Case Title : CISCO System B : Maintaining an edge in E-Business

Overview of Cisco systems

            Cisco’s efforts in the area of standardized B2B commerce platforms illustrate the company’s innovation process. Cisco has automated the purchasing process for its largest customers by writing custom software that integrates the customer’s purchasing systems with Cisco’s order management systems.

            Cisco Systems enjoys a reputation as the most sophisticated e-business in the world. Cisco’s image as the leading e-business is a critical driver of its sales success. The company’s ability to demonstrate cutting-edge e-business practices provides a compelling argument for CEOs weighing the tough decision to make multi-million-dollar IT infrastructure investments. While the company has been extraordinarily innovative to date, Cisco is far from complacent about being able to maintain its leadership position with respect to e-business practices.

            A final issue is that initiatives generated within business units tend to be narrow in scope. It is not clear to what extent “white space” opportunities are being overlooked. Developing projects across business units requires extra initiative plus the involvement of senior executives to establish initial connections and guide the collaboration. As the company grows, this becomes less likely. Moreover, it is becoming clear that there are opportunities to co-develop, co-design, and co-engineer new e-business processes with external organizations, including clients and partners, but it is not clear exactly how to approach these possibilities or how to make them routine.

           By relying on the same sensibilities that have made it one of the most successful corporations of its generation, Cisco combines its knowledge of networking technologies with its organizational acumen to help "raise the capacity" of promising non-profit organizations. Paramount to all efforts, Cisco and its non-profit peers focus on mutual respect and open, active communications.

Q1.What do you think of the way Cisco funds new e-business initiatives?

                             

                        Until 1993, Cisco funded new e-business initiatives in a manner similar to what is in place at many corporations today. Funding came through the IT department, which was a cost center that accrued as administrative overhead (G&A). The department was funded at 0.75 percent of Cisco’s revenues.

                Cisco took steps to align the objectives of the IT department with the strategic goals of the company as a whole in 1993. The existing funding mechanism meant that e-business initiatives were all evaluated on the basis of cost reduction, often overlooking impacts on sales, customer satisfaction, or employee retention.

              Cisco created a system that decentralized IT investments. The new “Client Funded Model (CFM)” gave each business-unit manager the authority to make whatever expenditures were sensible to increase sales and customer satisfaction. In addition, the organizational structure was changed so that IT reported to a new group called Customer Advocacy.

              Cisco’s efforts in the area of standardized B2B commerce platforms illustrate the company’s innovation process. Cisco has automated the purchasing process for its largest customers by writing custom software that integrates the customer’s purchasing systems with Cisco’s order management systems.

Q2.Do you think Cisco should centralize any aspect of the innovation process? Which of the three possibilities above seems most appropriate (or can you suggest a different one)? Why? How would you define the specific charter of the new organization?

                     Up to some extent it is advisable to centralize any aspect of innovation process as far as technology and innovation is concerned. While the decentralized system, combined with an emphasis on staying close to the customer, has been incredibly successful for Cisco so far, it is not perfect. First, as the company grows, it becomes more complex. The alternative to the current decentralized system is some sort of centralized organization that focuses on innovation.

                     At a conceptual level, Cisco executives are tossing around at least three possibilities:

1.    A Technology Research and Training Team centralized :

                    “Think-tank” that studies emerging technologies and keeps business managers informed of what will soon be possible

2.    A “Venture Engineering Team”:

       Centralized technology research and implementation team

3.    An Internal Venture Capital Group :

         Centralized technology business analysis and funding team

          According to me “A Technology Research and Training Team centralized” one of the possibilities that CISCO is looking for is best one because technology research and training team help in developing as well as discovering new Innovations which is ultimately beneficial to CISCO.

         There are any number of ways in which the charter of this new organization could be configured. What specific activities would it be responsible for? Who would staff it? How would it be funded? How would it be evaluated? Can it be configured in such a way that efficiencies and elusive “white space” opportunities are captured without destroying the innovative spirit at Cisco or its decentralized (Internet-like?) culture? Losing either could outweigh any benefits of centralization.

Q3.Can Cisco measures its innovative efforts? Tie compensation to these efforts? If so, how?

                               Cisco’s efforts in the area of standardized B2B commerce platforms illustrate the company’s innovation process. In the past, Cisco has automated the purchasing process for its largest customers by writing custom software that integrates the customer’s purchasing systems with Cisco’s order management systems. To extend this functionality to far more customers, Cisco, in conjunction with an industry consortium known as RosettaNet, is developing protocols and platforms that will simplify this process and obviate the need for (painful, brute-force) custom solutions.