday evening in Silicon Valley. Sean was at the office and he wanted to be at home. But he wasn’t.
He was thinking about software. He’d been thinking about it all day and now he found his mind drifting to houses. In the next week he planned to move permanently to Sacramento, to a house he had bought and renovated. An old whorehouse, in fact. It wasn’t originally designed for just one couple, obviously, so it took some major modifications. Sean comes from a family of builders, of self-reliant people, of rugged individualists. He’s the only one in his family who hasn’t built his house with his own hands…yet.
Thinking about houses was also a way of thinking about software. It was lateral thinking. “I know how I want to live. I know what kind of rooms I want, how I want to those rooms to connect, etc. I know what I need and it makes sense to build,” thought Sean.
Over the years he’d lived in the software equivalent of many rentals (3rd party software) and custom built homes (custom software built in house). There were pros and cons to each.
Sean was into online dating early, like really early. Back when it was basically a frontier community in the Old West. In those days you had no option but to build. So build they did. There were experiments in building out load balancers for large databases. The platform was built in a particular language. At one point the Old West turned into something more like the California we know today. That’s about the time that the original tech had to be updated. It was painful. People running newer tech could load their pages faster with fewer servers. It became difficult to hire people who would code in the original language. The changes were costly and resource intensive.
Sean was also early into the streaming business. There again it was the Old West, build-it-yourself approach. They built using a proprietary codec that was java based and faster than any other online streaming solution. But times changed. The West was won and a whole advanced civilization had sprung up. “When we finally moved off java and went to flash, we instantly saw a 30% lift in revenue,” recalled Sean.
Tracking systems and stats
When he got into dating they launched an affiliate system. At the time there were fewer than a dozen affiliate programs on the internet and there were no enterprise software solutions for tracking. Because of the large portfolio of dating sites, all with independent databases, the system was incredibly robust. “The team integrated internal statistics with the affiliate system and built out ROI modeling that was updated by the minute,” Sean remembered. A majority of affiliate programs that launched later modeled their systems on his.
Now Sean is creating a performance CPA network. The goal is simple: Optimize traffic to perform to the highest KPI in the vertical. He’s facing build vs. buy decisions again.
What are the requirements? Sean described the situation, “Why should someone send us traffic, versus sending traffic to something they own, or directly to a partner?”
The competition is clear. Sean’s software and service or the client’s existing software and relationships.
To win in that direct competition Sean must have sophisticated tech that shows the right sales funnel to the right customer. Then he needs to remarket to show that customer a new, different offer. “We’ve leveraged different enterprise software, modified software, and used different software in tandem, but we were still not able to do what we needed.” The whorehouse wasn’t turning into a dreamhouse for him.
Sean continued, “I went into the decision to build or buy with my eyes wide open. For me, the costs of building were outweighed by being able to create the exact flow that we needed. Building it with a team and taking advice from outside sources, we were able to include modules into the suite that we would have never considered before.”
In one form or another, we are all in the technology business, monetizing our own platforms. Where does it make sense to create your own backend? When does it make sense to leverage an enterprise product? At what point do you let the professional manage a service and focus on your own business core?
When does it make sense for you to rent? When does it make sense for you to build your house?
Questions for discussion: How do I make the role of leader fit for me? How do I decide where to invest resources, what risks to take and what to build versus buy?