Techno Finance and Executive Diary...

Friday, December 05, 2008

How Cisco's CEO John Chambers is Turning the Tech Giant Socialist

Lehman Brothers had just declared bankruptcy after 158 years in business. Merrill Lynch had been snapped up in a fire sale by Bank of America. Murmurs of woes in credit markets and rating agencies had sent the Dow on a roller-coaster ride, headed mostly down. By the time more than 100 financial analysts arrived in San Jose for their annual meeting at Cisco Systems, many didn't know if they would have jobs when they got home. Piling croissants and other breakfast fare onto their plates, the subdued crowd milled around a catering tent on Cisco's 52-building campus, then quietly filed into the presentation space where John Chambers, the company's legendary CEO, was shaking hands and holding court.

To the fading strains of U2's "Beautiful Day" -- a projected slide of two executive types sitting lotus style and meditating got a few chuckles -- Chambers bounded to the front of the room. Looking out over the group, he paused before discussing Cisco's business. First, he wanted the analysts to know that, well, he felt their pain. "We went through a life-threatening experience in 2001," he said, referring to the good old days when a market bubble was just a tech-sector problem. "At first, there is disbelief, then understanding ... then how do you position yourself for the future?" Most companies come out of things like this stronger and more flexible, he assured the nervous crowd. "But if there is anything we can do in any way to help, we will be there for you."

He waited a beat, took a breath, and moved on. "Now, let's take a step back," he said -- and began talking about just how much stronger and more flexible Cisco is today. Sure, Cisco's stock has gotten hit in recent months along with everyone else's, but the company's underlying business remains robust. Back in 2001, Cisco went from being the most highly valued company in the world to a cautionary example of the excess of bubbles. Today, in the midst of an even wilder economic spiral, the company has a cushion of $26 billion in available cash, two dozen promising products in the pipeline -- each of which is targeting a minimum 40% market share -- plus an unprecedented forward-looking strategy to unleash what it's calling a "human network effect" both on and off the Cisco campus.

Cisco is the plumber of the technology world. Roughly three-quarters of its revenue comes from the routers, switches, and advanced network technologies that keep data moving "7/24," in Cisco vernacular. The company's outlook has been buoyed by the hunger for cheap and easy video -- not just from regular folks whiling away the online hours watching cats on a wheel, but from network spending and infrastructure upgrades for companies, a market that's expected to reach $50 billion by 2013. "It was a market transition we saw early," Chambers told me during one of several exclusive conversations in New York and San Jose.

And Chambers has greater ambitions, even now, in the midst of turmoil. Or, perhaps, especially now. He has been taking Cisco through a massive, radical, often bumpy reorganization. The goal is to spread the company's leadership and decision making far wider than any big company has attempted before, to working groups that currently involve 500 executives. This move, Chambers says, reflects a new philosophy about how business can best work in a networked world. "In 2001, we were like most high-tech companies, with one or two primary products that were really important to us," he explains. "All decisions came to the top 10 people in the company, and we drove things back down from there." Today, a network of councils and boards empowered to launch new businesses, plus an evolving set of Web 2.0 gizmos -- not to mention a new financial incentive system -- encourage executives to work together like never before. Pull back the tent flaps and Cisco citizens are blogging, vlogging, and virtualizing, using social-networking tools that they've made themselves and that, in many cases, far exceed the capabilities of the commercially available wikis, YouTubes, and Facebooks created by the kids up the road in Palo Alto.

The bumpy part -- and the eye-opener -- is that the leaders of business units formerly competing for power and resources now share responsibility for one another's success. What used to be "me" is now "we." The goal is to get more products to market faster, and Chambers crows at the results. "The boards and councils have been able to innovate with tremendous speed. Fifteen minutes and one week to get a [business] plan that used to take six months!" As storm clouds form for the rest of the business community, he says, "We're going to gain market share." Rain? What rain?

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Posted by "CPerformance" :: 5:05 PM :: 0 comments