Is John Chambers, CEO of network equipment manufacturer Cisco Systems Inc, en route to the computer industry hall of fame? Andrew Lawrence profiles the man driving Cisco’s strategy.
When John Chambers, a former Wang and IBM sales executive, joined Cisco in 1992, it hardly seemed possible that he might one day join the ranks of the computer industry elite and become one of those individuals who not only run large, successful companies, but whose name enters general business history as an exceptional leader, and as one who has pioneered new business and technology practices. Today, 47-year-old Chambers is not quite in the line up alongside Bill Gates of Microsoft, Andy Grove of Intel or Larry Ellison of Oracle. This may be because Cisco’s share price performance, exceptional though it has been, has not yet matched that of those other giants. It may be because Chambers, a law graduate who was once diagnosed as being dyslexic, does not have the technological background to be classed as a visionary. Or it may simply be a matter of size and relative youth. Cisco’s paradigm is networking, and that adventure is only just beginning.
Cost conscious
Chambers is passionate about the importance of good strategy and of not becoming complacent. This he learnt the hard way, spending six years at deeply troubled office systems supplier Wang, where he laid-off 4,000 people. It was there that he became deeply cost conscious. Cisco executives have small offices, relatively modest salaries and limited perks, but 42% of stock is in employees’ hands. Before Wang, Chambers spent six years at IBM, where he witnessed the gradual erosion of its power. In part, he blames the decline on IBM’s failure to listen to the customer. Chambers meets thousands of customers every year; whenever he loses a big order, he calls the CEO to ask what Cisco could do better; and every night, he asks to be briefed on the problems of every big account – not by email, but by voice mail. I like to hear the emotion, he says. An added incentive for employees is that one- third of their bonuses are based on customer satisfaction surveys. This was an innovation which led to an immediate jump in satisfaction ratings. And when things go wrong, Cisco’s customer advocacy officer takes up the customer cause. Another lesson learnt from IBM: It doesn’t matter where the technology comes from. Chambers argues that the company, unlike the old IBM, is agnostic about which technology customers choose and, if big customers ask for a technology Cisco doesn’t have, it will try to acquire it. Chambers also believes there is no point in being number three or four in a market. The leaders get better margins, better opportunities, and have better resources to drive new technologies. This is an argument he has used when Cisco engineers have been told to drop projects in favor of technology bought in from outside. If you have less than 20% of the market, you can disappear very quickly.
Smooth road
Chambers describes his succession to the top job at Cisco as one of the smoothest transitions in American business leadership. This was partly because his predecessor John Morgridge had been kind enough to promise him the top job when he first took up his post, unless I messed it up. But equally, it was because they shared many of the same ideas. Chambers, along with Morgridge and chief technical officer Ed Kozel, can lay claim to the successful development and implementation of acquisition and development (A&D). This process – buying young companies purely for their technology – is now widely, but not necessarily successfully, imitated, and, with the active support of the venture capital industry, is transforming Silicon Valley business. Another Chambers/Morgridge belief is that the company should use what it sells. Cisco is a huge buyer of technology and is highly decentralized. At Cisco, Chambers is highly regarded by fellow executives. They’d walk through fire for him, James Cramer, a fund manager, told Time magazine. Job search agencies
report that very few people are willing to leave the company, in spite of modest pay rates. Those who do usually complain of too much instability, responsibility and onerous and escalating sales targets. Individuals who don’t work well with others are likely to get a rough ride – not being a team player is cause for dismissal at Cisco. In fact, Chambers likes to think of business as a team game in which the prize is to be number one, but not to win completely. If you have someone you like to compete against, you don’t want to blow them away and never play again. I love to compete.
Computer Business Review
