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June 17, 2015updated 22 Sep 2016 1:30pm

John Chambers, Cisco CEO: Why I’m stepping down

UK exclusive: Outgoing Cisco leader talks candidly about his successes, failures and expectations for the future.

By Alexander Sword

John Chambers led Cisco through the ‘perfect storms’ of the advent of the internet, the dot-com bubble and the 2008 financial crisis. Now, just as the next big trend is kicking off, he’s stepping down. In a UK exclusive, Chambers spoke with CBRonline.com.

Chambers reveals:

Why he’s stepping down as CEO now

"That’s the time you make the transition, as you get to the inflection point."

– What makes a great leader

"Innovation and leadership is about a company’s ability to reinvent themselves, reinvent their leadership team and to reinvent their CEO."

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"Great companies like Nortel, Lucent, Alcatel, Siemens…are a shadow of what they were before."

-Where he’s putting his money in the future

"Every industry will become Uber-like."

– How Cisco will win in China

"The progress is going the right way in China in terms of the overall direction."

– Which emerging markets to watch

"If I were betting on emerging markets now, I’d probably say bet on India first and Mexico second."

– His role as Chairman

"We studied why most high-tech transitions don’t work; it’s where the chairman stays around and helps the CEO too much."

– Upsetting the telcos

"It wasn’t just voice that will commoditise and be free. Data transport will commoditise and be free…"

– His predictions for the future

"Did I have doubts 20 years ago about the role of the internet, or today about the next generation of the internet being around digitisation? I have no doubts."

 

Chambers on why he’s stepping down now

John Chambers was asked whether he regrets stepping down now – at a time when, by his own admission, the trends he is most excited about are set to accelerate?

"The first generation of the internet brought the world closer together, changed the way we lived, worked, learned and played and gave every citizen of the world a chance to participate in the economic future. This next generation of the internet, this digitisation world, connecting five hundred billion devices will have five to ten times the impact the first generation of the internet did.

"So we are at one of the most exciting times and what Cisco’s done very successfully over the years is see when these inflection points would come and get ahead of them three, five, seven years ahead, such as the internet of everything, such as the transition towards security, such as architectures, such as convergence.

"We are at the key inflection point and I knew literally three years ago that I would take us out of the question at that time and position us very well for the future. Then you needed a new generation that would be willing to make a minimum commitment of three years, probably five to ten, if they do as good a job as I’d expect to take the company to the next level.

"That’s the time you make the transition, as you get to the inflection point. Are we at the most exciting time in the history of our company? Probably. Do we have a chance to become the number one IT company? A very good chance. In terms of our critics in the marketplace, we have none.

"I have zero regrets [about stepping down] and I’m so excited about our family. Chuck [Robbins, incoming CEO] and I trust each other completely and I will transfer that baton to him and be a great strategic advisor and I’ll work about half time. If you work full-time you probably get in his way too much. This way I’ll be his partner."

 

Chambers on leadership

There are now very few CEOs in the tech industry that have led their companies for the same length of time as Chambers. Microsoft’s eccentric Steve Ballmer retired in early 2014 and left the board later that year, while Larry Ellison of Oracle left the CEO role in September. Reflecting on this, Chambers commented:

"I think innovation and leadership has nothing to do with age. Innovation and leadership is about a company’s ability to reinvent themselves, reinvent their leadership team and to reinvent their CEO. We’ve shown the capability to have done that over the last twenty years, I would argue, more effectively than any other company in the high-tech industry, and we’ll make this seamless transition between Chuck and myself the example of how high-tech transitions should occur.

"First of all, most companies almost never stay on top for more than ten years. All of our competitors from fifteen to twenty years ago are gone, and from ten to fifteen years ago, [there’s] only one left…from five to ten years ago, great companies like Nortel, Lucent, Alcatel, Siemens, are a shadow of what they were before. Companies that two years ago were together – you were worried about an HP, VMware, Arista, other players, an Alcatel-Lucent that was gaining momentum – we’ve pulled away from them again. So if you watch, leadership is not about a generation. Leadership is about reinventing your company as market transitions occur.

"I would argue that we’re a role model for that and you’ll see if we do the CEO transition as smoothly as most people feel we’ve done today. If you look at CEO transitions, it was very well understood, it was very transparent and done with classic Cisco crispness in approach. So I think great leaders know how to reinvent their company, their leadership team and themselves on a regular basis. That’s true whether you look back ten years ago, which Cisco probably do better than anybody else – we left our peers behind, and it’s what we’re going to be able to do going forward."

 

Read about Chambers’s mistakes as leader on page 2.

Chambers on doubts and mistakes

Chambers clearly places a lot of stock in a company’s ability to weather transitions. Did he ever have any doubts about where these transitions would come from?

"The role of the internet did evolve to where we said, and it probably will again with this digitisation. Did I have doubts 20 years ago about the role of the internet, or today about the next generation of the internet being around digitisation? I have no doubts.

"However there are going to be lots of transitions along the way. I’ve probably reinvented myself five maybe six times as a leader, and so when a transition occurs that’s when we go. We were an enterprise company and we moved into small business. We were in enterprise and small commercial business and we moved into public sector, we moved in as a service provider.

"We saw data, voice and video combining and we moved into telephony and became the number one telephony player, when many of the strong telephony players said we couldn’t spell telephony – might have been true, we now have 65 percent market share.

"As a leader I’ve had to reinvent myself and I’d argue our company maybe five or six times, and Chuck will do it again over time. Companies and countries and cities that are going to really lead have to have the confidence to change. Are you always sure of the results? No. If you are you’re over-confident. But once you get the trends right then you’ve got to have to courage to go and stick behind those.

"So at any time did I believe that I lost confidence in my ability to lead the company? No. Do you get questioned during the tough times? But during the tough times I had already made my bets."

"I have no hesitation about buying 177 companies and a couple dozen of them not working out. If my worst criticism is Flip, which was a $600 million acquisition, and we did 20 acquisitions much larger than that. You’ve got to have the courage as a leader to create a culture where people take risk and are periodically not successful, that’s what makes your children stronger and that’s what makes your company stronger."

 

Chambers on the future of telecoms

As CEO, Chambers famously (or infamously) made the prediction in 1999 that voice services would eventually become free, as they have done. CBR asked if he had any similarly shocking predictions to make about today’s landscape:

"The fun part is that we predicted almost all of these moves. Voice will be free is just the one I wished I’d worded differently because I upset every service provider customer in the world…
What the concept was there was the second bullet [in the keynote] on my why companies fail: you do the right thing too long.

"It wasn’t just voice that will commoditise and be free. Data transport will commoditise and be free and then video will commoditise and be free. If you’re not constantly moving ahead of these trends you do get left behind, so you’re doing the right thing too long. What we’ve done is nail the convergence issue, first data to the internet and then voice to the internet and then video and we’ve nailed the convergence issues with convergence and technology in the data centre compute storage network.

"That’s why in a market that’s growing two percent we grew last quarter at 30 percent in that segment. Our ability to get these trends right by listening is pretty good. So if you were to say where to bet now, I’d bet heavily on digitisation on the companies that learn to reinvent themselves and the countries that do. If I were betting on emerging markets now, I’d probably say bet on India first and Mexico second.

"But I think people don’t understand: it’s way beyond just connecting 500 billion devices, it will change your healthcare, it will probably solve many of the health issues today that are more difficult to solve. It will create a much more level playing field on a global basis; you don’t have to be in a given country or a given city to participate as the market goes forward."

 

Read about Chambers’s vision of the future on page 3.

Chambers on China and the tech giants of the future

The world that Robbins leads the company through as CEO will be radically different to the one in which Chambers assumed the mantle in 1995. There will be, he says, new giants in the tech world, since at a government level the US is no longer leading in digital transformation.

"Countries’ futures are based on four or five elements. It starts with an education system, it starts with a country that’s willing to build out infrastructure for the future…it starts with a country that knows how to catch market transitions and bring innovation to their country and all their citizens. It starts with a country that government can work together in a very cooperative way and create this environment and the coordination between all the groups coming together."

"As any major technology change occurs, and you saw the same thing as we moved from an economy that was horse-driven to automotive-driven, the people who delivered horse-shoes and stables evolved into those who built the system for automotives. I think it’s the responsibility of the governments to train the workforce for where the jobs are going to be rather than where the jobs have been."

One of the countries that is taking an active approach to its digital transformation is China. Cisco’s latest quarterly results, however, caused Chambers to comment that China was holding back Cisco’s growth in the Asia-Pacific region. CBR asked when he thought this might change and why.

"First, I’m a huge believer in China. I’ve been in China for almost 35 years. I did the first joint venture in China with Wang Laboratories. Dr. Wang was Jiang Zemin’s classmate, the prior president, so when I went to China I had access to all segments.

"The Chinese reinvent themselves remarkably effectively; they’re on their twelfth five year plan, it’s very well thought out. It’s a company that understands business and a company in transformation and if the meeting between our two presidents goes well here in the fall, I think you will see our joint cooperation and business pick right back up. If it doesn’t go well it won’t. But the progress is going the right way in China in terms of the overall direction."

 

Chambers on industry transformation

What of the non-tech companies in this new landscape? CBR asked Chambers what advice he would give to leaders outside his own industry.

"First, you need to move your company to a digital company period. Second is the technology will actually be the easier part, although I would argue with Cisco as your partner you raise your probability of success. The third will be that you have to organise differently and motivate people and you’ve got to break down the silos that exist in your company, and you’ve got to change your process as you do this.

"Every industry will become Uber-like. Uber increased the traffic in terms of traditional quote taxi rides fivefold in San Francisco. They didn’t replace taxis, they changed the industry. Every industry will have, as Jimmy Dimon said, Silicon Valley is coming, and you can either participate and get ahead or you get left behind. I feel with leaders the fear of getting behind, ie failing, is stronger than even the positive about here’s what happens when you go well."

 

Chambers on being chairman

Of course, going forward it will no longer be Chambers who has to make these decisions; it will be Robbins, with Chambers continuing as chairman. He commented on what his own take on the chairman role would look like:

"We studied why most high-tech transitions don’t work; it’s where the chairman stays around and helps the CEO too much. I wasn’t going to do that.

"One of the things that we think is very important to know is that Chuck will be the leader, period. But as executive chairman I will focus on being a strategic advisor to Chuck. He will ask me to take certain roles such as country transformation. I’ll probably take a fair amount of those.

"[I will also be involved in] key industry relationships for acquisitions with common customers. That’s what I enjoy most, that’s what’s fun about being a grandparent now to my company, but it’s also where I can be very effective as Chuck’s wingman. But understand he will be the CEO.

"It’s a working chairman role, and it’s about half time although Chuck is trying to push me up to 60 percent; there are more opportunities we can go after, I’m pretty good at the execution side and he needs to make the decisions about what he wants to do or not. You’ll find that we will execute together very effectively, we’ll make a great team but he’ll be the leader."

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