Marc Wouters

2017

Products brought forth by disruptive innovation improve quickly and continuously,
challenging both existing products (Bower and Christensen, 1995: 44–45) and their
manufacturers. Hence, new products may enter a company’s portfolio, while others
may be discontinued. Accordingly, these companies need to decide which products
and associated components to manufacture in-house and which to source externally.
This paper reports on the development of a strategic approach to decisions whether
to make or buy selected objects (i.e., products, components and parts), including
objects affected by disruption. The proposed approach relies on a two-dimensional
portfolio to facilitate decision-making. Objects are placed in the portfolio according to
an underlying scoring-system, which uses company-specific weights derived from the
analytic hierarchy process (AHP) and inputs gained through semi-structured expert
interviews. A case study is conducted at a traditional manufacturer of automobiles to
apply the approach to powertrain components of electric vehicles. The results
indicate that the approach is generally suitable for strategic decisions on the vertical
range of manufacture, but has to be refined in order to be used practically. Its
complexity has been criticized by the case company’s employees, but the approach
was appreciated due to its ability to stimulate constructive discussions. The main
contribution of this study to the literature is to present the conceptualization of a
strategic approach to the vertical range of manufacture and the critical discussion of
experiences which were made during its application. Financial make-or-buy analyses
were not part of the study.