Innovation at Cisco

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E-Business Innovation at Cisco
“We view the Internet as a prototype of how organizations eventually will shape themselves in a truly global economy. It is a self ruling entity.” - John Morgridge, Annual Report, 1993

In early 2001, Cisco Systems was a very rapidly growing corporation (see financial summary, Figure 1) that sold a wide variety of sophisticated internetworking products. One of their most important business segments was other corporations interested in upgrading their technology infrastructures to enable more efficient business processes, higher quality products and services, and, increasingly, entirely new internet-based strategies. Anticipation of how this “e-business transformation” was going to revolutionize the way the economy functioned inflated stock valuations for information technology suppliers to unprecedented heights. One constant spokesman for the potential of e-business was Cisco CEO John Chambers, who often used his own company as an example of what was possible. At the time, Cisco enjoyed a reputation as the most sophisticated e-business in the world. As a rule, if anything could be “webified” at Cisco, it was. Nearly 90 percent of all orders were placed on Cisco’s website, the Cisco Connection Online (CCO), and nearly 80 percent of all products were built and shipped from a supply partner, without Cisco ever physically taking possession. The company’s ability to demonstrate cutting-edge e-business practices provided a compelling argument for CEOs weighing the tough decision to make multi-million-dollar IT infrastructure investments. While the company had been extraordinarily innovative to date, Cisco was far from complacent about being able to maintain its leadership position in e-business. Amir Hartman, a leader in Cisco’s Internet Business Systems Group (IBSG), which consulted to other corporations on information technology strategies, described the angst: This case was written by Professor Philip Anderson, Professor Vijay Govindarajan, and Professor Chris Trimble, and by research assistant Katrina Veerman T’01 of the Tuck School of Business at Dartmouth College. The case was based on research sponsored by the William F. Achtmeyer Center for Global Leadership and the Glassmeyer/McNamee Center for Digital Strategies. It was written for class discussion and not to illustrate effective or ineffective management practices. Unless otherwise noted, the information in this case was gathered from one of the following sources: (1) SEC filings, (2) internal Cisco Systems, Inc., documents, and (3) interviews listed in Appendix 1. © 2003 Trustees of Dartmouth College. All rights reserved. To order additional copies please call: 603-646-0898

E-Business Innovation at Cisco

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“What was innovative yesterday, in many cases becomes the standard way of doing business tomorrow. You’ve got software packages and applications out there in the market that have 90-plus percent of the functionality of the stuff that we custom built for our own company. So…how do we maintain and/or stretch our leadership position vis-àvis e-business?” Corporations making heavy investments in IT, meanwhile, wondered what they could learn from what Cisco had already accomplished.

Cisco’s Evolution to E-Business
In early 2001, Cisco viewed itself as an “end-to-end” networking company that could meet all of a corporations internetworking needs. Cisco’s products ranged from simple bridges and routers to optical switches, software, and even services. (See Technology Note, “Internetworking Products.”) Cisco sought to offer products that were scalable, could be upgraded easily, and provided customers with maximum possible flexibility. To reach its customers, Cisco sold through several channels, including the IBSG, a direct sales force, third-party distributors, value-added resellers, service providers, and system integrators.

The Early Years Cisco had come a long way from its origin in the mid-1980s....
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