Adapting to Shifting Markets

I've always wondered how large companies perceived disruptive new entrants, how they understood the need to make a leap to new technologies and how they made changes to their company structure to keep up with the market shift.

Cisco, in particular, has dealt with this in a very systematic manner, they have been astute in understanding customer needs which is evident from the fact that they have keenly observed the kind of problems their customers were facing and also the potential solutions they were looking at. This gives a very clear idea of where the company should be investing because they are directly addressing the problems faced by their customers and not shooting into the dark. The added benefit is that Cisco was carefully eliminating the chances that the customer chooses a substitute product thereby building a loyal customer base.

The above seems like a very good way to deal with changing technology but it comes at a cost. It has been implicitly mentioned in the reading 'Why Good Companies Fail to Thrive in Fast-Moving Industries' that customers sometimes do not know what they want when you ask them, you need to be careful about the investments you make and always following an aggressive policy can lead to disasters. 

 Coming back to how Cisco dealt adapted with this, they believed in three ways:

1. Develop the new technology in their traditional R&D process:

This is probably the safest way to do it because they already allocate 15% of their revenue on it and they have in-house Entrepreneurs and experts who can make it happen on the regular payroll.

2. Make an acquisition:

Sometimes, it might not be economically feasible to invest time and money into building a product that some other startup has been building for years. This is the time to make a call on acquiring the startup, this is the easiest (maybe expensive) way to acquire the technology.

3. Spin-in:

This is an interesting way of emulating the startup culture with a group of engineers from within a company. This can lead to really good results as this startup essentially will have huge funding from the parent company (Cisco in this case) and also has the agility to make decisions and stay ahead of the curve. 

It will be interesting to see how Cisco will deal with the slow decline they are facing now.