Build, Buy or Ally Growth Strategies for Business

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A presentation by Joe Deklic
Vice President, Strategic Investments Group
Cisco Systems Canada Co.

Build, Buy or Ally Growth Strategies for Business

  1. 1. Build, Buy or Ally Growth Strategies for Business Joe Deklic Vice President, Strategic Investments Group Cisco Systems Canada Co.Presentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 1
  2. 2. Cisco: A culture of innovation  Cisco’s corporate culture encourages innovation  Innovation is the engine that drives growthPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 2
  3. 3. “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.” John Chambers, President and CEOPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 3
  4. 4. “Companies that use both acquisitions and alliances grow faster than rivals do – as companies like Cisco have amply demonstrated.”Presentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 4
  5. 5. Evolution Components of Innovation  Cisco’s innovation model has evolved beyond the 3 “Build – Buy – Ally” pillars Build Ally  Collaboration Portfolio Market internally and Dynamics Management Collaborate externally with customers and partners is essential for innovative leadership going forward BuyPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 5
  6. 6. Why Collaborate : Differentiation  Power of many  Time to execution  Alignment  Multiple competitive scenarios  Customers winPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 6
  7. 7. Partners who Collaborate with other Partners…Presentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 7
  8. 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 expertisePresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 8
  9. 9. Innovation at Cisco The Cycle of Innovation Manage Deploy Differentiation Advanced Foundation Mission-critical at Scale Technology Technology Processes at Scale 2. Deploy 3. Manage 1. Invent 4. Offload / Repurpose Funding Extract Invent Differentiated Emerging Reinvent Resources Offering Technology Technology to Reinvest for CorePresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 9
  10. 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 2009Presentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 10
  11. 11. Why Buy: Core to business  Core to business  Need intellectual property  Time critical  Shortage of in-house expertise  Acquire market leadershipPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 11
  12. 12. Innovation at Cisco ETG Pursues a New Growth Model ETG Focus New Partner, Internal Venture, Acquire Financial InvestmentMarket Develop, Acquire, Existing Acquire Partner Existing New Technologies Source: Prof. Ed Roberts, MIT Sloan SchoolPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 12
  13. 13. Why Partner: Speed  Fastest Time to Market  Reduce Risk  Leap Frog Competition  Customize for Specific Markets  Customers buy best of breedPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 13
  14. 14. Four Key Dynamics of Alliance Strategiesshould 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 Presentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 14
  15. 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 servicesPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 15
  16. 16. Competitive ScenariosPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 16
  17. 17. Where are Our Alliances? Ecosystem Evolution Where are the “Points of Power” in the network? Create Competitive Competitor Advantage by Optimizing Parallel Manufacturer Customer Strategic Supplier Advertising Agency CISCO Distributor R&D Customer Co- Marketing Outsourced Service Manufacturer & Customer Support Provider Service & Development Logistics Distribution Sales SupportPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 17
  18. 18. Lifecycle Portfolio Management Future Sales Goal $1.0B Borrow (Alliances) Buy Sale (Acquire) s Build Internal (internal $.5B Growth growth) BUs Current Sales Level Divestitures Bow-Out (exit) TimePresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 18
  19. 19. Every individual alliance goes through aunique life cycle Evaluate Form Incubate Operate Transition RetireDefine Partnering Structure Executive Review ConductCisco value prop alliance comms & strategy & managementstrategy governance boards value prop discussionsAnalyze Secure Build Business Value curves Determineportfolio sponsors operations planning & trends exit model strategyEvaluate Negotiations Plan Alliance Update Buildecosystem & agreements communication solutions strategy exit plans & initiatives goalsEvaluate Intellectual Partner Field Confirm Definepartner properties engagement engagement joint activities & model & marketing commitment timelineBuild Announce New alliance Metrics & Determine Createbusiness alliance launch performance future messagingcase marketing reporting investmentPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 19
  20. 20. Evaluate Before negotiations begin  Determine value proposition  Develop joint win-win  Build solid business planPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 20
  21. 21. Form Stages of successful negotiation  Pre-negotiation  Problem solving  Decision making – Create mutual benefit  Alignment – Revise and ratify agreement  ImplementationPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 21
  22. 22. Operate 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 quitsPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 22
  23. 23. Transition 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 Refresher Vantage PartnersPresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. 2006 Cisco Confidential 23
  24. 24. Decision CriteriaWe need clear reasons to decide among alternatives IF These Conditions Speed of Internal Expansion Risk Required Resource Similarity Change in the Growth Level Availability Environment Make Low Slow High The Same Slow Low to High to High M&A Buy Moderate Moderate Moderate Moderate Similarity THEN High to Moderate to Ally Fast Different Extensive Moderate Low AlliancePresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 24
  25. 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.Presentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 25
  26. 26. Presentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 26
  27. 27. Q and APresentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 27

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