This Month's Spectrum Summary:

(The following is an excerpt from the January 2004 issue of Spectrum, a proprietary monthly briefing published exclusively for the clients of I.T. Strategies, Inc. © 2004)

2004: Extending the Boundaries;
a Time for Evolution, Not Revolution

Marco Boer and Liz Ziepniewski this month look ahead to the new year, evaluating strategies for profitable growth. Marco calls for balance between radically innovative ventures and evolving the business areas you are already in. The emphasis needs to be on the latter. To evaluate strategies, we look back at some significant cases.

Lasermaster evolved from RIP software to wide format inkjet printers, a successful transition that ended when the company was sold to McDermid. 3M Company evolved from signage media and inks to becoming a profitable "hardware specifier" for WF printers. Barco leveraged market access to address the end user directly via dotrix. Outside our industry, Adobe is cited as an outstanding success story, a testimony to flexibility. The founders were able to abandon their plan to build workstations and grow the company around PostScript, and when that product had run its course, move on to Acrobat as a central product.

Next we compare various pathways for evolutionary extension of existing core competencies. In terms of product, this can go back to the preprint processes, or forward toward finishing and beyond. Examples of the latter include Prisma software developed by Océ, GMC variable data software, and Digital Print's device that synchronizes offset print speed with that of an in-line digital print module. Finishing is a tougher problem that HP Indigo has addressed, and thus has moved successfully into digital labels. Users more and more are looking for solutions rather than specific hardware, and vendors are responding by moving ever more deeply into services.

Four paths to evolutionary growth are evaluated. First is organic growth, the lowest risk, highest success route. Then there is the "greenfield" route: starting a new enterprise from scratch as a spin-off seeded by a large parent or independent start-up. There is no bureaucracy that can slow things down, but capitalization can be a challenge. The third route is acquisition. This may be motivated by the need to expand product offerings, make short-term profit, plug into a new distribution channel, or as a defensive move to keep an acquisition out of the hands of a competitor. Finally there is the joint venture route, but this has not generally been successful. A recent example is the HP-Kodak Phogenix venture. A joint venture needs a well-defined beginning in terms of objectives and also a well-defined exit.

Whatever the path, size normally helps. We consider Kodak which has the resources to make moves down most of these paths. Their main problem is seen as time since they are under pressure from shareholders to grow even though this means their new ventures will have to grow fast enough to offset losses in their declining silver halide film markets.

In the end, the model should be something like a mutual fund portfolio with a mix of low risk and high growth bets, with emphasis on the former. It's finding a balance.