Cisco’s John Chambers speaks to Storm Exec’s

Last night we hosted John Chambers, Executive Chairman of Cisco Systems Inc., for a dinner where he spoke with 30 of Storm Ventures portfolio company Founders and CEOs. We scheduled and planned the events months ago — before the Warriors made it to the finals and before we knew game 5 would be at home. John, for those of you who don’t know, has 4 seats mid court, 3 rows up. Because of this, we thought we would have to cancel yesterday’s dinner. But John was true to his commitment and gave up his Warrior tickets to speak to Storm’s portfolio companies. Hats off to John Chambers for showing how important it is to keep your commitments.

All of us should learn from that example. It would have been very easy for John to say that he did not realize that there would be a conflict and try to reschedule, but he did not do that. It turns out that creating trust and confidence in what you say and what you do is one of the hallmarks of John Chambers’ values and an important ingredient in his 20 years of success as the CEO of Cisco Systems.

Background

John joined Cisco Systems in 1991 after it had already had its IPO in 1990 as Sr. VP of sales and Operations, a similar post that he had held at Wang. John was promoted to Executive President a year later and became a CEO in Jan 1995. Under John’s leadership, Cisco grew from $70 million in revenue to over $46 billion in revenue. At one point in March 2000, Cisco Systems was the most valuable company on the planet with a market cap of just over $500 Billion.

John Chambers aggressively grew Cisco’s served markets from its original Routers, by going into LAN Switching, WAN Switching with a combination of acquisitions and spin-ins. Under his leadership Cisco made over 180 acquisitions and over 15 spin-ins. What is unique about Cisco’s acquisitions is that a majority worked and worked extremely well. How well you ask? Cisco is in 18 different markets and has over 40% market share in 16 of the 18 areas it does business in. The 40% market share is John’s threshold for defining success.

John, opened his talk by saying he was there to help answer any questions Storm’s CEO’s had. He did a “lightening round” where he went around the room to give everyone a chance to ask a question and he would give a quick and crisp response. We had distributed our Founders and CEOs over 4 tables and John spent 45 minutes at each table answering more in depth questions.

Advice

John said that there were 4 things every CEO should focus on

1. Vision and Strategy for the Company
2. Recruiting the Senior Management Team to execute the Strategy and deliver on the vision

3. Instilling a Culture in the company

4. Communication — Between employees and customers. John made it clear that the most important part of communication was listening

When asked if those 4 items changed over the life of a company, John said that they did not. One piece of advice John had was for each CEO to track how he/she was spending their time each day, week, and month. John said he was surprised that when he first started tracking his time he realized that most of it was not being spent on those 4 key focus areas.

Opportunity and Mistakes

John felt that it was important to focus on transitions that happen in the economy and use those transitions as opportunities to build significant market share and stockholder value. One of the early transitions that Cisco took advantage of was Routing and Switching which changed Voice and Data communications. Cisco exploited this transition extremely well and built up its revenue at the expense of Nortel, Lucent Alcatel who were the industry leaders in the 1990’s and early 2000’s.

John said that Cisco also built market share in down markets and slow growth and no growth markets.

One of the mistakes Cisco made was its acquisition of the Flip camera. Cisco was looking for applications that would consume bandwidth as that helped Cisco sell more Routers and Switches. But the mistake Cisco made was to focus on the hardware of the Flip camera and not enough on the user experience and storing videos in the cloud and sharing them. So that acquisition was a failure.

The Next Wave

The next transition John sees is the digitization of the economy which is happening now. John thinks that Countries and Societies have to recognize this transition and make the necessary investments to ensure that their citizens have good jobs. Smart Cities, with fast transit and ample and cheap bandwidth are a prerequisite. Skills training is another as job needs and tasks change rapidly.

Today, John spends a lot of his time meeting with world leaders and CEOs of large organizations trying to get them to see the changes coming and to take advantage of them. John feels that unfortunately over 405 of the large incumbents will not make the transition. He pointed out to how UBER and AirBnB had disrupted their markets.

We at Storm hope that some of our portfolio companies will be the ones that create new disruptions and become the industry leaders of the future. And with the insights and perspectives that John shared last night, we feel that our companies should be slightly better prepared to create sustainable value.