Wednesday, June 15, 2011

Learn how NOT to manage a blue ocean strategy from Cisco

This is a classic example of a big whale eating a young, beautiful, prosperous fish and then puking it out due to indigestion. The big whale here is Cisco Networks and the small fish is Pure Digital Technologies which created FLIP and the low-end highly portable video camera market, and was ranked by Deloitte as one of the fastest information technology companies before being bought by Cisco in 2009 for $590 million (pardon me for my bad analogy).

Cisco is a smart company. They have made a comfortable living as a solutions provider for networking infrastructure for quite some time now. On a nice sunny day, somewhere in an executive board meeting, a top B-school MBA would have come up with a brilliant idea to impress his bosses (just like we are hoping next week for our final presentation) - to enter the consumer product market. And how to get a jump start?? Simple, go shopping !! This is my hypothetical reconstruction of what might have occurred before the takeover of Pure Digital.

That was in 2009, now lets come to the present, Cisco has announced shutting down of the Flip camera product line in just two years. Our condolences to a great product that knocked camcorder market giants such as Sony, Canon, JVC on their collective ear. Clearly, Cisco lacked a clear strategy how to manage this product. Since its acquisition the product did not get any major upgrades apart from skins and an HD. Despite being a networking company, Cisco did not think of adding social network integration or a wi-fi connectivity to the product. The company is stuffed with smart product managers but they clearly lacked direction in the consumer electronics market segment.

According to me, buying FLIP was a poor decision in the first place. A company should only think of acquisitions that align to its core competency. Cisco is a service company. Buying a promising consumer electronics product and just showing up in a new market space does not look like a very thought out plan. A bigger mistake was shutting down the venture. I understand that Cisco is going through a bad phase but they could have easily afforded tweaking the product a little or even selling it.

This strategic move surely gets a B- from my side! What do you say Prof Zak ?

1 comment:

  1. references :-
    http://www.slashgear.com/why-cisco-shut-down-the-flip-business-13145992/
    http://www.theaccidentalpm.com/failure/fire-sale-–-what-happened-to-ciscos-flip-camera

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