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A presentation by Joe Deklic Vice President, Strategic Investments Group Cisco Systems Canada Co.
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© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 1
Build, Buy or AllyGrowth Strategies for Business
Joe Deklic
Vice President, Strategic Investments Group
Cisco Systems Canada Co.
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 2
Cisco: A culture of innovation
Cisco’s corporate culture encourages innovation
Innovation is the engine that drives growth
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 3
John Chambers, President and CEO
“Philosophically, I don’t partner and then compete later. I won’t enter into strategic partnerships that I think will not have lasting evolution. … We share what we’re doing with them very closely and they share what they’re doing with us very closely.”
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 4
“Companies that use both acquisitions and alliances grow faster than rivals do – as companies like Cisco have amply demonstrated.”
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 5
Evolution Components of Innovation
Build Ally
Buy
Cisco’s innovation model has evolved beyond the 3 “Build – Buy – Ally” pillars
Collaborationinternally and externally with customers and partners is essential for innovative leadership going forward
Collaborate
Market
DynamicsPortfolio
Management
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 6
Why Collaborate : Differentiation
Power of many
Time to execution
Alignment
Multiple competitive scenarios
Customers win
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 7
Partners who Collaborate with other
Partners…
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 8
Why Build: Technology Leadership
Pioneer in the field
Patentable technology
Need to own the intellectual property
Core business
Have time or can build in increments
Have in-house expertise
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 9
Innovation at Cisco The Cycle of Innovation
Deploy
Differentiation
at Scale
Invent
Differentiated
Offering
Manage
Mission-critical
Processes
at Scale
Extract
Resources
to Reinvest
for Core
2. Deploy
1. Invent
3. Manage
4. Offload / Repurpose
Advanced
Technology
Foundation
Technology
Emerging
Technology
Reinvent
Technology
Funding
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 10
Innovation at Cisco
This study has found that Cisco has laid a strong foundation for innovation by organizing its efforts around three elements critical to innovation success:
–People and Culture
–Process and Organization
–Products and Technology
Cisco does not exclusively establish innovation through acquisition but fosters and encourages innovative thinking, development, collaboration, and entrepreneurship throughout its organization.
Wharton study 2009
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 11
Why Buy: Core to business
Core to business
Need intellectual property
Time critical
Shortage of in-house expertise
Acquire market leadership
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 12
Internal Venture,
Financial Investment
Innovation at CiscoETG Pursues a New Growth Model
New
Existing
Existing New
Source: Prof. Ed Roberts, MIT Sloan School
Partner,
Acquire
Develop,
Acquire
Acquire,Partner
ETG
Focus
Market
Technologies
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 13
Why Partner: Speed
Fastest Time to Market
Reduce Risk
Leap Frog Competition
Customize for Specific Markets
Customers buy best of breed
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 14
Four Key Dynamics of Alliance Strategies should be Monitored to understand the Driving Forces in Market Space
Value Migration in the Market Space
Competitive Scenario Mapping
Ecosystem Evolution & our position in the this relative to the Customer
Life Cycle Management of each Alliance itself
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 15
Value Migration
We must view Value Migration from the Customer’s Perspective
Process Migration
Design Cycle Time
Quality Systems (Six Sigma)
Fulfillment (Supplier-Distributor Delivery)
Market & Customer Needs Migration
Providing route-to-market for sales and service
-vertical expertise
-solutions integration
-unique geographic access
Providing complementary hardware and software
Providing integrated solutions for products and services
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 16
Competitive Scenarios
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 17
Ecosystem Evolution
Development Logistics Distribution SalesService &
Support
CISCO
Strategic
Supplier
R&D
Outsourced
Manufacturer
Service &
SupportProvider
Customer
Customer
Parallel
Manufacturer
Distributor
Competitor
Co-
Marketing
Customer
Advertising
Agency
Where are Our Alliances?
Where are the “Points of
Power” in the network?
Create Competitive Advantage by Optimizing
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 18
Future Sales Goal
Borrow(Alliances)
Buy(Acquire)
Build (internal
growth)
BU's Current Sales Level
InternalGrowth
$.5
B
Time
Sa
le
s
$1
.0B
Lifecycle Portfolio Management
Divestitures Bow-Out (exit)
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 19
Every individual alliance goes through a unique life cycle
Evaluate Form Incubate Operate Transition Retire
Plan
communication
Build
operations
model
Business
planning
Partnering
value prop
Partner
engagement
model
Announce
alliance
Alliance
solutions
& initiativesField
engagement
& marketing
Secure
sponsors
Negotiations
& agreements
New alliance
launch
marketing
Metrics &
performance
reporting
Review
strategy &
value prop
Value curves
& trends
Update
strategy
goalsConfirm
joint
commitment
Determine
future
investment
Conduct
management
discussionsDetermine
exit
strategy
Build
exit plans
Define
activities &
timeline
Create
messaging
Structure
alliance
governance
Executive
comms &
boards
Define
Cisco
strategy
Analyze
portfolio
Evaluate
ecosystem
Evaluate
partner
Build
business
case
Intellectual
properties
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 20
Before negotiations begin
Determine value proposition
Develop joint win-win
Build solid business plan
Evaluate
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 21
Stages of successful negotiation
Pre-negotiation
Problem solving
Decision making
– Create mutual benefit
Alignment
– Revise and ratify agreement
Implementation
Form
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 22
Delivering results
Develop operational dashboard
Clear metrics a must
Evaluate long-term returns
Variable model
Partner-dependent
Adjust resources to match results
Know when to call it quits
Operate
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 23© 2006 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 23
Confirm joint commitment
“70% of alliances either fail outright, fall captive to shifting priorities, or achieve only initial goals, and 55% fall apart within three years after they are formed.”
The CEO RefresherVantage Partners
Transition
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 24
Decision CriteriaWe need clear reasons to decide among alternatives
IFThese
Conditions
Risk
Level
Speed ofExpansionRequired Resource
Availability SimilarityChange in theEnvironment
Make Low Slow High The Same Slow
BuyLow to
ModerateModerate
High to
Moderate
High
SimilarityModerate
AllyHigh to
ModerateFast
Moderate to
LowDifferent Extensive
Internal Growth
M&A
Alliance
THEN
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 25
In conclusion
Don’t win the negotiation and lose the alliance.
Each alliance has its own life cycle . Find it.
Find ways to win together; collaboration. Play for keeps.
Alliances is a learned skill (practice + training). Invest in it.
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 26
© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 27
Q and A