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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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.&nbsp; 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.&nbsp; Management's responsibility is to orchestrate the resources of the business to optimize value creation relative to expenses.&nbsp; A board's responsibility is to provide oversight on management.&nbsp;&nbsp; Management should be compensated proportionately to the value they create.&nbsp; When their compensation is out of proportion, or rewards perverse decisions, then the board is not doing their job.&nbsp; 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.&nbsp; There is a crude analogy between business' reward system and the brain's reward system:&nbsp; 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.&nbsp; I would suggest too many executives exhibit addictive behaviors.

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,&nbsp; during their time.&nbsp; Their motivation like politiicans is self preservation at ALL costs. They talk "team" but walk&nbsp;and operate as&nbsp;"I". They have no sense of honor or duty except to themselves. They&nbsp;are the "Desk officer" in HQ sending you into a hell hole, but&nbsp;if they get into such a&nbsp; situation&nbsp;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&nbsp;is&nbsp;perhaps a&nbsp;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&nbsp;turn around&nbsp;- hence the recent layoffs.

Duh is spot on so is ....farfaraway.&nbsp;

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


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...

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).&nbsp; 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.&nbsp; The CEO is an employee that works at the discretion of the BoD as representatives of the shareholders.&nbsp; 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.&nbsp; The employees lost jobs but at least got a salary along the way.&nbsp; What did the shareholders get?&nbsp; Nothing.&nbsp; 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.&nbsp; Sometimes that means shuttering businesses, sometimes it means growing and investing in them.&nbsp; Different businesses are in different points in their lifecycle.&nbsp;

Bollocks is 100% wrong because of this.&nbsp; The internal people ARE the management team.&nbsp; 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.&nbsp; The downside is when the short term fake results become a big outcome for a few employees.&nbsp; Which is the second mistake made here, which is to equate maximize shareholder value with make the stock be the most right this second.&nbsp; Not all businesses are in a position to do this.



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