INTRODUCTION

Cisco Systems, Inc. is an American multinational technology conglomerate headquartered in

San Jose, California, in the centre of Silicon Valley. Cisco develops, manufactures and sells
networking hardware, software, telecommunications equipment and other high-technology
services and products. Through its numerous acquired subsidiaries, such as OpenDNS,
WebEx, Jabber and Jasper, Cisco specializes into specific tech markets, such as Internet of
Things (IoT), domain security and energy management. Cisco is incorporated in California.

Cisco Systems was founded in December 1984 by Leonard Bosack and Sandy Lerner, two
Stanford University computer scientists who had been instrumental in connecting computers
at Stanford. They pioneered the concept of a local area network (LAN) being used to connect
geographically disparate computers over a multiprotocol router system. By the time the
company went public in 1990, Cisco had a market capitalization of $224 million. By the end
of the dot-com bubble in the year 2000, Cisco had a more than $500 billion market
capitalization.

Cisco helps seize the opportunities of tomorrow by proving that amazing things can happen
when you connect the unconnected. An integral part of their DNA is creating long-lasting
customer partnerships, working together to identify our customers' needs and provide
solutions that fuel their success.

Cisco has been able to preserve this keen focus on solving business challenges since the
founding in 1984. Len Bosack and his wife Sandy Lerner, both working for Stanford
University, wanted to email each other from their respective offices, but technological
shortcomings did not allow such communication. A technology had to be invented to deal
with disparate local area protocols, and as a result of solving their challenge, the
multiprotocol router was born.
 CREATIVITY AND INNOVATION IN CISCO

Foundation

Just as San Francisco, for which Cisco Systems is named, provides a gateway to the Pacific
Rim, Cisco provides the networking technology that is the gateway to computer-based
communication. This Silicon Valley giant is the worldwide market leader in routing,
switching, unified communications, wireless communication, and security. Creativity and
Innovation is what led to the foundation of Cisco. Cisco was founded in order to enable
communication. In 1984, founders Len Bosack and Sandy Lerner were experimenting at
Stanford University to connect detached networks in two separate buildings on campus. After
running network cables between the two buildings, and connecting them with bridges and
then routers, the two realized that to make the disparate networks talk to each other and share
information, a technology was needed that could handle the different local area protocols. So
Bosack and Lerner invented the multi-protocol router, which they launched in 1986. By 1989,
with only three products and 111 employees, Cisco’s revenues were $27 million.

First Patent

In 1992, Cisco earned its first patent, number 5,088,032, for Interior Gateway Routing
Protocol (IGRP), a method for routing between computer networks. IGRP is a proprietary
routing protocol developed by Cisco to overcome the limitations of the standards-based
protocol, RIP. The 15-hop count limit of RIP was a significant limitation in large networks.
IGRP uses a number of metrics, including bandwidth, delay, hop count, and reliability, to
determine best route. IGRP evolved into EIGRP and was a significant upgrade for most
organizations, performing significantly faster and scaling much better than RIP. IGRP was
the first of many proprietary protocols that improved on the standard

Becoming the fastest

The AGS router was Cisco’s first router, but the Cisco 7000 took routing to another level.
The 7000 was the first true carrier-grade router with forwarding performance of 110,000
packets per second and many features that increased the reliability and availability of routers,
including redundant power, hot swappable line cards, and flash-based memory for easier
software upgrades. The "7K" was a true multi-protocol router. MCI and PacBell were both
early adopters of the 7000, and it became a core component of their Internet strategies.
Cisco Certified Internetworking Engineer Certification, 1993

John Chambers, a VP at the time, was a strong advocate for Cisco to create the industry’s
premier IT certification. In September of 1993, Cisco announced its “Cisco Top Gun”
program. Cisco’s Stuart Biggs became the company’s first Top Gun and had this awesome
leather jacket bestowed upon him. Cisco later changed the name to CCIE, and the rest is
history. The CCIE is considered by most in the industry to be the pinnacle of an engineer’s
career, and its success has long driven Cisco sales, building a huge army of Cisco-certified
engineers around the globe today who are experts in deploying networks using Cisco gear.

From Routers to switches

In 1993, Cisco paid about $90 million for a small switching vendor called Crescendo
Communications. The $90 million was considered by many to be a huge overpayment for a
company that was doing about $5 million per year in revenue. Cisco took the Crescendo
assets and launched the Catalyst 5000 switches. The Catalyst line is by far the best-selling
network product of all time. In addition to the switches, many key individuals joined Cisco
from Crescendo, including Jayshree Ullal, Randy Pond, Prem Jain Mario Mazzola, and Luca
Cafiero.

Cisco Powered Network Program, 1997

The vendor co-marketing program has been the most successful of its kind in the industry.
Initially, CPN was focused on service providers that built specific services using Cisco
infrastructure. For example, service providers earned the “Cisco Powered Network” branding
if 75% of a service’s equipment was from Cisco. I’ve interviewed many service providers
that carry the CPN logo and all of them raved about its effectiveness. The program initially
launched with five service providers: Ameritech, BT, Digix, @Word, and Compuserve
Network Services. An interesting, related fact is that Cisco’s first-ever national brand
campaign was to launch the program. The program has since expanded and is no longer
exclusive to network owners, but it still carries weight with customers.

Going VoIP, 1999

Cisco wasn’t the first vendor to sell VoIP technology, but it did legitimize the market. In late
1998, Cisco acquired Selsius Systems for $145, million kicking off one of the most
phenomenal runs that any business unit has ever had in the IT industry. For about a decade,
Cisco dominated the VoIP market and left a bunch of legacy TDM companies, such as Nortel
and Ericsson, dead in its wake.

TelePresence

Cisco’s TelePresence brought an entirely new experience to enterprise video. Prior to

TelePresence, video was too complicated and generally offered a poor user experience.
Although other solutions, such as HP’s HALO, available prior to TelePresence, Cisco
brought a turnkey solution to market that was dead-simple to use and provided a user
experience that was second to none. Since that launch, Cisco has dominated the immersive
video market.

Converging the technology

When Cisco released its Unified Computing System (UCS), many industry experts thought
Cisco would never succeed in the server market. The key to the company’s success with UCS
is that Cisco wasn’t selling just a server. UCS was the first converged infrastructure solution
in the industry and enables customers to automate many tasks to speed up the provisioning of
data center infrastructure. While the hardware is the sexy stuff people love, UCS Manager
and the service profiles made UCS a game-changing technology. UCS is also a core building
block of Cisco’s VCE joint venture with VMware and EMC, which has proven the value of
converged infrastructure as a core component of cloud computing.

Application Centric Infrastructure, 2013

In 2013, Cisco unveiled its Application Centric Infrastructure (ACI) solution. ACI takes the
concept of UCS and expands it past converged servers and networks. ACI enables the
automation of management tasks across the entire IT stack – from applications through the
network. Like UCS, the software management tools and application network profiles will be
the elements of the ACI solution that eventually separates it from the many other converged
infrastructure solutions that have emerged over the past year.
5G solutions of the Future

Cisco 5G PowerX delivers an open, hyper-programmable architecture that slims down your
multivendor, multidomain network into a sleek, agile, unified system. Cisco has used their
breadth of understanding across multicloud, IP routing, 5G core, service edge, access
networks, IOT, and security to create real value in 5G services. Cisco 5G architecture
delivers traffic engineering for bandwidth management, network control for your
applications, and flexible network topology support for interactive service assurance.

 Connected Network: Turn your network into a mobile-cloud services platform.

Break down network silos, streamline network architecture, and simplify operations.
 Architecture: 5G is about delivering connected experiences from the cloud to the
client over a trusted, open multi-vendor network. Cisco provides services over a
software-driven, open architecture.
 Mobile Edge Computing: Different services and requirements require different edge
computing designs. But one common factor is they all require advanced zero-touch
automation to deploy and maintain this distributed system. Cisco solved the MEC
puzzle through award winning mobile architecture.
 Reducing 5G Deployment Costs: Now there's proof that open vRAN is not only
possible but can be done faster and at lower costs than traditional RAN networks.
Cisco has simplified operations behind the largest open and virtualized mobile
network in the world
 Increased bandwidth: Cisco’s Seamless X-Access Convergence makes it simple to
deliver the bandwidth and reliability you need over simultaneous wireless and
wireline access.
 Cisco Ultra is the cloud-native, next-generation mobile packet core. It provides a
unified platform for service enablement over licensed, unlicensed, and IoT access. 5G
support includes anchoring the new radio, both NSA, full policy, and network slicing
control. This virtualized packet core’s distributed architecture can extend functions
and services as needed, where needed – all the way to the network edge.
 CULTURE THAT FOSTERS INNOVATION

No one doubts that the future belongs to the Internet of Things. From drones to refrigerators,
from massive industrial robots to tiny, implanted medical devices, machines already are
communicating with other machines, sharing data and, without human guidance, accomplishing
ever more sophisticated tasks.

All of this change will require new technologies that enable faster, more secure ways for
machines to share and process data. To keep up, new standards, architectures, and
infrastructures will have to develop at the same pace. The question confronting Cisco and other
companies is how to do that – how to speed the process of innovation, especially as
technological change threatens to upend our current business models.

At Cisco, they are learning to answer these questions through three initiatives designed to
broaden their knowledge base by bringing multiple perspectives together: embracing diversity
within their walls; reaching out across industries; and building partnerships with former (and
current) competitors.

Internal diversity

A 2013 study found that companies with a diverse workforce – both culturally and in terms of
professional experience – “out-innovate and out-perform others. Employees at these companies
are 45% likelier to report that their firm’s market share grew over the previous year and 70%
likelier to report that the firm captured a new market.” This makes intuitive sense (fresh ideas
come from fresh faces), so at Cisco, they’ve tried to bring together people with different
backgrounds, educations, and geographical origins to find new lanes of opportunity.

They find that innovation flows from the dynamic created by putting people with different
backgrounds together; it emerges naturally from the tensions that exist between opposite
requirements. For example, if some players within a team are inclined to be risk averse (say
corporate risk managers) and others are not (an innovation group), incorporating the risk
managers’ input will produce more innovative and viable ideas than if the group had not had to
synthesize opposing viewpoints.
Experts from outside industries

Including experts from other industries – especially very different ones – can offer similar
problem-solving benefits. For example, they recently hired an expert from the high-end watch
industry to help them develop a program for customers in emerging markets. They had some
last-generation inventory that they knew would be an upgrade for some markets that had long
desired our products, but considered their latest products too expensive. Developing new
markets for unsold inventory has become an area of expertise in many luxury product
businesses, so it was natural for us to look to that sector for expertise on this issue.

In this instance, tailoring solutions for customers in specific geographies was new to Cisco.
Doing so – even conceiving of doing so – required thinking from outside our walls.

Partnerships with outside organizations

They believe partnering is one of the best ways to broaden a corporation’s knowledge base. To
advance the development of fog computing technology and architecture, Cisco partnered with
Microsoft, Ericsson, and other leading players, creating the Open Fog Consortium.

In the Open Ledger Project, IBM, Intel, Cisco, and others have joined forces to explore new
business possibilities for blockchain – a dynamic ledger of executed transactions first
developed to record and validate Bitcoin transfers – that could allow anyone to exchange
anything that carries value (stocks, bonds, mortgages, car titles) securely, reliably,
transparently, and automatically. This technology could eliminate expensive middlemen, and
close loopholes that allow traders to game systems.

As the digitization of business continues to disrupt industries on many fronts, an isolated,

internalized approach to innovation is becoming increasingly suboptimal and impractical. At
the same time, the opportunities offered by new technologies, such as the Internet of Things,
are enormous – if they are approached with an expansive strategy that embraces diversity,
crosses industries to partake of external expertise and experience, and recruits new partners.

Innovation Hub
In 2015, Cisco embarked upon a journey to build a culture of innovation across the company.
This effort, named “My Innovation,” encompassed several workshops, awards, competitions,
and resources. One of the biggest drivers of this cultural shift is the Innovation Hub, a one-
stop portal for all things innovation at Cisco. The Innovation Hub has become a thriving
virtual community where employees can participate in innovation events and competitions,
discuss new technologies, and connect with peers and mentors with similar interests. A
dedicated “Hub team” comprised of members from both IT and the Corporate Strategic
Innovation Group designed the Innovation Hub in fall 2016 as a simple prototype that
managed employee involvement in Cisco’s company-wide innovation competition. From
there, the Hub team has engaged in continuous feedback and improvement loops to add
features that attracted and retained users and effectively built an active community. By early
2018, the Innovation Hub had become an all-in-one center for everything innovation-related
at Cisco and was generating the type of spontaneous peer-to-peer interactions that
characterize a culture of innovation. As the Innovation Hub evolves to allow more nuanced
insight and analysis into innovation flows, hot spots, and experts across the organization, it
will enable Cisco to focus on the most valuable innovation experiences and leverage
employees’ passion and strengths to accelerate future innovation.

Startup Cisco

Using a workshop format, Startup//Cisco equips employees with the skills and mindset of a
startup founder. Employees learn and then apply innovation methodologies to accelerate new
projects so they can get to stronger business outcomes faster and with fewer resources.

Participants use design thinking and lean startup innovation principles and techniques to
validate ideas directly with customers. The program takes employees through, gathering
feedback from customers, analysing insights, creating prototypes, and repeating until Cisco
and the customers agree that the solution has been perfected. More than 500 Cisco employees
have participated in Startup//Cisco workshops to date; more than 175 participated in fiscal
year 2018 alone.

Angel Workshop

One of the key lessons from the first Innovate Everywhere Challenge (IEC1) was that
innovation is a collaborative process that requires a strong network of supporters. My
Innovation decided to encourage employees to advise and mentor IEC teams and reward
those who supported teams. It introduced an Angel Workshop to help employees, especially
managers and leaders, develop the skillset needed to identify and nurture innovation.
Real world angel investors teach the angel workshop. Participants learn and then apply
methodologies to evaluate pitches, perform valuations, guide innovation teams, and build a
balanced investment portfolio. These skills are necessary in a large, corporate environment,
as evaluating and investing in early stage innovation differs significantly from managing
traditional product portfolios. By the end of 2018, more than 60 Cisco employees had
participated in an Angel Workshop.

Mentor Network

The Mentor Network, hosted on the Innovation Hub, consists of more than 4,500 Cisco
employees that volunteer to help others in their innovation journey. Any employee can go on
the Innovation Hub to search for the perfect mentor. Users can find mentors by title, interest,
business or technical expertise, and/or geography. Searching for mentors is one of the most
popular features on the Innovation Hub and more than 100 connections are made every year.

Innovate Everywhere Challenge

The Innovate Everywhere Challenge (IEC) is Cisco’s global innovation competition. It is an
annual opportunity to engage all employees to innovate cross-functionally. The IEC follows
startup-like phases – ideate, validate, fund, build – and lasts about nine months (see Figure 4).
It helps employees grow their ideas by providing them the skillset, resources, and visibility
they need. Cisco “Founders” and “Angels” are recognized as vital parts of the IEC. In fiscal
year 2018, more than 500 ideas were submitted to IEC3 and 21% of Cisco’s workforce
participated in the challenge.
 Pitfalls and Potential Risks

Following are the pitfalls and potential risks identified at Cisco:

1. Cisco continues to acquire a large number of companies. While this improves revenue
opportunities, it increases integration risks. Moreover, we also note that the large
acquisitions negatively impact the balance sheet in the form of high level of goodwill,
which totalled $33.61 billion or 37.2% of total assets as of Jan 25, 2020.
Another huge challenge that gets imposed is spreading the culture of innovation that
already exists in the acquired subsidiaries. All this together, impacts the overall efforts
to streamline costs and maximise benefits.

2. Cisco has been forced to offer discounts and deals in response to actions by peers due
to stiff competition from Arista Networks, Juniper, HPE and Huawei, in Ethernet
switch and routermarket. Cisco‘s competitors are revamping their product lines with
faster and power-efficient products. Although the edge business remains strong, the
competitive pressure at the core remains intense and is likely to hurt profitability.
Since they are always under cost pressures, innovation takes a hit.

3. Cisco generates significant portion of revenues from outside the United States (40.4%
of total revenues in fiscal 2019), subjecting the company to exchange rate volatility.
Unfavorable movement in exchange rates of foreign currencies like renminbi, euro,
pound sterling, Costa Rican colon, and yen related to the U.S. dollar can adversely
impact results and undermine its growth potential to some extent. Weakness in service
provider business in China, is a headwind. Moreover, imposition of tariffs owing to
trade war between the United States and China is anticipated to affect growth
prospects. The uncertainty over the recent trade war truce has impacted investors’
confidence and is likely to remain an overhang on the company’s performance.