Innovation Big and Small - Chapter 2
Bucking the Trend

Last week, we left our heroes in the throes and woes of the corporate cultural contamination of the innovation that drives growth, success and stability in today's high-technology companies. We discussed how innovation in startup companies is the norm. Fueled by life-changing potential rewards, focused by unity of purpose, and unencumbered by corporate policies, procedures, and red tape, startups are clearly the creative engines powering modern technology evolution.

The larger company, however, faces a situation where they can fall victim to the spoils of their own success. Once upon a time, they too were focused, fast-reacting, hard-driving startups. At some point, however, they probably made a major score with a successful product line that propelled them into the big leagues. With that membership card comes a bloat of baggage – support for existing product lines, protection of previously captured market territory, more employees to water and feed, reputations to protect, policies to follow, and legal hurdles to clear. The innovation balance can tip wildly away from their side.

For many large companies, the tendency is to give up on true internal innovation. These companies simply watch for new markets to emerge, monitor the latest crop of startups, and scramble to be the highest bidder when a good technology goes on the auction block. Over time, these companies devolve from their former innovative incarnations into simple commodity traders, speculating on technology futures and buying and selling equities to maintain technology portfolios that they can distribute through their well-oiled sales and marketing channels.

There are exceptions, however. The electronic design automation (EDA) industry is something of an anomaly in high-tech. Because their products are almost purely software, and their customers are themselves engineers, they can come unusually close to a business model based on pure innovation, although most EDA companies do fall into the bin above, updating their product portfolios strictly through acquisition.

We talked with the CEOs of three EDA companies that have bucked the trend. Mentor Graphics, Magma Design Automation, and Altium have each managed to add successful products to their portfolios via distinct and creative strategies for cultivating innovation. Sound like no big deal? Check out the EDA industry's track record. You'll find that there are almost no examples of big EDA companies following their opening act with a subsequent dominant product that was developed inside the company. EDA companies tend to have one big bang and then retire to the acquisition farm after a painful succession of failed sequels.
[more]