Cisco's Lessons on Learning from Start-Ups

When I was researching the current cover story of IN: Inside Innovation, on how HP is infusing its corporate culture with start-up-style creativity, I spoke to executives at other tech companies to see what lessons were to be learned from the smaller companies they acquire.

And when I spoke with Ned Hooper, senior vice president of corporate business development at Cisco, we discussed how Cisco has spent years focusing on how to best retain entrepreneurial thinkers who join the company when their start-ups are acquired. Hooper himself became part of the Cisco team after an acquisition. His previous company, Lightspeed International, a maker of VOIP technology, was acquired by Cisco in 1997 in a stock deal valued at approximately $160 million. He admits today that he hadn’t planned on staying at the larger corporation after the acquisition.

He had an exit strategy in mind even before he started working there. His was an attitude that’s common among creative start-up staff members who join larger companies but ache for the adrenaline rush of working at a smaller tech firm that isn’t bogged down by corporate processes and restricitions. But Hooper’s still at Cisco today, a decade later. Why?

“I’d worked with big companies before—and I hadn’t particularly enjoyed it. I chose to go the startup route,” Hooper recalls of his pre-Cisco life. When he joined Cisco, he had only planned on staying at the corporation for about two years because he realized at the time that “no matter how successful the startup is, after it is acquired, the acquirer introduces signifigant change,” he says. In other words, he was reluctant to stay on, fearing that the imaginative--and thrillingly risky--culture of Lightspeed would change radically--and even be lost.

But Cisco tapped Hooper's knowledge and interest in entrepreneurship and applied that to his evolving role at Cisco over the years. Today, Hooper investigates companies in new markets and helps strategize how Cisco will incubate inventive technologies. He is now on the 10th year of his original 2-year contract with Cisco, as Hooper puts it. In his current capacity, he relies on his own experience at an acquired startup as he negotiates acquisition terms with staff from smaller companies that Cisco wishes to acquire. Because he identifies with them, he focuses on how to prevent them from fleeing for entrepreneurial ventures that they might feel more accustomed to. He works with each company on an individualized basis to help accommodate how founders and their teams want to keep working after getting folded into Cisco.

“That’s how we still do business with startups," he says, referring to his own experience of receiving a high-level executive job at Cisco that would specifically cater to his desire to work within an entrepreneurial context--even at Cisco.

"We put incentives in place to keep people here for multiple years,” he says. While at Cisco, Hooper guided the company to acquire startups such as IronPort and Airespace –- as well as much larger companies such as Linksys and Scientific Atlanta. Cisco credits Hooper with helping to bring in $3 billion in revenues since 2002, via the acquisitions he's helped advice.

Hooper sees keeping start-up-style culture alive within the acquiring company, no matter how large it is, as key to achieving systemic innovation. “To innovate, you need a culture of risk, and people who come in from startups know how to have this culture of risk,” Hooper says. Larger corporations don't -- or feel that they can't, because of obligations to shareholders, of course.

But he cautions other corporations that looking for a special-sauce formula for attempting to integrate an agile startup’s culture into a larger corporate structure can be paradoxical. “A lot of folks want to apply a manufacturing analogy of the assembly line process to intergration of an acquisition. They believe everything’s repeatable. We see it differently. Each is unique,” he says. While the whole concept sounds somewhat random, Hooper's insight is valuable. The ways that fresh ideas are nurtured and developed at start-ups can't be easily mimicked -- even if they can, in some way, possibly be kept alive even within a the large, coroporate structure of an acquiring company.

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