Innovation plays integral role in Cisco’s success

John Chambers has played a key role in making Cisco one of the most profitable firms in history. (GETTY)

As chairman and chief executive of Cisco Systems, John Chambers is one of the most influential businessmen in the world. Although perhaps not a household name like Bill Gates or Richard Branson, his company’s products carry 80 per cent of all internet traffic, so our future is very much in his hands.

“The network is becoming the platform for almost all communications through IP (internet protocol),” said Chambers in an interview at Cisco’s California headquarters. Time magazine got it wrong. In 2005 it said the person of the year was ‘you’ through personalisation, but personalisation has been happening for the past seven years.

“What’s happening today is social networking – it’s about us. It’s about the power of collaboration that will drive innovation for the next decade. I have spoken to top economists from all over the world and they agree it will be about the power of ‘us’.”

Chambers words should be well heeded. Since becoming Cisco CEO in 1995, having joined as senior vice-president four years earlier, he has increased the company’s annual revenue from $1.2 billion (Dh4.4bn) to $28.5bn (Dh104.5bn) last year. That’s more than the GDP of Bahrain, Lebanon or Yemen.

Cisco’s revenues are poised to grow by a further 20 per cent in 2007, having generated revenues of $25.5bn (Dh93.45bn) in the first three quarters of this financial year. Hindsight is easy to claim, but there must be plenty who despair at failing to invest in Cisco when it went public in 1990. If you had invested a dollar in the company back then, it would be worth $150,000 today.

Chambers said: “We may become the first global company. Not an American or European or Japanese company doing business globally, but a truly global company. We are trying very hard to get there. Cisco is one of the most profitable companies in history and is listed in the top 10 most innovative companies in the world.”

Innovation has been the core of this extraordinary success and Chambers discusses the subject with a messianic zeal.

“When I talk to leaders around the world, and I talk to them all, they understand the opportunities that exist for collaboration,” he said.

“It’s moving from the old-world hierarchical approach to a blended version and then onto complete collaboration. Government leaders are beginning to understand this across the world, politically and business-wise. A lot of this is enabled by the network where you can access any content anywhere in the world from any device in what ever mode you want – video or mobile and so on. The technology is there today, but the problem is people. It’s hard to change, even me, and it’s my idea. I love command and control.”

During the course of our interview he unselfconsciously name checks some of the most powerful people on earth. These include US Secretary of State Condoleezza Rice, California governor Arnold Schwarzenegger, who both met him the same day as I did, former US Federal Reserve Chairman Alan Greenspan and an array of national leaders. They talk to him because he is rarely wrong in business and economic matters and Chambers accurately predicted that the internet would increase US productivity.

“From 1997 the US economy increased from growing at below two per cent to growing at five per cent in 2002. The exact same numbers will happen again.

His connections and Cisco’s international reach make Chambers ideally placed to comment on the world economy. Developed countries are no longer leading, emerging markets and economies are. It does not matter what emerging region you are talking about, whether it is Africa, Asia or Eastern Europe or the Middle East, the issues are the same. Government leaders and politicians understand that the best form of politics is a stable economy. A stable economy is a result of a good education system, combined with an infrastructure, which in the future will be broadband, an innovative society and a supportive government. “Most government leaders regardless of their politics are really interested in developing a strong economy. I don’t get involved in politics I have enough on my hands running my business.”

Cisco’s collaboration with state governments is reaping huge rewards for the company, with its emerging markets revenues growing by 40 per cent this year, while for the Middle East this figure is 100 per cent.

Previously a relatively unknown network provider, Cisco is fast becoming one of the world’s most recognised companies and was ranked the 18th in Business Week’s top 100 brands. At the peak of the dot com boom in 2000, Cisco was the world’s most valuable company, with a market capitalisation exceeding Dh1,830bn. Today it is worth more than Dh605bn to place it 24th on the global ranking. The widely-respected Fortune magazine has rated the company as the 11th best company to work for in America, while it also came 241st on the magazine’s top 500 global companies 2006, based on its 2005 revenues.

“If the network becomes the platform for all IT communications we suddenly have the chance to move beyond providing plumbing,” Chambers said. “We have the chance to help our customers achieve their goals, be they countries, industry verticals or individuals and we have the opportunity to change the way the world works.

“We don’t go with the old philosophy that we can be number 10 or 15 to market and become number one or two – that almost never happens. Our ability to capture these market transitions is what really separates us from our competitors,” he said.

This philosophy has seen Cisco buy out more than 120 companies. It does not undertake hostile takeovers. Cisco’s move into the consumer market was highlighted by its acquisitions of LinkSys and Scientific Atlanta in 2003 and 2005 respectively. The former provides broadband and wireless routers for home and small office networks, while the latter is a leading manufacturer of set-top TV boxes and digital video recorders.

Chambers returns time and again to the theme of innovation and how collaboration can multiply the potential for change. Cisco operates a “wiki” ideas database on which any employees can make suggestions.

“We take thousands of ideas that come in and we whittle those down to the best 250. We then do an evaluation and select the best two-dozen and then finally pick the best five to run with our new emerging technologies. It’s a replicable process of creativity with the power of us, not just two or three or four of us. We are the only company that has moved into new and emerging areas and achieved number one market share,” said Chambers.