Growth Strategies Build Buy Ally

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 1
Build, Buy or Ally
Growth Strategies
for Business
Joe Deklic
Vice President, Strategic Investments Group
Cisco Systems Canada Co.

Cisco: A culture of innovation
 Cisco’s corporate
culture encourages
innovation
 Innovation is the
engine that drives
growth

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.”

“Companies that use both acquisitions and
alliances grow faster than rivals do – as
companies like Cisco have amply
demonstrated.”

Evolution Components of Innovation
Build Ally
Buy
 Cisco’s innovation
model has evolved
beyond the 3 “Build
– Buy – Ally” pillars
 Collaboration
internally and
externally with
customers and
partners is essential
for innovative
leadership going
forward
Collaborate
Market
Dynamics
Portfolio
Management

Why Collaborate : Differentiation
 Power of many
 Time to execution
 Alignment
 Multiple competitive scenarios
 Customers win

Partners who Collaborate with other
Partners…

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

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

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

Why Buy: Core to business
 Core to business
 Need intellectual property
 Time critical
 Shortage of in-house expertise
 Acquire market leadership

Internal Venture,
Financial Investment
Innovation at Cisco
ETG 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

Why Partner: Speed
 Fastest Time to Market
 Reduce Risk
 Leap Frog Competition
 Customize for Specific Markets
 Customers buy best of breed

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

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

Competitive Scenarios

Ecosystem Evolution
Development Logistics Distribution Sales
Service &
Support
CISCO
Strategic
Supplier
R&D
Outsourced
Manufacturer
Service
&
Support
Provider
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

Future Sales Goal
Borrow
(Alliances)
Buy
(Acquire)
Build
(internal
growth)
BU's Current Sales Level
Internal
Growth
$.5B
Time
Sale
s
$1.0B Lifecycle Portfolio Management
Divestitures Bow-Out
(exit)

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
& initiatives
Field
engagement
& marketing
Secure
sponsors
Negotiations
& agreements
New alliance
launch
marketing
Metrics &
performance
reporting
Review
strategy &
value prop
Value curves
& trends
Update
strategy
goals
Confirm
joint
commitment
Determine
future
investment
Conduct
management
discussions
Determine
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

Before negotiations begin
 Determine value proposition
 Develop joint win-win
 Build solid business plan
Evaluate

Stages of successful negotiation
 Pre-negotiation
 Problem solving
 Decision making
– Create mutual benefit
 Alignment
– Revise and ratify agreement
 Implementation
Form

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 Refresher
Vantage Partners
Transition

Decision Criteria
We need clear reasons to decide among alternatives
IF
These
Conditions
Risk
Level
Speed of
Expansion
Required Resource
Availability Similarity
Change in the
Environment
Make Low Slow High The Same Slow
Buy
Low to
Moderate
Moderate
High to
Moderate
High
Similarity
Moderate
Ally
High to
Moderate
Fast
Moderate to
Low
Different Extensive
Internal
Growth
M&A
Alliance
THEN

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.

Q and A

Growth Strategies Build Buy Ally

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