Cisco Systems:

Acquiring and Retaining Talent in Hypercompetitive

Markets

Presented by: Lin Yi 13 - Feb - 2013

Agenda ¡  Background

¡  Three Mysteries of Cisco’s Success

¡ Cisco’s Strategy

¡  The Cisco Way of Acquisitions

¡  Acquisition Success Factors

¡  Values at Cisco

¡  The Cisco Way of Management

¡  Lessons Learnt

Background ¡  1984: Founded by a couple at Stanford University

¡  1990: Went public

¡  1999: Ranked 24th on Fortune’s list of “100 Best Companies to Work for in America”

Ø  More than 26,000 employees in over 54 countries around the world

¡  2000: $12 billion high-tech company; fastest-growing company of its size in history, faster even than Microsoft, with a market capitalization of over $200 billion; ranked 4th on Fortune’s list of America’s most admired companies;

Ø  Voluntary attrition rate of 8% - extraordinary in the Silicon Valley

Background (cont’d)

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Three Mysteries of Cisco’s Success

How does Cisco manage to succeed despite constantly focusing on different technologies, products and markets?

How does Cisco keep up when technology is always changing, intellectual capital is scarce, and competition from rivals is brutal?

While most mergers are failures, why is it that Cisco has succeeded and expanded through frequent mergers & acquisitions (M&As) over the years?

Cisco’s Strategy ¡  It does not have a technology religion – it refuses to take a

rigid approach that focuses on one technology, and impose it on customers as the only answer

¡  Instead, its philosophy is to listen to customers’ requests, monitor technological advancements and offer clients a wide range of solutions from which to choose

¡  One of Cisco’s core strategies for growth is acquisitions, and one of the primary purposes for acquisitions is for the engineering talent

The Cisco Way of Acquisitions

¡ From 1993 - 1999, Cisco acquired 44 companies

The Cisco Way of Acquisitions (cont’d)

¡ Cisco never seeks a merger of equals

¡ Cisco divides markets into segments and seeks to be No. 1 or 2 in each segment

¡ Cisco identifies acquisition targets carefully

The Cisco Way of Acquisitions (cont’d)

¡  Cisco seeks to retain all personnel where possible

¡  Cisco’s integration process – structural and cultural – is comprehensive and swift

¡  The integration process is closely monitored from start to finish

Ø  Cisco ensures the new company is not overrun by Cisco employees

Ø  At the conclusion, there is a “lessons-learned” review designed to improve the next acquisition

Acquisition Success Factors

�  Clear identification of technology/ product to be acquired

�  Vision of leader of company acquired must fit Cisco’s

�  Cisco’s acquisition identification process stresses cultural compatibility

�  Cisco sets clear expectations how merged entity will function

�  Cisco manages the change process for an acquisition carefully

�  Cisco ensures short- and long-term wins for stakeholders in both companies

Values at Cisco ¡  Innovation & learning

¡ Openness

¡ No tech religion (No bias)

¡  Listening to customers

¡  Successful implementation of cultural norms

¡ Good treatment of their people

The Cisco Way of Management ¡  Strategy and people practices are specific to the high-

tech world. (Not applicable from e.g. Airline Industry - Southwest)

¡  Focus on acquiring and retaining people

¡  Align culture with strategy and enforce it

¡  Align reward system with strategy and values

Lessons Learnt

¡  Willingness to provide customers with what they want, even if this means killing technologies developed by the company

¡  Ensure cultural fit and shared vision, and understand needs to continually change

¡  Most importantly, it is able to implement values and cultural norms that differentiate it from the competition