Delta Model: Cisco

1.0 Introduction: The development of The Delta Model has generated a significant amount of research and thinking into the drivers of sustainable profitability for businesses and corporations both from the early efforts that led to the formulation of the core concepts to the considerable amount of follow on research spawned by the publication of this new approach to formulating business strategy. It represents more integrated strategy framework to win in the 21st century globalization war. This assignment will lead us to the exploration and implementation of Delta Model (Figure 1) and Strategy Maps framework in one chosen company, Cisco Inc. as one of the success and consistent fortune 500.

2.0 Company Background: Cisco has been at the heart of many historic changes in technology, and that continues to be true today. Now, at a time when the technology industry is going through a period of dramatic change, company is the market leader in multiple areas, such as routing and switching, unified communications, wireless and security. The company helped catalyze the industry's move toward IP and, now that it is fully underway, the company is at the center of fundamental changes in the way the world communicates Cisco was founded in 1984 by a small group of computer scientists from Stanford University. Since the company's inception, Cisco engineers have been leaders in the development of Internet Protocol (IP)based networking technologies. This tradition of innovation continues with industry-leading products and solutions. Cisco has a shrewd liability to spot this potential in their respective fields and then relentlessly pursue the attainment, consolidation, anti extension of system lock-in. Cisco 1998 had created $100 billion of market value in excess of the debit equity investment, analyst call Cisco as Wall Street darling. Cisco with annual revenues of more than $11 billion. Further, Cisco is pressing aggressively on M&A, their partners, including retaining the talented employees as well as focus on technological innovations.

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Fig-1: Integrated Strategic Framework -The Delta Model Business Improvement Architecture

Examples

Source: Hax, A C, & Wilde, D L II, (2001), ‘The Delta Project: Discovering New Sources of Profitability in A Networked Economy’, Palgrave, New York, P-259

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3.0 Strategic Options - The Triangle Business Model: According to author there are three distinct strategic options that reflect new sources of profitability, best product, total customer solutions, and system lock-in, (Hax & Wilde, 2001). Author believes that a firm owes itself to it customers, they are the ultimate repository of all the firm’s activities. At the heart of management and, certainly, at the heart of strategy, resides the customer. Cisco has to serve the customer in a distinctive way, if company expects to enjoy superior performance. The name of the game is to attract, to satisfy, and to retain the customer. The triangle should capture the essence of how the Cisco competes and serves customers in its relevant marketplace to achieve customer bonding continuum. Further, the emergence of the network economy changing the entire value chain of technology and placing the network squarely at the center of innovation, in addition, Cisco strategic option builds based on proprietary standards positioning as we can see in Fig-2. Fig-2: The Delta Model of Strategic Positioning

Total Customer Solution

Source: Hax, A C, & Wilde, D L II (2001), ‘The Delta Project: Discovering New Sources of Profitability in a Networked Economy’, Palgrave, New York, P-31

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Cisco is the innovators of the data transfer technology through IP (Internet protocol) networking communication, today from ATM (Asynchronous Transfer mode) to satellite communication to Terrestrial communications (Cable TV), is run by IP protocol, this become the industry standard, they are also interoperable of system lock-in operating systems, such as windows Xp, Linux, Unix, Sun Solaris, Symbian Os. Proprietary are at the extreme of the bonding continuum. Cisco represents the fulfillment of the most demanding objectives. In addition, the customer drawn to Cisco product because of extensive network of third party complementors that are design to work with Cisco product. In other words Cisco product fuels the operating systems as a complete product.

4.0 Company Mission & Vision: The guiding principles of Cisco, with a company vision, which is ‘changing the way the world works, lives, plays and learns’. To accomplish this without mission is purposeless, therefore, company mission is ‘to shape the future of the Internet by creating value for Cisco shareholders, customers, partners and employees’. Further, to help keep the company aligned, in 3-5 year goals, and explode those down into one year initiatives. Because staying focused on these initiatives as a team is so important to company success, Cisco corporate goals and initiatives are part of each employee's badge. Cisco can change the world. As we all know, there will be bumps along the way but Cisco have tremendous momentum as a company and together Cisco will leverage both the good times and the tough times to continue be industry leader. With good execution, Cisco will achieve break away strategy and truly change the way people work, live, play and learn - and have fun doing it. (Company website, 2006). Company core competencies are to provide cutting edge customize technology, given the sense of treating every customer and partners individually and satisfying it. Moreover Cisco products are certified hacker’s free product and technological editors choice, this has been sustainable and consistent in Cisco since company was found in 1984, to make this happened Cisco create the sense of utter corporate culture of innovation and team work, they call it ‘Cisco nationalism with different races’. Furthermore, the Internet Revolution is about knowledge and how that knowledge is applied. It's about economies of skill and empowerment. At Cisco, empowerment is part of the culture, and Cisco believes in empowering down to all levels of the organization. However, empowerment only works if you have two things - if you know where we're going, and you have the data to make good decisions (Fahey, 1999). Further, sound features of Cisco’s corporate culture as followed. in (fig-3). iv

Fig-3 Cisco Culture Sustainability Maintaining Cisco's culture is one of the most important areas of focus for Cisco leaders in the organization and the one that company employees, personally, feel passionately about. It is Cisco unwavering focus on customer success, quality team and stretch goals that has made Cisco what it is today - the Internet technology and business leader in the industry. To keep culture front of mind for everyone in the organization. Quality Team Maintaining the quality of the team is critical to Cisco's success. Cisco must continue to recruit the top 5 to 10 percent in the industry and manage out the bottom 5 percent. Cisco need to do an even better job than firm have in the past of managing performance. A strong, high quality team will help Cisco maintain the leadership position and ensure that Cisco remains one of the best places to work. No Technology Religion Time and time again, companies fall in love with technology and ask their customers to use it. But that's not always best for customers. Because customer satisfaction is our number one priority therefore, Cisco employees to actively listen, share and explore to ensure to provide the best solutions to meet the customers' needs. Moving forward, this will be one of our highest priorities. Stretch Goals/Continuous Improvement (Cisco CEO, John T.Chambers) If I ask you to do something 10% better, what are you going to do? You're going to work a little harder. If I ask you to do something 50% better, you're going to have to do it differently. I believe in setting stretch goals that always make us do things differently, and get 10 times the results. The belief in stretch goals is founded on a belief that to be the very best, you must continually strive to work smarter and achieve increasing levels of efficiency and productivity. Teamwork Teamwork brings good people and good skills together in ways that help Cisco continue raising success. For the speed at which Cisco works, and will continue to work to maintain the leadership position, teamwork is critical. But as with everything we do, there's always room for improvement especially in this area. (John T.Chambers, Remarks, I have some teams who are great at teamwork, and others who need to improve. Those teams who work well across the company will be rewarded). Fun One of the reasons employees stay at a company is because they are working for a higher purpose. Cisco Employees are excited to come to work every day because they believe we have a great team that is truly going to help change the way the world works, lives, plays, and learns. As we build our company to last, (Chambers, I want Cisco to be the place where you want to retire, and one day will tell your grandchildren about. So let's work together as a team, and have fun doing it). Trust/Integrity/Giving Back Cisco was founded in an environment of open communication, empowerment, integrity and trust. These values remain at the forefront of company culture and business decisions. Organization, must maintain the commitment to these values and continue building a culture that understands what is acceptable and what is not. (Chambers, We will never compromise on issues of integrity. My goal is to continue promoting a culture that not only produces results but also ensures that Cisco is recognized as one of the most generous companies in the world. For years, we have given to communities around the world on a local, national and international level to help people learn to help themselves). Drive Change Cisco, must measure against both companies internal goals and against how well that execute on the opportunities in the market. One of the keys to Cisco success has been the ability to listen to the customers and react quickly and effectively to meet their needs. Only by continuing to drive change in the industry.

4.1 Industry Structure: Michael Porter postulates that there are five forces (Fig-4, following page) those typical shape industry structures, which are intensity of rivalry among current competitors in the industry, threat of new entrants, threat of substitutes, power of suppliers, and power of customers Fig-4: Porter’s Five Forces

Competitive Forces

Analysis v

The Rivalry among Existing Firms

Threat of New Entrants

Bargaining Power of Buyers

Threat of Substitute Product or Service

The main fierce rival of Cisco is Nortel connectivity penetrating aggressively to south east Asia market, however Nortel is focusing more to VOIP (Voice over internet protocol) and providing the switching base phone to companies, but since Cisco is also providing customize VOIP technology, it become potential rival for Cisco. Huawei Technology a Chinese base company aggressively pursuing the market in Asia and Europe region, marketing Routers and switches half the price of Cisco, making Huawei a ultimate rival for Cisco. The Router industry is considered as a capital-intensive business, which required a large sum of money to operate efficiently and effectively. Thus, it implies that the barrier to entry in this industry is high. However, since Cisco successfully create proprietary standard in market. The new entrants potentially flourish copy Cisco formula and enter the industry. Example of new entrants is Huawei Technology. Imitating Cisco technology and market it as if their own. As number of companies grows the market become saturated, Cisco have to face buyer bargain power, and particularly low end products like Lan and Wan , small home switches, customer tend to be price sensitive and certainly want to look for cheapest price available in market, the underlying reason might be that customer generally are not well technological versed or in other words they are end users, particularly Asians where bargain power of buyers are high , they will go for price not the quality in the first place. At the moment, the customers are less potential to switching to other brands, because Cisco is still the market leader and innovator of WLAN, MAN, LAN, AP, Routers, Switches, Hubs, Uplinks, and Bridges. However, linked to others competitive forces, rivalry and threat of new entrants, the buyers will high potentially switching to others alternatives, except Cisco is strongly differentiated the product and service, which is already, began diversifying. Until now there is highly unlikely that Cisco being substituted to other product, however substituted services can be questionable, like Huawei and Nortel connectivity are pressing hard for total customer solution strategic model, there fore Cisco have to follow the pursuit and provide and design and strategic model based of customer needs and provide the individualized customer solutions, this will give Cisco as leading edge from other companies that they already are the innovator with customer services , a mix of best product with total customer solutions. Cisco do in-house supply activity, however, Cisco also have suppliers like Intel for special product IC (Integrated circuits), therefore Cisco have to maintain good relationship with Intel and continue to buy components from Intel, because there are only two companies exist making computer and networking components (AMD) and (Intel), the bargain power of suppliers are greater.

Bargaining Power of Suppliers

In 5 years India will also manufacture IC’s for computer and network components, as if their own product, therefore, Cisco has to keep an eye on this development as well for other external factors, such as market trends, pricing, and competition. Since Cisco does Most of supply chain supply activity in-house, the company has to maintain the strong corporate culture and retain the loyalty from employees, retention of employees become major focus of their redefining strategy, hence Cisco have to offer share options and compensatory package to employees. Thus, Cisco reliance to others will be less, which also the edge to other companies.

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In the early 1980’s, Stanford University had accumulated many separate computer networks, each using different machines and different electronic languages. Leonard Bosack and Sandra Lerner with its brilliant innovation, they manage to hook-up those computers in one platform to connect the computers (Router), and saw the opportunity and realizing that interoperable router might have commercial value, which help formed a company name Cisco. Further, in the 80’s there were hardly any competitors. Cisco went to public in 1990 with annual sales of $70 Million, by 2000 Cisco evolved as dominant supplier of routers, switches, uplinks and hubs with annual sales excess of $19 billion, no debt and a return on invested capital of around 22% (Hill and Jones, 2004). When Cisco becomes a mature router industry, the competition was almost non-existent. Further, company success had significantly changed the dynamics of the router commerce. Cisco became the pioneer of router technology. However, its success greatly intensified the need of other companies to compete and companies begin to emerge mainly Lucent Technology, Huawei Technology, Nortel Connectivity (Fig-5) and penetrating the market, as potential threat , the companies was start selling their product with same Cisco invented IP protocols, as low cost products. Bargain power of buyers starting to take their toll and threat of substitute of product became ultimate for Cisco. Cisco initiates to comprehend their strategy and redefining their model strategies with their market need and dynamics of the company to change. Fig-5 Main Competitors in Network Industry No

Company

Product

1

Lucent Technology

2

Huawei Technology

3

Gateway

4

DEC

Routers

5

IBM

Switches

6

Netgear

Routers

7

Juniper

Access Point

8

Nortel and 3COM

9

Hp

Routers, uplink Routers, Hubs, Uplinks, Switches Access Point , Bridges

Routers, Hubs, Uplinks, Switches, Access points, OC3 Routers, Blue tooth

Technology Routers and Switches Tl base 10/100 Mbps Lan management Cat3,5,5e Routers and Switches Tl base 10/100 Mbps Lan management Cat3,5,5e Routers and Switches Tl base 10/100 Mbps Lan management Cat3,5,5e Routers and Switches Tl base 10/100 Mbps Lan management Cat3,5,5e Routers and Switches Tl base 10/100 Mbps Lan management Cat3,5,5e Routers and Switches Tl base 10/100 Mbps Lan management Cat3,5,5e Routers and Switches Tl base 10/100 Mbps Lan management Cat3,5,5e, Access points: 1.2 GHz Ap Routers and Switches Tl base 10/100 Mbps Lan management Cat3, 5,5e, Access points: 1.2 GHz Ap, optical carrier 3 to 12 (Fiber Optics). Routers and Switches Tl base 10/100 Mbps Lan management Cat3,5,5e

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Cisco’s showcase product is the routers, where they dominate exchange customers and partners use Cisco router so that they can communicate more reliably with the other routes that pervasively occupy the nodes of the internet backbone. Further (See fig-6). Cisco identifies its revenues as coming from 5 sectors, defined below. Revenue in FY05: Fig-6 Product statement percentage wise Product Routers Switches Advance Technologies IP telephony, home networking, optical Networking, security, storage networking, wireless Other’s, (network management software, access products excluding wireless LAN, other miscellaneous services)

Percentage 41 % 25% 20% 14%

Source: Cisco (2006), ‘Company Website’ Viewed at 15/0/06 , www.cisco.com/index.html/company_fy06_fy_05%u20.pdf

Fig-8 Cisco SWOT Analysis Cisco Opportunities

Cisco Strengths

The company is positioned well overall, as IP-based networks that form the backbone of the Internet expand and drive productivity. One of the key concepts of networking is Metcalf's Law, which says that the value of the network equals the SQUARE of the number of users (Boyd, 2003).

Financial strength: the company is debt-free and has about $21 billion cash in the bank. It is generating at least $4 billion per year in free cash flow (FY05) and is anticipated to generate $5 billion in FY2006. Not just does it give the company the ability to fund critical areas such as R&D or marketing, but it gives it strength to acquire technology with lower venture capital funding in the market. It also enabled the company to buy back $2 billion in common stock during FYQ5. (Strategic paper, 2005).

Howard Charney, Company employee in a presentation to Korean customers of Cisco, notes that U.S. non-farm productivity has been growing at an average rate of 3% per year since 1995 (when the Internet and browsers became widely used) -- more than double the 1.4% of the previous 20 years. As India grows to be informational super power, as Indian firms business grows Cisco product pose great opportunity, according to iQ magazine ‘Businesses in India between 50 to 999 employees spent more than $2.9 Billion on information technology products and their services in 2005, (iQ, 2005). China is also a immense market place for Cisco, with FDI well over $51 billion annually and every major company is gearing to china, companies like GE, Ford, BMW, EMC, the list goes on, and all MNC needs an cost effective communication and network solutions. Which Cisco can certainly provide their proprietary standard product and services. Cisco Just Sign the MOU with number of countries including Pakistan, $5.6 billion project which help maintain CNIC (Computer

Core competency (TCP/IP) Transfer control protocol / Internet protocol: Cisco started out as a bridge/router company, basically providing switches for networks. It built its core competencies in the late 80s/early 90s as token ring/Ethernet really gave way to TCP/IP-over-Ethernet (some might say TCP/IP over ANY transport). Cisco's core customer base has been the early adopters of TCP/IP (education and government), as well as large corporations with extensive networks. Flatter management, shared vision/ideas employee culture, camaraderie and informality of Cisco culture that guided positively the behavior of employees. Successfully in expand the market into far flung of Asian continent regional headquarter in Malaysia. Cisco sought an acquisition with Linksys, the company provides products largely sold through retail to small businesses and homes

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National Card) and MRP (Machine readable passports) with (NADRA (National authority of Data base and Registration Authenticity)) (Pakistan Economist,2006). The company itself is seeking to identify 12 advanced technologies that could generate $1 billion per year if markets develop. According to CEO Chambers, six have been identified and are in the Advanced Technology revenue group (IP telephony, home networking, optical networking, security, storage networking, wireless). Asian Crises during 1997, companies were pulling from Asia, however Cisco were developing their strategic alliance with number of local companies specially in Singapore and Malaysia, hence after though times Cisco built image of loyalty and brand among Asian Countries, present an opportunity to become top technological MNC in Asian countries.

Cisco Weaknesses As is often the case, strengths are also potential weaknesses. The high gross margins are not believed to be sustainable, even by management. With the acquisition of Linksys, average gross margins declined by 1% because consumer products typically have gross margins in the 30-40% range (Boyd,2003). Analyst Alex Henderson is among the analysts who fear Dell's entry into this business, using low-cost off-the-shelf components: (ZD/NET, 2000)

Cisco Threats: China counterfeit and particularly Huawei technology as violator of Cisco patents (Cisco Vs Huawei- case is still underway at international courts) , pose great danger, Cisco in china is facing some immense challenges, China internet users are growing to 5% annually, therefore , This untapped market is filled by counterfeit network products and software’s. China is not alone in this inadequate intellectual property protection other Asian countries are following this pattern.

Short-term, spending on IT infrastructure continues to suffer. Bookto-bill for the most-recent quarter remained below, Cisco noted during the earnings call that customers often say, "I wish my business was as good as the economic numbers indicate."

Uncertain global economy , variability of revenues

The company has done some vertical integration, including purchasing chip-maker Seagull Semiconductor in 2000, but is reliant on outside vendors who may be capacity-limited during periods of high demand.

Potential acquisition of Juniper by a major strategic partner, such as IBM., presents clear threat to Cisco Juniper Networks, which outsourcers all of its manufacturing, (in contrast to Cisco), is able to build a lower-cost operating model, particularly in the high-speed network arena.

Product gross margins may not be sustainable other factors include Turmoil among the ISPs. Including increased competition may weaken their ability to fund capital equipment spending

Low-cost hardware entries in the Wireless LAN market further eroding Linksys margins. Continued sluggish spending in IT infrastructure. Delays in development of new market areas, such as voice-over-IP, which has been delayed in implementation due to regulatory, product and logistical issues.

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5.0 Business Strategic Agenda: 5.1 Cisco Financial Objectives. 

To increase net profit expected to minimum 20%.



Keep maintaining the sales growth of minimum 30 % annually with increase in sales volume to 40%.



Keep maintaining the highest profit margins in the industry, but improve on yield and load factor at minimum 2%.



To increase earnings per share up to 5%.

5.2 Cisco Strategic Objectives: • • • •

Lead Cisco entry into key market. Invest in strategic technologies and partners. Partner with business units – a strategic advisor Talent Management.

Source: Scheinman, D (2004), ‘Corporate Development at Cisco’ Senior Vice President, Dan Scheinman Viewed at 14/07/06 http://eco.cisco1.com/login/insight/Corporate_development_at_cisco.

•

Evaluating the Options

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Source: Scheinman, D (2004), ‘Corporate Development at Cisco’ Senior Vice President, Dan Scheinman Viewed at 14/07/06 http://eco.cisco1.com/login/insight/Corporate_development_at_cisco.

• Acquisition Strategy:

Source: Scheinman, D (2004), ‘Corporate Development at Cisco’ Senior Vice President, Dan Scheinman Viewed at 14/07/06 http://eco.cisco1.com/login/insight/Corporate_development_at_cisco.

6.0 Cisco Strategic Agenda Strategic Thrust Supported by : • Business Segmentation •The Triangle •The Mission Statement

Organizational Structure Assignment of Responsibilities and Authorities

Business Processes Detecting activities that cut across organizational units requiring horizontal coordination

Performance Performance indicators; time-driven events

Source: Hax, A C, & Wilde, D L II (2001), ‘The Delta Project: Discovering New Sources of Profitability in A Networked Economy’, Palgrave, New York.

Strategic agenda is the expansion of mission statement, whereby their key objective lies in their talent management and employee retention strategic management. Furthermore, Cisco competes in a dynamic industry where technologies, products and markets are in a continuous state of change. It thus has to develop a talent management programme to grow and develop its key employees in globally and successfully manage and run the businesses. Cisco develops and grooms in-house talent to ensure continuity in its key business lines, stretches their potential through assignments and task forces, as well xi

as put them through a rigorous training programme to hone and develop their skill levels. Furthermore, Cisco itself has followed an aggressive growth-by-acquisition strategy, gobbling up small technology outfits that provide superlative solutions in the product-market areas in which it seeks future dominance. Rather than waste valuable time developing in-house solutions in all areas, Cisco selectively acquires technology-rich companies that can then be supplemented with its extensive and sophisticated marketing and support network. Although the acquisition costs to Cisco might not be significant on a per-deal basis, speedy implementation and integration of these deals within the Cisco framework increase the chances of non-linear returns in attractive product-markets. In addition, Cisco is an active partner of large players like Microsoft, EDS, Peoplesoft, HP, and many other industry leaders on projects of joint strategic interest and importance. These projects typically involve more substantial R&D investment and aim to avoid expensive duplication through the development of mutually acceptable and industry standards. Thus, Cisco plays both ends of the spectrum, enabling it to chart and push the broad vision for an emerging industry, and also carry out detailed implementation in specific solution areas. Its critical competence therefore is in bringing new technologies to market in an extremely short time-span, through collaborative R&D, or the acquisition of R&D. While most companies immediately cut costs and people from newly acquired company, Cisco adheres to what it calls the “Mario rule”- named after SVP Mario Mazzola, CEO of Crescendo when it bought by Cisco and Mario remain a CEO shows that Cisco care about talented employee as their organizational tangible strategic assets, and to create a culture of innovation, ideas and passion of Cisco boundary less nationalism. (Besanko and Shanley, 2000).Fig-9 describe Cisco Organizational process M&A Framework Fig-9 M&A Framework Organizational Process es M&A Framewor k Strategy

Strategy

Strategic thrust of The firm

Strategic thrust of the acquired company

Processes& values

Resources

Resources

Normative claims

Processes & values Normative claims

Conflictory, creative process Strategy

New Strategic Thrust

Resources

2003

Processes & values

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Source: Penning J, M, (2003), ‘Framework of Strategic Thrust (Product-Market Focus), with hardware levers such as structure, control and incentive systems, and software such as people mix and culture’ Viewed at 18/07/06 http://www-anagement.wharton.upenn.edu/pennings/coursedocuments/SMI/SMI(Class%207)HermesandCISCO.ppt#13

M&A are seen differently by Cisco they not just merely acquire company to speed growth or swell market share. They routinely employ acquisitions intellectual assets and next-generation products. “Most people forget that in high-tech acquisition, you really acquiring only people” say Cisco CEO Chamber. “That’s why so many of them fail. At what we pay, $500,000 to $2 Million an employee, we are not acquiring current market share. We are acquiring futures”. (Company website, 2006). For Cisco it is important to know what business model it generated for every strategic thrust. Ultimately, each individual of strategic thrust has to be properly monitored with performance indicator. All the strategic agenda process shows in following fig-10. Fig-10 Cisco Strategic Agenda Process Organizational Units

Key 1. Key role in formulation and implementation 2. Important role of support and concurrence

1 Identifies ‘Champion’, who takes leadership for strategic execution

B. Business Model OE. Operational Effectiveness CT. Customer targeting I. Innovation

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7.0 Adaptive Process Trough its business processes, Cisco needs to develop flexibility and responsiveness to the everchanging business environment. The adaptive process (fig-11) provides the framework with its critical process: Operational effectiveness, customer targeting and innovation in the mechanism of adapt to environment. Fig-11: The Adaptive Process: Linkage Strategy with Execution Business Model

Source: Hax, A C, & Wilde, D L II, (2001), ‘The Delta Project: Discovering New Sources of Profitability in A Networked Economy’, Palgrave, New York, P-259

Innovation

Operational Effectiveness

Customer Targeting

7.1 Operational Effectiveness Cisco has been an innovator company, this image has enabled the company to reap major efficiency gains, while providing its customers with superior point-of-sales and after-sales services and support. Cisco was one of the first companies to move much of its sales effort onto the internet, the company began to experiment with online sales. It design and develop the program to walk customers through out the process of ordering equipment online. The critical feature of this program helps customers to order exactly the right mix of equipment, thereby avoiding any ordering mistakes and delivery process is 24/7 365 a days with swift and responsive manner. Therefore, Operational effectiveness strategy also plays important role to support infrastructure and efficiency for customer access using IT innovation. Since Cisco run their all core operations in-house, company needs to focus on product quality as well, creating an environment and trained employees as future enablers. Since Cisco, using internet on-line system rather than third parties such as network retailers and whole sellers, they also established new system, which is also interrelated with customer targeting strategy, such as solution technology system. It consist of two internal programs, EP (Enterprise Marketing) and CP (Commercial Marketing), where, CP enable Cisco to B2C consumers and EP enables B2B customers as partners. Most of B2C business process handles by BPO (Business processing outsourcing) companies, In Malaysia, (Teledirect Telecommerce), xiv

a Singapore base outsourcing company support’s, distribute and sales over internet and telemarketing as awareness programme of Cisco’s B2C customer products, such and home and small office routers, hubs, LAN (Local areas network), WAN (Wide area network) and WLAN (Wireless Local area network) switches. However Cisco provide services and after sales services to B2C customers. Thus, it helps streamlining the Cisco’s floated operation handling. Ultimately, Cisco can put more time and money to their future product innovation strategy and generate more revenue from others marketing strategies, rallying around from efficient operation system.

7.2 Customer Targeting: Quality and performance are judged by customers. Thus, Cisco must take into account all product and service features and characteristics that contribute value to customers and lead to customer satisfaction, preference, referral and loyalty. Being customer driven has both current and future components and understanding of today’s customer desires and anticipating future customer desires and marketplace offerings. (Kaplan & Norton, 2004). Further, value and satisfactions may be influenced by many factors throughout the customer’s overall purchase, ownership, and service experiences. These factors include the company’s relationship with customers that help build trust, confidence, and loyalty. In this model, strategic direction is not formed by an insular group of top-executives, but by the companies leading customers. It’s as outside-in approach as apposed to inside-out. In Cisco the customer is the strategy. (Thomas, 2004). Cisco, address not only the product and service characteristics that meet basic customer requirements, but also include features and characteristics that differentiate them from competing offerings. Such differentiation may be based upon new or modified offerings, combinations of product and service offerings, customization of offerings, rapid response and special relationships. In Cisco’s customers are their strategic partners. Cisco is eager to make partners Succeufull, for example ISP’s (internet service providers) to provide them cutting edge solutions and undeniable future technology with highly customize technical security features, a good example can be ISP in Malaysia Jaring Sdn Bhd, Cisco provide solutions product as well as knowledge of the product, including training program which cost Cisco millions. Jaring is now sole provider of optical carrier12 (OC12), tracerouting of ATM network in Malaysian banks such as Public bank and www.maybank2u.com. Boeing is also a good example of Cisco strategic customer targeting. Boeing informed Cisco that their future network needs were unlikely to be satisfied. Cisco quickly responds to solve the problem, in very short span of period, Cisco develop the customize switch access points to solve the Boeing problem, which require acquisition with xv

Crescendo Communication. Cisco craft the customer value and highly satisfy the company, Boeing as loyal customer only deal with Cisco in big future generation projects, like radio routing and from flight to control room IP protocol, for boeing this innovation is cost effective, saves $2.8 billion a year. (iQ, 2005). Out of all major partners, Indofood is also a strategic partner of Cisco, Indofood own the world’s biggest floor mill in Bogasari. Recently company’s entire network was under attack by crackers and hackers who manage to penetrate the main server of Indofood using rouge modulators de-modulators, (Un-detectable), and it was Cisco who inform Indofood that the main server of company was under attacked, a routinely maintenance of Cisco, Indonesia employees, Cisco again quickly respond and provide Indofood a PiX firewall technology, a combination of both hardware and software which facilitate Indofood network as self detector, a highly customize artificial intelligent firewall, which can detect every in-bound and outbound data which transfer through network and filter it automatically and logged it to the database and e-mail every workstation of Indofood or in other words PiX firewall runs under less monitoring by company employees.

7.3 Innovation To be outstanding and adaptive in innovation as Cisco’s core competencies, company must drive their value as future with their ingenious marketed as well as customized products, innovation comes with people therefore innovation is directly proportional to innovation, thus, facilitating talent management programs for talent attraction and retention. This remains an ever-present and essential concern for Cisco. In addition it’s increasingly vital to ensure total talent commitment. Aligning the individual's expectation to the organization’s desired result increases talent involvement and enables them to thrive fruitfully. Hence, Cisco, must be adaptive and Aligning Cisco’s business strategy with talent management, including, Cisco must outlining various processes used to identify talent such as CCNA, CCNP and CCNI , Cisco certification which would be the key essence of Cisco’s talent management model, to be adaptive Cisco must accelerate the development programmes to build up talent.

To interconnect the innovation adaptive strategy with customer targeting, a good example would be the partnership between Cisco and Microsoft Inc. which resulted in a new technology with embracing adaptive innovation to make network more intelligent. The mix product software (design in C++ xvi

language) and hardware (Cisco router), lets network knows immediately a user’s identify and location and to respond differently to each one accordingly. This innovative mindset of Cisco as well as the strategic partnership with Microsoft allows both companies to expand this market together more rapidly. This shows vis-à-vis novelty of adaptive strategy and complementing Microsoft network platform to handle the data of Apple and NetWare operating systems in one platform and Cisco router capability to connect different operating systems with their high speed data transfer mode.

8.0 Strategic Map: Using the Kaplan and Norton’s Strategic Maps framework to analyze how well Cisco strategies and actions linked to product innovation and product leadership. By utilizing the strategy maps, Cisco xvii

business strategy will be evaluated from four different perspectives: financial, customers, internal processes, and learning and growth perspectives and all of these perspectives are interrelated to one another. This Strategy Map of Cisco is a visual representation of the cause-and-effect relationships among the components of an organization’s strategy, is as big an insight to executives as the value proposition including outstanding performance. The Integrated Strategy Map of Cisco organization shows in fig-12. Fig-12 Strategic Map of Cisco Long-Term Shareholder Value Revenue Growth Strategy

Productivity Strategy Financial Perspective Lower Cost of entry level products

Revenues from third party Access to customers Complementors

End-user customers Offer broad selection and convenient access Manage Operations

Manage Customer Relationship Create Awareness

Provide service and benefit to complementors

Provide capacity for proprietary product and service

Influence switching costs of existing and potential customers

Complementors investment in proprietary products Attract retain new complementaors

Develop Skill that Enhance the proprietary product and standard , CCNA, CCNP, CCIE

Offer easy to use platform and standard

Innovation Develop & enhance Proprietary standard Lower potential customers switching cost

Increase breadth application of standard Improve functionality while maintaining backward compatibility

Informational Capital

Human Capital

Learning and Growth Perspective

Provide Convinient distribution channel

Provide innovation on a stable platform

Manage Complementors

Reliable Access and easy to use

Internal Perspective

Provide a widely used standard

Re du c e n ew c c u s tom e r s ea r c h c o s t

Customer Perspective

Revenues from secondary prodcut services

Revenues from new customers

Expand knowledge of customer behavior

Provide Convinent platform for customers and complementaros

Provide Large customer bees Manage Social and Regulatory processes Defend Proprietary Position , IP Innovator Expand use of Standard Communications , through Govt licensing

Organization Capital Deliver benefit to customers and Complementors

Source: Kaplan. R, S & Norton. D, P, (2004), ‘Strategy Maps: Converting Intangible Assets into Tangible Outcomes’, Harvard Business School, Boston.

8.1 Aggregate and Granular Metrics: Aggregate metrics is the overall scorecard of business performance, turn our attention to the outputs as the key indicators of success for the business, known as granular metrics. (Hax & Wilde, 2001), Cisco xviii

emphasizes on Acquiring the company with more or less similar to Cisco corporate culture of innovation , providing customize service quality to customer (Partners) and product leadership company wants to be first-to-market with their innovation and enhanced features and functionalities of the products, gain the proprietor-ship position. By being first, they can command high prices from early adopters who most value the unique functionality of the products. Cisco also capture the high market share in situation characterized by large switching costs or that, in both case as company’s credibility can be enabled to defend their first-mover advantage without price cutting. However many dot-com fails of this because of this first mover advantage. The classic example is wal-mart going e-sales, fails to recognize the customer needs in retailing sector. eBay although its business model is successful but there is big disadvantage of this model, such as customers who choose to buy or sell products on an auction service on eBay loose access to product. Cisco is the same case of this disadvantage, particularly in Asian countries, because their mindset is to touch and feel the product. Therefore, this skeptical Asian market, Cisco would try to plug in Acquisition with local companies for convenient distribution channel strategy and formulate fresh strategic thrust and try to understand the culture of the Asian countries as how they react when it comes to buying the high end products. Furthermore, Cisco must develop the talent management program to develop employee skill, and relate with performance management as companies performance review is based on MBO (management by object) by individual employees. Thus, SHRM plays pivtol role for Cisco growth. Cisco has cross-functional team and they put a performance review committee for collective strategic thrust. Cisco as complementors provide a key source of sustainability for system lock-in, by providing customize products and services that require customers and partners to use the company’s proprietary product and standard. To successed in implementing the strategy, Cisco must develop a capability to influence the customers and lay network industry standards through their unequivocal innovation means in network business that drive the truly works with Cisco way. Furthermore, to create awareness, Cisco must offer their proprietary products by offering networking supporting equipment such as routers, and switches to college and elementary schools. Young people, who would be most comfortable with the technology became familiar with Cisco’s product and then selected them for use in their jobs after graduation. Cisco also generating talent as well as awareness from the early years of young graduates.

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Cisco must protect its proprietary precut from imitation and use by competitors and from unauthorized use by customer, complementors and suppliers. Therefore, Cisco require strong legal protection to prevent competitors from copying the product and Cisco’s core technology, and construct the mass programme awareness to customer not using imitated products, through community reach bulletin. Cisco must robustly protect and enforce the uniqueness it offers so that Cisco can continue enjoy the benefits from successful proprietorship standard. Further, Cisco must enforce contracts and penalize violators to ensure that customers, partners do not deviate from the violate the rule of exchange. To help curb this problem Cisco must innovate the software and coding which is very difficult to reproduce, as they done that in the past and certainly Cisco can do it now. Cisco Corporate culture is highly customer and complementor- centric. Cisco key to success is providing exceptional services responsiveness so that the customers and complementors always perceive that a switch to an alternative provider would be fraught with uncertainties, create a loyalty and retention of customer. Further, Cisco culture should be persistent for all the employees.

8.2 Experimentation and feedback: The experiment and feedback is the process of the generating tasks to test the assumptions and learn about the market (Hax & Wilde, 2001). In network industry it relate with innovating the products and market it and try to build and proprietorship or complementing the system lock in product as their core technologies, and also market reaction and indicators of the product, the easiest way is gallop poll. Conducting regular customer opinion surveys to monitor the quality of its product/services and write any feedback in guest support of Cisco website. The survey result will analyzed by the key personnel in the organization. In addition, the market research department also conducts regular focus group studies to predict future customer requirement for service quality improvement based on its customer feedback. Moreover, to supplement the customer feedback, Cisco must focus on product reliability and trying to make it better product developmental customization strategy, and thus to deliver benefit to customer and complementors Cisco must expand knowledge and customer behavior, develop customer skills and tools to support, in order to enhance the proprietary standards to customers and completers and augment the certifications program through procurement center such as CCNA.( Cisco certification Network Administration) xx

CCNP (Cisco certification Network Protocols) and CCIE (Cisco certification Internet experts), and hire as Cisco certified managers.

9.0 Conclusion: In talent hungry Silicon Valley, Cisco must measures the success of every acquisition first by employee retention, then by new product development, and finally ROI. The company has been phenomenally successful at holding onto the intellectual assets it buys, Cisco overall turnover among acquired employees is just 3% a year globally (Robinson and Pearce, 2005). Furthermore, Cisco must focus on beyond the box strategies to improve a company’s products, services, and processes and create new value for the company’s stakeholders and creating the intangible value perspective among customer, in order to attract satisfy and retain, including company has to sustain their proprietor standards, while digging more how to maintain closer relationship with its customer ‘Changing the way the world works, lives, plays and learns’, to accomplish companies vision, Cisco’s Innovation capability is important for key product and service processes and for support processes. Cisco must structure in such a way that innovation becomes part of the culture and daily work. To comprehend all this fundamentals of Cisco and preferring the Delta Model which was developed to fulfill the today’s networked complex environment puzzle with putting all the pieces of strategic options, comprehensive execution process, metrics, and adaptations for deep-seated answer that emphasize on “Customer Bonding”. “All I’ve done since I got here is focus on one word innovation.” – CEO Cisco John T.Chambers.

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