It consists of just two questions.
First: How risky and unpredictable
  1. Very clear: We have a good understanding of the final product and might have a good understanding of how to make it. Then focus on doing it in a waterfall method. Break it down and understand the ins and outs and detail it as much as possible.
  2. Unclear and unpredictable: We have a general understanding of what we want but we do not know the details of what and how to make it. Then Agile is the way to go. Understand your assumptions and what you want out of it and approach it illiterately.
Second: is it core to my business?
  1. Core: Work at it internally.
  2. Not Core: externalize it. For outsource try to control it with waterfall or buy a ready made product. If Agile, partner with a provider and have an agile contract to get to the point together.
Now this sounds simple, but let us start with the first question. The risk is we think we know what we want, but once we see it, it is different. Diving in the details will give perspective on how clear is it. We can have high level details that are decided, but some smaller details need experimenting a bit.
The second question is about core and most cases, people are distracted and waste tremendous amount of effort on non-core work in general, many of it is busy work. On the other end, if you outsource everything, you will not be contributing unique value and will be putting yourself in a risky position. Core can mean many things such as functionality, security, competitive advantage. Whatever the core is, it has to be well defined.
A company such as amazon, the core of their work is technology and mainstreaming logistics, which is why they spend great effort into protecting and empowering it. If we think about their rating, it is not core, and they out sourced it to … yes, their customers. It is by no means not important, but is it core to Amazons work, would amazon hire people who specialize in rating products, they are not consumer reports or want to be (as far as I know on the date this is published). Mistaking the core can lead to issues such as the infamous Apple Vs. Microsoft case with details from wikipedia or video. In short, Apple outsourced developing the operating system in long term partnership and it turned into a lawsuit.
It doesn’t mean the core business doesn’t change, but for resource allocation, the strategy that sets the core has to be clear for decisions to be made effectively.

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