Cisco’s Virtual Management Lab

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Cisco Systems is one of the world’s most innovative companies, yet some of its most important breakthroughs in recent years haven’t been new products or services.  Instead, Cisco has been profiting from focusing its R&D attention on its own business practices.

In “Cisco’s Virtual Management Lab,” in the Spring 2011 Strategy+Business, the author reveals how the company has developed new business models and entered new markets by learning to reinvent itself.

Sidhu is the senior vice president of strategy and planning for worldwide operations at Cisco, and a member of the company’s operating committee. 

As he explains, a turning point in Cisco’s history occurred in 2002, when the son of John Chambers, the company’s CEO, installed a wireless network in the family’s home. 

“I assume you used Cisco products,” said Chambers.  But his son hadn’t — because he couldn’t find any home-networking devices made by Cisco at the consumer electronics store where he shopped.  Cisco’s gear was too expensive and technically advanced for his needs.

That didn’t sit well with the CEO.  At the time, there was a $20 billion global market for home and small-office network connectivity products, which was projected to grow into a $74 billion gold rush within a few short years. 

There was no way Cisco, the world leader in networking equipment, could ignore that market.  Chambers believed that if consumers by the millions were networking their living spaces with inexpensive, easy-to-use routers, Cisco ought to be at the center of this revolution.  But how? 

Cisco is the world’s most successful manufacturer of computer networking equipment.  It provides the bulk of the infrastructure that powers the Internet and other networks, both public and private.  When you send an e-mail, visit a Web page, connect to a secured corporate network, or make a phone call, chances are Cisco equipment and software make it happen.  The company does business in more than 140 countries and has a market capitalization of roughly $140 billion.

But Cisco’s leaders are aware that when a company is large and successful, it can grow complacent.  Somewhere along the way, Cisco had started acting less...

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