After more than 15 years at Cisco, Chuck Robbins took the reins as CEO in 2015 and became chairman in 2017. Ever since, the $52 billion networking giant has been busy reinventing itself as a software company.
At our summit last week, John W. Thompson (Venture Partner at Lightspeed and Chairman of Microsoft), engaged Chuck in a lively discussion about what it takes to reinvent a company as large and dominant as Cisco.
Below is an edited excerpt of their conversation. For the full interview, check out the latest episode of Lightspeed’s podcast, “Tomorrow, built today.”
Over the last four years Cisco has acquired a number of companies like AppDynamics. Is that part of your strategy to make Cisco more of a software company?
When I was going through the CEO selection process, my strategic thesis was that we needed more software content and a higher degree of subscription business. Our customers wanted software solutions. Our investors wanted the predictability that comes from subscription models. So we set out to do that. In 2017 we launched our first enterprise campus switching portfolio with a mandatory software subscription. It became the fastest ramping product in Cisco history. Now almost all our access points, switches, and enterprise routing platforms come with mandatory subscriptions.
Cisco has been one of the most successful acquirers of early stage companies in the Valley. How do you choose between organic and inorganic growth?
It varies. Sometimes you miss out on a technology and need to go buy it. Sometimes you know you want to be in a certain part of the market, but you don’t know how it’s going to evolve, so you wait to see how things play out and then invest in what’s successful. Buying AppDynamics was a way for us to enter the application performance monitoring market. And then there are tech and talent deals that bring new capabilities to our portfolio.
How would you advise startups that might want to be acquired by Cisco or another large company?
Obviously, you need great technology that people are embracing in significant numbers. But getting something to scale in the enterprise is difficult and the technology is usually not the problem. It’s the go-to-market strategy and getting it to the customer base. So we’ve begun partnering with startups whose technology we like and helping them scale through our ecosystem.
The thing we worry about is making sure the people inside those startups care about the long-term viability of the asset once it’s inside a large enterprise. We’ve walked away from technology we loved because we thought the founders would leave. You have to be realistic about who you’re going to recruit and who wants to work with you.
How does Cisco go about integrating these acquisitions?
We do a lot of thinking about the right time to integrate an acquisition. The natural tendency is to take a small company and distribute their employees among your engineering, sales, and other functions. In reality this usually destroys the fundamental value of what you bought. We know because we’ve done it. Now we’re building a set of criteria for acquisitions to reach before we integrate them to ensure they don’t get lost in our business.
What does a successful acquisition look like inside Cisco?
By the time we get to talking about acquiring a company, the technology fit is fairly clear. Then it’s a question about culture fit. We’re looking for people who share our values. Duo Mobile’s Dug Song and Jon Oberheide are a perfect example. They care about the same things we do. We’ve walked away from companies that were beautiful technical fits because the CEO cultural thing just wasn’t going to work.
There are a number of interesting young companies trying to take what Cisco does in hardware and move it to the cloud. How do you compete with that?
Four years ago we identified every existential threat to our company and then said we’re going to embrace and lead all of them, even if it means we have to disrupt ourselves. Software-defined networking was one of them. Cloud was another. Back then the argument for moving to the cloud was simplicity. Today most of our customers are consuming anywhere from 50 to 600 services from different cloud companies. They have to re-architect their entire infrastructure in order to accommodate it. It turned into a huge growth driver for us. The cloud actually represents more of an opportunity than a threat.
Our summit is all about scale. What are the most important things you’ve learned about scaling a business?
When you’re big and you make a mistake, it hurts big. Our history is building for the high-end enterprise. We build in a thousand features on the first day a product ships. That’s our culture. But we’ve also begun to embrace the minimum value proposition process. We’re building a cloud management platform for our traditional feature-rich networking platforms. Now we’re saying, if you want Cisco cloud management, you’re going to get 50 features. If that’s good enough, great. If not, you’ve got to go over to the high-end side. Embracing two different methodologies is one of the things we’ve had to think about in order to really scale and move fast in today’s world.