Success tips in a startup world: leadership lessons from John Chambers, Cisco’s CEO for 20 yearsMadanmohan Rao
This compelling book by John Chambers, the head of a Silicon Valley tech powerhouse, is packed with lessons for leaders, companies, and countries in an era where creativity is shaped by startups.
How are startups driving the wave of disruption, and what can companies and countries do to tap digital innovation at scale? What are the foundations of customer success in a connected world? How should one keep reinventing oneself in a world of change? Answers to these questions are well captured in the new book, Connecting the Dots: Leadership Lessons in a Startup World, by John Chambers, Chairman Emeritus, Cisco.
John Chambers joined Cisco in 1991, and was its CEO from 1995 to 2015. He helped take the company from $70 million in revenue in 1991 to $47 billion in 2015. Along the way, he acquired 180 companies, and also turned more than 10,000 employees into millionaires. After stepping down, he founded JC2 Ventures as an investor and coach for startup founders.
The material is spread across 306 pages, and the 13 chapters are well written with a list of actionable takeaways at the end. I have summarised some of the key messages in Table 1 below; each chapter is packed with anecdotes and examples from the author’s personal and professional journey. See also my reviews of the related books Shortcut Your Startup, People with Purpose, Blue Ocean Shift, Sell, and The Startup Way.
I. The Connected Leader: Mindset for Success
The book begins with leadership principles John Chambers imbibed while growing up in West Virginia, such as stay calm during crises (his father helped him manage his fear when he almost drowned), value skills and education (“the great equaliser” especially during economic downturns), adapt during change (rise and fall of the regional chemical industry hub), and commit to overcoming challenges (he overcome dyslexia).
By opening up to his employees that he had dyslexia, John realised the power of admitting his vulnerabilities and sharing his own story. Acknowledging one’s weaknesses also helps filling out a team with those who have complementary strengths (see my book review of The Culture Code).
Interestingly, John explains that being dyslexic also helped him become much better in visualising patterns and connecting dots. The CEOs of a number of other successful companies are also dyslexic: Charles Schwab, Virgin, JetBlue, Ikea, CNN, Ford and the Body Shop.
John identifies four key responsibilities of leaders: set vision and strategy, develop teams, create the culture, and communicate with clarity. “Vision, strategy and execution are like a chess game” that is played with tremendous speed and inter-dependencies. John set the aspirational vision for Cisco not as a seller of routers, but as a company that would change the way people around the world “work, live, learn, and play”.
Successful leaders are brave, curious, and hungry for new ideas. They seek out different opinions, and not just reinforcement of their own views; they tap people with broader cross-functional values, perspectives and networks. “There has to be some discomfort to be creative,” John says.
Leaders, like teenagers, are impatient, curious, ambitious, bold and audacious, he jokes. The digital natives of today are “pre-wired to seek out change and dare to get ahead of it”. Mentoring can channel mindsets and impulsiveness into a more structured framework.
Founders and leaders should hone their “pattern thinking” -- observe trends and patterns, filter out the noise, connect the dots, see the big picture, and look for what’s around the corner. Instead of fighting market shifts, it is better to anticipate what many happen five to 15 years ahead. “Change before you have to. The worst mistake is to do the right thing for too long,” John cautions.
He also draws important lessons about tech waves and customer connects during his years at Wang and IBM. Wang rode the mini-computer wave but underestimated the PC and Internet wave. IBM became too confident in its mainframe and PC hardware, and missed out on insights from its customers.
After joining Cisco, John kept the focus on technology trends and building a broader product portfolio by acquiring innovative companies. Many of its competitors failed to catch market transitions or listen deeply to their customers; such companies included WellFleet, SynOptics, Cabletron, Nortel, Lucent, Alcatel, and 3Com.
During a crisis, one must separate emotion from the facts. John made clear-headed decisions during the dotcom crash of 2001 (a “100-year flood”), and stayed the course with the company’s strategy, though 8,500 people had to be laid off. Dotcom brands were falling out of favour, but people and organisations were still going online. Leadership during times of crisis can be lonely, John cautions.
“What will differentiate the winners from the losers won’t be technology or capital but leadership and a willingness to learn,” John explains. Companies such as Microsoft and Apple have also reinvented themselves. “The ability to reinvent not only your company but yourself is the critical skill for every leader in the digital age,” John affirms.
“Those who embrace change are about to experience one of the most innovative – and potentially lucrative – periods in human history,” John says. “Take risks and move fast. Better to stumble first than arrive last. How you manage your setbacks and successes will determine your legacy and longevity as a company and as a leader,” he adds.
John also bet big on the Chinese market way back in 1995. He says he could also see that Emmanuel Macron would become the next president of France, due to his focus on inclusion and entrepreneurship.
Leaders should plan not just a step or two ahead, but till the end of the game; they should anticipate competitor moves and prepare their own counter-moves. Focusing only on short-term issues will make companies miss big inflection points, John cautions.
Picking up cues from customers about which technologies are promising and which companies create them helps identify acquisition targets. This approach helped Cisco acquire Crescendo for its Fast Ethernet switching technology, and become an architecture leader in both the router and switch market.
At the same time, leaders should find balance and know when to step back or exit a line of business. For example, Cisco acquired the company Flip for $600 million for its video sharing technology, but shut it down when Apple beat it to the game with the iPhone.
Leaders should also exercise caution in communicating with the media; sometimes, articles about the company can be misleading, misinterpreted, or misinformed. Separate fiction from fact, John advises, drawing on one of his own experiences with a misleading newspaper article published on the day of one of his speeches.
He says he also has had his share of journalists making nasty and unfair comments about him. One journalist called him one of the world’s best leaders in 2000, only to call him one of the worst a short time later; he was described subsequently as a “comeback kid”.
Still, leaders should keep communication channels open and engage with critics. Practising for media interactions with the help of media trainers helps; social media also opens up new communication options for CEOs.
During public speeches, John prefers to convert the speech into a conversation, and move off the stage and among the audience. “The most important skill in communication is absolutely listening,” John advises.
Cisco managers are rated in customer briefing centres for their content and delivery. Managers should be genuinely curious, inquisitive and responsive. “Writing the press release” in advance of a major action can help visualise success and focus on the outcome.
Communication should be about tech impacts and not just product features; it can also involve using simple sentences about predictions and not just trends. For example, “Voice will be free” was a message used by John at a time when data networks were converging with voice communication. He used “country digitisation” to describe outcomes and metrics for adoption of digital infrastructure.
Some of John Chambers’ often-cited quotes include: Video is the new voice. There are two equalisers in life: the internet and education. The Internet of Things will be bigger than the internet. There are two types of companies: those that have been hacked and those that don’t know they’ve been hacked. Market transitions wait for no one.
II. The Connected Company
Many companies fail not because they did the wrong thing, but did the right thing for too long. “The biggest mistake is that we get comfortable and we get disrupted because we didn’t disrupt ourselves,” John cautions. Companies compete against new technologies, market transitions and time – not other competitors, he explains.
Over the years, Cisco moved from internet traffic routing products to a range of other areas: switching, VoIP, video, data centres, cloud, IoT, security and even “country digitisation.” It showed that it believed in its own networked capabilities by creating global supply chains and could even perform a “virtual close” – closing financial books within a day.
In the early years of the dotcom boom, it was tough to predict the scale and impact of internet technologies, and decide who the winners would be. Many started out too early, too late, or down the wrong path; others confused eyeballs with customers, or shipped products below cost (such as Pets.com).
Leaders should set “stretch goals” for their teams, which are audacious but achievable and concrete (see my reviews of the related books Multiplier and The Moonshot Effect). While the company’s purpose and customer focus will generally remain same, the product mix and performance targets may change over the years. The mission should be clear, authentic, impactful, differentiated and sustainable. It should connect to employees, customers, investors, and partners.
While companies like IBM may have had a culture of building capability rather than buying it, Cisco chose an approach of acquisition and outsourcing. Its mindset of “core versus context” helped decide which areas to outsource, to gain agility, speed, and scale. Outsourcing, however, also entails maintaining oversight of partnerships and quality.
Cisco eventually became an “acquisitions machine” thanks to its playbook for acquisitions. John picked next-gen companies to acquire not just to fill a product portfolio gap, but because the founding team had a bold vision and the acquisition would help Cisco become a leader in new markets.
A good acquisition should be a “home run for both sides”, he advises, citing the acquisition of Crescendo and Meraki as an example. Leaders, investors, shareholders, employee, and customers should all benefit.
For the new team to stick around, there should be a culture fit via shared goals, values and expectations. Still, a third of Cisco’s acquisitions failed. For example, it acquired Scientific Atlanta but could not make a quick push into consumer video; the company was then sold to Technicolor.
Mergers between companies of equal size may be the riskiest, according to John, due to factors like differences in entrenched cultures and strategies, and challenges in speed and architectural alignment. He cites the flawed mergers of Alcatel and Lucent, WellFleet and SynOptics, and HP and Compaq as examples in this regard.
Cisco also developed a strategy of “spin-in” – invest in a startup rather than the in-house R&D department to develop a product that Cisco would buy, if the product was successful. This helped with speed and ambition.
“Understanding the cultural and strategic differences of your competitors, customers, peers, and partners is critical to success,” John Chambers explains. Cisco has successfully partnered on “needle-moving projects” with Apple for optimising enterprise networks for iOS devices, and with TCS to evolve customer infrastructure.
Incremental change or tinkering with things is not enough to survive in the digital world, despite the risks involved with disruptive change. “Sometimes, minimising the damage of failure can be as important as achieving success,” John adds.
Calmness during crises helps focus on the disease and not just on symptoms, and avoids giving in to anger, fear or resentment. Managers should stay visible to employees and customers, communicate clearly and consistently about current actions and future states, and drill down to identify possible solutions.
In the case of Cisco during the dotcom crash, the focus was on restructuring the company, consolidating different groups and functions, and reusing software and product components. Long term focus and market downturns can also expose short-term financial risks and internal shortcomings. “Every move you make can have unintended consequences,” John cautions.
During a crisis, companies should go beyond the data to dig into customer issues and market trends to gauge the magnitude of the problem and take corrective action. In the words of GE’s Jack Welch, it is surviving a near-death experience that makes a company great. “To become stronger, you have to be brutal in the addressing the flaws that let you become vulnerable,” John advises.
Top talent can be found internally, via recruiters, or through external acquisitions. Talent requirements vary during phases of growth, shifts to new business models, or downturns. Recruitment decisions should be based on track record, ambition, ability to be a team player and team leader, self-awareness, industry knowledge, communication skills, and customer focus.
For tech firms, the importance of an outstanding head of supply chain and manufacturing is often under-estimated. “Another role that’s often ignored when talking about the senior team is that of the executive assistant,” John highlights. This important role can improve productivity, effectiveness, and overall happiness of the CEO.
The dreams and future potential of the prospective managers should also be factored in, eg. money, chance to develop new skills, opportunity to work on new products, or international career. Even if managers leave the company, care should be taken to ensure they remain part of the extended corporate family.
“Culture is what will make or break a team or a company,” John Chambers explains. It is a deliberate and dynamic process, and goes beyond catchy slogans and cool office design.
Company culture starts at the top, and is seen in values and practices in innovation, ambition, customer focus, employee satisfaction, and market positioning. Employees are like family, says John, citing examples of support given to employees during illnesses and deaths of relatives.
The company’s values are also included at the back of employee badges: Focus intensely on customers. Make innovation happen. Win together. Respect and care for each other. And always do the right thing. These apply to all countries where Cisco operates, John explains.
Startup founders who want to stay close to product development should hire someone else to be CEO as the company grows. That helps focus on their strengths while getting another talented person to handle the broader leadership role, John advises.
At the end of the tenure, the toughest job for CEOs is to replace themselves. The transition should be smooth and successful, and not based only on considerations like loyalty – a mistake many startups make.
III. Connecting with Customers: Shared Success
“The most valuable currency with customers is trust and a track record,” John affirms. Trust is strengthened through standing by customers during their crises. During the economic recession of 2008 when US automakers were in desperate need for credit, Cisco committed to servicing them and extending credit. “Treat their crisis like it’s your own,” he advises.
John Chambers reviewed every critical account in the world every night, via voicemail (voice messages help detect emotions better). Crisis levels were classified into three categories. Direct intervention by the CEO helps reassure customers that they are a priority.
“Treat every customer and every encounter as an opportunity to gather data and learn,” John advises. Companies should help their customers become more productive, save costs, and grow their own businesses.
“You win customers by selling them what they need, not what you want them to buy,” John insists. “If you truly focus on your customers’ success, you can build a relationship for life,” he adds.
Large companies should be on the constant lookout for new technologies, industry innovators, and startups – as well as shifts in customer behaviour. “You can’t plan for a world ahead if you are not investing in imagining it,” John says.
Companies must be open about mistakes and missteps with their customers, and not pretend to be perfect. Showing that you made a mistake but want to help customers fix the problems can win their trust for the long term.
IV. Connected Countries: The Borderless Startup World
A number of countries have also embraced digital technologies for national transformation, such as Israel, Jordan, France, and India, and Cisco has helped them craft digital strategies. John is chairman of the US-India Strategic Partnership Forum for startup growth, and France’s first ambassador of French Tech. “Increasingly, the measure of a great company is its ability to create shared wins for everyone,” he says.
“We live in a world of constant surprises, not just on the technology front, but on the political, social, and business fronts, too,” John observes. Enlightened governments and leaders believe in shared wins and inclusive growth.
“I believe the next wave of innovation will connect and empower people on a scale never before seen, giving everyone a chance to compete,” John enthuses. A growing number of countries are reinventing themselves in the digital age, with new types of training, tax policies, sectoral transformation strategies, and an ecosystem of accelerators and incubators.
John Chambers was laughed at when he predicted three years ago that France would become the startup capital of Europe. Today, the number of startups and amount of invested capital has increased, and entrepreneurial skills are being taught at school level.
Who would have predicted that French startups would account for almost 30 percent of CES 2018 exhibitors in Las Vegas, asks John, or that Chinese VCs would be buying stakes in Indian startups. Today, the speed with which startups are being created around the world is happening at a faster pace than ever seen before. Unfortunately, many investors are only looking at short-term returns, and not at scenarios five or more years into the future.
The digital revolution will transform every company, country, city, car, and career. Digitisation represents “an inflection point like no other in history”, John Chambers predicts. But he also cautions that business and government leaders should not be tone-deaf to the downside of disruption, and help societies deal with the short-term pains to reap the gains in the long run.
During times of change, leaders should not give false hopes or resort to nostalgia; they should create a shared commitment towards handling risk and changing for a better future. There will be losses of jobs on some fronts, increased security challenges, a risk of digital divides, and new ethical concerns.
“There’s no entitlement, not even for Silicon Valley,” John Chambers cautions. “The conditions for entrepreneurship are not limited to Silicon Valley. In fact, I believe Silicon Valley has become somewhat insular and risks getting left behind,” he adds.
Ironically, the US is one of the few developed countries that lacks a national digital strategy or startup plan, John laments. Countries should compete, not retreat; partisan battles lose sight of bigger objectives for growth and inclusion.
Now, the US is not even in the top 10 of the Bloomberg Innovation Index, whereas it was the top country less than 10 years ago. The US accounted for 90 percent of worldwide venture capital investments 20 years ago; the share is now down to 54 per cent.
“We are not reinventing ourselves,” he warns fellow Americans. “Large enterprise companies, in total, aren’t going to create new jobs; 40 percent of them probably won’t exist within a decade,” he further cautions.
The road ahead
“I don’t get nostalgic for the things I’ve already done. None of it ever compares to the excitement of what’s ahead,” John says. “You’re never too young to mentor or too old to start again,” he jokes.
John likes to teach and coach, and after retirement, he founded JC2 Ventures. “By staying close to startups on a global basis, you can see changes in innovation, business models, and new technologies long before others connect the dots,” he explains.
Some of the startups he has invested in include Aspire Food Group (robotic insect farming for next-gen proteins), Sprinklr (pre-emptive marketing using analytics and social media), Dedrone (protection against drone attacks via detection-as-a-service), Pindrop (voice-based authentication), Uniphore (voice-based device protection and customer interaction), OpenGov (cloud-based platform for open data solutions in government), and Bloom Energy (distributed electric grids).
He cites Peter Drucker in this regard: “Entrepreneurship is neither a science nor an art. It is a practice.” Speed, scale and sustainability of startups also call for a process approach or playbook.
“A major change in innovation with speed and scale will occur when world-class enterprise companies partner with startups with leading technology and experience to disrupt new markets,” John predicts. Boeing’s partnership with industrial AI startup SparkCognition is a good example in this regard.
“The goal is not just a startup nation, but a startup world,” urges John, pointing to the need for creative approaches to tackle global problems in pollution, healthcare, education and livelihood.
“What excites me now is the next chapter and the next generation,” John Chambers signs off.