Cisco CEO: We Were Fat
John Chambers candidly explains what went wrong and how he has restructured his company for the road ahead, by painting a target on his rivals.
2011 has been a challenging year for Cisco. The company has had to layoff staff and restructure in an effort to remain competitive in an increasingly volatile marketplace.
During Cisco's 2011 Financial Analyst Meeting on Tuesday, Cisco CEO John Chambers assured analysts that Cisco is changing. Chambers stressed that Cisco is focused on driving innovation forward and will be significantly more aggressive in going after competitors like Juniper Networks, HP and Huawei.
As to why Cisco ended up in trouble this year, Chambers provided some candid comments on what his company was doing wrong.
"We were fat," Chambers said. "We had an extra four to five inches around the waistline and that slowed decision making down and we got away from the basics.
Chambers noted that sales operations have been realigned to provide more customer contact. On the engineering front, Chambers said that Cisco had multiple engineering functions and groups competing with each others. All those groups have now been combined for operational efficiency.
"There is a very high probability that as we take these inches off our waistline we will do dramatically better," Chambers said. "We need to move from defense to offense."
Cisco's realignment is a process of simplification, according to Chambers. The realignment focuses on clear accountability and ownership of operations.
"We need to have consistency in innovation and consistency in operations," Chambers said.
In total, Chambers noted that 22,700 employees were realigned in Cisco's restructuring this year. There were 12,700 people that exited Cisco in total during 2011. Cisco announced the layoffs in July as part of an effort to eliminate $1 billion in costs.
With the realignment, Chambers said that Cisco is aiming to empower the right people within Cisco and then make sure that they are held to be very accountable. Chambers admitted that the decision making process within Cisco was working too slow.
"We had actually empowered people too far down in the organization to say no, and we did not empower people high enough to say yes," Chambers said. "Now the head of engineering and the head sales makes the decisions."
Chambers also noted that Cisco has grown on the back of its many acquisitions over the years. That said he admitted that he doesn't always get it right.
"We missed on Flip," Chambers said. "We're always going miss at least a third of our bets, but as the CEO I'd rather miss the $500 million dollar bet rather than the $3.3 billion dollar one."
Cisco acquired Pure Digital, maker of the Flip digital video camera for $590 million in March of 2009. In April of this year, Chambers pulled the plug on Flip, shutting down the division.
Chambers also told analysts that Cisco had not been as aggressive versus competitors as they now will be.
"Candidly we waited a little bit too long on this but you'll see us go after Juniper," Chambers said. "Juniper is the most vulnerable I've ever seen, they've spread themselves too thin."