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Into the Future: Forces for Change at Cisco Systems

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Into the Future: Forces for Change at Cisco Systems

Cisco Systems was founded in 1984 by Len Bosack and Sandy Lerner, two computer scientists from Stanford University. Adapting its name from San Francisco, gateway to the Pacific Rim, the company was geared toward enabling disparate computer networks to communicate with each other and share information. Cisco has grown into the worldwide sales leader of “networking equipment and software technology for routing, switching, and fiber- and Internet Protocol (IP)-based solutions” with “more than 35,000 employees in five theaters worldwide,” covering the United States, Africa, the Non-U.S. Americas, Asia/Pacific Rim, and Europe. Cisco has been recognized by Fortune magazine as the one of the “100 Best Companies to Work For” and by Mother’s Magazine as one of the “100 Best Companies for Working Mothers.” Cisco has also been cited by Business Ethics magazine as being among the “100 Best Corporate Citizens.”

“Cisco has long led the market for Internet routers and switches, both in market share and innovation; and more recently expanded its presence into six advanced technology markets ⎯wireless, home networking, security, optical, IP telephony and storage. Combined, these core and advanced technologies comprise Cisco's vision of the Intelligent Information Network. Cisco is the number one or two player in almost every market in which it competes, and continues to deliver innovations that extend its Intelligent Information Network.”

On the occasion of Cisco System’s 20th business anniversary in 2004, John Chambers, president and chief executive officer of Cisco Systems, observed: “There are a lot of market transitions going on in the industry and it is the key to prioritize where we are going to go. It’s now about the future. The company that brought you the routers to make the Internet work 20 years ago is now innovating and allowing people to enable the power of the Internet by a factor of 100, opening up new ideas that were previously unimaginable. This is truly the end of the beginning.”
Cisco Systems focuses its technology on where the market is going ⎯ on the future. What does the future hold for Cisco Systems and other companies? A recent study conducted by The Economist Intelligence Unit and sponsored by Cisco Systems indentifies five key trends that will likely influence businesses through 2020. These trends are in the areas of globalization, demographics, atomization, personalization, and knowledge management.

In terms of globalization, emerging markets ⎯ especially India and China ⎯ will become more dominant in the world economy. Countries that are not members of the Organization for Economic Cooperation and Development (OECD) will account for more market growth than will OECD-member nations. Moreover, lower cost, lower wage economies will continue to experience a massive influx of labor-intensive production processes.
With respect to demographics, the aging population will have a significant impact on economic growth, as more products and services are targeted at that growing population segment. Mature markets will have workforces that are older and have a higher proportion of women in them. The changing racial and ethnicity demographics of the United States are likely to mitigate the impact of aging to some degree, and indeed will encourage economic growth. In Europe, however, the aging population is likely to inhibit economic growth.

Globalization and networking technologies enable atomization, wherein businesses and their processes, customers, and supply chains will fragment with overseas expansion as information is digitized and work flows to where it is best accomplished. The boundaries between different industries and business, and functions within individual businesses, will become indistinct, and consequently effective collaboration will become increasingly important. Moreover, data formats and technologies will become standardized.

Personalization of products and services will assume an increasingly prominent role in customers’ preferences and decision making. Price and quality will still matter as much as ever to customers, but personalization or customization will be added to the customers’ decision-making mix. This will affect the design and manufacturing of products, as well as relationships with customers and suppliers.

Knowledge management will become an increasingly important source of competitive advantage for businesses. Increasing attention will be focused on those business areas “where personal chemistry or creative insight matter more than rules or processes.” Moreover, improving knowledge workers’ productivity, through training, technology, and organizational change, will be a major challenge for businesses.

How is Cisco Systems positioning itself to capitalize on these trends? According to Cisco’s CEO, the company will continue to draw on it traditional strengths of making routers and switchers for electronic networks while also vigorously developing Cisco into a consumer-technology company. Chambers says, “[w]e were an enterprise company that moved into selling equipment to phone and cable companies. We went from there into selling equipment to small and medium businesses, and now we’re moving into [the] consumer” market. By combining its core strength of Internet Protocol with intelligence, Cisco is leading the transition to a network-centric technology environment by “creating a powerful communications platform that will serve as the basis for the convergence of data, voice, video and mobile communications in a secure, integrated architecture.”

Three recent acquisitions ⎯ Linksys, Scientific Atlanta, and WebEx ⎯ provide some additional clues regarding how Cisco Systems is positioning itself for the future. Cisco “extended its networking technology expertise in the enterprise and service provider markets into the high-growth consumer networking market” with the acquisition of Linksys in June 2003. Linksys has a home networking product line with over 70 products that span a variety of wired and wireless home applications including, but not limited to, sharing of digital music, photo, and video media files. “Linksys specializes in products and solutions that provide effortless and economical sharing of broadband Internet connections, files, printers, digital music, videos, photos and gaming over a wired or wireless network. These reliable, easy-to-use, world-class products are backed with award-winning technical support, setting the standard for excellence in the consumer and small business.”

Cisco’s acquisition of Scientific Atlanta in February 2006 provides entry into consumers’ homes via set-top cable TV boxes that receive television programming from cable and phone companies. The Scientific Atlanta acquisition also strengthened Cisco’s relationships with content providers. Scientific Atlanta is “a leading global provider of set-top boxes, end-to-end video distribution networks and video systems integration. The acquisition allows Cisco to offer a world class, end-to-end data, voice, video, and mobility solution for carrier networks and the digital home.”

Cisco completed acquisition of WebEx in May 2007. “WebEx's service portfolio includes technologies and services that allow companies to engage in real-time and asynchronous data conferences over the Internet as well as share web-based documents and workspaces that help improve productivity, performance and efficiency of workers in any size organization. WebEx's subscription-based services strategy has been [the] key to its success, and Cisco plans to preserve this business model going forward.”

Cisco’s John Chambers says, “Fifteen years ago we said we would change the way the world works, lives, plays and learns. Today, this company has the ability to understand and adapt to change, with a balance of leadership in four key customer segments. We have the courage to change, are setting the pace for change in our industry that’s never been seen before, and have the vision to take our customers into the future. We are truly redefining the industry, with the network becoming the platform for all communications and IT. What this really means is that we are the company that will enable all of life’s experiences, both personal and business, for the future.”

Discussion Questions
1. Describe the external forces for change that seem to be affecting Cisco Systems.
2. Describe the internal forces for change that seem to be affecting Cisco Systems.
3. Using force field analysis, explain the Cisco’s development as a business enterprise.
4. Explain the development of Cisco Systems from the perspectives of incremental change, strategic change, and transformational change.

  • SubjectBusiness
  • TopicOrganizational Behavior
  • Difficulty LevelCollege/University
  • Answer has attachmentsNo
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