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Enhancing the strategic toolkit of ‘Build / Buy / Partner’, to remain competitive in an unpredictable technology environment and establish new revenue sources. 

Key facts

  • Cisco¹ founded in 1984, is headquartered in San Jose and employs 72,000 people across the globe.
  • In 2015, Cisco recorded revenues of $49 billion and an EBIT margin of 23%.
  • Cisco is a worldwide leader in networking equipment.
  • Cisco uses a new strategic toolkit to support its focus on nine themes (Big Data/ Analytics, IoT, Storage, Content Technologies, Mobility, Silicon) and key markets (India, Israel, China).

Uniqueness

  • Cisco has always operated in an environment of unpredictable standards. To better deal with that uncertainty Cisco used Sequoia Capital – the venture capital vehicle – to finance an outside team, often staffed by former Cisco employees.
  • Additionally, the company’s growth strategy was focused from the very beginning on an approach of ‘Build / Buy / Partner’. With digital disruption a threat, Cisco needed to accelerate the pace of change. Cisco’s top management therefore added two additional elements to their growth strategy: ‘Invest’ and ‘Co-develop’.

Value

  • Whilst many competitors of Cisco have struggled, the company has been able to maintain agility in an uncertain market and outperform others regarding several KPIs over a 10-year period:
    • Total Return to Shareholders 5.1% CAGR (compound annual growth rate); Market capitalization 3.9% CAGR
    • Revenue: 7.1% CAGR
    • EBIT: 3.8% CAGR

Approach

  • Invest and Co-develop have been added as additional elements of their strategic toolbox – for example Cisco invested in 12 IoT start-ups in the first half of 2015.
  • Serial acquisitions of new businesses: 11 acquisitions completed in 2015 across their nine focus areas.
  • Agile internal operations: for example, by increasing the frequency of investment committee meetings.
  • CEO sponsorship: responsibility has shifted from business-unit-level to the C-Level.

Footnote:
1. Sources: Cisco; WEF/Accenture DTI Expert interview (October 2015)

Cisco is one of more than 100 case studies identified as part of the World Economic Forum’s Digital Transformation of Industries initiative. An overview of the DTI program can be found here.

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