05_Cisco Systems

How does a huge, world-spanning business stay nimble? By distributing leadership across the company and encouraging its units to act like startups.

Cisco's three-year-old Emerging Technologies Group, for instance, has churned out eight products that are each expected to produce $1 billion in revenue. The group's global business-plan competition recently attracted 2,500 hopefuls from 104 countries—the $250,000 prize went to a team led by Anna Gossen, a computer-science graduate student from Germany, for an energy-distribution idea. Smart-grid technology is a form of routing and switching, a core competency for Cisco, notes CEO John Chambers: "It can be a $1 billion or $10 billion business for us."

How Cisco Survived Economic Downturns:

"If you watch what is occurring today, people are acting like the sky is falling," he notes. But he is not unsympathetic: "I know how tough change is on people, on their families". Cisco, he says, has learned through numerous economic downturns—he cites 1993, 1997, 2001 and 2003—that it's entirely possible to come out stronger than when you go into it. "Each time, we have gained market cap versus our peers, and customer and employee satisfaction was greater that it was going into it," he explains.

When you face an economic challenge, "Focus on what we can influence, and not over or under react to things we can not. It's a question of living in the world as it is, not the way we want it to be."

Assess the damage externally—vendors, customers, colleagues. In 2001 we went to our customers in energy, manufacturing and automotive to name a few. We asked — how are you handling this?

Ask yourself—"Is this a market driven phenomenon or did you do it to yourself? Or is it some blended version of that? Based on the answers you learn, formulate a response from there. In 2001, our strategy was working extremely well before the downturn, and it seemed to be working from the customers side, so we said it was 90/10. That turned out to be about right."

Make a determination: How long is this going to last and how deep is it going to be? "Then prepare yourself for it to be longer and deeper than you think. And then build flexibility to adjust quickly if you need to."

Then, get ready for the upturn, because there will be one. What's our vision for where this industry is going with our without us? That, he says, is a five-year look-ahead. "What is our differentiated strategy within that vision? That's, a two to four year plan. How are we going to execute in the next twelve to eighteen months?"

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