Chambers: Networking's changing competitive landscape

In the second instalment of an in-depth interview, John Chambers talks with John Gallant, Scot Finnie, and Editor-in-Chief Eric Knorr about the changing competitive landscape, Cisco’s datacentre strategy and its relationship with HP.

Q: You face a lot of competition in enterprise networking right now. What are you doing to stay ahead of these companies?

John Chambers: We don't focus on the competition. We focus purely on market transitions. Did you get them right or wrong? Now, you can argue whether that's right or wrong? My view is that if you focus on competition, you're looking out the rearview mirror. I'm a West Virginian. You look out the rearview mirror too long, you're off the road. So, philosophically we focus on market transitions.

Second, if you haven't got really good competitors, you're in the wrong market. The good news is we've got a lot of really good competitors. But the fascinating part is who are my competitors versus Flip? Apple, Sony. Who are my competitors in security? Symantec. Who are my competitors in routing? Alcatel-Lucent, Huawei, Juniper. Who are our competitors in switching? A different set of competitors. Who are our competitors in data center virtualization? Another set of competitors. Who are our competitors in wireless? Ericsson, Siemens. Who are our competitors in terms of set-top TV boxes? Motorola.

Now, you know where I'm headed. We do them all. And we believe they are architecturally tied together across consumer, enterprise and service provider. If we're right on that strategy, it's hard [for the others] to move with the speed needed. If we're also right on our business model strategy [we can].

I'm command and control. I love it. Turn right. Sixty-seven thousand people turn right. Tremendous speed. But, that is only if you're going to do one or two products. If you're going to try to even think about what we've described, you've got to do counsels and boards. That's hard to replicate. You've got to use your own technology, this collaboration technology. So doing it ourselves and driving the products at the same time we use them, that gives us tremendous speed.

Q: What are the advantages of the councils and boards? On the face of it, that structure seems overly bureaucratic.

JC Any good CIO would tell you that if all you do is automate what you've already got, you get very little productivity. The hardest part is not the technology, it's the process change and it's the cultural change to really get productivity. We moved into councils and boards out of necessity. In 2001, we learned our lessons. I went into [the downturn] a two product company -- routers and switches, some good services. Our new advanced technologies were four to five years out, we didn't go into it with as much cash, didn't go into it with as much flexibility. This time we went into the slowdown with $28 billion dollars and are coming out of it with $40 billion dollars [in cash]. We went into it with 30 market adjacencies, a different organization structure, different business models. We cleared our decks very quickly at the front end of it, then turned the aircraft carrier into the wind and launched. We've never been more aggressive in our history.

Q: So this organizational structure enables you to launch products more quickly?

JC: MIt's a way to launch more products, but [it's more about] movements in new markets because, remember, I'm not a product company. I don't sell standalone products. We sell an architecture that ties routers and switches and security and wireless. I don't go into markets where you don't tie back to the vision.

But I didn't answer the question that you asked at the beginning. Is this a more effective way of managing? The answer is yes. Each one of these [teams] that are formed has to have one person from each functional group that can speak for the whole functional group. So, whoever represents sales has to speak for all of sales. Whoever represents engineering has to speak for all of engineering. Legal, IT, supply, demand, manufacturing, the same. It's a way of balancing exactly what I do at the Operating Committee level. It took us almost seven years to get this technique down. But now, I can come up with a new idea -- the smart grids we talked about earlier or a commitment to virtual desktops or a commitment to virtualization in the data center -- and I can take any two of my leads, they form their councils and boards. I review their vision, differentiation, strategy and execution. And they can be [presenting] to my board of directors in two months. That would have taken me two years before, if I could have done it, and it would all be Senior VP's.

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