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© 2006 Cisco Systems, Inc. All rights reserved. Cisco Confidential13020_10_2006_c6 1

Chris BeveridgeSenior Manager, Thought Leadership Research, Corporate PositioningCisco

Collaboration: Inside Cisco’s Cultural Transformationto a Collaborative Management Model and a Platform for Innovation


Inside Cisco’s Cultural Transformation

Process

Technology

Culture

Discussion Topics

Why Collaboration?

• Collaboration Drives Productivity

Cisco’s Journey

• Collaborative Management Model

• Cisco’s Platform for Innovation


This is a

StoryProductivity

Resources/Assets

Revenue & Net IncomeGrowth

Presenter

Presentation Notes

Focusing on a shift from execution to strategy / architectures, redefining operational review cadence to align the business, enable timely decisions and make course corrections… Portfolio and financial “pulse of business” review (monthly) Technology strategy and major initiative decisions review (quarterly) Tech trends/key market transitions for ”blue sky” discussions (semi-annual)


Why Collaboration? Productivity Redefined

• Economies of Scale

• Global Reach

• Global Brand

Operational Excellence

• Decentralized Decision Making

• Speed, Creativity Closest to Customer

• Motivated Workforce

Innovation

AND

Agility of a Small Organization

Economic Benefits of a Large Enterprise

Presenter

Presentation Notes

Answers the CEO Conundrum


Where this

BeginsStory $1 OPEX =

Revenue

NetIncome

Market ShareLeadership

1997-2001

$2.06

$.18

2Categories

Presenter

Presentation Notes

Focusing on a shift from execution to strategy / architectures, redefining operational review cadence to align the business, enable timely decisions and make course corrections… Portfolio and financial “pulse of business” review (monthly) Technology strategy and major initiative decisions review (quarterly) Tech trends/key market transitions for ”blue sky” discussions (semi-annual)


Why Collaboration?Productivity Gains

Process

Technology

Culture

$1 OPEX =

Revenue

NetIncome

Market ShareLeadership

1997-2001 2002-2009

$2.06 $2.42

$.18 $.46

2Categories

9Categories


Cisco’s JourneyCisco’s Cultural Transformation

DecisionMakingOpaque Transparent

LeadershipPassive-Aggressive Authentic

AccountabilitySiloed Shared

Culture of Competition

Culture of Shared Goals

From… …To

01 02 03 04 05 06FY00 07 08 09 FY10

ResourcesVertical Alignment

PortfolioManagement


Why Collaboration?Productivity Gains Cisco’s Market Adjacencies

FY07 2 Adjacencies FY08 20 Adjacencies

FY10 30 Adjacencies

10X (FY08)

15X (FY10)

Executive Participation on Councils/Boards FY07 100 ExecutivesFY08 500 Executives

FY10 750 Executives

5X (FY08)

7.5X (FY10)

FY07 60 DaysFY08 60 Days

FY10 55 Days1X

No Increase in Sr. Executive Time

Presenter

Presentation Notes

Cisco’s Councils and Boards are enabling our ability to do more faster. Cisco’s senior executive team spends 60 days each year in meetings planning and reviewing our priorities. With our previous command & control structure, were able to focus on only two priorities at a time. With our new model, we have increased the number more than 14 fold with no increase in the amount of time that executive’s spend together in strategic planning. And participating in developing and driving our strategy has been expanded out from roughly 100 executives to about 750… and growing. With the goal of involving at least 1500 leaders.


Faster, Better, “Stickier” Decisions

Passive Aggressiveness

Why Collaboration?Productivity Gains

November 2008 - January 2009

$500 Million Re-Alignedto FY09 Priorities

90 Days

February 2008 - August 2008

$500 Million Re-Alignedto FY08/09 Priorities

180 Days

Fiscal Year 2009

$1.5 Billion Cut from Cisco’s Run Rate

180 Days

Cisco Confidential, September 2009

2-4 Years

12-18 Months 5+ Years

STRATEGY

EXECUTION

VISION

Be the world’s most effective company at bothinnovation and operational excellence –enabled by the network.

Align Cisco’s collaboration business model, organizational structure and culture of shared goals into a network architecture for speed, scale, flexibility and replicability

FY10-11Alignment and Accountability

Cisco Collaborative Management Model

End Result:“Best in the World”at creating value


The Cisco Collaborative Management Model

2 Organizational Model …Councils/Boards

1Collaborative Business Model

…VSE Common Vocabulary

3 Culture of Shared Goals ….Market Adjacencies


EXECUTION

How Cisco’s Value Proposition Evolves Over 3-5 Years

VISIONSTRATEGY

Cisco’s Common Vocabularyfor Decision-Making

How Cisco Sustains Differentiation

How Cisco Measures Success


Cisco’s Common Vocabulary for Decision-Making

V

E

S

• List of critical initiatives, programs or actions in support of Strategic Priority X (above) and how you are measuring success.

• …• …• …

Cisco’s Value Proposition to Customers

Strategic Priority X(e.g., grow or improve

competitive advantage)

Strategic Priority Y(e.g., grow or improve

productivity)Strategic Priority Z

(e.g., drive growth)

How Your Council, Board, Function or Work Group Sustains Differentiation

• List of critical initiatives, programs or actions in support of Strategic Priority Y (above) and how you are measuring success.

• …• …• …

• List of critical initiatives, programs or actions in support of Strategic Priority Z (above) and how you are measuring success.

• …• …• …

Initiatives, Programs or Actions in Support of Each Strategic Priorityand How you are Measuring the Success of Each Initiative

Are We on the Same Page?

Are Our Resources Creating Sustainable Differentiation?

Who is Responsible for Success?


VisionAgreement

Market Transition

ExecutionAccountability

Results

StrategyAlignment

Sustainable Differentiation

Aug09

Oct08MediaAug

08Time-WarnerPartnershipEOS Platform

Oct08

Nov09

Internet Routersin Space

Oct08

Launch of firstsatellite router

Data, Voice, Videobetween satellites

Smart GridSept08

Jan09

Apr09

Florida Power &Light/GE

End-to-End Grid Communication & Control System

Impact of Transparent Decision-Making

Data Center/Virtualization

May08

Dec08

Unified ComputingSystem/Vmware/EMC

Realignment of Resources / Unified Computing

Mar09

Apr09

Feb 09

Smart + Connected Communities

Aug08

Gale International/Songdo IBD

Blueprint Announced

ConsumerNov08

Dec08 Pure Digital AcquisitionTransform Product

ExperiencesMar09

Sports & Entertainment

Sept07

July08

StadiumVision Wins:Yankees/Cowboys

IP-enabled SportsBusiness Model

Nov09

Speed of Innovation:~ One Year from Vision to Execution


Organizational ModelCouncils/Boards

Speed, Scale, Flexibility, Replicability

2001–2005Councils

2006-2008Councils / Boards

2008-10+Councils/Boards/Working Groups

1 Per Year 2 Per Year 30+ … Enterprise Service ProviderCommercial BPOC(Business Process Operations Council)

Emerging Markets Services Model

Dynamic portfolio evolves as market transitions affect our customers; no longer tied to the fiscal year.

Cisco Confidential, September 2009

Ent Comm SP Small Cons

Emerging Solutions Council

Connected Architecture Council

Connected Business Operations Council

Emerging Countries Council

OperatingCommittee

5 Segment CouncilsCustomer Intimacy

Innovation

Operational Excellence

4 Cross-Segment Councils

Organizational ModelCouncils/Boards

Presenter

Presentation Notes

Cisco’s Corporate Council structure is compromised of five segment councils and four cross-segment councils. The Segment Councils are: Service Provider, Enterprise, Commercial, Small Business and Consumer. Segment Councils are focused on building Cisco’s relevancy with customers. The Cross Segment Councils focused on innovation and operational excellence are: Emerging Solutions, Connected Architecture, Emerging Countries and CBOC This increased alignment in our council model will accelerate growth in both market adjacencies and customer segments.


Organizational ModelCouncils/Boards – Leadership

51% of the Vote

Functional RepresentationAll key functions

participate

Must be able to speak for their

function

Leaders Members

Cross-functional Leadership

2 or more EVPs/SVPsrepresenting CDO, Sales, Services and/or Marketing

Horizontal Thinking


Culture of Shared GoalsMarket Adjacencies

Customers asked us to distinguish between internal and external market adjacencies…

Adjacency Taxonomy

NewMarkets

New Categories

The main focus is a product, system, solution or architectural play.

The main focus is a customer segment and/or a geographic region or country.

Definition

TransformCisco

The main focus is to drive transformational change to the way Cisco does business or to Cisco’s culture.

Exte

rnal

focu

sIn

tern

al fo

cus


Phase 5Phase 4Phase 3Phase 2Phase 1

THE

CH

ASM

Rev

enue

Gro

wth

Fully Managed Jointly Managed Monitor

Cisco’s Collaborative Management ModelMeasuring Shared Goals

Presenter

Presentation Notes

CPAD is used to manage identified Cisco Corporate Priorities in their early life cycle. As a Priority moves through the phases, Revenue Growth increases to a plateau as the market matures. Priorities are completely managed by the CPAD process through Phase 3. In phase 4, priority management begins to shift to Cisco’s traditional fiscal planning process and the functions. The CPAD Steering Committee jointly manages this phase to ensure that this transition is smooth and that the priority gets due attention. In phase 5, the priority is fully managed by the Cisco traditional planning process. The CPAD Steering Committee monitors the progress of Priorities for additional learnings that may be applied in the first four phases of the CPAD process.


Rev

enue

Gro

wth

Fully Managed Jointly Managed Monitor

THE

CH

ASM

New Categories

Phases Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

Collaboration UC/Webex/TP

IP-NGN 2.0

Consumer

Advertising Advertising ExchangeBorderless NtwksCloud/XaaSIRIS Virtual HealthcareMedia SolutionsManaged ServicesIncubationSolutions/NBMSmart Connected CommunitiesSmartGridSafety & Security

Brasil/Russia/Saudi Arabia

Mexico 3.0

India 3.0

China 3.0

VideoVirtualization/Data CenterSports and EntertainmentSP Managed Services/DCMobility

SmallBusiness

Cisco’s Collaborative Management ModelPortfolio Management

NewMarkets


Phase 5Phase 4Phase 3Phase 2Phase 1

Portfolio Management:Video Example

Jointly Managed Monitor

ConsumerVideo

Medianet

ConsumerTelePresence

Rev

enue

Gro

wth

Service ProviderVideo

ConsumerVideo

DesktopVideo

EnterpriseVideo

Medianet

THE

CH

ASM

TelePresenceas a Service

SP VideoMedianet

Fully Managed

TelePresenceEnterprise

IP VideoSurveillance

DigitalSignage

Presenter

Presentation Notes

Some Priorities are more complex than others and are made of up several opportunities. These opportunities may be in different phases of CPAD. For example, Cisco set-top boxes are considered part of the Video Priority. This is a well establish business area for Cisco. Newer opportunities within the Video Priority, such as Consumer TelePresence, are still only in Phase 1. Managing all of the components together provides a holistic view into the progress of the Priority.


networkthe

as theplatform

Platform Innovation

Data

Mobility

Voic

e Video

Data

MobilityVo

ice Video

Data

Mobility

Voic

e Video

Data

Mobility

Voic

e Video

Data

Mobility Voice

Video

Enterprise ServiceProvider

Small Commercial

Data

Mobility

Voic

e Video

Consumer

Information

Freedom Communications

Entertainment

Presenter

Presentation Notes

As market transitions evolve, so does our product line and product offerings – all to best meet customer needs. Over time, Cisco has evolved from Enterprise and Service Provider solutions to addressing customer needs in many other segments including Small, Consumer and Commercial. The network has truly become the platform for providing one seamless, transparent customer experience. Enhancing life experiences and capabilities in Information, Freedom of use, Communications and Entertainment. As a result, Cisco and Cisco technology is changing the way we work, live, play and learn.


InternalInnovation

Engineers

20,000+R&D Investment

Annually

$4.5B+

Major Labs Worldwide

30+PatentsIssued

5000+

Patents Filed Annually

700+Build

Presenter

Presentation Notes

At Cisco, innovation is a key driver of productivity. The company uses both innovative internal development and acquisitions to improve its innovative edge. Cisco develops most of its products internally, using a deep pool of global engineering talent. With one of the largest research and development budgets of any technology firm, Cisco invests heavily to enable its 16,000+ engineers to develop not only new products, but new technologies as well. Recognizing that smaller companies can often develop new and innovative technologies, John Chambers’ development strategy is “Build, Partner, Acquire.” To ensure it remains at the forefront of network technology, Cisco has acquired more than 120 innovative companies. To protect its internally developed and acquired technologies, Cisco actively pursues patents. To safeguard its intellectual property and drive innovation, Cisco files more than 700 patent applications per year. Currently, more than 4700 patents have been issued to Cisco inventors (including Scientific Atlanta), and nearly 3000 Cisco applications are pending U.S. Patent Office review.


AcquisitionStrategy

Buy

Market Acceleration

MarketExpansion

New MarketEntry

Presenter

Presentation Notes

Cisco’s acquisition strategy is best-in-world. We particularly look for acquisitions that capitalize on market disruption through new technologies and new business models Our strategy emphasizes building a market by extending the technology and business model We take a global view, pursuing acquisitions that we feel present the best opportunities for business and technology innovation coming from both established and emerging markets All acquisitions are thoroughly evaluated for both their business and technology fit We segment acquisitions into three categories – market acceleration, market expansion or new market entry. The target companies might bring different types of assets to Cisco, including great talent and technology, mature products and solutions, or new go-to-market and business models. We particularly seek acquisitions with the potential to reach $B markets. We leverage deep expertise and unique experience in our acquisition practice, having cultivated world class processes over 10+ years and 125+ acquisitions of small to larger, private and public companies With a portfolio including companies such as IronPort, Airspace, Linksys, Scientific Atlanta, and WebEx, Corporate Development has led Cisco’s expansion into new markets, resulting in more than $5 billion in additional annual revenue since 2002 Cisco’s advice on acquisition integration is frequently sought by leaders in IT and other markets Our integration process starts with the entire acquisition strategy. We look for compatibility on many levels, seeking acquisitions where there is not only a strong business case, but also a shared business and technological vision, and where compatibility of core values and culture foster an environment for success.


2000(cont)

Acquisitions

1995

1996

1997

1998

1999

1999

2001

1993 2007

1999

1994

2000

2002

2003

2004

2005

2005(cont)

2006

2008

Presenter

Presentation Notes

127 acquisitions since 1993, when we started recording them. (As of 3/17/08, per Delphine Lemaitre and Angela Moncrief.) Cisco’s normal practice is to integrate an acquired technology with our product line, doing substantial development work in-house to produce products much more interesting than the initial acquired technology. Often, acquisitions fill a specific technology void in a larger Cisco product innovation. Our acquisitions focus on either expanding our leadership in existing markets (Metreo and Audium, for example) or entering new markets (Scientific Atlanta and WebEx.) Acquisitions bring not only great products, but, more importantly, great people. Acquisitions allow us to bring people into Cisco who are innovative teams with different experience sets and different skills. The mixing of these new skills and ideas with our own areas of expertise allows us to uniquely innovate in new markets in new ways. Very few companies have the culture to accept as many varied acquisitions as Cisco. We are able and willing to look externally to find the best ideas and the best people in the industry and to make them part of the Cisco family.


Go-to-Market Strategy

Partner

Best In Class

Long-TermPartnership

MutuallyBeneficial

Presenter

Presentation Notes

Cisco understands the importance of partnering with best-in-class providers to ensure customers receive support and solutions of the highest standard. Our partnerships are based on mutual benefits and long-term commitments. We consider our partners to be an extension of Cisco

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