Tackling Transition: Q&A With John Chambers

John Chambers is still as passionate about business and innovation as he ever was at Cisco, finds Steve Saunders.

Steve Saunders, Founder, Light Reading

May 22, 2018

14 Min Read
Tackling Transition: Q&A With John Chambers

I'm on the phone with John Chambers, talking about his new venture fund, JC2 Ventures, and he's telling me that America's innovation engine has stalled.

And, being John Chambers, he has the numbers to prove it:

  • NASDAQ IPOs are at a 40-year low. Last year there were 160 -- in 1996 there were 706

  • Business closures in the US now outpace the number of new startups annually

That's a big problem. In the next ten to 15 years, automation technology will cause a huge wave of unemployment to sweep across the US. To generate the 30 million new jobs that the US will need to replace the ones that will disappear, the annual IPO number needs to be 400 annually, reckons the former Cisco CEO.

Chambers isn't just talking about this problem -- he's launched a company to help fix it.

On the surface, JC2 Ventures may look like just another venture firm. It's not, for three reasons.

First, the goal of most venture companies is to make money -- pure and simple. JC2's goal is to generate a return while also creating as many viable jobs as possible by helping as many disruptive digital companies as possible to achieve an IPO (to the extent that Chambers is precluding his investments from M&A exits, where jobs are typically lost, not created).

Second, JC2 isn't just picking its investment companies at random. Almost all of the investments JC2 is making can be inter-leaved to deliver larger and more complex integrated solutions that enable the portfolio companies, under Chambers' guidance, to jointly bid on much larger deals from much larger companies.

Third, JC2 is also structured using an innovative business structure -- leveraging cloud, automation, freelance economy and so on -- that minimizes the number of full-time staff (and costs) while allowing the business to laser-focus on a strategic mission. This is not just a model for VC firms, but for how all companies should be structured in the 21st Century.

Chambers has started his venture term with his son and namesake, John J. Chambers -- hence the name JC2. No nepotism here, however: Prior to joining JC senior in business, John J. had a thriving career of his own, leading digital marketing teams at Houzz, Netflix and Walmart eCommerce. Chambers senior's long-term collaborator at Cisco, the excellent Shannon Pina, is also involved.

It's pretty obvious, even at this early stage, that JC2 will be a transformative business. Whether it becomes a model for other companies in the US, and helps to unstop the innovation impasse, depends not on whether the ability of US businesses to innovate is broken -- there's no question that it is -- but whether the US, as a nation, has the courage to follow JC2's lead and make the necessary changes to fix it.

So what can Chambers senior, pictured below, share with the wider world? Check out the transcript of our conversation below for an invaluable insight into the current state of business and innovation.

Figure 1:

Steve Saunders: So, John, what are you up to with JC2?

John Chambers: Oh, you know, Steve, trying to change the world one more time.

SS: Tell me about your end goal with this new business.

JC: In the big picture, I've always talked about a billion-dollar company with a handful of employees. So that's the goal. More important than the dollars are job creation, which I really worry about in this country and around the world.

SS: Me too. I'm very focused on where the jobs are going to be for our children in 20 years' time, because it seems to be that the logical end of this race to global automation is a world where half of today's jobs disappear. First of all, let me ask you, is automation a big focus for your new business?

JC: Yes, it is.

SS: What are the ramifications of unchecked automation?

JC: Starting with the big picture: 40%-plus of large companies will disappear in the next decade, and I mean disappear. They'll get Amazon'd, or Uber'd -- 30-50% of jobs as we know them today will disappear. The CEOs know this. So, this is a time where you disrupt or get disrupted. We have to create a new set of jobs for our children and their families. My belief is that these jobs will come entirely from startups, and small businesses getting bigger. The problem is that the innovation engine in the US is broken. We're kidding ourselves if we think of ourselves as a startup nation still. We no longer are.

SS: Agreed. Where did we lose our way?

JC: I think America can still be the place to innovate, but it's not something we're entitled to. We have to do it not just in Silicon Valley, or Texas, or New York, but across the whole country -- all 50 states -- and we need programs to do that. I'm the product of Boston 128 [Route 128, aka Boston's Technology Corridor]. Back then we were the hot tech center of the world. Fast forward to 25 years later and it's gone. It still has biotech, but none of the IT players are there. The same thing could happen not only to Silicon Valley, but to the entire country.

You've seen the numbers. If IPOs are the lead indicator for job creation, we're at a 40-year low. To generate the 25 to 30 million new jobs we'll need in the next decade, we need to have maybe five times as many IPOs.

We need to get our confidence back, but we also need to do what other countries are doing, starting with eliminating entitlement. France has become the startup and innovation nation of Europe. India is the startup nation of Asia, and is going to be the fastest growing GDP in the world, and the fastest growing in Asia; much faster than China. You either disrupt or get left behind. The US needs to go back to becoming a startup nation again.

SS: What are those countries doing right? Is it culture? Governmental involvement? What's lit the fuse on innovation in France and in India, for example?

JC: Great question, because culture isn't the answer. What lit the fuse was the combination of two very charismatic leaders who are very good, who are fearless, but also were elected by countries with an appetite for change. Their populations were ready to create a next-generation France, a next-generation India. In India it starts with [Narendra] Modi [Prime Minister of India] outlining a digital agenda for India. I'm the chair of the US-India Strategic Partnership Forum, so I'm very close to him, and I've been hugely committed to his agenda from the start. He is the real thing. His goods and services tax, which he got criticized for, is a brilliant move. He was utterly fearless in doing what's right for his country, long term, as opposed to taking a political out and making much slower progress. [Emmanuel] Macron, [President of] France -- amazing. His vision is as good as you've heard. A good man. I just had the honor of being the first global French high-tech ambassador ever named, and travelling with him to India. It was kind of a dream come true, where I got to travel and collaborate with the two leaders I admire most in the world.

Look at how quickly India and France have moved to change the tax policy. We took 15 years to make our tax changes. India and France took less than a year. It's resulted in the startup engines being on fire in both countries. They aren't saying there's any entitlement. They're saying, "We have to disrupt ourselves." And they have the courage to do it. In France alone, the number of high-tech startups went from 120 a year in 2012 to 720 last year.

SS: That's amazing, isn't it?

JC: This isn't a win-lose between countries, but it is a race about disrupting yourself. What I'm trying to do is be a champion of that on a global basis, but especially in three countries -- France, India and the US. I want us to lead by example. What we're doing with JC2 is focus on the disruptors – and how you take small startups and scale them with tremendous speed. I'm sure some will crash and burn, although right now they're all going well. I'm asking them to go public, not to sell to others, because while I was a tremendous recipient of 180 companies being acquired by Cisco, you don't create a lot of jobs when a company gets acquired. I would like to see us become the startup nation again in terms of IPOs that scale. I think it's important that we create the opportunity for these small companies to challenge the big incumbents.

Next page: Getting to the good stuff

Getting to the good stuff

SS: You must be getting bombarded with people asking you to invest in them. How do you filter out the white noise and get to the good stuff? What criteria do you use to evaluate the companies approaching you?

JC: The first thing I look for is a market that is in transition. The second thing I look for is an unbelievably talented CEO, who wants to be coached. I mean really coached, by a mentor. Third thing I look at is lighthouse customers. Have they already got products in the market that customers really like? The fourth thing is, do they have differentiation that can allow them to be the dominant player? I'm doing exactly what I did at Cisco. I'm shooting for 40% market share minimum, which causes you to think outside the box on potential. The fifth thing is, who do they have on their board of advisors? I'm not talking about a board of ten people. Usually four to five. Do they have one or two VCs who are world class?

If you talk to the young CEOs that we've really settled in, they would tell you that what they wanted most was the mentoring, the coaching, helping them open doors, build success. How do you grow? How do you build culture? How do you do an organization change? How do you change one of the founders? How do you learn from your mistakes? How do you develop true customer trust? How do you do channels and go to market?

The investment is a nice thing for them, but usually that's number five or six priority in terms of the CEO's criteria -- and it is definitely lower down the list on mine. I mentor them using the candor I have developed over the long term to become the trusted partner of each CEO. Part of that is I take them to Alaska with me fishing each year, so they can learn how to work together. I take 12 seasoned business friends with us, a number of them either current Cisco or prior Cisco, to help train them on ultra-direction. We're out fishing for seven days together. That's when you build relationships. It's different from what other venture firms do in a pretty dramatic way.

SS: Makes perfect sense. Being a CEO at a startup is lonely at the best of times. And who wouldn't want John Chambers as a mentor?

You've already got nine or so investments in play [check out JC2's current portfolio here]. I suspect they all fit together at some level, as part of a carefully thought through portfolio strategy. Is that right? Is there anything you can share with me on how they complement each other?

JC: You're the first one that has got that. My goal has always been to build architectures and relationships among my partners that deliver outcomes. When you go to a Microsoft or to Verizon or to an Apple, it's when you bring in a tightly-coupled portfolio that you can really change their top and bottom line. One company by itself can't do it, but five or six together really can. It's amazing how often when I talk to the CEOs and outline where we're going and the conversation goes from, "John, that's a neat company. I'm interested," to "I'm going to send my business development leader down to talk with you about your whole portfolio and see what we can do together." That's trust.

You know where I'm going here: big market advantages; disruption in IoT; AI and machine learning; automation everywhere; blurring physical and virtual lines; completely changing a company's interface to their customers, changing the customer experience; cybersecurity across everything. It's a complete architecture at play, and it's the portfolio where the real power occurs. I see hardly anybody else doing that, and I've been kind of surprised about that over the years.

SS: When you founded Cisco, that was the appropriate model to use for launching a big, world-changing company back in the 20th century. But in the 21st century we're seeing businesses develop completely differently. We don't need to have big monolithic businesses in order to make things, and in order to create change. We actually need to create a loose coalition of the best, right? That coalition, it doesn't have to be a super-formal coalition with all of the titles and structure that we've known for the last 200 years. It actually can be a loose affiliation brought together and driven by a trusted ombudsman -- that's what you and your son are. That's essentially what you're doing, right? You're building a virtual company, which can fulfill the needs of all of the customers, and do it in a much more flexible, low overhead way. It's a nimble way to do what you actually did in the last century in a way which is appropriate with the times and with the technology we have now. That's how I see it, anyway. It's very cool.

JC: Steve, you just did a better job of describing it than I can. I believe a corporation in the future could exist with less than ten people, and generate a billion dollars directly and indirectly through a loose affiliation or ecosystem. That will be the model. Companies have to move from a siloed bureaucracy where ten people have to say yes before you get a yes, to the horizontal implementation of outcomes where, once you want to move, you move quickly. We did that recently while at Cisco. Three of us wanted to do an acquisition -- we just did it! We didn't wait for everybody to get on board. It happened more than once, and they were our most successful acquisitions ever, by breaking the mold.

The challenge is -- how do you get that in large companies? The CEOs want to do it, but they're struggling with finding the digitization officer, an innovation officer. They've got to own it. They've got to change to turn their company on its head.

SS: You've placed a lot of interesting bets recently: Sprinklr, combining 25 social media platforms; Pindrop, with voice authentication, which will be critical once we start voice-activating automation applications…

JC: I was the person who said 20 years ago that voice would be free, and that it was the interface of the past. I was both right and wrong. Voice will be free, but it also will be the primary interface to automation, to the automated car, or home, and so on. That's where companies like Pindrop fit in. It does voice authentication, not just for fraud, but all the way into data centers.

SS: Very important. As is, Dedrone, for mitigating drone threats; and Aspire, your edible insect play, has gotten a lot of attention. But I have to tell you, the investment that excites me the most, personally, is OpenGov… I think it's an absolutely brilliant idea at exactly the right time, because it answers the need that everybody in every country that lives in a democracy wants to have -- greater visibility and accountability of where governments are spending their money. Government budgeting is intentionally miasmic and opaque to the people that are actually paying for it through their tax dollars. Anything which creates greater visibility and accountability is going to be hugely popular, and also wildly overdue.

JC: Thank you for recognizing that. Often people don't grasp how revolutionary that is. I'm starting to wonder if it's the way I'm explaining it. I think it's about democracy and having the citizens involved -- and transparency.

SS: John, every time I talk to you I learn something new. Your vision is always incredibly prescient, and you've been an extraordinary ally and mentor to both Light Reading and me personally over the years. So, I owe you. It's a great relationship. Thank you.

JC: I'd be honored to continue the work together. It isn't one person knowing the other, it's how you work together to really change the world. I do think, unfortunately, we have to move quickly in this country to do that.

— Steve Saunders, Founder, Light Reading

About the Author(s)

Steve Saunders

Founder, Light Reading

Steve Saunders is the Founder of Light Reading.

He was previously the Managing Director of UBM DeusM, an integrated marketing services division of UBM, which has successfully launched 45 online communities in less than three years.

DeusM communities are based on Saunders' vision for a structured system of community publishing, one which creates unprecedented engagement among highly qualified business users. Based on the success of the first dozen UBM DeusM communities, the UBM Tech division in 2013 made the decision to move its online business to the UBM DeusM community platform – including 20 year old flagship brands such as Information Week and EE Times.

Saunders' next mission for UBM is the development of UBM's Integrated Community Business Model (ICBM), a publishing system designed to take advantage of, and build upon, UBM's competitive strengths as a leading provider of live events around the globe. The model is designed to extend the ability of UBM's events to generate revenue 365 days of the year by contextually integrating content from community and event sites, and directories, to drive bigger audiences to all three platforms, and thereby create additional value for customers. In turn, these amplified audiences will allow business leaders to grow both revenues and profits through higher directory fees and online sponsorship. The ICBM concept is currently being discussed with a broad group of business leaders across UBM, and is earmarked to be piloted in the second half of 2013 and early 2014.

UBM DeusM is Saunders' fifth successful start-up. In 2008, he founded Internet Evolution (www.internetevolution.com), a ground-breaking, award-winning, global online community dedicated to investigating the future of the Internet, now in its fifth year.

Prior to Internet Evolution, Saunders was the founder and CEO of Light Reading (www.lightreading.com), Heavy Reading (www.heavyreading.com

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