How Cisco Has been able to Disrupt Itself?

After reading this week’s Cisco’s CEO on Staying Ahead of Technology Shifts,¹ regarding how it was able to adapt from its early days of selling switches and routers in the 1990s to then emerging technologies—wireless, HD video conferencing, cloud computing and others—in the 2000s, I was reminded of similar efforts and strategies Cisco implemented to leverage information communication technology (ICT) as infrastructures for sustainable cities in the mid-2000s.²

The focus of this posting is to examine dominant players such as Cisco in the context of the Innovator’s Dilemma: Why Good Companies Fail to Thrive in Fast Moving Industries. For starters, unlike the long list of major companies that have historically failed due to disruptive technologies, I think Cisco has managed to survive for a few reasons.

First, in his seminal book Mr. Christensen makes the case that the root cause as to why otherwise successful companies fail, has to do with how decisions are made at these organizations and the timing of such decisions. He asserts that, “…there is something about the way decisions get made in successful organizations that sows the seeds of eventual failure.” And, he further contends that sometimes it’s ok for large organizations to invest in lower margins’ products and smaller market segments, as a way to cope with unforeseen changes in the marketplace.   

Also, I think that Mr. Christensen’s views resonate with those of Cisco’s Mr. Chambers. The latter believes that, “For Cisco, each transition required a decision about when to jump from selling a profitable product to a new technology—often one that would cannibalize our existing product line.”¹

Second, under Chamber’s leadership Cisco has been able to adapt to market changes and “stay ahead of the curve” by developing technologies in-house or by investing in R&D or by acquisition of companies of emerging and networking technologies they didn’t already have. However, growing through acquisition is nothing new for Cisco. 

So, leading to the dot-com bubble in 2001 when its value declined 86% from a market capitalization of $555 billion in 2000, it had reached that high by acquiring a number of key players in the security space, cloud services, smart grid, wireless and video and many others.² Then the introduction of initiatives such as TelePresence in 2006 and “Connected Urban Development” enabled it to further its efforts on smart cities with a focus on environmental sustainability in emerging and developed economies through its Smart+Connected Communities framework.

Now, fast forward to June 2018 regarding the merger of AT&T and Time Warner, as recently reported in the media, the traditional strategy of merger and acquisition came up.³ An WSJ article indicated that, “Mr. Whitacre [a former AT&T executive] was a deal maker, building the modern AT&T from a regional player into a supersize phone giant by gobbling up company after company. While he says there was no less pressure during his time to pursue acquisitions, there has been a shift in the way empires are built.”³

Finally, like Chamber’s notion of companies “disrupting themselves,” this WSJ article discusses the need for companies being able to reinvent themselves by exploring new lines of business—beyond their core businesses. So, Cisco’s ability to anticipating such radical shifts, has enabled it to remain a dominant player in the industries it operates.

References:

1.     Cisco’s CEO on Staying Ahead of Technology Shifts: https://hbr.org/2015/05/ciscos-ceo-on-staying-ahead-oftechnology-shifts, Harvard Business Review, May 2015, accessed June 17, 2018.

2.     Cisco’s Vision: A Smart+Connected Word, Ivey Publishing, Case Western Reserve University, December 2013.

3.     Why Companies Have the Urge to Merge: https://www.wsj.com/articles/why-companies-have-the-urge-to-merge-1529078814?mod=searchresults&page=1&pos=3&mod=article_inline, accessed June 17, 2018.