revolution in san jose
continued from page 94
meet that guy!”
Chambers can afford to laugh. Despite
the stock’s decline, Cisco’s fnancial fexibility is high, thanks in part to that $26 billion cash bulge (an amount more than a few
fnancial institutions wish they had). “Not
only do we have the $26 billion,” he says,
“we now have 26 new market adjacencies
that are not relevant to our revenue today,
but they will be three to four years from
now.” And that, he says, vindicates his decision to reorganize the company.
When I ask if he is considering using the
money he has on hand to buy back Cisco
stock ($17.86 as of October 29), or bottom-fsh for acquisitions, he says brightly, “All
of the above.” And might some cash be used
to help clients (via Cisco Capital Finance,
the company’s fnancing arm)? “We know
market based. Chambers chose to redistribute the wealth: Executives are now compensated on how well the collective of businesses performs, not their own individual
product units. (Playing well with others is
also an increasingly important part of
rank-and-file employees’ performance
reviews.) There was a wall of cultural resistance for these changes, Chambers says,
and some 20% of his execs left. “Explaining
to people why we needed to change things
was the hard part.”
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.”
-_-_-_-_-_-_-_-_-_-_-_-_-_-
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
“I think that culture is really a refection
of the CEO personality.” Collaboration
works, “but only if it is what
the CEO believes.”—Ron Ricci, MG
how to handle leasing in tough times, so
it’s one variable, yes.” According to The Wall
Street Journal, Cisco financed more than
$4 billion of purchases in the last fscal
year. Its strong cash position means that it
can continue to step in should a customer
experience an unexpected credit crunch.
“In Russia, our leasing portfolio is more
than $700 million, with one small write-down for only $200,000. So it’s not just
bringing it to the market, it’s bringing it in
a way that will make money.”
He talks of the dark days of 2001 more
candidly than I expect, in no small part
because they are behind him, but also
because they led to the emergence of today’s
radically different Cisco. In the company’s
old “cowboy culture,” strong personalities
were rewarded for jostling one another out
of the way to get Chambers’s approval.
After he launched the reorganization into
boards and councils, “there were times
when everyone, even the CEO, was very
uncomfortable,” he admits. The internal
economy of the old Cisco was very much
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 ffth,
from mini computers to PC and software.
If you don’t catch them [all], you leave
your company behind.”
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 defne
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 specifc 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
134 Fast company December 2008 / January 2009
