Cisco: 'The Best Company for the World'
On Nov. 5, Cisco Systems (CSCO) was among the first companies to announce financial results including the catastrophic month of October. It wasn't pretty. While the company barely beat earnings estimates, CEO John Chambers predicted sales would decline in the current quarter by as much as 10%—the first time since the dot-com bust. But Chambers was careful to stress that he remains more committed than ever to Cisco's sweeping emerging-markets push. "Over time we expect the majority of the world's GDP growth will come from the emerging countries," he told analysts. "In expanding these relationships during tough times, our goal is to be uniquely positioned as the market turnaround occurs."
BusinessWeek Senior Editor Peter Burrows spoke with Chambers earlier this summer, to get his perspective on why Cisco has been successful in emerging economies—beyond just China and India—and on the special influence he hopes the company can have by helping to bring the benefits of the Internet to millions of people.
How important are emerging markets to Cisco's future growth?
The majority of the world's population lives in emerging countries, and the majority of consumption and growth will be in emerging countries. Let's say [these markets, including China and India] are 20% of our business today. Well, it's very likely that they'll be 40%-plus at some point. Also, a lot of the innovation is coming out of emerging markets. It used to come out of Western Europe and the U.S.
Why has Cisco been so successful in these countries?
It's not about just selling equipment to governments or [communications] service providers. It's how do you change the standard of living—how do you improve the health-care system, the education system. How do you add to the [competitiveness] of local industries, when often the skill sets [to make use of the Net] don't yet exist in the region. It's a view of country transformations.
How do you sell a concept as sweeping as "country transformation"?
When we're talking to top people in business or government, we talk about productivity.…Productivity from 1996 through 2004 went from 1% or 2% up to 5%, like we predicted it would. But in the past few years it hasn't grown much. What's been missing is the next generation of innovation. Now, there's a transition to Web 2.0 and other collaboration technologies, and our approach to country transformations can change every vertical industry and every government process.
You announce a new theme for your management team at your annual off-site meeting. I understand that this year's theme relates to using Cisco's dominance in networking so it benefits not only shareholders or customers, but the wider world.
We have an aspirational goal—and clearly it is very bold, but it's one we are going to address with proper humility. We are going to attempt to become the best company in the world, and the best company for the world.
What does that mean?
It means that we want to be the best in terms of financial success, as a place to work, as a trusted adviser to businesses and governments, and as a company that has a culture that lets us rapidly evolve our organization [to attack new opportunities]. And at the same time, we want to be the best company for the world—not just giving back [via philanthropy], but giving back in a replicable manner that really makes a difference. It's the Jordan Education Initiative (created with King Abdullah of Jordan) growing into the Global Education Initiative, in partnership with the World Economic Forum and a number of [nongovernmental organizations].…We don't just get involved in something and then leave. We get involved in ways nobody else does.
Another example is our activities in China, where we went in after the terrible earthquake to ask how could help transform both the health-care system and the education system in a way that builds it back dramatically better than it was before. And we'll do that together with 10 to 15 NGOs, at least that many business partners, and multiple government agencies. Cisco is the company that can architecturally pull all that together.
You seem to have a special interest in the Middle East. How did you come to be so involved in the region?
We got involved purely because King Abdullah asked me to. He said: "We can work together to change the education system and create jobs in Jordan. We can bring political stability and raise the standard of living in my country, and make it a model for the rest of the world."
Did it seem like it could lead to a significant business?
I remember he said: "John, you'll make a lot of money in Jordan and the Middle East." I said: "Your Majesty, I will not make money in Jordan, and I probably never will make money in the Middle East." Really a dumb statement, it turns out.
Because oil prices have spiked since then?
No, it wasn't that. It was the societies' acceptance of the technology, and our ability to create trusted relationships with people in the Middle East. You go across from Prime Minister Erdogan in Turkey to Siniora in Lebanon to Olmert and Peres in Israel, to Abbas in Palestine, to Mr. and Mrs. Mubarak in Egypt, to King Abdullah in Jordan and the royal family in Saudi Arabia, to Sheikh Mohammed in Dubai, to the other Sheikh Mohammed in Abu Dhabi, to the leadership in Qatar, and to Aliyev in Azerbaijan. They all trust us—and that goes across religious and political lines.
Bechtel helped build the physical infrastructure that led to massive changes in the Middle East last century. What will Cisco's legacy be?
If you give people a chance to participate in society, you can create a large middle class. That's what political stability is all about. It's a chance for Cisco to participate on a bigger scale, helping to bring peace to the world. Is that too big a dream?…(long pause)…Maybe.
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