Notes from our Strategy & Growth Roundtable with Cisco

By Adrian C. Ott


At one of our recent Strategy & Growth Roundtables, Steve Steinhilber, Vice President of Cisco, shared his perspectives on how Cisco fuels their innovation pipeline and how it impacts growth.

According to Steinhilber, one thing which is clear is that innovation is going to be the only long-term method of creating and sustaining value for organizations. He continued, suggesting that innovation is the engine that drives Cisco’s growth, supported and encouraged by the corporation’s culture.

The corporate culture at Cisco shifted several years ago to place focus on innovation. To explain this shift, Steinhilber asked, “What does this mean other than putting it on a badge”?

He responds by suggesting that, “for Cisco, a culture of innovation means: 

·         We bring in outside ideas.

One of the most important things we can do is to create a culture within an organization that fosters and encourages innovation.”

The Many Dimensions of Innovation

Innovation can occur anywhere within the value chain of your organization. And, it can cut across business divisions and departments.

Steinhilber offers an example of how one innovation idea can impact an entire organization. Cisco’s Network Academies, formed several years ago, offered one of the best ROIs the company has ever seen. These academies established around the world have created a series of jobs and have extracted targeted expertise from worldwide partners. Cisco offers the process for setting them up, empowering people to do what they are capable of doing.

What have these academies meant for Cisco?

These academies have created a pool of expertise around the world that will continue to fuel the growth, development and innovation the organization needs to remain competitive.

Innovation can also occur in business process.

Innovation within Cisco also occurs through the following processes and examples:

As you look across the Cisco value chain, you will see that people can create innovative ideas within any department of an organization. According to Steinhilber, “The key is to funnel it.” And Cisco does this through creating and sustaining an innovation culture.

Innovation Drives Company Growth

According to Steinhilber, there are three primary strategies of innovation growth within Cisco, “Build, Buy, and Partner”. All three innovation strategies work in partnership, creating the ongoing growth the organization is seeking.

 “Build”: Growth in New Markets-Technologies

Steinhilber stated that, “when looking at new technologies, we often don’t know exactly what customers are looking for. So, our innovation process for new technologies often follows this process:

→Appliance→ Blade→ Chip/Feature→ New H/W or S/W Technologies→

We may offer new capabilities as a standalone appliance initially. As we learn through the innovation process, we discover which features the customer is looking for and in which we could add upon, expanding through innovation. This appliance then becomes blade technologies, which are plugged into the Cisco systems. Finally, our organization looks into which technologies can be moved into chip/features. Many times our organization does not know which new innovations will successfully move through this entire process chain. But, taking the first step is the first step required to innovate.”

Steinhilber continues, “to suggest that the process above provides the framework for working through innovation with new technologies; ‘Refresh, Renew, Repeat.’ At Cisco, where we innovate and when we innovate is just as important as the dollar amount spent on innovation.”

The Cisco build process in simplest terms can be described as:

Find Ideas→ Filter →Incubate →Initiate (Business Unit Formed) →Accelerate

→Graduate or Repurpose

Overall, the frameworks utilized by Cisco offer a structure for communicating their processes to the outside investment world and to their internal employees. These frameworks take complex concepts and make them easy to follow, easy to understand and are relatable.

External Innovation

One of the external mechanisms Cisco utilizes to encourage new ideas is the I-Prize. The organization offered $250,000 for the best idea for new concepts in 2008. As a result of this announcement, 1,200 ideas were presented from entrepreneurs all over the world (104 countries). The winning concept came from two Russians and a German for an IP framework which could lower electric consumption by making devices ask for power from the grid when required. This idea may be funded for development by the organization. This concept is a great way to encourage external innovation. According to Steve, this type of external system will become more and more important for bringing new ideas into the organization on the R&D side.

“Buy”

According to Steinhilber, one thing learned in the business is that market timing is everything. So, buying is another important part of the innovation process. What does Cisco look for in investments?  

“Sometimes we invest when we feel like a really important technology is coming, but we don’t know which approach is going to make the most sense,” says Steinhilber. So, the company will place their bets in more than one space and will watch to see how things go. The organization also invests to support enabling technologies which can help Cisco at large win in another space. The company also invests to learn, to better understand a specific market in which it is not a current area of strength. 

But, as Steinhilber already mentioned, ‘market timing’ is everything. In some cases, there isn’t enough time or there isn’t the current level of expertise required to utilize internal resources or an external investment. In either of these cases, acquisition may be a viable option for Cisco to consider.

The Role of Acquisitions at Cisco

There are two primary reasons why Cisco would consider acquisitions: new market entry or to expand within a market. New market entries involve acquiring internal leadership or channels, access to large, new revenue sources or to expand a current product line. Market expansions occur when the organization is looking to strengthen their current advanced technologies, to acquire technology and talent to drive leadership or to allow expansion into adjacent growth markets.

“Partner”

The third and last piece of the innovation equation with Cisco is partnership. Partnerships allow the total pie size to increase, benefiting everyone involved in the industry, when they are formed in a strategic manner. Most of the strategic partnerships within Cisco are formed with large organizations who compliment their capabilities. Their partnership model has evolved over the past twenty years, becoming a scalable model. One of the aspects of partnerships which Cisco recognizes today is that they all follow a lifecycle:

Evaluate → Form→ Incubate →Operate →Transition →Retire

Cisco works to manage their innovation portfolio by reviewing alliances across business sectors and their associated strategies: HW/SW platform companies, service companies, telecom solutions companies, vertical solutions companies, and device companies. Partnering is and will remain a primary focus of the Cisco innovation model, according to Steinhilber.

In summary, Steinhilber suggests that innovation must be constant, it must occur along the entire value chain of an organization, it must be developed in a framework to be scalable and repetitive, it must extend beyond the organization, it involves taking risks and failing and most importantly, it is the only ‘true source’ of long term differentiation.  Thank you Steve, for an excellent and insightful presentation.

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