22 different ways to run Cisco
November 26, 2008
How did Cisco go from one or two big new initiatives a year to 22 in the last one?
Most would call Cisco a bellwether for the technology sector as it is well managed and sells to businesses rather than consumers, which puts its in the front line of Mr Market‘s fluctuations. The company is now in the news for its planned New Year shutdown to help trim €1bn of costs (link). In last month’s earnings call, it announced that it is expecting Q2 2009 revenue to be down 5 to 10 percent on the previous year. Not great.
But Cisco is good at this. In the face of the 1997 Asian financial crisis, it continued to invest heavily in the afflicted economies and obtained a number one market position which it keeps to this day (source: HBR article). As John Chambers reminded listeners in that same call, “Cisco has always navigated [economic slowdowns] very effectively. We did this in 1993, 1997, 2001, 2003, and in each scenario gained both wallet share and in my opinion profit share. As a result we were better positioned coming out of these transitions versus our peers.” (link)
How will it deal this time around?
Cisco’s TelePresence and other communications technologies make collaboration easier (and have allowed it to slash travel costs by 20%). However, it is the structuring of the organisation that is most interesting.
Cisco appears to have put the onus on employees from across the company’s divisions to form ad-hoc groups to pursue new opportunities, rather than being told what to do from up-on-high. The seniority of these groups depends on the estimated size of the opportunity, but each has enough independence, authority and flexibility to move decisively. In the words of John Chambers:
“At Cisco, our major priorities are managed not by our top five or top 10 executives but instead by cross-functional, collaborative councils and boards. And, in fact, our engineering organization – which is a third of our total employee base – is not run by a single leader but instead by what we call our Development Council, which is made up of the nine senior vice presidents who lead our engineering divisions. This companywide, council-based leadership model has allowed us to move from taking on only one or two cross-functional priorities a year in the past to addressing 22 this year. We think this is what organisations of the future will look like.”
He goes on to explain how boards and councils actually work: “boards and councils are the equivalent of social-networking groups, where groups of people with relevant expertise work together to make and execute key decisions supported by networked Web 2.0 technologies. Councils are established where we believe we have a $10bn opportunity, boards are created for €1bn opportunities, and working groups are formed for more tactical initiatives related to a board or council.”
“Working groups are accountable to boards, boards to councils, and councils to the Operating Committee, which consists of two dozen or so senior leaders at Cisco. Each person on a board, council, or working group has the authority to speak on behalf of their entire organisation, allowing decisions to be made in real time, with all who may be affected in the same room.”
To push things further, there is a clear process driving these groups and keeping a consistent standard: VSE. These are three steps: 1) vision, 2) strategy and 3) execution.
“The councils and boards propose possible initiatives to the Operating Committee through highly detailed business plans that have to answer three questions: What’s the vision? What’s our strategy for sustainable differentiation? And how are we going to execute the plan over the next 12 to 18 months?”
“Each plan has an owner who makes a commitment to his or her peers and is held to that commitment and measured on his results. In fact, compensation for many of our top executives is based more on their success within the councils they belong to than their individual performance. In this way, management can consider many, many opportunities spanning the capabilities of the company, instead of just viewing them by silo or by function. This allows us to have a constructive discussions, get buy-in and execute rapidly.”
Why is this interesting?
Technology usually comes up when collaboration is discussed, but is often just a tool with little benefit in the wrong hands. Collaboration is hard, and is often implicitly discouraged by the organisation of large companies. The example of Cisco highlights how much (of the right kind of) structure it takes to get ideas flowing freely and has allowed it to run with 22 ideas at the same time. How?
- Cisco has put together a structure which makes it much easier for ideas to bubble up from its 67,000 employees. Every corner of any business (sales, marketing, R&D, support, etc…) has its own approaches, strengths and weaknesses. Formalising these cross company groups allows the different functions to collaborate and speak with one voice.
- Breaking down structures speeds up innovation and development, but can make it hard to channel. However, Cisco’s clear mantra of VSE gives each group the same benchmark against which to plan its offering and a clear plan to get it to market. This ensures they speak the same language so they can be heard within the company.
A final quote:
“To me, collaborative management means putting a lot of people who speak a common language to work towards a common goal.”
What other rules make collaboration work, and gets the results in the hands of customers?
Full article here (sadly behind pay wall).