photograph by Nigel Parry
"You won't have to depend on the CEO anymore," says Cisco's John Chambers. | photograph by Nigel Parry
One longtime Cisco employee who didn't need convincing was senior vice president Tony Bates, who runs the $12.5 billion service-provider group. "We had purchased all these companies, we didn't even know what they did," he says. Without the reorganization, he adds, "we'd still be thinking in a straight line, pure cowboy. It was an important shock to the system."
Chambers wants nothing less than a total redesign of the corporation as we know it. Starting at the top: "You won't have to depend on the CEO anymore." About those Cisco execs who left, he says he came to realize that "some people need a command-and-control environment." But that's not the way of the future: "We now have a whole pool of talent who can lead these working groups, like mini CEOs and COOs. We're growing ideas, but we're growing people as well." In fact, he says, "where I might have had two potential successors, I now have 500."
Chambers is convinced that the role of the CEO has to morph. He recalls a lesson he learned working for An Wang of Wang Laboratories, whom he has often called one of the smartest people he's ever known: "One person cannot anticipate a market transition. At Wang, we transitioned four times, but we missed the fifth, from mini computers to PC and software. If you don't catch them [all], you leave your company behind."
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I am staring at a beamed-in, life-size image of Cisco vice president Ron Ricci in one of the company's Telepresence video-conferencing suites. It is an eerie experience of Star Trekian proportions. The room Ricci is sitting in -- he is in San Jose, I am in New York -- looks exactly like the room I'm sitting in, down to the logo behind me and the wood-paneled conference table in front. (Telepresence, at $300,000 fully loaded, has become Cisco's fastest-growing product.) Except for my initial tendency to holler at his image, it really is as if we're meeting in person.
It is Ricci's job to translate Chambers's ideas into action -- as he puts it, "I'm John's scaling machine" -- and he was the chief architect with Chambers of the new quasi-socialist Cisco. They were inspired in part, Ricci says, by management guru Gary Hamel's ideas about the need to democratize strategy and distribute leadership in order to stimulate innovation. "One of the traditional ways you define power in a big corporation is by the resources you control," Ricci says. "It's one of the evil characteristics of corporations. If you control resources for your unilateral use, you can move away from the greater whole, even if you make good decisions. Now we believe it's about learning to bring resources together to the table with groups."
The boards and councils he and Chambers have created are cross-functional, interdepartmental, even international teams of executive "volunteers," who organize themselves around major initiatives or specific product lines. Ricci, for example, convened a board of self-identified sports freaks to brainstorm how Cisco might tap into the sports business. Without buy-in or even permission from Chambers, they brought in 15 people with relevant skills -- turning down an invitation to collaborate is not an option -- and built a product called StadiumVision, which allows venue owners to push video and digital content, including targeted advertising, to fans in the stadium. Ultimately, the board collaborated with sales and marketing to win contracts with the Arizona Cardinals, the New York Yankees, and the Dallas Cowboys. A multimillion-dollar business came together in less than 120 days.
Across the company, Ricci says, fiscal 2008 saw "a tenfold increase in new projects." And he points out that operating expenses have been trimmed from about 38% at the height of the tech boom to between 35% and 36% today: "We're shaving 2% to 3% of profit off of every dollar of revenue we get in."
At this year's analyst conference, Cisco introduced a network platform designed to carry secure, high-quality video and other rich media -- ultimately virtualization -- on TVs, PCs, and mobile devices. "Any screen you show me, our network can handle it," Chambers told me. MediaNet, as it's known internally, was developed, in corporate terms, practically overnight. Ninety days after the council's first meeting in December 2007, it had a strategy and $25 million in initial investment. Some 120 days later, there was a prototype and more money was allocated. The product will be available in December -- 12 months total. "This is awesome performance," Ricci asserts. "We are doing all this at the vice-president and director level. We don't need John to do this now."
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Recent Comments | 122 Total
December 2, 2008 at 4:05pm by Traci Fenton
Thanks for the great article. Cisco socialist? Nope, I think they're becoming a model of a democratic company. Can this work outside of Cisco? Yes, and it already has. Our company, WorldBlu , publishes annually The WorldBlu List of Most Democratic Workplaces, which ranges from small to Fortune 500 companies (eg: Linden Lab, Pandora, BzzAgent, DaVita, Great Harvest Bread Company, Zingerman's and more).
It would be great to have Cisco apply for our award -- and hopefully make the List, further reinforcing that this is indeed the future of work.
Traci Fenton
Founder + President
WorldBlu, Inc.
December 6, 2008 at 10:34am by Dominik Zynis
Interesting article Cisco has been trying to do the collaboration thing for quite some time now, looks like it may be paying off.
I applaud Mr. Chambers for democratizing some of the decision making at Cisco which contributes to the use of their own technologies and allows them to practice what their sales people preach. However, the author of this article did a disservice to Cisco investors by claiming that the company is becoming socialist, and given its employees false-hope. Turning a corporation into a Socialist would ultimately mean that the corporate Gini coefficient for Cisco employees would show a drastic movement at a large expense to Mr. Chamber's and other top executives' yearly earnings.
I don't think we are there yet.
December 7, 2008 at 8:20pm by Barton Friedland
It's interesting how ideas take hold and are, like things, popular, based on who uses them and how they are presented. However, both the style of the article and the photography make it more of a marketing piece than a case study. Still, as a marketing piece, it does a great job explaining why these ideas are so important. For a more in-depth view, see Margaret Wheatley's work. Ricardo Semler's Semco has used this approach for years and many of the fundamental concepts discussed are seen in lean manufacturing and agile software development processes. It is good to see these steps taking place as well as further support for these principles to become more generalized. This follows from the thesis of our paper on strategy, organization, and process: http://www.luminousgroup.net/docs/Strategy,%20Organization,%20and%20Proc...
December 10, 2008 at 6:24am by James Gilbert
OK, you got the word "socialist" into big letters to get attention, but c'mon Ms. McGirt, socialists do the opposite of what Cisco is doing: They centralize everything. So, you're either being disingenuous or naive. One wishes Mr. Obama and our Congressional leaders would learn from John Chambers, but then that would empower the American people instead of themselves.
December 13, 2008 at 7:21pm by Nicholas Pontius
Great article. This is what is meant by a Learning Organization (ie: the 5th discipline). As a leader I want to know more about the boards and councils that were frequently mentioned. How do they work, Who is responsible and how is leadership shared at these boards and councils.
January 6, 2009 at 5:58pm by William Farnsworth
I found the article well written and a compelling read but I have to agree with Mr. Gilbert’s comment. I realize that socialism is very much in vogue these days so calling a system that is clearly portrayed as free enterprise, a socialist enterprise seems to be a bait-and-switch. On the other hand, if Ms. McGirt’s article can persuade industry and the federal government to practice Cisco’s brand of “socialism” there might be hope for us yet.
January 11, 2009 at 12:59am by Mark Dust
This is not "socialism", it is a great example of Shared Leadership. We must get away from the traditional top down leadership methodology which has been followed since the early 1900's. During the industrial revolution the top down approach worked very well because usually management were the only ones with an education. The workers were largely uneducated immigrants that didn't speak English. Today's companies are largely made up of Knowledge Workers who are highly educated and can lead themselves. The only false impression in this article is that Cisco is the only company that has discovered the power of Shared Leadership and John Chambers is the "guru" of this type of leadership. Several people are publishing research on Shared Leadership. One of the foremost thinkers on shared leadership is Craig L. Pearce. He has contributed many articles and books to this field of study. Check out Shared Leadership Reframing the Hows and Whys of Leadership, Craig L. Pearce and Jay A. Conger. Another author to explore this area is Charles C. Manz. He has published around 20 books on Self and Shared Leadership.
January 26, 2009 at 5:48pm by Paula Cassin
Ellen, I would agree with a lot of the commenters here - this is clearly not an example of 'socialism'.
In a socialist model, everyone pools their efforts and are rewarded based on 'need' rather than talent or skill or contribution. This is why they tend to fall apart- individuals inevitably stop making an effort when the rewards aren't there.
I assume that the company's leaders still are being remunerated at top-dog levels much higher than the rest of the company, in line with their responsibilities. What's happened is their individual incentives have been aligned to foster innovation and partnership and keep them from competing with peers for resources. Now they are aligned directly to their company's survival and ability to evolve, rather than to their division's budget numbers or outputs.
The more interesting part is the decentralization of decision-making that's underway. I'd be interested to know how employees are remunerated or incented to work this way - are they being rewarded individually (or even as individual teams) for the success of their efforts, or is it considered part of the job to collaborate and work on a myriad of fluid projects that constantly morph.
April 4, 2009 at 9:27am by David Weigelt
The writer of this article definitely does a disservice to herself and Cisco in her characterization of Cisco as socialist. That said, this is a nice glimpse into how democratizing leadership and innovation can transform a company and reap financial rewards. David Wolfe, the author of Firms of Endearment is currently working on a new book for which he explores how corporations needs to shift from Newtonian thinking to what he calls "Organic" or "Quantum" thinking. As the owner of a small company, I would love to hear how this works for small companies and how companies that operate in this manner assure that there will be tangible outcomes at the end of the day. My friend and mentor, Mr. Wolfe, would tell me that this is very Newtonian thinking on my part. I guess that's where 70/30 ratio (Shared Leadership vs. Command and Control) comes in.
--David Weigelt, CEO of Immersion Active and Co-Author of Dot Boom: Marketing to Baby Boomers through Meaningful Online Engagement
April 13, 2009 at 8:00am by Bob Jacobson
Good article, thoughtful comments.
The "socialism" tag isn't as off-base as some commenters make it out to be. Modern socialist theory and John Chambers' theory aren't that far apart. Its dogmatic to associate socialism only with the Soviet model of state socialism or our own sad experience with corporate socialism in the financial sector. Applying Cisco's model to socialism would improve it as much as it will improve management and innovation in a corporate setting. Smart is smart in any context.
April 13, 2009 at 8:02am by Bob Jacobson
Good article, thoughtful comments.
The "socialism" tag isn't as off-base as some commenters make it out to be. Modern socialist theory and John Chambers' theory aren't that far apart. It's dogmatic to associate socialism only with the Soviet model of state socialism or our own sad experience with corporate socialism in the financial sector. Applying Cisco's model to socialism would improve it as much as it will improve management and innovation in a corporate setting. Smart is smart in any context.
August 17, 2009 at 11:35pm by Nathanial Ann
Cisco socialist? Nope, I think they're becoming a model of a democratic company.
Good article, thoughtful comments.
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August 25, 2009 at 1:25pm by pauls simes
Cisco has been doing a lot with with business voip in Atlanta and their phone systems which are replacing standard PSTN systems.
September 18, 2009 at 8:24pm by Anthony Burton
Honestly, I think he is doing a good job at running the company. Times are changing and so do the people who lead businesses. Hopefully all will go well.
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October 5, 2009 at 5:23am by Arnold Johnson
Chambers was actually voted the Most Powerful Person in Networking by Network World magazine amongst other accolades, such as the Distinguished Industry Leader Award from the IEEE and the My Boss is a Patriot award and the Above and Beyond award by the Employer Support of the Guard and Reserve (ESGR) for Cisco's exemplary treatment of employees deployed to military service. What a guy... Chris editor of alli reviews
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October 14, 2009 at 5:47am by Kaewjung Narak
Of all of the maturing tech giants that have struggled to keep investors interested in recent years (think Microsoft, Intel, Oracle, IBM), Cisco has arguably done the most impressive job of maintaining profits while building new growth opportunities. Darren editor of collectible action figures
October 17, 2009 at 11:23am by Howard Carl
An interesting take on things. I love the description of Cisco as "the plumber of the technology world". It's so apt, in a positive way. John Chambers and Cisco have clearly learned from the 2001 debacle, something many companies never recovered from. Howard the car broker.
October 28, 2009 at 8:49pm by Jim Smith
This is interesting. At least the CEO isn't making them all take illegal drugs.
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This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.
November 12, 2009 at 10:34am by terry rae
This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.
November 12, 2009 at 10:34am by terry rae
This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.
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This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.
November 12, 2009 at 10:35am by terry rae
This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.