The Marine Corps Way: Using Maneuver Warfare to Lead a Winning Organization
Cisco Systems ” the Fast Beats the Slow
Embodying CEO John Chambers s mantra, It is not the big that beats the small in the new world; it is the fast that beats the slow, [2] Cisco Systems has employed rapid tempo in product development, acquisitions, and internal operations to outpace its rivals and become the premier provider of Internet networking equipment.
Pre-Internet telecommunications equipment was generally designed to last several years or more, and products had correspondingly long sales and development cycles. Correctly anticipating the accelerating pace of technological change in the Internet age, Cisco turned to decentralized decision making to shorten these cycles from years to months and ushered high-quality products to market faster than competitors were able to. Cisco organized its product managers around market segments and gave them considerable authority to make design, budgeting, and marketing decisions based on their particular segment s needs; there was no waiting for approval from layers of bureaucracy far removed from evolving market dynamics.
In stark contrast, product introductions and changes at other telecommunications equipment companies, notably Lucent Technologies, muddled through a cumbersome product review and approval process, often resulting in multiyear product development cycles. Owing to such methodical review, Lucent and other would-be competitors fell behind as Cisco raced forward.
Although Cisco developed an estimated 70 percent of its products internally, the remainder came from acquisition; to this end the company acquired seventy-one small companies from 1990 to 2000 alone. [3] Beginning with the due diligence and decision-making process, speed was a central element in Cisco s acquisition strategy. While competitors typically approached due diligence deliberately, fumbled through multiyear integration efforts, and relied heavily on outside advisers, Cisco appointed in-house mergers and acquisitions (M&A) teams to analyze targets and complete acquisitions. These teams relied heavily on predefined frameworks and procedures with specific technical, strategic, financial, and cultural guidelines to structure their efforts and incorporate lessons learned from previous acquisitions. And immediately after transaction closings, Cisco would dedicate internal cross-functional SWAT teams to oversee the full integration of the acquired companies, a process that was generally completed in a mere 120 to 180 days.
The 1994 acquisition of Kalpana Inc., a 150-employee provider of Ethernet switching equipment, exemplifies Cisco s blistering tempo in acquisitions. IBM had been considering acquiring Kalpana for several months. But during one of the weekends that IBM was conducting, of all things, soil tests at the Kalpana site, a Cisco M&A team completed an analysis of Kalpana s strategic fit and valuation, made the decision to acquire the smaller company, and snatched it from IBM s grasp. [4]
To facilitate breakneck speed in internal operations, Cisco has embraced the power of the Internet. Systems that are closely networked together have maximized the amount of timely information that can be shared throughout the company. Digital dashboards have enabled managers to monitor all aspects of the company s operations in real time and make better-informed decisions more quickly. And Cisco s chief financial officer claimed in 2000 that the company could close the books ” reconcile and aggregate the financial statements of its far-flung global operations ”using online software system in a day . [5]
Rapid tempo has resulted in rapid growth for Cisco, whose revenues have increased from $69 million in 1990 to $19 billion in 2002.
Leadership Lessons
Cisco could very well have served as an excellent example of decentralized decision making in Chapter 8. But Cisco appears in this chapter because the company was deliberately configured to support a strategy of rapid decision making. Product development decision-making authority was positioned as close to the market segments Cisco served to maximize responsiveness to changing conditions. The company s leaders brought M&A capabilities in-house and adopted a highly structured approach to create internal expertise and facilitate rapid execution in an inherently uncertain and complex endeavor. And Cisco senior management invested in the infrastructure necessary to arm decision makers with real-time information and streamline internal operations.
[2] Dunlap, Charlotte, The Builders, Computer Reseller News , November 15, 1999, 133.
[3] www.cisco.com.
[4] Segil, Larraine, Alliances: Preemptive Alliances: The Object of Some Partnerships Is to Thwart a Competitor, Industry Week , August 21, 2000, 27.
[5] Stewart, Thomas A., Making Decisions in Real Time, Fortune , June 2000, 332.