CASE FOR ANALYSIS: Cisco Systems Develops a Collaborative Approach to Organizing
Cisco Systems is famous for developing the routers and switches on which the Internet is built. In 2010 Cisco still made most of its $10 billion yearly revenue by selling its Internet routers and switches to large companies and Internet service providers (ISPs). But the boom years of Internet building that allowed Cisco to make enormous profits are over. And its CEO John Chambers, who has led the company from the beginning, has had to reexamine his organizing approach in order to improve the way his company's different teams and divisions work together.
Chambers admits that until the mid-2000s he had a "control and command" approach to organizing. He and the company's ten top corporate managers would work together to plan the company's new product development strategies; they then sent their orders down the hierarchy to team and divisional managers who worked to implement these strategies. Top managers monitored how fast these new products were developed and how well they sold and intervened as necessary to take corrective action.
Chambers and Cisco's approach was largely mechanistic. Chambers was forced to reevaluate his approach when Cisco's market value shrunk by $400 billion after the dot.com crisis. Given that the Internet was now established, how could he develop the new products to allow his company to keep on growing? After listening to his top managers he realized he needed Cisco's organizing approach and he developed a "collaborative approach," meaning that he and his top managers now focus on listening carefully to the ideas of lower-level managers and involve them in top level decision making. In other words, the goal of Cisco's new collaborative approach is to move toward a more organic structure that will allow Cisco's different teams and divisions to plan long-term strategies and work together to achieve them so that new product developments and technology are shared across the organization.
To facilitate collaboration, Chambers created crossfunctional teams of managers from its different divisions who were charged to work together to develop promising new kinds of products. Within a year, 15% of his top managers could not handle its new organic approach left the company. At the same time Chambers insisted that cross-functional teams set measurable goals such as time required for product development, and time to bring the product to market, to force them to think about short-term as well as long-term goals and speed product development.
The top managers of its divisions who used to compete for power and resources now share responsibility for one another's success in the new collaborative, organic approach-their collective goal is to get more products to market faster. Cisco's network of cross-functional councils, boards, and groups that are empowered to launch new businesses has reduced the time needed to plan successful new product launches from years to months. Chambers believes Cisco's new organic approach will allow it to develop the new products that will make Cisco the global leader in both communications technology and Internetlinked hardware in the 2010s as it finds ways to bring products to the market more quickly than its competitors.
Discussion Questions
1. How has Cisco changed its structure and control systems?
2. Relate Cisco's changes to its control and evaluation systems to the stages of growth in Greiner's model.
3. Go online and investigate how Cisco's new approach has worked. How is it continuing to change its structure and control systems to solve
its ongoing problems?