your proprietary system business plan

The Impact of Proprietary Systems on Company Value: A Strategic Analysis

In the digital age, businesses are constantly seeking innovative solutions to gain a competitive edge in the market. Proprietary systems, which encompass software, technologies, and processes developed exclusively in-house, have emerged as a popular strategy for achieving differentiation and maintaining control over critical assets.

Proprietary systems offer numerous immediate benefits.

Competitive Differentiation : Proprietary systems set companies apart from their competitors by offering unique features, functionalities, and solutions that are not readily available in the market. This can strengthen the company’s market share and its ability to command premium pricing.
Enhanced Innovation : Developing proprietary systems encourages a culture of innovation within the company. Teams collaborate to create solutions that cater to specific needs, which can lead to the discovery of new technologies, methods, and processes.
Intellectual Property and Barrier to Entry : Proprietary systems are often protected by intellectual property rights such as patents, copyrights, and trade secrets . These legal safeguards create substantial barriers to entry for competitors, as they are unable to replicate the exact functionalities without facing legal consequences. This protection bolsters the company’s market position and reduces the risk of commoditization.
Control over Technology and Data : Developing proprietary systems allows a company to maintain control over its technology stack and data. This control minimizes reliance on external vendors and safeguards sensitive information from potential security breaches.
Customization and Scalability : Off-the-shelf solutions may lack the flexibility to adapt to unique business requirements. Proprietary systems, on the other hand, can be customized to precisely fit the company’s workflows. Furthermore, as the company grows, these systems can be scaled to accommodate increased demand without incurring significant overhead.
Long-Term Cost Savings : While developing proprietary systems requires initial investment, it often leads to long-term cost savings. Businesses can avoid recurring licensing fees associated with third-party software and instead allocate resources to ongoing development and enhancement. Over time, these savings can be substantial and contribute positively to the company’s bottom line.
Data Monetization Opportunities : Proprietary systems generate a wealth of data that can be leveraged for strategic insights and potentially monetized. By analyzing user behavior, preferences, and trends, companies can make informed decisions, improve customer experiences, and even create additional revenue streams by selling anonymized data to interested parties.
Agility and Rapid Iteration : Having in-house development capabilities allows companies to be agile and responsive to changing market dynamics. They can quickly iterate on their proprietary systems, releasing updates and new features in a timely manner. This agility enables businesses to seize emerging opportunities and address customer needs promptly.
Attracting Top Talent : The reputation of developing cutting-edge proprietary systems can attract top-tier talent. Skilled professionals are often drawn to organizations that encourage innovation. This influx of talent can further enhance the company’s capabilities and value proposition.
Leveraging for Strategic Partnerships : Well-developed proprietary systems can serve as valuable assets in forming strategic partnerships, collaborations, or joint ventures. Other businesses might seek access to the technology stack for integration or co-development, presenting opportunities for mutually beneficial alliances.

Short-Term Gains vs. Long-Term Considerations

While proprietary systems can bolster a company’s competitive position, the long-term implications must not be overlooked. One potential downside lies in the heavy investment required for ongoing development and maintenance. As technology evolves, companies must continually allocate resources to keep their systems up to date, diverting funds from other critical business activities. Moreover, proprietary systems can lead to isolation from industry standards and best practices, making it challenging to adapt to changing market dynamics.

Another significant concern is the potential for employee knowledge concentration. When key technical knowledge resides with a select few employees, the risk of disruption due to turnover or unforeseen events increases. This can hamper the company’s ability to innovate, respond to challenges, and maintain system reliability. The lack of external perspectives that comes with proprietary systems may also hinder the identification of opportunities for improvement.

Considering these challenges, partnering with a capital raise and M&A firm can provide a strategic pathway to mitigate the negative effects. NOW Capital Partners can offer valuable insights, diversification, risk mitigation, and growth opportunities. Ultimately, a balanced strategy that combines the benefits of proprietary systems with the expertise NOW Capital Partners consultants is more likely to result in sustained company value and success in the ever-evolving business landscape.

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3 Things To Do Before Deciding To Develop A Proprietary Business System

It is not uncommon for businesses to rely on IT-based solutions as a way to streamline their operations. Technology enables better operations and more control over the flow of information, both of which are beneficial to businesses. There are also a lot of solutions on the market, so finding one that matches the specific needs of your business should not be difficult.

For a lot of businesses – perhaps including yours – developing a proprietary or custom system is an alternative worth considering. However, a proprietary solution isn’t always the best alternative to use for several reasons.

Before you jump into developing a custom business system for your company, here are the three things to consider:

Think Long Term.

Developing a custom solution is just the beginning. While the development costs are still very manageable, keeping the system up to date and well-maintained may be too much for the company. It is often more efficient to use an existing solution rather than developing one yourself for the lower running and maintenance costs.

When you use a system built by a tech company, you have the power of that company helping you keep the system up to date. The developers will handle all the hard work of patching bugs, delivering timely updates, and keeping the system relevant to the latest market challenges. Systems that have a lot of users will do these tasks at a much faster pace.

You don’t have to worry about paying for updates or investing too much in maintenance either. Be sure to compare the costs of developing and maintaining your own system with the costs of using existing solutions before making your decision.

Customize and Integrate.

As mentioned before, there are a lot of business solutions already available on the market. A lot of those solutions are designed to fit most businesses nicely. Other solutions are geared towards specific industries or operations, offering features that perfectly match your requirements.

The brewery POS system from Lavu is a good example of a tailored solution. It is a point of sale system developed for breweries, with specific features such as bar tabs and happy hours added to the mix. The basic POS features remain the same, but Lavu’s brewery POS system is customized further for a specific industry.

Similar customized solutions are easy to find. Even when you cannot find a system that offers all the features you need, it is often possible to integrate multiple systems through APIs and other means. Don’t forget to explore your options to customize and integrate existing solutions before deciding to go proprietary.

Time to Deployment.

Last but not least, there is also the fact that you need to invest sufficient time to develop a reliable proprietary business solution. This isn’t the case with using existing systems. A lot of business solutions are offered as a service (SaaS), allowing the entire solution to be deployed in a matter of minutes.

There is also the initial setup cost. A proprietary software must be run on your own server or cloud ecosystem, which means you have to prepare the deployment environment yourself. Existing solutions, especially solutions designed to be marketed as services, eliminate the substantial initial investment almost entirely.

Considering you also save a lot of time during deployment, SaaS is certainly an efficient option to use. With the user accounts set up, the entire system can be integrated with your existing business workflows immediately.

When you consider these factors, developing a proprietary system becomes a last resort. You should always take the three things we covered in this article into account before deciding to start with your own development project.