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SM 2

Cisco centralized marketing and R&D in 2001 due to declining revenues, redundant technological development across business units, and poor coordination. Each unit previously designed products independently, wasting resources. This siloed structure also inhibited idea sharing. The reorganization allowed consolidation and focus during slowdown but risked reducing customer focus. Cisco implemented executive councils bringing leaders from different functions together to collaborate on specific customer group needs and issues. The councils helped mitigate the risk of losing customer focus during centralization.

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Bhaskar Saha
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53 views

SM 2

Cisco centralized marketing and R&D in 2001 due to declining revenues, redundant technological development across business units, and poor coordination. Each unit previously designed products independently, wasting resources. This siloed structure also inhibited idea sharing. The reorganization allowed consolidation and focus during slowdown but risked reducing customer focus. Cisco implemented executive councils bringing leaders from different functions together to collaborate on specific customer group needs and issues. The councils helped mitigate the risk of losing customer focus during centralization.

Uploaded by

Bhaskar Saha
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. Why did Cisco centralize marketing and R&D in 2001?

Also during this time, Cisco saw a decline in revenues, redundancies in technological
development, and poor coordination among different segments. Since each business unit
designed and sold its own product line to customers in an industry, there was a lot of wastage.
This old structure inhibited the exchange of ideas because engineers worked in separate silos –
a solution in one area might have suggested a solution in another, but that didn’t happen.

2. What were the tradeoffs and biggest downsides of the reorganization?

Reorganization allowed Cisco the much-needed consolidation and re-focus amid the slowdown
of 2001. It helped Cisco remove a lot of redundancy and helped the organization become a lot
nimbler. The reorganization also allowed the firm to focus on product innovation, increase
number of products in portfolio and cut down on the overhead and duplications costs. The
biggest obvious downside of reorganizing company around product and not customer groups
was the risk of making the company less customer-focused. Under the new org structure, each
functional unit was committed to a specific technology, which entailed the risk of dismissing the
customer. Culture and informal ties still allowed Cisco to stay customer focused, however
maintaining same level of custom focus became difficult as Cisco grew. CEO Chambers realized
that losing customer focus carried risk and took various steps to ensure that the culture would
not change. Given that the company had groups structured around technologies instead of
customers caused lack of all the relevant information on a given client to be able to know the
holistic view of requirements. It caused situations where part of client needs was unmet as both
technology and sales team were focused only on serving needs of their product.

3. What did Cisco do to mitigate the risk associated with reorganization?

In response to the 2001 market downturn, Cisco Systems implemented a major restructuring that
transformed the company from a decentralized to centralized organization. While recognizing that a
centralized, functional structure was necessary to avoid product and resource redundancies, it also
risked making the company less customer-centric. To mitigate this risk, Cisco implemented a cross-
functional system of executive-level councils that would bring leaders of different functions together to
collaborate and focus on the needs and issues of specific customer groups. Each council employs a
"Three-in-a-Box" leadership model consisting of an executive leader from the engineering or technology
business unit, a member of the go-to-market team, and an operations resource director. Each council is
also accountable to the Operating Committee, which is chaired by CEO John Chambers and determines
the long-term corporate strategy and allocation of corporate resources. Many other companies have
failed at facilitating collaboration across functions-particularly large organizations-but Cisco's system has
been successful because the company remained committed to the system, required a consistent
infrastructure while also allowing for flexibility, gave members decision making authority, and used
council leaders who thrive in collaborative environments. The success of the council system led to the
creation of 20 boards of "sub-councils" in 2007. The boards are charged with driving development
efforts and customer reach further into the organization by addressing specific issues too narrow for the
councils to address.

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