Page 41 - Grow from Within Mastering Corporate Entrepreneurship and Innovation

28 grow from within

people rotating through it to gain experience with new ven-
tures, then deciding to remain as early-stage experts or to cycle
back to the comfort of core businesses.
Businesses cannot afford to cede new business creation to
independent entrepreneurs. What if your competitors begin to
figure out how to build businesses on a repeated basis? For years,
Cisco relied on a broad and deep community of venture-backed
entrepreneurs to fill its pipeline of new growth opportunities.
The company pursued the “fast second” strategy—articulated in
2005 by Constantinos Markides and Paul Geroski in their book
of the same name—more effectively than any other company.
Cisco spent relatively little on “R” (of R&D). Most of its innova-
tion budget was focused on development for iterations of estab-
lished products or for new products to be launched within a 12-
to 18-month horizon. Cisco’s strategy was to know everything
that was going on in the telecommunications ecosystem so that
it would be the first buyer there when a start-up began gaining
traction. The strategy worked exceptionally well for years, espe-
cially during the telecom boom of the late 1990s. Entrepreneurs
and venture capitalists alike considered a purchase by Cisco to
be a big win, and in the process, the company became the indus-
try’s dominant player.
As long as venture capital investments in start-up telecom
equipment companies remained strong, so did Cisco’s
pipeline. When the telecom crash hit in 2001 and 2002, venture
investment dried up. Ammar Hanafi, then a vice president of
strategy at Cisco, remarked in 2002, “It’s like being in the best
house on a really bad street.” He noted that the company’s
leadership realized that Cisco needed an internal development
capability for emerging technologies. Between 2002 and 2008,
it built what became the Emerging Markets Technology Group
(EMTG). EMTG leads Cisco’s advanced development pro-
grams that don’t quite fit within established business units. Its