I’m Robert Reiss, and welcome to the CEO Show. We’re here today with John Chambers. How are you, John?
Robert, I’m doing great, here to talk about innovation start-ups and how the world is changing.
Well, we’re going to talk about those, but first I want to say. So, everyone knows, here’s a guy when he was with Cisco, he comes in. There is like 400 people, 70 million in revenue. It grows to four, at one business. That’s it and an unknown brand grows into 47 billion, with 70 thousand employees, and one of the most valuable companies and transformative in the world. The biggest thing that I want you to comment on that you did, I understand you’ve created 10, 000 millionaires.
Well, you’ve hit a number of different topics. First is, all of us who have been CEO, just know there’s no substitute for being in the right market at the right time. But then it’s a matter of how well do you execute and how well do you disrupt existing markets. “It was a rush” would be an understatement for that growth to occur, and my philosophy is, you didn’t try to catch technology transitions with business-model transitions. That’s what we did at Cisco. We took a techy concept and instead of talking about how do you sell routers, we talked about how it would transform every business in the world, and we led that example.
In the process, we tried to create in the classic approach that all CEOs focus on, unprecedented opportunities for your customers, for your shareholders, for your employees, and your partners. We were the best partnering organization in the world. We won that. The shareholders, the stock went up 10, 000% which is amazing in terms of the stock growth. But in terms of our own employees, we share the success across the board in ways that I don’t think may occur again. We created 10, 000 millionaires at a time when a million was really a million in terms of the direction. But everybody benefitted, our existing shareholders, our leadership, et cetera. It does speak how I think the future of innovation will be about how do you get business model change with technology changes. What Amazon did very effectively versus Walmart, what Tesla is doing very effectively versus the GM, what Uber is doing very effective in terms of asset sharing.
So, for now, let’s just get one little thought on innovation and what CEOs should look for. A lot of the CEOs we’re dealing with are the top companies, but a lot are smaller companies. Talk about the blend, how they work together, what’s going on, and in a world of innovation, what should the CEO’s mindset be?
So, three or four questions, let me think about it in a sequence.
I know, I’m sorry because you have so much to say, so I keep throwing you them.
Well, we’re both dyslexic, and so dyslexic so we can break it into pieces and play out the chess game in the reverse order.
Basically, this is going to be a period where you would disrupt so you’re going to get disrupted. When I started saying about three to four years ago, that 40% of the large companies in the world, and the higher percentage of small companies would not exist in a decade. People said, “John, not accurate. You’re missing it.” Now, I think most CEOs would say that’s a conservative number. So, as we, in leadership, think about it, the key change on innovation is occurring at three to five times the speed that it did during the internet era.
Do you think it will increase more in the future?
It will increase even more. So, the example I love to use is one of them we talked about earlier, which is Amazon took 21 years to bypass Walmart in market cap. I was on the Walmart Board, the best running company in the world, most valuable company in the world and we saw Amazon coming.
Were you trying?
Big-time. By the way, it’s still a great company, but it took 21 years. Tesla passed GM a short time later, in 14 years in terms of innovation and market evaluation. Then Uber, with a different model for how do you purchase and share assets, passed Tesla in seven years. 21, 14, 7, it’s exhilarating. So, as you think about the CEOs, you’re now seeing how do each of us, especially in the larger or medium-sized companies, innovate. For the first time in my life, I’m seeing a partner, not work with, but partner with small companies because they realize many of the best and brightest from University(ph) Alumni North Carolina State, from the MITs, The Stanford of the World, The Polytechnic in France, the IITs in India. Instead of going to the traditional Wall Street firms, the large, established government agencies, et cetera, they’re going to startups.
So, the big companies are saying, “If I would do innovation in the future, I have to partner with startups in a way I never did before.” Some that you’re seeing a world-class innovation company like Boeing partnered with a company called, SparkCognition, 220 people, and they do a 50/50 joint venture for the next unmanned aviation for the FAA, and so you see just an understanding by the CEOs that large companies probably would not be able to move with the speed they did before and saying, “I’m going to do innovation in part by unique relationship in partnering with small companies.”
So, that trend is going very, very fast as well, but the key takeaway is, when you see a business model change occur at the same time of a technology change, that’s when you get disrupted and that’s when you disrupt.
Wait, when you see the business model? Explain that.
Combined with a new technology change.
So, Amazon’s business model changed the physical and the virtual world.
So, what AI is doing, that’s going to create a whole new opportunity?
Big time. The internet of things is probably the driving force. I call it, “Digital Era, ” where you combine 500 billion devices. There were only a thousand devices connected in there when Cisco started. There are 12 billion today. There’ll be 500 billion. How you use this information and concepts like AI to process this and get the right information at the right time, to the right person and machine, to make the right decision, that’s what innovation is about. AI will probably be rather the only technology that I’ve seen, maybe other than the internet. And event the internet started slower, that will exceed its expectations early. So, a lot of the issues like cryptocurrency and even blockchain, may not develop as quickly as people think, but artificial intelligence, it is being done by almost everyone in my 18 startups that I’m investing in, and coaching and mentoring, and you’re going to see artificial intelligence enable the information being collected from these 500 billion devices to change business models, how you interface to your customers, how you do your supply and chain in a tremendous speed. Then you’re going to have security across the whole gap of that.
So, in terms of where I’m looking for innovation, I’m looking across the technology changes with the business model change, and I get to see every startup in the world. I’m not sure I’m worthy of this, but I get my pick of the litter, and so I get them to see the very best, wherever there is in the world, and I’m more of a champion, a coach, a mentor, and to put it in terms that I think your viewership would understand. President Macron of France was kind enough to ask me to be his Global French Tech Ambassador. He appointed me to do this. Can you imagine America appointing a German or a French person to do this?
They’re all into small businesses as the future just like several countries are becoming brands in and of themselves.
They are very much. This is a good example of where you disrupt or you get disrupted. France used to be the worst place in the world to do business. Great place to take your spouse, a romantic weekend, great place to have dinner, et cetera. Last place in the world to locate jobs or much less do a startup. It is now number one in Europe, and I predicted that four years ago because I saw the country changing. It went from a 140 high-tech startups per year, then ventured back to 740. Remember, all companies will be high-tech. At that time, the U.S. is actually decreasing back to where there’s no entitlement. I saw that the hard way in West Virginia. Used to be on top of the world, Chemical Center in another world. Now, we’re number 47, 48, 49, or and 50 in each area.
We’ll see if we can change that with some things I’m honored to do with West Virginia University and Gordon Gee there. The second thing is that I saw Boston use to be the Silicon Valley. Boston got displaced by Silicon Valley, there. We lost between Deck(ph) and Weighing(ph), and Data Journal. We lost 200 thousand jobs, and now Silicon Valley, which we all view as the innovation center of the world, it got passed by New York.
Any verticals that are the hottest? By the way, you only have a minute left before break.
Okay. The answer is, all of them are moving with tremendous speeds. First time I’ve seen that, you usually see the finance industry lead first, and then maybe manufacturing.
Do you see retail and healthcare, or what?
All of them combined. Every single one.
All of them, but the key is partnerships?
Now, the key is the CEO has to own the transformation. They have to say, “I’m going to innovate differently, ” they have to be willing to disrupt themselves, their leadership show and their company and they’ve got to say, “I’ve got to do this internally and map your two partnerships all from the smaller companies.
By the way, a lot that you’ve said but if anyone wants to learn about it, there is a book you wrote called, “Connecting the Dots.”
It is brilliant. I read in one sitting at a Dunkin’ Donuts.
That’s unheard of for dyslexic because we have trouble reading because we read backwards. So, for somebody to read it is a tremendous honor.
But the advantage of dyslexia is you could see the endgame, you could see the chess game at the end. By the way, before reading this, I thought it was a curse I had. No one even on the area knows really that I have it but that book said, “Oh my god, it’s a blessing.” You said one out of five CEOs are dyslexic.
It’s probably a number greater than that but most of my dyslexic friends will not admit it publicly nor I except I did it by accident and take our children to work. Where a young lady couldn’t get a question out.
She was about 10 years old, and she said she’s dyslexic. I forgot I had my mic on and I said I am too, and here’s how you do it and then 500 people heard it. So, it was out in terms of the approach, but it forces you to think differently, and that’s what we all know with CEOs, we’re all going to get knocked down. We’re all going to have weaknesses. I could get back up and prosper.
You’ve been talking about innovation in the future. I want to find out, you grew Cisco amazingly and you grew it up, you know, what did you say, what was the return if you invested $1, 000?
If you invested in a dollar, you’ll get 10, 000.
So it was the like the money has returned, it’s exciting.
So, here is the challenge. What happens in life when you come into challenges? You know that the market crisis, you lose 80% of all the value, you’re the fair-haired child of Wall Street, and all of a sudden, you know it’s terrible. Now, I know you learned a lesson in Elk River. That actually was brilliant there, too. If you could just give a few sentences of that, and how you think about what you do when you’re in the face of challenge.
So, breaking it down to a couple pieces again, I wrote a book on Connecting the Dots about lessons for leadership in a digital startup world, because I got the same questions, Robert, as I went around the world. It didn’t matter if I was in Dubai, or Paris, or London, or New York or New Delhi. It was questions about leadership. One of the most basic lessons in leadership is you’re more a product of your setbacks and how you handle them than your successes, although nobody ever writes about that. I’ll come back to that in a second.
The second thing is that my parents, at a very early age, both of them were doctors. They taught our whole family about staying calm during a crisis. But at six years of age, I was fishing in a place called Elk River, in rapids. I was a pretty good swimmer, but we were in a very dangerous area. My dad said, “John, just don’t get too close, because if you get swept out, ” and this very dangerous, as the water was going extremely fast that day. He was up about a hundred yards above me and what did I do? I got to close to the edge, I fell in, and I started to panic. My dad was yelling at me, “Hold on to the fishing pole.”
Robert, it was an ugly fishing pole, it might have cost $5. He was yelling at me, “Hold on to the fishing pole.” He was flying down the side of the riverbank, yelling, “Hold on to the fishing pole.” I was getting plummeted over and over. Each time I had to go up for a gasp of air, “Hold on to the fishing pole.” We must have gone 200 to 300 yards downstream, and he caught up to me, swam out and got me out of it, and immediately sat me down. He taught me all the time, he said, “Why did I tell you to hold on to the fishing pole?” I said, “I don’t know, Dad.”
You liked that fishing pole.
Yeah, and he said, “Because in a crisis, you got to remain calm.” You can’t swim against the rapids. You got to be realistic on the situation you’re in, and then find a way you’re going to navigate out of it. Don’t let your emotions cause you to do things that will actually make the situation much worse. Sounds basic, but it’s a lesson I learned forever, and that’s why I told the stories, my lesson in life is. I wrote the book with your takeaways at the end, but in between, I tell the stories because you’ll remember the story about hold on to the fishing pole.
Actually, in reading that story, it said, there was a kid 14 years old, and what happened there? He didn’t hold on to the fishing pole, and he died and you were at the funeral.
Well, I had no idea about this young man. He happened to be a friend of one of my sisters. He’s a very strong athlete, and had many similar sayings that I did, like, if you die tomorrow, I’m okay because it’s been a great life. When I went to his funeral, I found out that he actually died in that exact same spot. He was a strong athlete and much older than I was. But my feeling is, no one was there to remind him to remain calm. So, it’s one of those lessons learned.
Another one is for — and I think the CEOs will appreciate this probably as much as anything we talk about today. During the late 90s, I got to know Jack Welch very well. They modeled Cisco. Again, big company, very innovative, big company who always literally did the looks of other companies, the benchmarking, and usually we get one idea from the other companies. Jack got 24 from us the first time he met with us, and we became friends. During the late 90s, he said, “John, you have a good company.” Well shoot, at this time, to a point you made earlier, we were getting probably more credit than we deserved. We were on every magazine, and the most innovative company in the world, maybe the number one CEO in the world, et cetera. He said, “John, you have a good company.”
He said, “John, you have a company, ” I said, “All right, Jack, you’re teaching me something. What does it take to have a great company?” He said, “A near-death experience.” I didn’t grasp it at the time. After 2001, when our stock went down by 80%, and it doesn’t matter that my competitors went down twice as much. My shareholders got hurt, people are suddenly questioned could I even do my job, and perhaps it was time for me to find another line of work, and I was getting clobbered on some of the news media stations.
I changed the company. We made all of our changes in 51 days and we started gaining market share in 52. At the end of 2001, Jack Welch called me and he said, “John, you’re now a great leader, and you have a great company.” I said, “Jack, no one would agree with you, ” and probably no one else is ever going to tell me, but he said, “John, I watched what you did. You handled the setback better than anyone else.” You know the truth, he was only the first man who ever told me that. But in hindsight, he may have been right. I think all of us are going to go through setbacks as leaders, or as companies. While everybody likes to write and talk about how you did to the successes, you’ll be more a factor of how you handle your setbacks, and how you learned to deal with those, and how you learned the position for the future, then well, they’re successes.
So, what do you do? You’re a true visionary. What should a CEO do to come up with a vision of understanding where it’s going, how to intercept it?
Well, I don’t know about being a visionary, but I can connect dots, and this goes back to being dyslexic. I’ve learned by watching the symptoms in West Virginia.
You said the key to hiring people, first, you have seven different points, but one is know the results. It doesn’t matter what industry, know the results.
Well, when you think about what you want to hire, you want to hire people that have a track record of getting the results. Secondly, I always look for people who build great teams. Then one thing that I learned the hard way is, I was always a sucker for great talent. I’ve learned you only hire people who fit into your culture. No matter how good their talent is, if they don’t fit into your culture, they aren’t going to achieve the results you want. It’s like a sports team, The Warriors. They only put players on their basketball team that really fit into their culture and their strategy the same thing is true of companies.
A pleasure having you on The CEO Show.
That was really fun, I like that.
*Reprinted with permission of The CEO Forum