Cisco CFO Kelly Kramer believes paranoia can be healthy when competing in an age of disruption and innovation
How can you keep ahead of the competition in an age of rapid change and disruptive innovation? Cisco is attempting to do so by investing in innovation, buying strategically, and paying close attention to current and future technology talent needs.
“We never minimize the potential for competition and disruptors,” says Kramer, “so it’s all about constantly having a healthy paranoia to make sure we’re staying abreast of what we call product transitions or market transitions.”
Having steered the company to US$49.2 billion in total revenue to the end of her first full fiscal year in the post, and posting a 4% year on year revenue increase for the first quarter of fiscal year 2016, her approach seems to be working.
“I wanted to see the business continue to grow and to maintain our strategy of driving profitable growth,” says Kramer.
She’s been focusing on three key areas to help drive this growth, despite what she calls “a very tough macro environment” for both the wider industry and the economy more generally.
1. Investing in innovation
Kramer’s “healthy paranoia” drives her to insist innovation dollars are being invested in the right areas. An example of this is Cisco’s dedicated venture fund for supporting start-ups and entrepreneurship.
“We invest in the very, very early stage companies,” says Kramer. “That could be something to do with our existing product lines or it could be something in an area that we are interested in.” The hope is that these will lead to growth down the line – and by getting in early, Cisco is able to keep ahead of the competition.
2. Making strategic acquisitions
Making the right acquisitions can be a quick way to rapidly respond to shifting business environments. By keeping an eye on new, potentially disruptive competitors, and then bringing them into your own organization, you can disrupt rather than be disrupted. Having invested US$70 billion in more than 180 acquisitions, mergers and acquisitions have become a core part of the Cisco growth story.
“It could be anything from a US$2 billion acquisition of a company such as [Wi-Fi start-up] Meraki, or it could be what we call ‘tech and talent’ acquisitions,” says Kramer. “Those might be very small private companies that could have anywhere from five to 30 employees that have a certain expertise in an area of interest… That way we have a lot of different avenues to get in front of the technology trends.”
3. Fighting for digital talent
Kramer is a firm believer in the value of her workforce, and Cisco has no hesitation in investing to develop its future leaders. With a global skills shortage in many key parts of the digital talent landscape, the competition for the best people is fierce. “It is a race to get the best technology talent, the best engineering talent,” Kramer says. “We are fighting with the Facebooks and the Googles of this world.”
This is why Cisco has created a series of internal start-ups to foster entrepreneurial creativity from within – disrupting themselves to drive innovation while developing existing talent and acting as a magnet for ambitious new hires. “We hire someone from the outside, give them a charter and get them to build a team and a plan of what they are going to deliver,” she explains.
Building success for the future
The partnerships, acquisitions and talent development programs the company has in place are all designed to boost the bottom line now, as well act as the foundations of future growth. Existing growth “will continue to benefit from the partnerships or acquisitions that we’ve announced,” says Kramer. “We are aggressively going after these areas where we see growth and we will continue to do that.”
“First and foremost, we will continue driving top and bottom line growth for shareholders and customers,” she says. And to do that, maintaining a little healthy paranoia about the potential for disruption has proved invaluable. By keeping track of the competition, Cisco is always keeping one eye on the future while delivering on the needs of today.