John Chambers on Risk and Opportunity in the Modern Age

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Loop.Com hello, I'm Bob Gourley, the Chief Technology Officer of OODA llc. Today on the oodacast, John Chambers. Welcome, John, to the oodacast.

Bob, it's a pleasure to be back with you again and looking forward to today's session.

John, you are widely known as the legendary CEO of Cisco, now Chairman Emeritus. And your success at Cisco is measured in a lot of different ways. Some is just the success of that company in helping build out the new digital age, but also for those who track this, the revenue growth. When you joined Cisco, you were, I think, in sales and you helped grow that company from about 70 million a year to 1.2 billion a year. When you took over CEO, you led it to a run rate of over 40 billion a year. So really significant numbers. But that's not a full measure of leadership, is it? To really measure leadership, we need to look at other things that you have done. And you gave us some insights into that in your book Connecting the Dots. And I thought maybe if I could.

Ask you some questions of that, it.

Would help shed the light on some of your leadership principles.

You said it very well. To the outside world, we often measure it in revenue growth. And from 70 million to 48 billion was a rush or headcount growth from 400 people to 75,000 people. But the real issue is how we changed outcomes and how the Internet changed the way you work, live, learn and play. And when I said that originally they said, john, wait a minute, you move zeros and ones around between techies at universities. And I said, no, it's going to have an impact way beyond that. And at the same time, culture, which we'll have fun with today, is equally as important. And I was proud that we were the highest market evaluation at a point in time in the whole world, which said financial success, very good. And we made 10,000 millionaires among our employees. But we also won almost every corporate citizenship, corporate social responsibility, working with government, et cetera, in the world environment way before it was, quote, the thing to do. And we want it from Democrats and Republicans, we run it from democracies and dictatorships around the world. And so to accomplish that is what I'm most proud of, is the outcome results, but also the culture that we did with our people.

Great, thanks, John. And John, your book, Connecting the Dots, by the way, I love that title because as a technologist it made me think, oh, he's from Cisco. Connecting the Dots this is obviously about routers and switches and how to make the data go. But no, it was really about connecting different kind of dots. It was a book about leadership and how leaders need to connect teams and customers and producers to get to outcomes. Did I get that about right?

Yeah, you did. Really. Connecting the dots was about being able to do pattern recognition and as you connect those dots, being able to predict the most likely outcome or the opportunity or the challenge in front of you. And the networks are way more than zeros and ones moving around. It's about people, it's about ecosystem, it's about society, and it's about economic outcomes as well as benefits to society outcomes. So I think you nailed it. Pretty accurate in terms of what it really means. Right?

Well, let me tell you another thing I liked about your book is there's a foundational story in there and it talks about you going to school and some of your first positions. But there's something I was wondering about your early days. You worked at IBM and Wang, by the way, I remember the Wang's great, great device. They were on my desk in my intel center in my youth. But I was wondering, you succeeded in sales early on and that's something hard for people to do. I've always thought technology sales is perhaps the hardest function out there. Do you feel like that's something that is an inherent trait, something you have inside you or something you're taught and learned?

I think it's the combination of the two, Bob, looking back in hindsight, I've always enjoyed building great teams and then selling the output of those teams, whether it was in intramural sports, in college or moving into business. How do you really position your product in a way that meets your customer needs? And I've always focused on the customers anticipate, Bob, that may be a surprise to your viewers is I never really loved technology. It was interesting, but it was just a thing over to the side, if you will. And after nine and a half years of college, multiple degrees, I was headed to Wall street and big companies M and A type of activity. And Buddy asked me to come and interview at IBM and he was in sales there. And I said, steve, I didn't go to school for nine and a half years to go into sales. I have tremendous respect for what you've done, but I don't really like technology that well and I wouldn't be interested in the position. He said, john, I get it, but it just makes me look good. If you interview that, I can pull the people in to interview Then it's management's responsibility to get them to sign up or not. And I hesitate. He said, I got two tickets to the ball game Saturday night. And I said, I'll be there. And, and it speaks to keeping an open mind because what IBM taught me and a guy by the name of Chris Christie was the branch manager there back when IBM branch managers were the czars, they controlled their geographic areas. They delivered on the fulfillment that only IBM, only IBM could bring their customers to help them run their business better. And he said, john, you think this is technology? Let me tell you how you use technology to run the business so much more effectively. And what sales really means is about business analysis and changing your business. And I fell in love with the concept. And then he was nice enough to say, he said, well, tell me your best offer. Of course, I gave him the offers in New York City, this would have been in Indianapolis. And he said, I'll guarantee you double that next year. Now, I'm not money motivated, but he literally, that was an initial benefit statement that really caught my attention. And I ended up joining IBM, never looked back. And it, it gave me the foundation of how you use technology from the very beginning about changing outcomes, not technology for technology State. And then to your point, Wang did the same thing. Dr. Wang, smartest man I ever met in my life. He invented magic core memory, walking across the Harvard quad doing zeros and ones, humble as he could be. I'm good at math, terrible at English, as you can already tell, but he could do math as quick as in his head and is. I could do it knowing the business case on a calculator. And he brought us into office automation at Wang became the number one player there and you mentioned you had it on your desktop. Then he brought us in the minicomputers and became the number one player there. But we missed the transition to client servers and the PC, just like IBM really missed the transition to the minicomputers. So they taught me the transitions wait for no one. You either disrupt or, and disrupt yourself or you get disrupted. And when you see a transition coming, rather than wish it was something else, by parents or both doctors, deal with the world the way it is and lead through transitions in terms of the direction.

Well, you mentioned several things that I observed firsthand about Cisco and most of the Cisco folks I knew were on your federal team. But yearly you would bring many of your people together in vision conferences and I get to hear directly from you and your leadership team. And one thing that you had a great reputation for as well as your entire leadership team was spotting those market transitions. And I always wished I was as good at you in spotting market transitions. Can you give us any advice on how to do that? How do leaders best spot market transitions?

Well, first is realize they occur all the time. You've got to listen and you've got to learn to listen to people in different positions. It often may be one of the techies deep in an organization that sees a transition occurring. And early on for Cisco, when I talked to the customers, they weren't talking about moving around zeros and ones. They were saying, this is going to change the way we communicate. And when I'd go into a Ford or one time and they talked to me about a new technology, not my traditional routing, but fast ethernet switching, and how this was a different form of switching and I didn't understand it, but they explained it to me. And then two weeks later I was at Boeing again calling pretty deep in the organization on the technical leaders. And they said, hey, there's this new technology that we're actually fascinated by. And I said, fast Ethernet. And they said, how did you know? And I said, well, I just kind of keep my fingers on the pulse. Now can I have my router order? Because I was asking for a five million dollar router order. And they said, only if you acquire this company called Crescendo, which is in fast ethernet switching. And so it's a long story short that you listen to customers, you are always looking for the next transition. Then when you hear a transition, you bounce it off of other customers that are pretty knowledgeable and say, does this make sense and is it about to hit the inflection point? So I'm constantly watching for that either on the technology transition about the Internet changing the way you work, live, learn and play, or cloud changing computing forever. And now as you move to the edge, the role that literally artificial intelligence and 5G Internet things will play at the edge, then you watch for the business transitions as well around those. So you see the economic changes in 2000, which I got blindsided on, we had grown at over 65% per year, 15,000% increase. If you had bought the stock when we came in to the market and you had stayed with us, 15,000% increase for each dollar as you put in, you can do the math on that fairly quickly. But yet the market changed and we didn't adjust. And the 2000 bubble, 2001 bubble took place. Once I saw that in 2007, when my numbers were suddenly out of line, I Didn't keep doing the right thing too long. I said, something's unusual in the finance industry. I said, I think we got a problem coming. And everybody said, well, John, that's just you. And I think you're overreacting. And perhaps your stock isn't as good an investment as I thought it was. And that was eight months ahead of the 2008 major Great Recession. So once you see a pattern, then you adjust to it. Same thing with voice being free. Once you understood that there wouldn't be separate voice networks and data networks and video networks that come together, Voice was going to go on the Internet and it'd be such a small load in the Internet, it was going to be free. And traditional Internet players would give it away to get new customers. So it's catching those transitions, translating them to business outcomes, understanding the implications, good and bad, for your customers that help them through that transition. That's really what connecting the dots about for customers.

Great. Thanks, John. And I have two kind of related questions. One is you were you also became famous for disrupting yourself. I remember one of your vision conferences, you had me on a panel with Clayton Christensen and what a phenomenal writer, studier, thinker. And I wonder, I think you influenced him a lot in his writing, or did he influence you about the need to disrupt yourself?

I think it was the combination of the two. First, to be mentioned in the same breath as as him is a tremendous honor. Secondly, I learned all the time, I learned from you on that panel. I learned from him. But I'd seen disruption all my life. West Virginia used to be the coal center of the world and the chemical center of the world, and 125,000 coal miners, 6,000 of the top engineers in the world, and the chemical industry. And we lost both and we didn't disrupt ourselves. So I've learned that the market waits for no one and that the rewards of getting market transitions right are very positive. But actually the penalties for not getting them right are even worse. And so that's been a part of my DNA since I grew up, where my parents, both doctors, influenced my thinking, especially my dad, on the business models. Right.

Thanks, John. And about market transitions, what do you see for 2022?

Ah, well, this is probably the more interesting one. And it might sound like since we're a month and a week into it, this is my thinking as of today. This is exactly what I said it January 1st. And I want to put it into perspective for your viewers and listeners to understand that. Let's use Covid and The implications of COVID on our world. And we all understand the terrible implications both health wise, human suffering and economic. When that first started to come out of China back In very early 2020, we were, I think, among the first, not the first to say something is wrong in the business models I was seeing in my startups in Southeast Asia, suddenly their sales slowed a little bit. And remember startups, you lose an order or two, you have a terrible month. And all of a sudden, not only were sales slowing, my sales leaders had to get on a plane and go to the various countries, Vietnam, or go into Thailand or go into Singapore to get the deal closed, where before they could have not had to have done that. So I saw there was a disruption occurring and I said, this is going to have economic impact far beyond what we see. And as you saw from that March, April, May, June timeframe of the stock market, it was brutal both economically and the terrible loss of lives last year at this time, same question, what's your prediction for this year? And I said, actually, even though Covid is going to continue to be a major challenge for us, health wise and human suffering wise, I think the economies are going to be okay. The central banks responded well. The fiscal stimulus from the governments were good, united on a global basis, and as it turned out, pretty accurate in stock markets. Depending on which one you follow, we're up between 20 and 28% in January of this year. At the very beginning, I said this is going to be the year that is not going to be predictable. It's going to be like riding a huge roller coaster that we've never ridden before. And you better fasten your seatbelts because the lows are going to be lower than we think and they're going to occur with tremendous speed. And as you go down that roller coaster, your stomach is going to come up into your throat, as all of us have felt as kids. And you're wondering, is the bottom going to be there? Then about the time that you almost say maybe it's not going to be there, you're going to whip back up and then you're going to whip back down again. And that is what the year is going to be like. I think it's going to be a roller coaster ride. My own view is probably up slightly by the end of the year, but tremendous ups and downs. And so agility is the watchword for leaders today. And I think you've got to be very agile in your short term implementation. On your long term implementation, if your strategy and vision was working before it will work three years from now. So stay focused on where you want to be three to five years out, which is what I'm doing my startups. But with all the startups I'm building agility into both their business plans, adjusting up or down very quickly. And I teased in early January that if you don't have the stomach for this and if you get queasy easy, this is the year perhaps when you ought to sit on the sidelines or on the curb and watch. And by the third week in January, at the end of the third week, I was thinking maybe I ought to follow my own advice because boy, that was scary how it occurred on it appears to be leveling out. You don't know for sure now and a lot depends on what the Fed does effectively or not and how they deal with inflation, which I think is the top issue facing our country. In our world it isn't the COVID issue, although it's very important. I think how we deal with inflation and how we deal with the reaction to it by the central banks is the most important variable for this year.

John, thanks. That makes total sense. Agility really has to be the key word.

And Bob, I used to consider it a marketing term. I didn't like it but actually it has so much substance in today's activity, especially for this year. Riding that roller coaster, right?

John, I wanted to transition a little bit and ask you a few other questions about JC2 Ventures, about things like what is JC2 Ventures and what are you trying to accomplish there. And I would really love to talk about Balbix, especially because one of the greatest tech leaders I've ever met is Gaurav Banga. And I just have a deep respect for him and I know he's a key part of your portfolio. But would you start with what is JC2 Ventures?

Well, at Cisco I loved my job as CEO and I was CEO for 20 years, which was almost unheard of. And the point you made earlier, one of my toughest competitors at one point in time said John, congratulations on the way you reinvent yourself and your company. And very few CEOs know how to do that. And in hindsight he was right on it. But what I love most at Cisco was moving into new markets and growth. And I did 180 acquisitions and heavily involved in most all the large ones and actually did the handshakes on trust and then told the lawyers to clean it up afterwards. But it don't change the business agreement. So I like the acquisitions moving into new markets and using that to move from doing routing into switching, switching into voice, voice into cloud, into the data center, into security, et cetera. And I like creating jobs and I love growth. And so JC2 is about creating jobs, not just in Silicon Valley, but throughout our country and around the world. And I'm a dreamer, Bob. That's never going to change. But I know how to make dreams come true. Most of the time I'm pretty good on execution. And so I set the goal, what I thought was going to be originally eight companies, maybe 10, now it's 20. To really talk about how do you move into new market transitions, how do you create jobs in those new market transitions, how do you do that across all geographies? In theory, across all 50 states around the world. And then how do you pick a couple examples to really drive it through? Out of the 20 startups that I have, only one has failed and we have eight unicorns already. And we have a couple decacorns hopefully in the making in the not too distant future, which is a pretty good return for an organization of only four people and internally funded. In terms of the focus, it's about not only creating jobs here in Silicon Valley, and Gaurav is here with Babix as an example, but doing it in Arizona, doing it in Texas, doing it in Georgia, doing it in West Virginia, doing it in, if you will, Boston, and then also doing it throughout France where I'm the French high tech ambassador for President Macron, and in India, across all 29 states there and the seven territories where Prime Minister Modi is kind enough to call me his global ambassador and his wingman, if you will, on digitization of the country, which I love doing. So it's a nice way of saying startups are where all job creation is going to occur. Large companies will actually, because of automation, et cetera, probably shed jobs over the next decade. So if you're going to have a vibrant economy, you've got to have a lot more startups. In all geographies, if not many geographies, you get left behind, which is the wrong thing for society and the wrong thing for business as well. So it's getting that attitude and that confidence to be able, able to dream what's possible and bring those dreams to execution. And I've seen every movie, Bob. I've goofed it up at least once. I've had some pretty good successes as well. So I can usually help These startups, the CEOs like Gaurav, navigate through his focus areas and his challenges. If you Watch. He's in the area of CyberSecurity. I have eight companies in cybersecurity. Gaurav has a tremendous tiger by the tail on what he's doing. And his growth the last couple quarters has really been exciting. He's currently finishing up a fundraising round in that area, which has been very successful. And he differentiates himself. So how do I select my companies? I focus first on the market transition enabled by new technology, transition in cybersecurity enabled by new ways of defending against these issues. I then bet on the CEO Curtis Garav at Balbix. What I did, I then go to customers and say, what do you think? Are they solving something that's really important to you or is it just a nice to do? And is this company really differentiatable within it? And do I think they're very close within a year or two of an inflection point where they could really take off. Where my skills are about scaling and growing companies, that's where I had the most. So that's how I picked out BobX. I have other security companies that are very exciting, like Aversec, etc. On it, but cybersecurity is one that is key. And what Gaurav's done there is the model for what I look for other companies to do. Other areas I'm interested in artificial intelligence, cloud moving to the edge, if you will, on IT and cybersecurity are my top three in terms of the focus areas.

Great. And all of those, I assume, should be aware that the more they can help companies with agility, the better. For this year.

Oh, it is. And what's fun you set me up is I get very close to my CEOs. It isn't like I'm a venture capitalist. I'm not. I'm really a strategic partner, a coach, a mentor to them. And if they don't want to be coached, I don't invest. If they do. I've seen every movie. It's their company to run. But every time they get into an opportunity or challenge, the ones that I'm closest to, which is most all of them. Grav, as an example, will say, what do you think, John? Here's what I'm thinking. Have you seen this before? Or hey, I got a problem. How do I get out of it? What are your thoughts? And I'll say, well, I've done that several times. I've messed it up at least once. But here's what normally works. And we strategize through it. So that to me is Fun. I know it sounds a little bit sick, but that's what I love. Growing and scaling organizations and I like big challenging problems and then say, how do we solve them?

Great. John, I have a final question for you and that is about the pandemic again. I really believe what you said about this year and the need for agility. But I wanted to see if you have any longer term lessons for us. I mean, if you look at the pandemic, one thing that seems clear is companies that were prepared for shock, prepared with more resilience, seem to do better. But preparation takes years. And I'm just wondering what should companies be preparing for next long term? Any thoughts on that?

Yeah, I think Bob, you've hit a really important question. I was trained in MBA school at Indiana about you improve your business 3 to 5% a year and you prepare for opportunities for years. You've got to have your strategy and vision, has to think three to five years out. But your ability to adjust is not. You've got to be very agile, you got to be very flexible and you deal with the world the way it is, not the way you wish it was. My parents being doctors drilled that into my head very, very strongly. And so as you think about this next year, I think you really want to say what is the long term that I want to stay focused on. But you control your own destiny. You've got to have the courage to dream, but dream with cautious investments of your funds till you see the opportunity or headcount to really begin to take off and count on this roller coaster being up and down. Keep that seatbelt fastened. But the winners are those that don't do the right thing too long. The winners are those that are willing to disrupt themselves and disrupt markets and have the courage to not just dream, but to execute to those dreams. So if I were to give your viewers one thing to think about as we close, what I worry most about this country is we're losing our ability to dream and bring the country together behind those dreams. We should have a national approach to startups and inclusion of all Americans in that startup economy in all states. And we ought to have a national digitization strategy because if India has and what Modi's done there has been amazing. It's one of the key economic drivers they have for one of the fastest growing economies in the world. A lot of lessons that we think about emerging countries learning from us, we can learn from them and you begin to see companies and countries dream and then make dreams come true. So I want to challenge everyone, dream a little bit bigger, be a little bit more inclusive in your thought process and create jobs. And if you do the right thing for society and right thing economically, the stock will take care of itself.

Great, John, thanks for that. And thanks for this entire time. We really appreciate your thoughts.

Bob, it's been my pleasure. You have a great day.

All right, we'll see you.

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