Buoyed up by the downturn

Market transitions represent opportunities to gain market share and come out dramatically stronger, Cisco chief executive John Chambers tells Karlin Lillington

CISCO CHIEF executive John Chambers seems to like business when it is both shaken and stirred. "Cisco keys off transitions. We focus on market transitions and try to get there ahead of the competition," he says.

A global economic downturn? A great opportunity to buy companies with Cisco's massive cash reserves. A good time to lure excellent employees to a company they feel might be there for the long haul.

"Anytime there's a market transition, that's when Cisco moves. In today's environment, a number of opportunities and transitions are happening," he says, sipping a diet Coke during an interview from Cisco's Silicon Valley headquarters, staged over Cisco's telepresence room in its Dublin operation.

The telepresence room, which enables life-sized, face-to-face video-conferencing over ultra-high bandwidth connections, is used intensely within Cisco operations.

Chambers says the rooms saved the company $170 million (€108 million) on travel costs and lost productivity in its first year of use.

"I can touch twice as many customers and spend half as much time on the road," he says.

He almost seems to be enjoying the thought of a downturn. "During each of the past economic bumps, we have gained market share and come out dramatically stronger each time." This time, he says, "you'll see us come out aggressively; you can see us move on a number of fronts rather than just one or two."

He adds: "The definition of innovation in the future is, how you do it yourself, how you partner, and how you acquire. We'll do all of those."

With an acquisition appetite similar to Oracle, Cisco has picked up 130 companies already. "We're pretty good at acquisitions," says Chambers. "You'll see us acquire companies in all aspects of our business, from home to the data centre. Partnering is actually harder to do."

He also clearly enjoys applying the concept of "disruption" to his own company. "I'm pretty radical in how I think the company is going to evolve. It will function as a matrix implementation enabled by collaboration between councils and boards."

Chambers now presides over 22 councils and boards that run the company, rather than holding power amongst a small group of executives at the very top. "What you're seeing us move into is a company run by councils and boards where each has to speak for the area they cover," he explains.

"It's only when we started using Web 2.0 [online social networking and collaborative technologies] that it really took off. Actually, teams make better choices than the top five or six people."

But for some in senior management, that type of radical change was too much.

"We had breakage of about 15 to 20 per cent of those who couldn't make this transition," he acknowledges. Implementing the technology has been the easy part - managing people is much harder, he says. But he thinks that Web 2.0 technologies will be at the centre of the next generation of management because they drive efficiency and productivity.

"Within Cisco, we've been using collaboration aggressively since 2001. I think you're about to see the next decade driven by 2.0 technologies and collaborations, driven by consumer uptake."

Consumers rapidly opted for social networking and collaborative technologies, he notes, but it took until 2004 for business to really get its head around Web 2.0. How does Cisco manage what can seem a frighteningly unruly and unregulated set of technologies?

"We put a process in behind them. We add a lot of discipline and process, which allows us to move with speed and scale."

Examples of Cisco's uptake of such technologies include using wikis to harness employee and customer ideas, sorting and evaluating them using 2.0 technologies ("we have a process for implementation of an idea that is even faster than I can fund it"), discussing them using WebEx collaboration technologies (a $3.2 billion Cisco acquisition last year), and choosing finalists through interviews in its telepresence rooms.

Chambers describes threats to public confidence in Web 2.0 collaboration technologies, such as the recent court decision requiring Google to hand over detailed records about users of its YouTube video site, as just "bumps" on the road to widespread adoption.

Young people are particularly willing to make use of such technologies. "Governments around the world will learn over time to balance the hurdles," he says.

He loves the growing interest in virtual worlds like Second Life and the possibilities for doing business through them. "I love it because it loads the networks," he laughs - network equipment remains a core part of Cisco's business.

On the company's Irish operations, he says the 2006 decision to base its research and development centre in Galway was taken for one reason: "We go where the best educated workforce is. That's the most important. That's found in Ireland, in Silicon Valley, in Bangalore and Shanghai [locations of other Cisco RD centres]."

In addition, Cisco likes locations where governments create a positive business environment. "That's probably where we'll be?