For innovation arms inside massive companies like Cisco, early revenue is irrelevant—a $5 million success would be laughed at. The true measure of success is creating strategic options for the parent company to navigate future market shifts, not hitting traditional startup KPIs.
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An innovation arm's performance isn't its "batting average." If a team pursues truly ambitious, "exotic" opportunities, a high failure rate is an expected and even positive signal. An overly high success rate suggests the team is only taking safe, incremental bets, defeating its purpose.
Unlike standard corporate M&A, an innovation incubator's acquisition criteria are different. Cisco's Outshift ignores a startup's revenue and business metrics, focusing solely on the technology, talent, and cultural fit to accelerate its own strategic objectives.
To avoid being too futuristic or too incremental, Cisco's innovation arm manages its ventures across two axes: technology risk and time horizon (from 6 months to 5 years). This portfolio approach ensures a mix of near-term value and long-term strategic bets.
To select new ventures, Cisco's incubator finds a "Goldilocks zone." The idea must be close enough to leverage a strategic advantage from the core business, but far enough away that it doesn't overlap with or duplicate the work of existing business units.
An internal incubator’s biggest mistake is acting like an external startup. Finding product-market fit is insufficient. Lasting success requires achieving "product-company fit" by deeply understanding and aligning with the parent company's internal business units, strategic goals, and unique challenges.