By Marthin DeBeer (China Daily)
Updated: 2007-08-22 11:41

Companies must innovate continuously to stay relevant, otherwise they will risk losing ground to nimbler competitors. Although innovation occurs throughout healthy organizations, it is the technological innovation and introduction of new disruptive product offerings that has the greatest potential to drive growth.

There are three basic approaches to extending your company's product footprint.

The most common form of innovation is the organic, incremental enhancement of existing product portfolios. Most organizations embrace this strategy because it is comfortable for them.

Given a company's strong knowledge of the current market and its requirements, the risks appear minimal and can be managed with existing processes. But relying solely on this strategy is a trap. Although organic growth can extend the life of a product set, market maturation eventually creates an environment of diminishing returns.

The second form of innovation is the acquisition of outside talent and solutions that fit new product and technology niches. Smaller, more nimble innovators tend to address minor challenges that augment the offerings of established vendors. Acquisitions can deliver quick access to untapped opportunity and help companies move into adjacent markets, but they can also pose challenges. The acquired and the acquirer must be close matches in technology and culture for a successful integration. And the acquired products nearly always require further development to ensure integration with existing products, delaying the desired rise in revenue.

The third strategy for innovation, and a very important one, is internal venturing. Successful internal innovation permits a company to gain access to adjacent markets with new solutions that disrupt those markets, creating an environment of opportunity and expansion. Although adjacent markets can provide strong prospects for growth on their own, it is important to maintain architectural integration with existing products as this inevitably creates an opportunity for disruption in adjacent markets and long-term differentiation. Properly implemented, internal venturing is well suited to take advantage of all the complementary assets of the corporation - brand, sales force, channels, and so on - thereby creating a total product offering that is greater in value than the sum of the parts.

Healthy internal ventures

From experience in the process of internal innovation, Cisco has identified several keys to a healthy internal venture strategy:

Create a dedicated team not distracted by current business operations. By their nature, internal ventures seek to create new, disruptive technologies. These technologies must have an opportunity to grow without being beholden to more powerful entities in the organization. Without a degree of autonomy, many good but misunderstood technologies could succumb to pressure from the rest of the business before they have a chance to take root. Or worse, the new technology could be forced into a support role for an existing product offering.

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