Build vs. Buy, Part 2: What A Good Build Decision Looks Like

Last time we discussed 4 questions that could help companies decide when to invest in building solutions. Learning and honing this skill is one of the hallmarks of a high-value technology organization, and companies that get good at doing this can leave their competition far behind. Let’s look at a classic example of this: in the 90s and early 00s, Google was one of several commonly used search engines. Competitors like Yahoo, AltaVista, and Inktomi had captured early market share (and mind share), and Google needed a way to set itself apart.

Let’s look at the four “when to build” questions with respect to early google.com.

1. What are we trying to do?

Google.com wanted to be the number one search engine, and a household name for search

2. What sets us apart from other industries, market verticals, and competitive landscapes?

At the time, most other search engines had large databases of web site links, but struggled with returning results that were truly useful to the users. Many sites would try to “game” the search engine results by placing keywords in the HTML code on the page to try to move themselves up in the rankings. In the early days of search, this meant that a company could struggle to find itself on the first page of search results even when users looked for it by name.

Moreover, as the internet grew in size and complexity, search engines like Yahoo began to struggle to return search results quickly and efficiently. Google took a new approach to search with their PageRank algorithm, which looked at which search results were linked to by other authoritative sites. This meant that google.com would return results that were more relevant to the user doing the search, and they would not have to hunt through pages of “false positive” results to find the link they were looking for.

3. What makes us different from the other companies who operate in the same space?

Coupled with the focus on accuracy of results was a laser focus on speed and efficiency. While many search engine pages were becoming unwieldy behemoths covered in banner ads, and offering numerous features beside search, Google kept its homepage extremely spartan. A small text logo, a search box, and an enter button were it.

Everything that would distract from the mission of fast, relevant, and reliable search was kept off the page. At the time, Google was there to offer a great search experience, and nothing else. In fact, this is the core of Google’s entire product philosophy.

4. For each of our differentiating factors, how can technology measurably increase our competitive advantage?

Google focused on a number of approaches to improving the search experience for its users. These strategies were a combination of ongoing efforts and longer term investments designed to help them develop and keep new competitive advantages

• They focused continually and relentlessly on improving the PageRank algorithm so that they could stay ahead of competitors, who were already attempting to implement similar functionality.
  

• They kept the home page clean and simple, with no banner ads, and also did the same for the search result pages they returned, instead focusing on text-based ads that were less intrusive and did not require longer load times to be seen.
  

• Google further invested in technology, AdSense, that would serve ads relevant to the search the user was performing (and, ultimately, tailored specifically to the user’s search patterns and behavior across all of Google’s platforms)
  

• They began development of a scalable back-end architecture that would allow them to easily scale, and to incorporate new technologies and platforms easily. This architecture, known as Google File System, was key to allowing them to scale to increasing user demand, as well as giving them a solid backend they could plug other tools and platforms (such as YouTube) into.
  

• They created a highly cost-effective and scalable approach to infrastructure that utilizes vast numbers of inexpensive, bare bones servers that could quickly be added or replaced in their data centers, giving them the ability to rapidly scale their infrastructure without needing to purchase and configure larger, more expensive servers. Today this is a standard approach for cloud data providers, but at the time it was revolutionary, and (along with Google File System) is what enabled Google to commit to bigger and more ambitious ideas.
  

• They made innovation a part of their culture, encouraging employees to spend 20% of their time at work on things outside of the daily responsibilities of their job. While this was not without its downsides and pitfalls, this attempt to foster a culture of innovation did result in numerous technologies and tools that later made their way into production: gmail, google news, and even parts of AdSense.
  

Ultimately, by identifying their goal and lining their “build” spend up behind that goal, leveraged these technologies and approaches to win the search engine war, and proceeded to use them to good effect in other online niches as well.

So now we have some guidelines on when to build, and an example of what that looks like. Next time we will look at the other side of the equation: when to buy.