Dec 2, 2019

The make or buy decision

After a long time, we (K, D and me) went out shopping on a Saturday afternoon. We had a clear intent of what we need to buy and we stuck to it (mostly!). It took a good 2.5 hours to shop for a few clothes and footwear for all of us. We didn't stop for our evening tea anywhere, instead, we chose to come home and I straight headed to the kitchen to make ourselves a strong cup of masala chai along with popcorn (made with dry corn, salt and oil). After 15 minutes, we were sipping tea and munching on hot popcorn.

This made me think about our decision-making process. How do we decide whether we want to make something ourselves or buy from a vendor? "Buy" doesn't necessarily mean products; it also includes services that we avail from a service provider.

There has been extensive research done on the "Build vs Buy" decision framework in the enterprise space. If a particular activity is closely tied to the "core" function of an organization, then organizations are better off building it themselves and taking complete ownership of it. If an activity is part of the "context" (activities that organizations need to do to stay in business), then they can choose to outsource to specialists/external parties.

I'm more interested to explore how these decisions are made by consumers. What factors determine whether to make it ourselves OR use the services of an external vendor? Is the "core vs context" model applicable for individual decisions? If so, shouldn't FOOD fall under the core category since it is a basic need? Why are we outsourcing/relying on food corporations to fulfill this basic need?

Now going back to my personal example. Let's take the case of tea:
Ever since we switched to using naattu sakkarai (country jaggery) for tea, both K and I don't seem to like tea made with white sugar. 
Making tea at home has become such a super easy task, given the years of practice I've had.
I can choose to add different spices that we like, and make it tastier.

In the case of popcorn, 
making homemade popcorn is so easy - the effort is literally less than a minute.
I can make it healthy by using less salt, cold pressed groundnut oil and good quality corn.
Also, it is super economical to make it at home. The multiplex cinemas are just plain ripping us off with their tub of popcorn priced at a whopping Rs.400 price point.

Let's take a moment to think about clothing. I have heard that people who knew how to stitch saree blouses always prefer to stitch their blouses themselves without seeking a tailor's assistance. They are clear about what fit suits them, the patterns, designs etc. 

I usually give my blouses to stitch to a tailor. Though she does a good job, her rates are extremely high - Rs.900 for a blouse (with lining). Sometimes, I take the material to Chennai and give it to a tailor there, where the rates are around Rs.450. I understand that the tailor invests her time, he/she has the required skill. Am I ready to invest my time to learn a new skill? How long would it take for me to learn?

I think the make or buy decision depends on the following criteria. We tend to make something ourselves IF most of these criteria are met:
  • It should be easy, quick and less time consuming
  • We should have the required skill and knowledge
  • We possess the tools/technologies involved in making it
  • We understand that the cost of making it ourselves is far less as compared to buying it from the marketplace
  • Last but not least, we have the right motivation and interest levels to pursue the task of making it

To validate these criteria, I'll use an example from my life:
I give my family's clothes for ironing (pressing) to a service provider. Every Sunday, he comes home, picks up the clothes to be ironed, presses them and delivers the clothes by the end of the day. Now I know many people who iron their clothes themselves at home. But somehow, I have never taken up this activity.
  1. I don't own an iron box at home
  2. Though I know how to iron clothes, I have never really attempted it regularly
  3. I have never done a cost-benefit analysis per se. I'm paying the service provider money to do this work, so I can use my time in other activities that I enjoy
  4. I find ironing clothes to be a tedious, boring activity. People who do it themselves might disagree with me on this
It is the same case with cooking which I find to be an interesting, therapeutic activity. Some of you reading this might not feel the same way. 

There are certain specialists who are experts in their own field. We have been trained to use their expertise whenever needed.

What if all of us are trained on certain essential life skills? If not at an expert level, we can at least raise to a state where we know our way around. Some of these essential skills are cooking, sewing, managing finances (taxes, investments), growing a vegetable garden, basic carpentry, handling electrical fixtures etc.

The whole idea of whether one should be a generalist or a specialist is such a fascinating area for me. I'm yet to conclude which one is better, but from my personality, I believe I love to be a generalist with multiple skills at a decent level THAN be a specialist with 1-2 skills at a mastery level.

This post is just a random collection of thoughts on various topics. I just wanted to dump it all, so I could get some clarity.

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