Successful businesses balance growth and profitability - innovation and operational excellence. Doing both provides mutual benefits across functions. Healthcare can improve care and reduce costs. Manufacturing can increase productivity and lower emissions. The public sector can expand access to information while protecting privacy. In most scenarios, the best approach is to simultaneously optimize and innovate - not just in product development but across employee relations, customer service, partner management and more. Pursuing mutually reinforcing strategies creates advantages and turns trade-offs into opportunities.
Cisco invests significantly in research and development (R&D), with over $5 billion allocated in 2008, accounting for 13.2% of its annual revenue. This investment supports the Cisco Development Organization, which focuses on creating new networking products, video technologies, virtualization software, and collaboration tools. While this organization aims to enhance existing products, Cisco also funds speculative projects through the Emerging Technologies Group. This group seeks to develop ideas that could lead to $1 billion markets within 5-7 years, encouraging innovative pitches and providing start-up funding for the most promising ones. Marthin de Beer, the group leader, emphasizes the importance of not just asking customers what they want but focusing on their roles and goals to inspire disruptive innovations. The group also interacts with non-customers to foster truly novel ideas. Ventures that emerge from this group undergo a staged development process, starting with seed funding and potentially advancing to full integration with Cisco's mainstream operations. Cisco also engages in external funding and spin-ins, which are similar to acquisitions but involve early-stage investments with the option for Cisco to later purchase the company. These spin-ins are supported with management guidance and may involve transferring key Cisco employees. Inder Sidhu, a Cisco executive, notes that spin-ins blend startup energy with Cisco's established resources. However, spin-ins come with risks, such as integration challenges and the time required to gain traction. To mitigate these risks, Cisco also directly acquires companies that use its technology innovatively. Cisco's strategy of combining internal development, external spin-ins, and acquisitions has allowed it to expand into various markets, including voice, storage, computing, video, and cloud services. In evaluating potential ventures, Cisco prioritizes customer success over technical milestones, focusing on end-user satisfaction and experience. By balancing product improvements and disruptive innovation, Cisco has maintained its industry leadership. The company's pragmatic approach to innovation, choosing between internal and external sources based on project needs, has been key to its growth beyond its networking technology core.
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