Chambers Promises a Simpler Cisco

LAS VEGAS -- Cisco Live 2011 -- After his Tuesday keynote, Cisco CEO John Chambers said he's making a mental note to not miss the next big transition in his business.

His talk had included a slide showing Cisco's major transition points so far. In 2001, at age 15, Cisco survived the dot-com bust by expanding beyond switching and routing. Now, 10 years later, Cisco is at another major transition point -- one Chambers said the company will fix by making decisions faster and becoming less bureaucratic.

"Speed of decisions is the number-one thing I want to see improved at Cisco," he'd said during the keynote.

His slide showed the next phase lasting only five years. While a small group of audience members hung out with Chambers after the keynote, Zeus Kerravala, an analyst with Yankee Group Research Inc. , asked about that time frame, and Chambers responded that he expects the next major transition to come that quickly.

He added that he intends to do a checkup on the business at around year four, to make sure he isn't caught by surprise again.

The simpler Cisco
Cisco isn't expected to detail its restructuring until after its fiscal year ends on July 31. So, Chambers didn't talk at all about the staff cuts that have been all the rage in the press. (See Report: Cisco Cuts Could Hit 10,000, Cisco May Cut 5,000 Jobs and Cisco's Early Retirements Begin.)

But he did give Cisco's customers an overview of how the company's management is changing, the goal being to create a faster organization that's easier to do business with.

Because Cisco Live is a customer event, Chambers emphasized that more sales decisions will be made closer to the customer level, rather than by faraway executives.

In the post-keynote hanging-out session, Chambers added the boards-and-councils structure hadn't necessarily outlived its usefulness but had become too bureaucratic. The number of boards and councils has already been reduced to three -- enterprise, service provider and emerging markets. (See Cisco Cuts Down on Councils.)

"The guys that run those boards will be held to greater accountability than in the old model," Kerravala told Light Reading.

Cisco is also merging some product groups, because the siloed approach that served it well in the 2000s has become too clunky, Chambers said. Too many groups emerged -- software had three major ones plus assorted skunkworks around the company. Software is being melded into one group, and something similar is happening to Cisco's other major businesses.

Table 1: Integrating Cisco
These pieces... ... Are getting combined into:
Various software groups OS group
Switching / Routing / Optical Core technology group
Voice / Social media / WebEx Communications and Collaboration team
Cable and set-top stuff Service provider group

Chambers also mentioned in his keynote that the company will integrate new technologies more quickly. Kerravala translates that to mean Cisco has to make "fewer acquisitions or bigger ones" -- probably the latter.

One topic Chambers didn't discuss was market adjacencies -- the technologies peripherally related to Cisco's business. "That to me is their biggest challenge," Kerravala says. "Last year they were talking about 30 adjacencies. I think they might streamline that down to 10."

Adjancencies are maligned nowadays, partly because no one could figure out why Cisco wanted to own the Flip camera. But they helped Cisco dig out of the dot-com crash. Five of the six advanced technologies, as Cisco called them back then, became $1 billion businesses for Cisco, Chambers said. Those include security and wireless LAN. (The sixth technology is probably optical networking.)

Kerravala thinks Cisco has to keep looking outside its normal boundaries for growth. "Enterprise drives the ship, and there aren't that many large areas of spend lift in enterprise that have the margins Cisco wants and that they don't dominate," Kerravala said.

— Craig Matsumoto, West Coast Editor, Light Reading

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paolo.franzoi 12/5/2012 | 4:57:45 PM
re: Chambers Promises a Simpler Cisco

I keep thinking you guys are missing the point to mix MEANS and ENDS.

What I keep seeing presented here about MEANS to build businesses (make good technology, have and keep good employees, build a find customer base).  The problem is that this gets mixed up with the END to return value to shareholders.

This is particularly problematic because it is how the Management team gets the entitlement culture that they use to justify their taking extra large paychecks and perks.  The CEO is an employee that works at the discretion of the BoD as representatives of the shareholders.  The Management Team led by the CEO forget that their job is to return value to the shareholders and give it to themselves and their friends.

If I use Nortel as an example, it is the shareholders that lost the money.  The employees lost jobs but at least got a salary along the way.  What did the shareholders get?  Nothing.  The top employees - like the management team - made out like bandits.

By confusing means and ends, it reduces the clarity involved in remembering that shareholder value is the goal.  Sometimes that means shuttering businesses, sometimes it means growing and investing in them.  Different businesses are in different points in their lifecycle. 

Bollocks is 100% wrong because of this.  The internal people ARE the management team.  The Management Team ARE employees.

The beauty of the Silicon Valley thing when it works right is that the employees are owners are the business and thus have interest aligned with the investors to maximize their value.  The downside is when the short term fake results become a big outcome for a few employees.  Which is the second mistake made here, which is to equate maximize shareholder value with make the stock be the most right this second.  Not all businesses are in a position to do this.



btierney 12/5/2012 | 4:57:47 PM
re: Chambers Promises a Simpler Cisco

wouldn't that be nice.

I hear internally they are positioning him as the "comeback kid"


Johnny boy, be a man and walk into the sunset...

bollocks187 12/5/2012 | 4:57:48 PM
re: Chambers Promises a Simpler Cisco

American Business Management is screwed up - thats a fact.

Most executives operate to gain as much money out of a company,  during their time.  Their motivation like politiicans is self preservation at ALL costs. They talk "team" but walk and operate as "I". They have no sense of honor or duty except to themselves. They are the "Desk officer" in HQ sending you into a hell hole, but if they get into such a  situation they would soil their pants and cry like a baby. They are the people that would call "AAA" to change a flat tire, or hire a mexican to mow the lawn. They grumble over the breakfast eggs overdone or the cold wine or warm beer etc etc.

John Chambers is perhaps a great example of a failed CEO, but very rich for his miserable efforts. He now "promises" a simpler Cisco, but has NO clue himself on what is simple. It is just another 'hollow politic' statement to wall street to allow him to reorganize, buy some time, wait fo the market to turn around - hence the recent layoffs.

Duh is spot on so is ....farfaraway. 

A business exists because the internal people want it to exist ! 


Duh! 12/5/2012 | 4:57:49 PM
re: Chambers Promises a Simpler Cisco

I shouldn't get sucked into philosophical discussions on business... but will anyway.

Businesses exist to create value through products and services.  Profit is the reward for value creation. Investors invest (as opposed to speculate) in a business because they believe that the value created by the business will be rewarded with growth in their equity and/or dividends.  Management's responsibility is to orchestrate the resources of the business to optimize value creation relative to expenses.  A board's responsibility is to provide oversight on management.   Management should be compensated proportionately to the value they create.  When their compensation is out of proportion, or rewards perverse decisions, then the board is not doing their job.  And, finally, since optimization of value creation and (especially) expense inevitably creates negative externalities, government must regulate businesses to protect other stakeholders from those externalities.

The idea that business exists to solely make a profit is a dangerous one, one that leads to all the dysfunction we see in business today.  There is a crude analogy between business' reward system and the brain's reward system:  when a substance or behavior over-stimulates the brain's reward system, to the point of obsession, we call it an addiction, and recognize that it is destructive.  I would suggest too many executives exhibit addictive behaviors.

inauniversefarfaraway 12/5/2012 | 4:57:51 PM
re: Chambers Promises a Simpler Cisco


It is a great idea for you to reconsider your life, congratulations! You have my best wishes for a more humane view of life. It is never too late!

Many of the issues you raise resemble euphemisms used by sociopaths to justify sanguine behavior disguised as something else.

We could only hope that greed could be synonymous with vested self-interest. History demonstrates that greed eventually degenerates into theft, in these times it could even be termed self-righteous theft. Lawyers and politicians can make lemonade from lemons.

The clue is that nobody wants to invest anymore because they understand the game is fixed. They give up their life savings so the same folks can buy another yacht. The confirmation that the game is fixed is the government getting into the game to float the "greedy" folks' boats.

The upside is that it is self-limiting. As we are already seeing the general trend lines where theft that is actually masquerading as "profit", "greed" and other euphemisms.

Why not repeat the crash of the robber barons and give the "greedy" folks all the money. When they have it all, it loses it's value entirely and we get to start over again. Sure, we all get to suffer as well, but that is going to happen anyway at the rate these idiots are going at.

This is the great lesson: sociopaths cannot appreciate the value of life. This is why they think of it in a strictly numeric sense, usually from a twisted sense of what is "important". The lack of a moral base has serious implications for the sociopath, they can never appreciate the intangible things that give life meaning, they simply lack that faculty. Even if they play the market and win, ultimately they fail. They just don't get why it's important to let the dog win once in a while, otherwise the dog just stops playing.

This is why companies like Nortel fail. They can play the numbers game and still come up short because they don't get it at all. That has to be the funniest thing about the folks at Nortel, they all think they were doing the "right thing". They just don't get why it is important to have (and retain) an ethics officer, for example. They see that kind of role as a "useless noise generator". Hilarious!

So you are an "outhouse" MBA? Good for you! It is too bad you measure your worth in patents, engineering degree and being an entrepreneur to beat up other people. It is too bad you appear to exhibit this need to bully people. Unfortunately, a lot of technical people compensate this way because of poor coping mechanisms. Why do you see yourself as having such low self worth that you need the "trinkets" to show your worth? You are a great human being without the junk! Love yourself man (and that is not a euphemism for go ---- yourself;-)!

One last thing, who would be affraid of being wrong? That has to be a hard life. Engineers often suffer from this disorder and it doesn't help them socially.

All the best 7!

paolo.franzoi 12/5/2012 | 4:57:51 PM
re: Chambers Promises a Simpler Cisco


Perhaps you could read what I ACTUALLY type.  Businesses are set up for investors.  That has nothing to do with the lying that goes on.  Perhaps you have missed my entire point about corporate governence.  That is why companies like Nortel fail.  They quit serving the investors and start serving the management team.  That is the fundamental issue.  The BoD is too close to the management team and thus the company is actually run by and for the management team.  What hurts society about this is that the capital of the society is invested improperly.

NONE - REPEAT - NONE of this changes my statement that in our economic system that corporations are run for the investors.  

Note:  All goverments, economies and systems are rigged - best build your new system assuming people will game it as well.  The only question is can people still live and grow reasonably within it.  I hope you grow up someday and figure out that ALL systems are corruptable and thus will be corrupted.  

And if you think Nortel was bad, check out Lucent.  Remember during the telecom collapse and they dumped their CEO.  Then they handed out multi-million dollar bonuses to the senior management as stay bonuses?  Want a more recent example?  I went out with some friends of mine who work at Tellabs...the following line came up in the conversation "Well, I got my bonus in Februrary and...."  Really?  They are handing out BONUSES given that performance (this person is a low level employee and did not cause them to get handed out).

I am shocked by what gets put up with as how companies are run.  But that changes NOTHING about why they exist.  That is also why when I want to invest in stocks, I study management teams.  If I find a good one, that is where I put my money.  When it changes, I re-evaluate my investments.  The mediocre ones do nothing and the bad ones destroy companies.


If you want to make a private charity (which in the context of what we are talking about is not relevant) go for it.  If you want to make a non-public company to do something then go for it.  If you want to make a stock (like Cisco) that sits on a public exchange, then the point is to create value for shareholders.  We have laws in place intended to ensure that this is what happens.  These laws do not work well nor are they enforced effectively.


bollocks187 12/5/2012 | 4:57:54 PM
re: Chambers Promises a Simpler Cisco


Stop trying to write a book or lecture us all - its a blog man.


bollocks187 12/5/2012 | 4:57:54 PM
re: Chambers Promises a Simpler Cisco

How about John does the right thing and simple resigns for messing up Cisco.

Now that is Change you can beleive in.


opticalwatcher 12/5/2012 | 4:57:55 PM
re: Chambers Promises a Simpler Cisco

"Business serve the interest of society by helping to create a place for investors to make money.  That is the sole purpose of a business."

Wow, I can think of a million reasons for businesses to exist. Apparently you can only think of one.

I blame the movie Wall Street which had the quote 'greed is good'. It was meant to be a criticism, but everyone took it as gospel and now everyone is spouting this 'the only reason for businesses to exist' nonsense everywhere.

inauniversefarfaraway 12/5/2012 | 4:57:57 PM
re: Chambers Promises a Simpler Cisco

Do you think you overpaid for the MBA? Would a library card be a better use of cash?

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