1
00:00:02,810 --> 00:00:06,194
I¡¦d like to welcome you all to this wonderful event today

2
00:00:06,294 --> 00:00:13,380
which kicks off our Industry Leaders speaker series this year,
with the CEO of Cisco.

3
00:00:13,415 --> 00:00:15,490
I know you¡¦re not here to see me

4
00:00:15,970 --> 00:00:18,093
so I¡¦m going to leave the podium right now

5
00:00:18,193 --> 00:00:22,951
and introduce President Hockfield,
MIT¡¦s sixteenth president.

6
00:00:29,900 --> 00:00:30,530
Thanks very much.

7
00:00:30,730 --> 00:00:33,460
I'll try to be brief because I know
you're not here to see me, either.

8
00:00:34,430 --> 00:00:37,620
It's a very great privilege to introduce
this afternoon's distinguished speaker,

9
00:00:37,820 --> 00:00:40,320
and our very special guest, John Chambers.

10
00:00:40,520 --> 00:00:43,990
Mr. Chambers joined Cisco Systems in 1991,

11
00:00:44,190 --> 00:00:48,120
has been the company's
President & CEO since 1995.

12
00:00:48,320 --> 00:00:51,790
In the ten years that
he's been at Cisco's helm,

13
00:00:51,990 --> 00:00:55,220
the company's revenues
have grown twenty-fold,

14
00:00:55,420 --> 00:00:57,520
to approximately 24 billion dollars a year.

15
00:00:57,720 --> 00:00:59,450
It has become the worldwide leader

16
00:00:59,650 --> 00:01:01,350
in networking for the internet.

17
00:01:02,590 --> 00:01:04,350
Mr. Chambers has been widely recognized

18
00:01:04,550 --> 00:01:07,290
as one of the outstanding
business leaders of our day.

19
00:01:07,490 --> 00:01:09,550
Institutional Investor
Magazine has called him

20
00:01:09,750 --> 00:01:13,920
the most influential
CEO in telecommunications.

21
00:01:14,020 --> 00:01:19,360
And under his leadership, Cisco itself
is regarded as an exceptional place

22
00:01:19,690 --> 00:01:22,590
including a large number of MIT graduates.

23
00:01:22,790 --> 00:01:26,050
We're proud that MIT has a
longstanding relationship with Cisco,

24
00:01:26,250 --> 00:01:29,520
which employs well over 100
alumni of the institute.

25
00:01:29,890 --> 00:01:32,420
Upstairs, here in the Status Center,

26
00:01:32,620 --> 00:01:36,420
room 341 is named in honor of Cisco,

27
00:01:36,620 --> 00:01:39,420
in recognition of the
company's generous collaboration

28
00:01:39,520 --> 00:01:41,550
on the Center's technological infrastructure.

29
00:01:41,950 --> 00:01:46,850
Here our faculty and students will rely
on a ten gigabit Cisco network.

30
00:01:47,050 --> 00:01:48,550
As an early adopter, we are now developing

31
00:01:48,750 --> 00:01:51,250
some of the most demanding applications

32
00:01:51,450 --> 00:01:53,250
to use this bandwidth.

33
00:01:53,450 --> 00:01:54,590
Beyond his work at Cisco,

34
00:01:54,790 --> 00:01:58,820
John Chambers has been active in a wide
range of initiatives in public policy.

35
00:01:59,020 --> 00:02:00,390
He's a forceful advocate of

36
00:02:00,590 --> 00:02:03,750
the importance of investing in
American education and research.

37
00:02:03,950 --> 00:02:07,720
Mr. Chambers served as Vice Chairman of
the National Infrastructure Advisory Council

38
00:02:07,920 --> 00:02:09,050
convened by President Bush,

39
00:02:09,250 --> 00:02:12,090
and on the Education Committee
of the President's Transition Team.

40
00:02:12,290 --> 00:02:14,990
Previously,

41
00:02:15,090 --> 00:02:15,550
he had served on President
Clinton's Trade Policy Committee,

42
00:02:15,750 --> 00:02:18,550
and in partnership with His
Majesty King Abdullah II

43
00:02:18,750 --> 00:02:20,385
in the World Economic Forum,

44
00:02:20,420 --> 00:02:23,550
he has co-sponsored the
Jordan Education Initiative.

45
00:02:23,950 --> 00:02:25,490
In recognition of his accomplishments,

46
00:02:25,690 --> 00:02:27,490
Mr. Chambers has received
numerous honors

47
00:02:27,690 --> 00:02:30,790
including the Woodrow Wilson Award
for corporate citizenship,

48
00:02:30,920 --> 00:02:32,620
and the Smithsonian
Lifetime Achievement Award.

49
00:02:32,820 --> 00:02:34,450
We are indeed very fortunate

50
00:02:34,590 --> 00:02:36,420
that Mr. Chambers was able
to accept our invitation

51
00:02:36,620 --> 00:02:37,520
to speak to us today,

52
00:02:37,720 --> 00:02:41,180
and I'm delighted that
the Industrial Liaison Program

53
00:02:41,310 --> 00:02:42,710
and the Computer Science and
Artificial Intelligence Laboratory

54
00:02:42,910 --> 00:02:46,310
have collaborated to bring him to MIT.

55
00:02:46,510 --> 00:02:48,640
He will be speaking this afternoon

56
00:02:48,840 --> 00:02:51,910
on a topic he's uniquely
qualified to address:

57
00:02:52,110 --> 00:02:53,680
The Power of the Network

58
00:02:53,880 --> 00:02:55,480
to Change the Way We Work,

59
00:02:55,680 --> 00:02:57,540
Live, Play, and Learn.

60
00:02:57,740 --> 00:02:58,580
And I can tell you,

61
00:02:58,780 --> 00:03:00,480
after having spent an hour with him,

62
00:03:00,680 --> 00:03:05,080
this is a man of
enormous intellectual power,

63
00:03:04,640 --> 00:03:06,305
and wide-ranging interest.

64
00:03:06,340 --> 00:03:08,340
It is a great pleasure
to welcome to our campus,

65
00:03:08,410 --> 00:03:09,710
Mr. John Chambers.

66
00:03:09,910 --> 00:03:11,180
Thank you.

67
00:03:12,680 --> 00:03:14,210
Thank you very much.

68
00:03:15,210 --> 00:03:16,710
It's a pleasure.

69
00:03:17,610 --> 00:03:19,010
Thank you.

70
00:03:22,940 --> 00:03:27,640
I've had the opportunity to meet with
some of the students from around the world,

71
00:03:27,840 --> 00:03:28,710
from Tsinghua,

72
00:03:28,910 --> 00:03:29,740
to Cambridge,

73
00:03:29,940 --> 00:03:31,510
to Stanford, to here.

74
00:03:31,710 --> 00:03:33,980
And it's always enjoyable to watch

75
00:03:34,180 --> 00:03:37,280
what the next generations of
leaders are going to represent

76
00:03:37,480 --> 00:03:39,510
for this country and around the world.

77
00:03:39,710 --> 00:03:41,780
And often, sitting there
as a student many years ago,

78
00:03:41,980 --> 00:03:44,940
I looked up and somebody said,
¡¨You'll be the leaders of tomorrow,¡¨

79
00:03:45,140 --> 00:03:47,310
and I was thinking,
¡§You better sell your stock.¡¨

80
00:03:48,110 --> 00:03:49,780
And yet, you will be.

81
00:03:49,980 --> 00:03:53,140
And one of the things that
my generation did not do well,

82
00:03:53,340 --> 00:03:57,140
was understanding how to
share common experiences,

83
00:03:57,340 --> 00:04:00,780
and teach that in a way of
teamwork and collaboration.

84
00:04:01,080 --> 00:04:03,610
So if I do my job over the next hour,

85
00:04:03,810 --> 00:04:06,440
I would like for you just to
take home one or two points

86
00:04:06,640 --> 00:04:08,580
that you say,¡§I'm going to
do differently in the future.¡¨

87
00:04:08,780 --> 00:04:10,610
I'll cover a wide range of topics.

88
00:04:10,810 --> 00:04:13,910
I do not expect each of us to agree
on many of the principles

89
00:04:14,110 --> 00:04:15,040
that I'm going to put forward.

90
00:04:15,240 --> 00:04:15,940
Or for you to say,

91
00:04:16,140 --> 00:04:18,580
¡§John, that's something I really
believe is the right way to run a business.¡¨

92
00:04:18,780 --> 00:04:19,940
But what I'd like to do

93
00:04:20,140 --> 00:04:21,910
is challenge your thought process

94
00:04:22,110 --> 00:04:23,880
and to share with you
what we've done well,

95
00:04:24,080 --> 00:04:25,540
what we see others doing well,

96
00:04:25,740 --> 00:04:27,140
and common mistakes.

97
00:04:27,340 --> 00:04:30,010
I believe there are
two equalizers in life.

98
00:04:30,210 --> 00:04:31,440
My parents are both doctors.

99
00:04:31,540 --> 00:04:33,480
They taught me it was education.

100
00:04:33,940 --> 00:04:36,240
But the second equalizer
is now the internet.

101
00:04:36,440 --> 00:04:37,810
It will level the playing field

102
00:04:38,010 --> 00:04:39,810
in the way that Thomas Freeman in
¡§The World is Flat¡¨-

103
00:04:40,010 --> 00:04:41,840
and if you haven't read that book,
you ought to read it.

104
00:04:41,880 --> 00:04:43,240
He's got it nailed.

105
00:04:43,440 --> 00:04:48,500
It literally will level the playing field
on a global basis,

106
00:04:48,400 --> 00:04:51,400
But a large part of technology
in education is,

107
00:04:51,530 --> 00:04:53,100
how do you practically apply it?

108
00:04:53,300 --> 00:04:56,870
And how do you use it in teams
in ways that perhaps

109
00:04:56,970 --> 00:04:58,070
we're just beginning to understand?

110
00:04:58,270 --> 00:05:00,530
So what I'd like
to do is share some thoughts

111
00:05:00,730 --> 00:05:02,530
on these categories.

112
00:05:02,730 --> 00:05:05,430
I believe that the
future of countries

113
00:05:05,630 --> 00:05:08,530
will be based around four basic principles.

114
00:05:08,730 --> 00:05:11,270
The first is catching market transitions,

115
00:05:11,470 --> 00:05:14,600
whether that's in
bio-sciences or technologies,

116
00:05:14,700 --> 00:05:16,400
education,

117
00:05:16,530 --> 00:05:17,600
business process, or other areas.

118
00:05:18,270 --> 00:05:21,830
Your ability to catch these transitions
determines your economic future.

119
00:05:22,030 --> 00:05:23,830
And your ability to be
a leader and innovate

120
00:05:24,030 --> 00:05:25,530
and can make most out of this system

121
00:05:26,000 --> 00:05:27,530
from a capitalistic system,
those who get there first

122
00:05:27,730 --> 00:05:29,730
usually have the majority
of the market share,

123
00:05:29,731 --> 00:05:31,230
and the majority of the benefits
for their citizens as well.

124
00:05:32,130 --> 00:05:34,930
The second part is education.

125
00:05:35,130 --> 00:05:36,430
You've got to realize that

126
00:05:36,630 --> 00:05:37,800
as the world becomes flat

127
00:05:38,000 --> 00:05:40,970
and common time and distance
slowly disappears,

128
00:05:41,170 --> 00:05:43,670
it will be about the
quality of the workforce,

129
00:05:43,770 --> 00:05:44,430
their skill sets,

130
00:05:44,530 --> 00:05:46,530
and the ability to work
together as a team.

131
00:05:46,730 --> 00:05:49,500
To do that effectively
in the Industrial Revolution,

132
00:05:49,600 --> 00:05:50,400
it was about railroads,

133
00:05:50,530 --> 00:05:52,570
it was by about highways and airports.

134
00:05:52,670 --> 00:05:54,370
In this revolution, it's about broadband,

135
00:05:54,730 --> 00:05:56,430
infrastructure build-out,
unlimited bandwidth,

136
00:05:56,730 --> 00:05:59,400
access to every piece of information
on a need-to-know basis,

137
00:05:59,600 --> 00:06:02,330
from any device, anytime, anywhere.

138
00:06:02,530 --> 00:06:03,265
And finally,

139
00:06:03,300 --> 00:06:08,130
something that I really did not
want to believe after MBA school:

140
00:06:08,330 --> 00:06:10,130
supportive government.

141
00:06:10,970 --> 00:06:13,830
It requires all four working
together to be successful,

142
00:06:14,030 --> 00:06:16,300
to create the economies of the future.

143
00:06:16,500 --> 00:06:18,830
So I will cover with you
what I see occurring

144
00:06:19,030 --> 00:06:20,800
in business and technology trends.

145
00:06:21,000 --> 00:06:23,830
We'll talk about new
network productivity models.

146
00:06:24,030 --> 00:06:25,370
We'll talk about what it really means.

147
00:06:25,570 --> 00:06:28,030
We'll talk architecturally,
how does it tie together?

148
00:06:28,230 --> 00:06:30,670
We use Cisco's example of productivity,

149
00:06:31,670 --> 00:06:34,240
when we drive our productivity as a company

150
00:06:34,340 --> 00:06:34,500
at ten percent a year.

151
00:06:34,700 --> 00:06:36,670
And that's only part
of my productivity gains.

152
00:06:36,870 --> 00:06:38,600
I've realigned half my
engineering organization

153
00:06:38,800 --> 00:06:40,430
in the last five years,

154
00:06:40,630 --> 00:06:45,200
which means my productivity actually grew
dramatically faster than ten percent a year.

155
00:06:46,000 --> 00:06:47,770
We have at the current time

156
00:06:47,970 --> 00:06:51,790
two-thirds of my industry's
market capitalization.

157
00:06:51,890 --> 00:06:52,720
That's the good news and bad news.

158
00:06:52,820 --> 00:06:56,060
It speaks to the ability
for not only to say how to use the technology

159
00:06:56,095 --> 00:06:57,420
But how do you enable every element

160
00:06:57,620 --> 00:06:59,620
of every strategy
that I've put in place,

161
00:06:59,820 --> 00:07:01,260
my team puts in place at Cisco,

162
00:07:01,460 --> 00:07:03,090
is network-enabled.

163
00:07:03,290 --> 00:07:04,590
How do you do innovation?

164
00:07:04,790 --> 00:07:06,390
And how do you tie it together?

165
00:07:06,590 --> 00:07:09,790
How do we see some of the
technology architecture changes?

166
00:07:09,990 --> 00:07:10,890
And really,

167
00:07:11,090 --> 00:07:14,360
where do we see this network
IT world going in the future?

168
00:07:14,560 --> 00:07:17,690
I think it's important to realize
in today's litigious environment

169
00:07:17,890 --> 00:07:20,490
that anything I say today is
subject to safe harbor.

170
00:07:20,690 --> 00:07:23,420
Any of you that get pro forma
mixed up with gap [analysis],

171
00:07:23,620 --> 00:07:25,285
you can see it on our website.

172
00:07:25,320 --> 00:07:26,820
We've got obviously too many lawyers

173
00:07:27,020 --> 00:07:29,420
and it's nice to see more
engineers being trained.

174
00:07:30,390 --> 00:07:34,530
But if you look at where
this market's going to go

175
00:07:34,220 --> 00:07:37,360
It is, to me, like a
multi-dimensional chess game.

176
00:07:37,560 --> 00:07:42,860
And I think as each of you decide
to pursue your careers in academia

177
00:07:42,990 --> 00:07:43,090
or the business world or government,

178
00:07:43,290 --> 00:07:46,360
most people make the mistake
of making one move at a time,

179
00:07:46,560 --> 00:07:48,920
and not understanding the evolution

180
00:07:49,120 --> 00:07:50,720
and market transitions that can occur,

181
00:07:50,920 --> 00:07:52,490
their differentiation as a business,

182
00:07:52,690 --> 00:07:55,590
what is sustainable,
what is commodity-like behavior,

183
00:07:55,790 --> 00:07:57,820
and how do you play out this game.

184
00:07:58,020 --> 00:08:00,320
As we begin to face competitors,

185
00:08:00,520 --> 00:08:02,320
and we're on our fifth
generation of competitors,

186
00:08:02,520 --> 00:08:03,620
and in my industry,

187
00:08:03,820 --> 00:08:07,390
¡§Only the paranoid survive¡¨
is not a saying that Andy Grove made up.

188
00:08:07,860 --> 00:08:11,090
My top ten competitors a decade ago are gone.

189
00:08:12,260 --> 00:08:14,460
My top ten competitors
from five years ago,

190
00:08:14,660 --> 00:08:16,990
only two or three of them
are really players today.

191
00:08:17,190 --> 00:08:19,285
My top ten competitors a decade from now

192
00:08:19,320 --> 00:08:21,690
will be largely players
that are not my top ten today.

193
00:08:21,890 --> 00:08:24,290
And by the way,
we could get left behind as well.

194
00:08:24,490 --> 00:08:26,255
So it's understanding this chess game

195
00:08:26,290 --> 00:08:29,720
and understanding just
how we use Cisco as an example.

196
00:08:29,920 --> 00:08:31,720
We decided that for our technology

197
00:08:31,920 --> 00:08:34,820
we would not target
just a service-provider market,

198
00:08:35,020 --> 00:08:37,420
the Verizons of the world,
the SBCs of the world,

199
00:08:37,620 --> 00:08:38,960
the __ Deutsch telecoms,

200
00:08:39,160 --> 00:08:40,590
Telstar, etc.

201
00:08:40,790 --> 00:08:44,890
But, service providers,
and enterprise, large companies,

202
00:08:45,090 --> 00:08:47,320
small-to-medium business, and the consumer.

203
00:08:47,520 --> 00:08:49,360
And we targeted those with the view that

204
00:08:49,460 --> 00:08:53,160
they actually would not be
separate products and decisions,

205
00:08:53,260 --> 00:08:54,780
but they would over time be
tied together architecturally.

206
00:08:57,510 --> 00:08:58,610
Secondly,

207
00:08:58,680 --> 00:08:59,780
we made a very conscious decision
that in our industry,we can be driven by customers

208
00:09:01,580 --> 00:09:04,450
Now, I realize that's different from

209
00:09:04,580 --> 00:09:05,250
perhaps some of my counterparts
in high tech believe.

210
00:09:05,410 --> 00:09:07,550
But I believe that if you
listen to the customers the right way,

211
00:09:07,750 --> 00:09:10,550
they will tell you what market
transitions are going on

212
00:09:10,750 --> 00:09:13,250
in plenty of time for you to either
build the product yourself

213
00:09:13,350 --> 00:09:15,380
or acquire the leader.

214
00:09:15,880 --> 00:09:17,680
The¡K a third thing that we do is

215
00:09:17,880 --> 00:09:20,380
we view products, leadership
in each category,

216
00:09:20,580 --> 00:09:25,810
a philosophy, right or wrong,
much like GE had in their early days of,

217
00:09:25,845 --> 00:09:26,245
¡§If we can't be number one or number two

218
00:09:26,280 --> 00:09:28,580
in an industry segment,
we do not enter it.¡¨

219
00:09:28,780 --> 00:09:33,410
Our ability to sustain market share
about above twenty percent is key.

220
00:09:33,610 --> 00:09:38,050
Because you can very quickly
lose complete leadership,

221
00:09:38,085 --> 00:09:39,575
but profitability-wise

222
00:09:39,610 --> 00:09:41,680
when you're below that number
in our industry segment.

223
00:09:41,980 --> 00:09:44,310
So we go into markets with a philosophy
of being number or number two,

224
00:09:44,510 --> 00:09:47,580
and our target market is usually
40%+ market share.

225
00:09:47,780 --> 00:09:50,410
We believe innovation
isn't about doing it yourself.

226
00:09:50,610 --> 00:09:55,350
And I'm a prior IBMer, so don't
misunderstand what I'm saying .You know way

227
00:09:56,010 --> 00:09:57,750
if you're not in the first five to market,

228
00:09:57,950 --> 00:10:01,280
to think you can be number six to
fifteen into the market and become number one

229
00:10:01,380 --> 00:10:03,945
does not happen.

230
00:10:03,980 --> 00:10:05,350
So our philosophy is very simple.

231
00:10:05,550 --> 00:10:07,380
If we're not in the first five to market,

232
00:10:07,580 --> 00:10:09,280
we either acquire one of the first five,

233
00:10:09,480 --> 00:10:10,880
or we partner.

234
00:10:11,080 --> 00:10:13,780
And I wish I could tell you that
was brilliant leadership from the top.

235
00:10:13,980 --> 00:10:15,280
It was Boeing and Ford,

236
00:10:15,480 --> 00:10:18,850
twelve years ago saying to me,

237
00:10:18,980 --> 00:10:19,510
¡§John, we think this new technology called

238
00:10:19,710 --> 00:10:22,610
¡¥fast ethernet' is going
to displace ATM to the desktop.

239
00:10:22,810 --> 00:10:26,350
All the leading engineers
thought ATM would be the future.

240
00:10:26,550 --> 00:10:28,580
But two of my top companies said,

241
00:10:28,780 --> 00:10:30,780
¡§We think fast ethernet's the future.

242
00:10:30,980 --> 00:10:33,280
And if you'll acquire this company,

243
00:10:33,480 --> 00:10:35,480
we'll give you a ten million dollar order.¡¨

244
00:10:36,650 --> 00:10:37,580
I acquired the company.

245
00:10:37,780 --> 00:10:39,580
That's how we started on acquisitions.

246
00:10:39,780 --> 00:10:42,950
And we also started in

247
00:10:43,050 --> 00:10:45,380
knowing that 90%+ of acquisitions
in high tech fail.

248
00:10:45,580 --> 00:10:48,550
So we aren't going to be smarter.
It's what you have to do differently.

249
00:10:48,750 --> 00:10:53,120
So it's catching this multi-dimensional
chess game and saying,

250
00:10:52,950 --> 00:10:55,450
and how do you do it on a
geographic basis as well?

251
00:10:55,650 --> 00:10:57,750
And if we're right on the architecture,

252
00:10:57,950 --> 00:10:59,215
we have a sustainable advantage

253
00:10:59,250 --> 00:11:01,540
which will be very, very
difficult for our peers,

254
00:11:01,740 --> 00:11:03,140
regardless of the cost of labor,

255
00:11:03,340 --> 00:11:04,740
to duplicate.

256
00:11:04,940 --> 00:11:06,270
And the key is can we move faster?

257
00:11:06,470 --> 00:11:10,340
So, use Cisco as an example, not that
every business should model after this,

258
00:11:10,540 --> 00:11:12,570
or every business is in the
right position to model,

259
00:11:12,770 --> 00:11:15,140
or this is the right
model for every industry.

260
00:11:15,340 --> 00:11:18,640
But understand where the transitions
are going to occur in your industry,

261
00:11:18,840 --> 00:11:20,540
what changes do you make,

262
00:11:20,670 --> 00:11:22,400
what are sustainable advantages,

263
00:11:22,500 --> 00:11:23,540
what are not sustainable,

264
00:11:23,740 --> 00:11:26,640
and how do you keep a momentum
in the marketplace,

265
00:11:26,840 --> 00:11:28,270
where ¡§only the paranoid survive¡¨

266
00:11:28,470 --> 00:11:29,900
but take the business risk

267
00:11:30,100 --> 00:11:32,570
before others become obvious
that it's there.

268
00:11:32,770 --> 00:11:35,400
It's like talking about
China as a market today.

269
00:11:35,600 --> 00:11:38,370
If your strategy is,
¡§What should I be doing in China today?¡¨

270
00:11:38,470 --> 00:11:39,600
it's too late.

271
00:11:39,740 --> 00:11:42,540
We started a decade ago in China
and have 60% market share.

272
00:11:42,740 --> 00:11:43,570
Your strategy should be

273
00:11:43,770 --> 00:11:45,470
what you're doing in
Russia and Eastern Europe,

274
00:11:45,670 --> 00:11:46,870
Northern Africa,

275
00:11:47,070 --> 00:11:47,970
Latin America.

276
00:11:48,170 --> 00:11:51,000
Catching markets in
transition are very, very key.

277
00:11:51,200 --> 00:11:54,200
So what I'd like to do over
the next period of time

278
00:11:54,400 --> 00:11:56,840
is get the slides to go forward.

279
00:11:57,040 --> 00:11:58,240
Is share with you,

280
00:11:58,440 --> 00:12:01,540
as you begin to think about
this multidimensional chess game,

281
00:12:01,640 --> 00:12:02,500
or at least, the way I view it,

282
00:12:02,700 --> 00:12:04,300
apply it to various industries,

283
00:12:04,500 --> 00:12:07,200
but understand where your power pieces are.

284
00:12:07,400 --> 00:12:09,840
The most powerful area that
I've got to protect the most

285
00:12:10,040 --> 00:12:11,200
is customer loyalty.

286
00:12:11,400 --> 00:12:12,740
We have the highest customer loyalty

287
00:12:12,940 --> 00:12:15,040
out of any [IT] [high tech]high
tech company.

288
00:12:15,240 --> 00:12:16,700
That is a huge competitive advantage.

289
00:12:16,900 --> 00:12:20,800
And five positive experiences is
balanced by one negative.

290
00:12:21,000 --> 00:12:21,900
So thinking forward,

291
00:12:22,100 --> 00:12:24,300
how do you maintain that customer loyalty?

292
00:12:24,500 --> 00:12:25,440
The second,

293
00:12:25,540 --> 00:12:27,570
the most powerful piece on the
chess board is the queen.

294
00:12:27,770 --> 00:12:28,900
The most aggressive thing we do is

295
00:12:29,100 --> 00:12:32,240
we catch market transitions before
they become obvious to others.

296
00:12:32,440 --> 00:12:34,205
And we bet three to five
years ahead of time,

297
00:12:34,240 --> 00:12:37,400
because it takes me five to seven years
to create a billion dollar market.

298
00:12:37,600 --> 00:12:38,970
It takes me three to four years

299
00:12:39,170 --> 00:12:41,540
to make commercial market the
fastest growing of our segment.

300
00:12:41,740 --> 00:12:44,740
So you've got to identify the
transitions that are occurring,

301
00:12:44,840 --> 00:12:46,900
and move before it becomes
obvious to others.

302
00:12:47,100 --> 00:12:49,470
And the third, and
this was a surprise to me,

303
00:12:49,670 --> 00:12:52,600
I have never seen a great
company around the world

304
00:12:52,800 --> 00:12:54,000
that doesn't have a great culture.

305
00:12:54,200 --> 00:12:55,700
You may like the culture, you may not.

306
00:12:55,900 --> 00:12:57,440
But they have great cultures.

307
00:12:57,640 --> 00:12:59,040
Culture is what you're about.

308
00:12:59,240 --> 00:13:01,240
It's deeply ingrained in you.

309
00:13:01,440 --> 00:13:03,670
It's on the badge of every Cisco employee,

310
00:13:03,870 --> 00:13:05,290
not just out three-to-five year goals but,

311
00:13:05,490 --> 00:13:06,830
¡§What is our culture?¡¨

312
00:13:07,030 --> 00:13:10,660
And so as you look at the
other key foundational

313
00:13:10,860 --> 00:13:12,730
components of our strategy,

314
00:13:12,930 --> 00:13:14,590
you see network architecture,

315
00:13:14,790 --> 00:13:17,230
you see business architectural changes,

316
00:13:17,430 --> 00:13:19,030
you talk about innovation,

317
00:13:19,230 --> 00:13:20,730
you talk about the quality of the team.

318
00:13:20,930 --> 00:13:23,260
It is about the best and brightest
working toward a common goal.

319
00:13:23,460 --> 00:13:24,660
But this is the foundation

320
00:13:24,860 --> 00:13:27,360
that I've run each of those
multi-dimensional chess games off of,

321
00:13:27,560 --> 00:13:30,060
in terms of where we're trying to go.

322
00:13:30,260 --> 00:13:31,660
If you're customer-driven,

323
00:13:31,860 --> 00:13:34,090
the first question should be,

324
00:13:34,190 --> 00:13:34,390
¡§Alright, John.  What are your
customers telling you

325
00:13:34,590 --> 00:13:36,330
are their top priorities?¡¨

326
00:13:36,530 --> 00:13:40,730
CEOs around the world are unusually
cautious in today's environment.

327
00:13:40,930 --> 00:13:44,930
Many of us got burned by the economy's
going faster than we thought then slower,

328
00:13:45,130 --> 00:13:47,330
competition moving in ways
we did not expect.

329
00:13:47,530 --> 00:13:51,060
So what the number one
priority of a CEO in Russia,

330
00:13:51,260 --> 00:13:52,360
or the U.S.

331
00:13:52,560 --> 00:13:53,690
or in China

332
00:13:53,890 --> 00:13:54,560
or in India

333
00:13:54,760 --> 00:13:57,290
often is, how do they build a structure

334
00:13:57,490 --> 00:14:01,160
which can move with speed for
acceleration, or deceleration,

335
00:14:01,360 --> 00:14:05,360
and how do they create a culture
and a capability to change?

336
00:14:05,560 --> 00:14:06,430
Second is,

337
00:14:06,630 --> 00:14:08,660
there's a realization that
while you can drive productivity up,

338
00:14:08,860 --> 00:14:11,560
the stock market's going to not
reward just productivity.

339
00:14:11,760 --> 00:14:12,830
If you don't go revenue,

340
00:14:13,030 --> 00:14:14,730
your P/E ratio's going to be very low.

341
00:14:14,930 --> 00:14:17,430
So every business is looking about
how they grow revenues.

342
00:14:17,630 --> 00:14:18,960
And as you grow these revenues,

343
00:14:19,160 --> 00:14:20,590
how do you build a base of productivity

344
00:14:20,790 --> 00:14:23,860
which will allow you at
the time and over time

345
00:14:23,960 --> 00:14:25,330
to bring more of it to
the bottom line?

346
00:14:25,530 --> 00:14:28,390
Third issue on their
mind is very, very simply¡K

347
00:14:28,590 --> 00:14:29,930
I'm sorry. The fourth issue is,

348
00:14:30,130 --> 00:14:32,590
out of the share that your
customers are going to spend

349
00:14:32,690 --> 00:14:36,430
whether their individual consumers,

350
00:14:36,465 --> 00:14:36,760
other businesses or whatever,

351
00:14:36,860 --> 00:14:38,330
what percentage of the wallet,
the share, did you get?

352
00:14:38,530 --> 00:14:39,690
And how do you increase that?

353
00:14:39,890 --> 00:14:41,290
That's true whether you're a Wal-Mart,

354
00:14:41,490 --> 00:14:42,590
or a Neiman Marcus.

355
00:14:42,790 --> 00:14:45,090
It's true whether you're a GM or Toyota,

356
00:14:45,290 --> 00:14:46,490
in the direction.

357
00:14:46,690 --> 00:14:51,230
What has changed, however, that was
very controversial versus a decade ago

358
00:14:51,430 --> 00:14:54,630
when we started sharing with the
government leaders around the world,

359
00:14:54,830 --> 00:15:00,060
is the one-to-one correlation between
infrastructure build-out,

360
00:15:00,095 --> 00:15:00,390
productivity,

361
00:15:00,530 --> 00:15:01,530
and GDP growth.

362
00:15:01,730 --> 00:15:04,890
And this was controversial when
we started talking about it a decade ago.

363
00:15:05,090 --> 00:15:06,730
Today, every government leader,

364
00:15:06,930 --> 00:15:09,915
and I've talked to almost all of them,

365
00:15:09,950 --> 00:15:14,850
And even some that were
slower to buy into it,

366
00:15:14,950 --> 00:15:15,880
such as Germany,

367
00:15:16,020 --> 00:15:17,780
[Prime Minister] Schroeder, in his last speech that I tracked,

368
00:15:17,815 --> 00:15:18,250
broadband,

369
00:15:18,450 --> 00:15:20,980
and competitiveness of
infrastructure twenty-two times.

370
00:15:21,550 --> 00:15:24,480
So the ability to catch
these concepts early¡K

371
00:15:24,680 --> 00:15:26,750
When we literally sat
down with Laura Tyson

372
00:15:26,950 --> 00:15:30,320
who was the [economic] presidential
advisor to our President Clinton,

373
00:15:30,520 --> 00:15:32,250
sat down with Mr. Greenspan
and others and said,

374
00:15:32,450 --> 00:15:34,580
¡§Productivity shouldn't grow at 1% a year.

375
00:15:34,780 --> 00:15:36,880
It should grow sustainably

376
00:15:36,980 --> 00:15:39,920
at two to three percent should be a given,

377
00:15:40,150 --> 00:15:42,750
And if you understand what that
means to a political leader,

378
00:15:42,950 --> 00:15:46,120
translated in terms of the
best form of politics is what?

379
00:15:46,320 --> 00:15:47,780
A stable economy.

380
00:15:47,980 --> 00:15:50,480
If you're growing productivity
at 1% a year,

381
00:15:50,680 --> 00:15:52,550
you're standard of living doubles
every seventy-two (72) years,

382
00:15:52,750 --> 00:15:54,220
once in your lifetime.

383
00:15:54,420 --> 00:15:55,680
If it's at 3%,

384
00:15:55,880 --> 00:15:59,020
it doubles every 24 years, every generation.

385
00:15:59,220 --> 00:16:02,950
If it's at 5%, which is doable,
it's every fourteen (14) years.

386
00:16:03,150 --> 00:16:06,150
So understanding the correlation

387
00:16:06,250 --> 00:16:07,680
and understanding your
customers' decision criteria

388
00:16:07,880 --> 00:16:09,580
and prioritization becomes key.

389
00:16:09,780 --> 00:16:13,420
And identifying those before
it becomes obvious to others.

390
00:16:13,620 --> 00:16:15,550
As you think about it, we could argue,

391
00:16:15,750 --> 00:16:18,380
is it 48%? or 52% of productivity?

392
00:16:18,580 --> 00:16:20,450
Or 60 or 40?

393
00:16:20,650 --> 00:16:25,980
But about half now comes out of
networked IT with process change.

394
00:16:26,180 --> 00:16:29,420
And so regardless of whether
you're in public or private sector,

395
00:16:29,620 --> 00:16:32,180
as you begin to think about
running your operations more effectively,

396
00:16:32,380 --> 00:16:35,680
your ability to take the business
process or governmental process,

397
00:16:35,880 --> 00:16:37,320
make the changes that are needed

398
00:16:37,520 --> 00:16:40,380
and enable it by the
infrastructure capability is key.

399
00:16:42,450 --> 00:16:43,320
Also, when you really
look at this country,

400
00:16:43,520 --> 00:16:45,250
and you're realistic
on the grading system,

401
00:16:45,320 --> 00:16:47,680
we've got some challenges in front of us.

402
00:16:50,250 --> 00:16:51,520
We want to create the environment,

403
00:16:51,720 --> 00:16:54,680
not just to have the best
education and university system,

404
00:16:54,880 --> 00:16:56,420
but the best in K (Kindergarten) through 12.

405
00:16:56,620 --> 00:16:57,720
And as I'll share
with you in a moment,

406
00:16:57,920 --> 00:16:59,980
we are falling rapidly behind.

407
00:17:00,180 --> 00:17:02,380
The jobs will go where
the best educated workforce

408
00:17:02,520 --> 00:17:03,650
is with the right infrastructure.

409
00:17:05,720 --> 00:17:06,680
Secondly, in terms
of infrastructure,

410
00:17:06,780 --> 00:17:07,280
we used to lead in broadband deployment,

411
00:17:07,480 --> 00:17:10,350
the interstate highways of the future.

412
00:17:10,550 --> 00:17:14,170
We're now fourteenth
and falling rapidly.

413
00:17:14,370 --> 00:17:16,710
France,

414
00:17:16,840 --> 00:17:18,570
which used to represent 1% of
their population having broadband,

415
00:17:18,770 --> 00:17:21,840
now is over 11% in three years.

416
00:17:22,040 --> 00:17:24,970
The ability to
understand education combined

417
00:17:25,070 --> 00:17:27,840
with infrastructure
will determine the winners.

418
00:17:27,970 --> 00:17:28,670
Market transitions and innovation.

419
00:17:28,870 --> 00:17:31,440
One of the reasons we're very,
very interested in a relationship

420
00:17:31,640 --> 00:17:33,610
closer with you all,
and Stanford Universities,

421
00:17:33,810 --> 00:17:35,670
is because you all lead in innovation.

422
00:17:35,870 --> 00:17:38,040
You're able to say,
¡§How do you combine engineering

423
00:17:38,240 --> 00:17:41,510
and biosciences and high tech together

424
00:17:41,710 --> 00:17:43,710
in terms of architectures and ideas?¡¨

425
00:17:43,910 --> 00:17:45,740
And something that is
painful for me to say,

426
00:17:45,940 --> 00:17:47,670
it is about supportive government,

427
00:17:47,810 --> 00:17:50,305
regardless of your political
views of government.

428
00:17:50,340 --> 00:17:53,210
And your ability to say,
¡§How do you create an ownership society?¡¨

429
00:17:53,410 --> 00:17:57,180
Starting with the most basic element,

430
00:17:57,280 --> 00:17:57,310
which your leaders understand
here at the university.

431
00:17:57,510 --> 00:17:59,840
If we're not preparing our
students in this country

432
00:18:00,040 --> 00:18:04,380
to be competitive as
they enter university systems.

433
00:18:04,415 --> 00:18:06,940
You're clearly the top 1/10th¡K sorry

434
00:18:07,140 --> 00:18:10,640
the top 3% of your graduating
high school groups, etc.

435
00:18:10,840 --> 00:18:15,180
But if you look across
the country and around the world,

436
00:18:15,215 --> 00:18:15,510
And candidly,

437
00:18:15,710 --> 00:18:19,440
in spite of a lot of money and efforts,

438
00:18:19,410 --> 00:18:22,280
Secondly,

439
00:18:22,470 --> 00:18:24,440
not where the jobs are.

440
00:18:24,640 --> 00:18:27,170
In China,
when I talk about doing business in China

441
00:18:27,205 --> 00:18:31,040
with the leaders of
Providence or Zhiang Zimen

442
00:18:31,075 --> 00:18:31,610
it is very simple.

443
00:18:31,810 --> 00:18:33,940
We will guarantee you twenty-five
percent of our students

444
00:18:34,140 --> 00:18:37,270
who graduate in math or
science and high tech.

445
00:18:37,470 --> 00:18:39,910
We'll give you land right
next to the university.

446
00:18:40,110 --> 00:18:42,570
We'll allow you to be up and
running in a very short time period.

447
00:18:42,770 --> 00:18:47,170
And we're talking about the
top 5% of our nation's population,

448
00:18:47,370 --> 00:18:48,940
intelligence-wise and training-wise,

449
00:18:49,140 --> 00:18:51,140
being available for your workforce.

450
00:18:51,340 --> 00:18:54,470
The other thing that's a little
bit challenging is our gender diversity.

451
00:18:54,670 --> 00:18:58,740
If you don't use both sides
of the equation successfully

452
00:18:58,870 --> 00:18:59,810
in engineering and computer sciences,

453
00:19:00,010 --> 00:19:02,610
you're playing with almost
one arm behind your back.

454
00:19:02,810 --> 00:19:04,310
It's something we've
got to do better as a country,

455
00:19:04,510 --> 00:19:07,240
and it is a world area.

456
00:19:07,440 --> 00:19:08,940
We lose many of our top women,

457
00:19:09,140 --> 00:19:11,240
in terms of the interests
in computer sciences and math.

458
00:19:11,440 --> 00:19:12,410
As Carol Bartz would say,

459
00:19:12,610 --> 00:19:15,840
who has been on my Board of
Directors for over a decade,

460
00:19:15,940 --> 00:19:16,440
the CEO of Autodesk,

461
00:19:16,640 --> 00:19:17,840
very, very successful,

462
00:19:18,030 --> 00:19:21,300
she believes and I believe that we
lose many of our women

463
00:19:21,500 --> 00:19:26,300
before they even graduate
from the sixth grade.

464
00:19:26,500 --> 00:19:27,230
So it's saying,

465
00:19:27,430 --> 00:19:29,630
How do we get people excited
about computer sciences

466
00:19:29,830 --> 00:19:32,730
and math and sciences
in the early grades?

467
00:19:32,930 --> 00:19:35,200
Being realistic.  Do the numbers.

468
00:19:36,100 --> 00:19:41,360
If the global competitors generate five
to ten times the number of engineers,

469
00:19:42,560 --> 00:19:44,930
and you look at Masters Degrees
and add that up,

470
00:19:45,130 --> 00:19:46,530
you're talking about 50,000

471
00:19:46,730 --> 00:19:48,560
is all we're producing as a country.

472
00:19:49,530 --> 00:19:51,360
That's a battle that's hard to win.

473
00:19:51,660 --> 00:19:53,460
So we've got to change these parameters.

474
00:19:53,660 --> 00:19:55,500
We've got to create an environment
that attracts the best

475
00:19:55,700 --> 00:19:57,560
and brightest to university
systems in this country,

476
00:19:57,760 --> 00:19:58,960
from all over the world.

477
00:19:59,160 --> 00:19:59,960
And we've got to say,

478
00:20:00,160 --> 00:20:01,630
¡§How do we create an environment where more

479
00:20:01,760 --> 00:20:03,300
and more of them go into math and sciences?¡¨

480
00:20:03,500 --> 00:20:05,200
But understanding an infrastructure build,

481
00:20:05,230 --> 00:20:06,700
it's is a big challenge for us.

482
00:20:06,900 --> 00:20:08,830
We used to be at the very top.

483
00:20:09,030 --> 00:20:12,560
Now you're talking countries like Japan
that have three times the speed,

484
00:20:12,760 --> 00:20:15,330
one third of their population penetrated,

485
00:20:15,530 --> 00:20:17,830
at 1/25th the cost.

486
00:20:19,260 --> 00:20:19,960
And so,

487
00:20:20,160 --> 00:20:21,800
if you believe in education
and infrastructure

488
00:20:22,000 --> 00:20:23,195
being two of the key determinants,

489
00:20:23,230 --> 00:20:27,000
which even the World Economic
Forum is now beginning

490
00:20:27,100 --> 00:20:28,630
to realize is a must, you begin
to see where this is going to go.

491
00:20:28,830 --> 00:20:30,360
So in terms of global competitiveness,

492
00:20:30,560 --> 00:20:32,830
it's what type of infrastructure you build,

493
00:20:33,030 --> 00:20:35,130
and then how do you use
that infrastructure.

494
00:20:35,330 --> 00:20:39,900
One of the areas that also
I think is a good turnconcern for this country

495
00:20:39,935 --> 00:20:42,500
is that,understand we in high tech
are just lousy at research.

496
00:20:42,700 --> 00:20:44,360
We shouldn't kid ourselves.

497
00:20:44,560 --> 00:20:46,430
So we have to be dependent

498
00:20:46,630 --> 00:20:50,230
and we have to fund those for government
research primarily to universities.

499
00:20:50,430 --> 00:20:53,500
And yet, if you look what is happening,

500
00:20:53,600 --> 00:20:54,630
we're falling behind in
terms of this direction.

501
00:20:54,830 --> 00:20:57,230
So a little bit in terms
of the basis for it,

502
00:20:57,360 --> 00:20:59,400
and attracting the best and brightest,

503
00:20:59,600 --> 00:21:00,900
from around the world.

504
00:21:01,100 --> 00:21:01,960
A welcome mat,

505
00:21:02,160 --> 00:21:04,560
and ¡§please stay¡¨- Environment.

506
00:21:04,760 --> 00:21:07,100
An employee ownership
environment becomes key.

507
00:21:07,560 --> 00:21:08,760
And here's the challenges

508
00:21:08,960 --> 00:21:10,430
that we face as a country.

509
00:21:10,630 --> 00:21:12,360
In terms of my costs per engineer,

510
00:21:12,560 --> 00:21:15,560
whether you're here in
Boston or New York or San Jose,

511
00:21:15,760 --> 00:21:18,730
is approximately $252,000 fully burdened.

512
00:21:18,930 --> 00:21:20,430
That's all the physical space,

513
00:21:20,530 --> 00:21:23,490
everything that goes with it,
as well as the salary.

514
00:21:23,690 --> 00:21:27,720
My engineers in Shanghai or Bangalore, at $48,000.

515
00:21:27,920 --> 00:21:29,890
So I've got to be five times more productive

516
00:21:30,090 --> 00:21:31,750
with the workforce I have in this country,

517
00:21:31,950 --> 00:21:34,450
versus my workforce in other parts of the world.

518
00:21:34,690 --> 00:21:36,155
So as you take this fact,

519
00:21:36,190 --> 00:21:38,650
¡§Fine, John.  That's nice
to talk about education,

520
00:21:38,750 --> 00:21:39,350
the challenges we face,

521
00:21:39,550 --> 00:21:40,920
tie it back to the business.¡¨

522
00:21:41,120 --> 00:21:45,450
It means that the skill sets and the
ability to focus on market transitions,

523
00:21:45,650 --> 00:21:47,450
the ability to get your best and brightest

524
00:21:47,650 --> 00:21:49,750
when you graduate from school
and become part of companies,

525
00:21:49,950 --> 00:21:53,720
to work together in a teamwork fashion
that moves with speed and productivity,

526
00:21:53,920 --> 00:21:57,090
are five times more than your
global competitors, what's required?

527
00:21:57,290 --> 00:21:59,820
And you say,¡§Well, John
that's too much.¡¨It isn't at all.

528
00:22:00,020 --> 00:22:04,220
My productivity was
450,000 five years ago.

529
00:22:04,420 --> 00:22:06,220
My competitors productivity around the world,

530
00:22:06,420 --> 00:22:09,850
revenue per employee
was about 200,000.

531
00:22:10,220 --> 00:22:12,890
Today we're at 700,000.

532
00:22:13,090 --> 00:22:16,150
Our competitors productivity
is about 225,000.

533
00:22:16,350 --> 00:22:18,820
I intend to take it
to a million per employee.

534
00:22:19,020 --> 00:22:21,820
So your ability to say,

535
00:22:21,950 --> 00:22:22,490
¡§How do you level this playing field?¡¨
is very key.

536
00:22:23,220 --> 00:22:27,120
At the heart of that,
regardless of which industry you're in,

537
00:22:27,250 --> 00:22:29,120
it's your ability to
identify market transitions,

538
00:22:29,320 --> 00:22:31,350
to identify them well before
it becomes obvious,

539
00:22:31,550 --> 00:22:34,190
in my industry it requires
probably three to five years before

540
00:22:34,390 --> 00:22:37,650
most people see it, and then
to position yourself for that.

541
00:22:37,850 --> 00:22:39,390
Transitions can be economic.

542
00:22:39,590 --> 00:22:42,020
They can be from one product
generation to another.

543
00:22:42,220 --> 00:22:44,650
They can be change in your
customer buying behavior.

544
00:22:44,850 --> 00:22:46,620
They can be technology convergence

545
00:22:46,820 --> 00:22:49,620
such as data voice video over
IP infrastructure, etc.

546
00:22:49,820 --> 00:22:53,450
And it's your ability to create
that environment becomes key.

547
00:22:53,650 --> 00:22:55,720
And you can say,
¡§John, that's fine in theory.

548
00:22:55,920 --> 00:22:57,290
Walk me through some examples.¡¨

549
00:22:57,490 --> 00:23:01,720
This is what we said at Comdex in 1997.

550
00:23:01,920 --> 00:23:04,490
At that time people thought
we were on the lunatic fringe.

551
00:23:04,590 --> 00:23:08,190
Yet, to us, by listening to our customers,
it was pretty obvious.

552
00:23:08,320 --> 00:23:09,290
Our data communication
industry consolidated,

553
00:23:09,490 --> 00:23:11,420
It made no sense to have
two or three hundred major

554
00:23:11,620 --> 00:23:13,790
data communication providers.

555
00:23:13,990 --> 00:23:16,550
That, we thought all in one conversion,

556
00:23:16,750 --> 00:23:18,420
data voice video networks were a given.

557
00:23:18,620 --> 00:23:20,220
As that occurs,

558
00:23:20,420 --> 00:23:22,620
voice would reside on your IP network

559
00:23:22,820 --> 00:23:24,690
with a very small percentage of the load.

560
00:23:24,890 --> 00:23:27,540
Therefore, it would
commoditize and become free.

561
00:23:27,740 --> 00:23:28,880
That as that occurred,

562
00:23:29,080 --> 00:23:31,580
there would be a consolidation
of the telecommunication,

563
00:23:31,780 --> 00:23:33,510
the service providers, if you will,

564
00:23:33,710 --> 00:23:35,810
the AT&Ts, the MCIs, the Sprints,

565
00:23:36,010 --> 00:23:39,340
and 5000 other service
providers in the US,

566
00:23:39,540 --> 00:23:40,680
which are now down to 500,

567
00:23:40,880 --> 00:23:42,780
but really ten serious players.

568
00:23:42,980 --> 00:23:44,980
And that would occur on a global basis.

569
00:23:45,180 --> 00:23:46,240
That as that occurred,

570
00:23:46,440 --> 00:23:47,510
you'd want to think through that,

571
00:23:47,710 --> 00:23:48,810
in our industry,

572
00:23:49,010 --> 00:23:52,410
that we would collide not
with our data competitors

573
00:23:52,610 --> 00:23:53,680
but with the voice competitors.

574
00:23:53,880 --> 00:23:55,580
The Lucent, the Nortels
the Alkatels ,

575
00:23:55,780 --> 00:23:57,310
the Siemens, much bigger companies.

576
00:23:57,510 --> 00:23:59,940
And you had to say, how do you
play out these transitions,

577
00:24:00,140 --> 00:24:01,680
not over the last three years,

578
00:24:01,880 --> 00:24:05,210
but how did you play them
out almost 8 to 10 years ago

579
00:24:05,310 --> 00:24:06,840
and position yourself for the future?

580
00:24:07,040 --> 00:24:08,240
The same thing's true for,from

581
00:24:08,440 --> 00:24:10,205
not the industry direction,

582
00:24:10,240 --> 00:24:12,210
but in terms of how
customers would make decisions

583
00:24:12,410 --> 00:24:13,680
within their own groups.

584
00:24:13,880 --> 00:24:16,640
Networks would enable
dramatic new business models.

585
00:24:16,840 --> 00:24:20,610
To be effective you had to have
architectural security across the board.

586
00:24:20,810 --> 00:24:23,280
That as transport commoditized,

587
00:24:23,480 --> 00:24:25,710
you've got to think about process change.

588
00:24:25,910 --> 00:24:28,280
And that things would get cheaper forever,

589
00:24:28,480 --> 00:24:31,380
which is a nice way of saying
productivity will continue to drive,

590
00:24:31,580 --> 00:24:34,140
if done right, faster
than cost will increase.

591
00:24:34,340 --> 00:24:37,610
And that speed is not
the only differentiator.

592
00:24:37,810 --> 00:24:39,840
Brand is of equal importance.

593
00:24:40,040 --> 00:24:41,740
And the importance of
the brand in terms of

594
00:24:41,940 --> 00:24:45,380
your ability to associate
it with moving into new markets.

595
00:24:45,580 --> 00:24:48,180
Your ability also to catch within
your specific industry,

596
00:24:48,280 --> 00:24:52,480
how things would evolve.
And again, it isn't so important to networking,

597
00:24:52,515 --> 00:24:52,610
it's more the concept.

598
00:24:54,940 --> 00:24:57,840
Networks used to be enabled by the
best of class in each category.

599
00:24:58,040 --> 00:24:59,510
Then companies began to realize

600
00:24:59,710 --> 00:25:01,340
if they had a preferred vendor throughout,

601
00:25:01,540 --> 00:25:04,180
they could make it
work much less expensive.

602
00:25:04,380 --> 00:25:07,610
Then they began to realize networks
need to go across multiple networks.

603
00:25:07,810 --> 00:25:09,310
It shouldn't matter to you as a user

604
00:25:09,510 --> 00:25:11,680
whether it's your school's
wireless network here,

605
00:25:11,880 --> 00:25:13,910
whether it's Verizon's mobile network,

606
00:25:14,110 --> 00:25:15,880
whether it's your company's network,

607
00:25:16,080 --> 00:25:17,440
fixed or wireless shouldn't matter at all.

608
00:25:17,640 --> 00:25:19,280
You'll just rotate through them.

609
00:25:19,410 --> 00:25:21,580
Then the ability to move
intelligence into the network,

610
00:25:21,780 --> 00:25:23,480
and as that occurred,

611
00:25:23,610 --> 00:25:26,740
that was the fundamental change in IT.

612
00:25:26,940 --> 00:25:30,410
It says, the complete virtualization
of where processes are,

613
00:25:30,610 --> 00:25:31,930
applications are,

614
00:25:32,130 --> 00:25:33,170
and storage occurs,

615
00:25:33,370 --> 00:25:36,030
which has huge implications which
I'll talk about a little bit later.

616
00:25:36,230 --> 00:25:37,230
And then again, you could say,

617
00:25:37,430 --> 00:25:39,330
¡§John, I might buy intelligence
into the network.

618
00:25:39,530 --> 00:25:40,300
That's where we are today.

619
00:25:40,500 --> 00:25:41,470
Where's the future going?¡¨

620
00:25:41,670 --> 00:25:43,530
The network will be the platform.

621
00:25:43,730 --> 00:25:45,230
You'll connect to it just
like you do electricity

622
00:25:45,430 --> 00:25:48,430
except it will be wired and wireless.

623
00:25:48,570 --> 00:25:49,735
Huge implications,

624
00:25:49,770 --> 00:25:52,170
and prepare my R&D five
[to] ten years out for

625
00:25:52,370 --> 00:25:54,030
where we're going to be within

626
00:25:56,030 --> 00:25:57,170
Simple statement.

627
00:25:57,370 --> 00:25:58,970
But a direction of the future.

628
00:25:59,770 --> 00:26:01,200
Proud to be an American company.

629
00:26:01,400 --> 00:26:03,630
But my jobs will go wherever
the best infrastructure exists

630
00:26:03,830 --> 00:26:05,230
with supportive government.

631
00:26:05,430 --> 00:26:07,470
At the present time it's fifty-fifty,

632
00:26:07,600 --> 00:26:10,030
in terms of the 4000 people
we added the last year.

633
00:26:10,230 --> 00:26:13,830
It's also catching changes
in terms of process

634
00:26:14,030 --> 00:26:15,730
and understanding what they mean.

635
00:26:15,930 --> 00:26:17,470
If you've really looked to about it,

636
00:26:17,670 --> 00:26:19,230
the productivity enabled, and granted,

637
00:26:19,430 --> 00:26:22,130
I have a bias from the IT network side,

638
00:26:22,330 --> 00:26:24,330
but it was the productivity line,

639
00:26:24,530 --> 00:26:25,930
the production line,

640
00:26:26,130 --> 00:26:27,830
or the supply chain management

641
00:26:28,030 --> 00:26:31,070
that really ruled
the production during the eighties.

642
00:26:31,270 --> 00:26:33,300
During the nineties it was
transactions.

643
00:26:33,500 --> 00:26:39,230
We entered 95% of our orders
over the internet a decade ago.

644
00:26:39,430 --> 00:26:42,170
We did 90% of our customer
support over the internet,

645
00:26:42,370 --> 00:26:44,700
with higher customer satisfaction
than any other player

646
00:26:44,900 --> 00:26:48,630
in the industry, an IT industry,
yet done over the internet.

647
00:26:48,830 --> 00:26:50,170
Those were transactions.

648
00:26:50,370 --> 00:26:53,000
You do¡K order something over the internet

649
00:26:53,200 --> 00:26:54,300
you check on the shipment date,

650
00:26:54,500 --> 00:26:56,400
you do a Google search.

651
00:26:56,600 --> 00:27:00,900
The next set of productivity
will be all about interactions.

652
00:27:01,100 --> 00:27:02,900
They will be data voice video interactions.

653
00:27:03,100 --> 00:27:06,930
We were talking earlier about your president
having the deans meet together.

654
00:27:07,130 --> 00:27:10,800
Today that's physically coming
together to talk about issues.

655
00:27:11,270 --> 00:27:13,935
Five years from now, seven years from now,

656
00:27:13,970 --> 00:27:16,600
They will be virtually come together 
It will be almost like a virtual table,

657
00:27:16,800 --> 00:27:18,470
in terms of the communication.

658
00:27:18,670 --> 00:27:21,930
And these interactions is
where the productivity will occur.

659
00:27:22,130 --> 00:27:25,230
How many of you call up a stock broker,

660
00:27:25,430 --> 00:27:27,070
to buy a share of stock?

661
00:27:27,570 --> 00:27:29,330
Why would you ever do that?

662
00:27:30,170 --> 00:27:32,500
The stock brokers had to
move from interacting

663
00:27:32,700 --> 00:27:35,230
with you on placing an order for the stock

664
00:27:35,430 --> 00:27:37,260
to being a financial advisor saying,

665
00:27:37,360 --> 00:27:39,820
¡§What mix.¡¨as you create
your own wealth later in life,

666
00:27:40,020 --> 00:27:41,490
¡§do you want to put into stock?

667
00:27:41,690 --> 00:27:42,890
What do you want to put in bonds?

668
00:27:43,090 --> 00:27:44,360
What do you need in insurance?

669
00:27:44,560 --> 00:27:46,990
What do you want to do in
terms of your mortgages?

670
00:27:47,090 --> 00:27:48,160
What do you want to do
as your estate planning?

671
00:27:48,260 --> 00:27:50,490
What do you want to do
with life insurance?¡¨

672
00:27:50,690 --> 00:27:53,860
The same thing's true when you
deal with people like Home Depot.

673
00:27:54,060 --> 00:27:56,460
Bob Nardelli, on of the leading, in my opinion,

674
00:27:56,660 --> 00:27:57,790
business leaders in this country,

675
00:27:57,990 --> 00:28:00,860
he's going to eliminate the
people in the checkout line.

676
00:28:01,060 --> 00:28:05,620
Why would you want to have
people paying very expensive cost

677
00:28:05,760 --> 00:28:06,920
when you're checking something out?

678
00:28:07,020 --> 00:28:08,990
Because you as a consumer just
want to get out as quickly as you can.

679
00:28:09,190 --> 00:28:10,855
You just put an ID tag on that,

680
00:28:10,890 --> 00:28:12,520
you'll go right through the line.

681
00:28:12,720 --> 00:28:14,420
But he won't eliminate the jobs.

682
00:28:14,620 --> 00:28:18,020
He will move the transactional
jobs of checking you out

683
00:28:18,220 --> 00:28:22,190
onto to his floor in his stores

684
00:28:22,360 --> 00:28:25,120
and educate his workforce about,

685
00:28:25,260 --> 00:28:26,390
how do you use the various capabilities

686
00:28:26,590 --> 00:28:29,805
so the value of coming to his
store is dramatically better

687
00:28:29,840 --> 00:28:33,020
than coming to other people'stor in this industry

688
00:28:33,220 --> 00:28:35,520
GE's one of the best
run companies in the world.

689
00:28:35,720 --> 00:28:39,060
Jeff Immelt, their CEO,

690
00:28:39,190 --> 00:28:40,090
would say it is exactly
in terms of transitions,

691
00:28:40,290 --> 00:28:45,160
that we look for you,
Cisco, to make a difference in.

692
00:28:45,195 --> 00:28:45,320
And again, while we provide good technology,

693
00:28:45,520 --> 00:28:47,790
if I can make that transition
and help our customers

694
00:28:47,990 --> 00:28:50,090
also make good business decisions,

695
00:28:50,290 --> 00:28:52,590
then it's very difficult to displace us.

696
00:28:52,790 --> 00:28:53,220
So,

697
00:28:53,420 --> 00:28:55,220
we're casting our net pretty wide.

698
00:28:55,420 --> 00:28:56,790
We'll see how well we do on it.

699
00:28:56,990 --> 00:28:59,160
But if you look at where the
jobs are of the future,

700
00:28:59,360 --> 00:29:02,660
they are moving completely away
from transaction into interaction.

701
00:29:02,860 --> 00:29:05,690
And if you begin to think about

702
00:29:05,820 --> 00:29:06,460
whatever kind of line of work
you decide to do later in your life,

703
00:29:06,660 --> 00:29:08,520
it will be much more interaction based,

704
00:29:08,720 --> 00:29:11,060
which is whyapplies teamwork,

705
00:29:11,260 --> 00:29:13,420
and the ability to set,
stretch goals and say,

706
00:29:13,520 --> 00:29:15,720
¡§How do you accomplish goals as a team?¡¨

707
00:29:15,820 --> 00:29:16,990
becomes more and more a key.

708
00:29:17,190 --> 00:29:19,020
This was a surprise to us.

709
00:29:19,220 --> 00:29:21,840
And I wish we had understood it during the nineties.
We didn't.

710
00:29:21,875 --> 00:29:24,460
I understood the one-to-one
correlation between infrastructure

711
00:29:24,660 --> 00:29:27,060
build-out and applications
and productivity.

712
00:29:27,260 --> 00:29:30,620
What I did not realize
until after the fact

713
00:29:30,820 --> 00:29:32,860
was if you don't change
the underlying process,

714
00:29:33,060 --> 00:29:35,160
she don't get the productivity.

715
00:29:35,520 --> 00:29:38,020
And I'm talking,
five- to tenfold difference.

716
00:29:38,220 --> 00:29:41,280
You all helped us do some
of these studies.

717
00:29:41,480 --> 00:29:43,810
Easiest example to understand,

718
00:29:44,010 --> 00:29:51,280
is I encouraged our company
to do e-learning across all aspects,

719
00:29:51,380 --> 00:29:53,080
which is a nice way of saying
we just dictated it.

720
00:29:53,210 --> 00:29:53,710
¡§We're going to do it.¡¨

721
00:29:53,910 --> 00:29:55,550
We did it for a very selfish reason.

722
00:29:55,750 --> 00:29:57,550
We were going to cover
so many product areas,

723
00:29:57,750 --> 00:30:02,010
that I had to be able to train the
workforce across not one or two,

724
00:30:02,810 --> 00:30:04,280
but across fifteen
going to twenty-five and change,

725
00:30:04,480 --> 00:30:05,950
in business process.

726
00:30:06,150 --> 00:30:11,410
I knew also that if I could get
e-learning into my customer accounts,

727
00:30:11,550 --> 00:30:12,910
a half-an-hour of video is equivalent
to a year-and-a-half of email

728
00:30:13,980 --> 00:30:14,110
load on the network.

729
00:30:14,310 --> 00:30:16,580
A nice way of saying they don't
have to upgrade all their systems.

730
00:30:16,780 --> 00:30:17,910
So I want to be very upfront.

731
00:30:18,110 --> 00:30:20,010
I had some very selfish
reasons for doing this.

732
00:30:20,210 --> 00:30:22,280
But I also knew when
I dictated e-learning

733
00:30:22,480 --> 00:30:23,650
it was going to fail.

734
00:30:23,850 --> 00:30:25,810
Because all my customers had failed.

735
00:30:26,010 --> 00:30:27,050
And we did as well.

736
00:30:27,250 --> 00:30:29,850
We saved money on travel
and hotel rooms, etc,

737
00:30:30,050 --> 00:30:31,880
but all we did was automate the teacher,

738
00:30:32,080 --> 00:30:33,450
delivering a course.

739
00:30:33,650 --> 00:30:36,110
Required the students to sit
through forty hours a course,

740
00:30:36,310 --> 00:30:38,380
take a test at the end.

741
00:30:38,580 --> 00:30:40,550
You know what my engineers and
sales reps quickly figured out?

742
00:30:40,750 --> 00:30:43,050
Take the test and see if
I have to attend the course.

743
00:30:44,010 --> 00:30:45,210
That at first bothered me
then I thought,

744
00:30:45,410 --> 00:30:46,410
hey, that's not bad.

745
00:30:46,610 --> 00:30:49,350
Then we began to figure out,
let's break into modules.

746
00:30:49,550 --> 00:30:51,980
You probably won't pass out
of most of the classes,

747
00:30:52,180 --> 00:30:53,680
but figure out what you don't know

748
00:30:53,880 --> 00:30:56,080
and only take six or
nine hours of the course,

749
00:30:56,280 --> 00:30:59,650
and take it right before
you call on the customer.

750
00:31:00,480 --> 00:31:01,710
And that allows us to move with speed.

751
00:31:01,910 --> 00:31:04,880
And I was sure that listening to
the president of the university

752
00:31:05,080 --> 00:31:07,650
or the CEO of the company talk for an hour.

753
00:31:07,980 --> 00:31:09,910
You know what happens
after twelve minutes?

754
00:31:10,110 --> 00:31:11,780
They dropped me.

755
00:31:12,150 --> 00:31:13,950
And you can track it over the internet.

756
00:31:14,150 --> 00:31:16,250
And, so you begin to see,

757
00:31:16,450 --> 00:31:18,650
what some of my senior
execs quickly figured out,

758
00:31:18,850 --> 00:31:20,310
but you can begin to see,

759
00:31:20,510 --> 00:31:23,780
until I changed and broke it up
into ten to twelve minute modules,

760
00:31:23,980 --> 00:31:25,380
learning done during lunch,

761
00:31:25,580 --> 00:31:26,310
at home,

762
00:31:26,510 --> 00:31:28,550
after you put your kids
to bed at night, etc.,

763
00:31:28,750 --> 00:31:31,010
that was the only time we really
began to get the productivity.

764
00:31:31,210 --> 00:31:32,950
So the key message is

765
00:31:33,150 --> 00:31:36,050
technology without process change,

766
00:31:36,250 --> 00:31:37,950
regardless of your line of interest,

767
00:31:38,150 --> 00:31:40,150
doesn't get the productivity results.

768
00:31:40,350 --> 00:31:42,810
And you almost think of it as,
in terms of volume

769
00:31:43,010 --> 00:31:45,940
on the triangle
or the pyramid created,

770
00:31:46,140 --> 00:31:47,900
in terms of one access
being infrastructure,

771
00:31:48,100 --> 00:31:49,300
one access being applications,

772
00:31:49,500 --> 00:31:51,870
and the others being the
process change that go with it.

773
00:31:52,070 --> 00:31:54,300
Transactions took us through the first step.

774
00:31:54,500 --> 00:31:57,340
Interactions, in my opinion,
will take us to the next step.

775
00:31:57,540 --> 00:32:00,900
Interactions are hard.

776
00:32:01,100 --> 00:32:02,440
Not just within a functional group,

777
00:32:02,640 --> 00:32:04,400
but especially as
you go across functions.

778
00:32:04,600 --> 00:32:06,140
Which is why the training,

779
00:32:06,340 --> 00:32:07,570
in leading universities,

780
00:32:07,770 --> 00:32:09,240
and I know you all are pioneering a lot of

781
00:32:09,440 --> 00:32:11,740
this across functional groups as well,

782
00:32:11,840 --> 00:32:13,600
the focus on teamwork becomes very key.

783
00:32:13,740 --> 00:32:14,800
The importance of
having your business leaders

784
00:32:15,000 --> 00:32:16,140
combined with the engineering leaders,

785
00:32:16,340 --> 00:32:17,700
combined with the biosciences,

786
00:32:17,900 --> 00:32:19,840
combined with the IT group.

787
00:32:20,040 --> 00:32:20,800
And understanding,

788
00:32:21,000 --> 00:32:24,570
how do you drive these
common directions together.

789
00:32:24,770 --> 00:32:27,170
We got our productivity in silos.

790
00:32:27,370 --> 00:32:31,440
Most productive workforce in our
industry by a factor of fourfold on systems.

791
00:32:31,640 --> 00:32:33,670
My productivity in the future, however,

792
00:32:33,870 --> 00:32:35,340
will be across groups.

793
00:32:35,470 --> 00:32:37,540
And this is hard.

794
00:32:37,740 --> 00:32:40,370
Really hard.

795
00:32:40,700 --> 00:32:43,270
I measured my team on teamwork.

796
00:32:44,170 --> 00:32:45,570
And to the best of my knowledge,

797
00:32:45,770 --> 00:32:46,700
we're the only company in the world

798
00:32:46,900 --> 00:32:49,200
that pays all of our managers
on customer satisfaction.

799
00:32:49,400 --> 00:32:51,170
Have done so for twelve years.

800
00:32:51,370 --> 00:32:52,200
Three years ago,

801
00:32:52,400 --> 00:32:54,340
I started measuring all
my senior executives on teamwork.

802
00:32:54,540 --> 00:32:56,300
Not as measured by me,

803
00:32:56,500 --> 00:33:00,240
but as measured by six of their peers
that they had to get along with,

804
00:33:00,440 --> 00:33:03,200
usually the ones they weren't
getting along with.

805
00:33:03,940 --> 00:33:07,040
The first year, a lot of people
lost thirty percent of their bonus.

806
00:33:07,400 --> 00:33:08,170
The second year,

807
00:33:08,370 --> 00:33:09,940
nobody lost their bonus.

808
00:33:10,470 --> 00:33:11,670
It was the right thing to do,

809
00:33:11,870 --> 00:33:14,240
but also tie in the reward
system to what expectations.

810
00:33:14,440 --> 00:33:15,400
But unfortunately,

811
00:33:15,600 --> 00:33:17,500
my generation of leaders were
not trained on teamwork.

812
00:33:17,700 --> 00:33:20,200
In fact, you often considered
your peers your competition.

813
00:33:20,400 --> 00:33:22,370
So it's important to build
that into the DNA.

814
00:33:22,570 --> 00:33:24,440
Because my ability to move as a company

815
00:33:24,640 --> 00:33:26,840
is now completely dependent upon

816
00:33:26,940 --> 00:33:29,670
my fifty business units
not only working together,

817
00:33:29,770 --> 00:33:30,370
sharing common Asics,

818
00:33:30,570 --> 00:33:32,670
common software, common architecture,

819
00:33:32,870 --> 00:33:35,370
but also working with
my customer support group

820
00:33:35,570 --> 00:33:36,700
to build that into product requirements

821
00:33:36,900 --> 00:33:38,600
to be able to support and service them

822
00:33:38,800 --> 00:33:40,870
at dramatically lower cost
than our competition does.

823
00:33:41,070 --> 00:33:42,240
Building that with manufacturing

824
00:33:42,440 --> 00:33:43,700
for speed of delivery

825
00:33:43,900 --> 00:33:45,540
from the time of idea

826
00:33:45,640 --> 00:33:46,840
to volume shipment, etc.

827
00:33:47,640 --> 00:33:50,040
It requires interactions that
we're just beginning to imagine.

828
00:33:50,240 --> 00:33:52,290
And then it's the ability as a leader,

829
00:33:52,490 --> 00:33:54,990
to regardless of your industry,
outline where you're going to go.

830
00:33:55,190 --> 00:33:56,960
And I'm a visual person.

831
00:33:57,160 --> 00:34:00,290
The ability to articulate
your strategy in a format

832
00:34:00,490 --> 00:34:02,630
that your average executive

833
00:34:02,830 --> 00:34:04,155
or your individual contributor

834
00:34:04,190 --> 00:34:05,890
understands what
you're trying to do,

835
00:34:06,090 --> 00:34:07,560
and what is their role.

836
00:34:07,760 --> 00:34:09,660
For us, it's clearly a
technology architecture

837
00:34:09,860 --> 00:34:11,090
coming up from one side,

838
00:34:11,290 --> 00:34:13,660
a business architecture
coming up from another.

839
00:34:13,860 --> 00:34:15,290
Intelligence into the network

840
00:34:15,490 --> 00:34:17,860
with is the market transition
in the IT industry

841
00:34:18,060 --> 00:34:20,660
that we think will be tremendously
fundamental to our future

842
00:34:20,860 --> 00:34:22,730
depending how well we execute or not.

843
00:34:22,930 --> 00:34:24,430
Then for this blueprint,

844
00:34:24,630 --> 00:34:26,160
we break it into three
to five year goals.

845
00:34:26,360 --> 00:34:28,560
And it takes you a minimum of
three to five years

846
00:34:28,760 --> 00:34:30,830
to drive any fundamental
goal through your company.

847
00:34:31,030 --> 00:34:32,930
Ask any CEO around.

848
00:34:33,130 --> 00:34:38,060
But then it's also about what initiatives
or actions do you do every year,

849
00:34:38,260 --> 00:34:40,460
to accomplish those three
to five year goals.

850
00:34:40,660 --> 00:34:42,430
And then we put them on our belt.

851
00:34:43,230 --> 00:34:45,960
And then we empower throughout
the whole company,

852
00:34:46,060 --> 00:34:46,990
to be able to make it happen.

853
00:34:47,190 --> 00:34:49,060
Catching transitions.

854
00:34:49,260 --> 00:34:51,160
The ability to realize that

855
00:34:51,360 --> 00:34:53,590
IT in the future,

856
00:34:53,790 --> 00:34:57,960
you'll have no idea what was
on the PCs some you have,

857
00:34:58,060 --> 00:35:00,390
the PDAs, or the cell phones.

858
00:35:00,590 --> 00:35:02,160
What data was resident there,

859
00:35:02,360 --> 00:35:04,830
what applications are
there or processors,

860
00:35:05,030 --> 00:35:06,560
what is down the hall,

861
00:35:06,760 --> 00:35:08,430
what is in your data
center here on campus,

862
00:35:08,630 --> 00:35:10,660
or somewhere on the worldwide web.

863
00:35:10,860 --> 00:35:12,360
You'll be able to gain access to this

864
00:35:12,560 --> 00:35:14,330
in whatever format you're familiar with.

865
00:35:14,530 --> 00:35:15,560
Make no mistake about it.

866
00:35:15,760 --> 00:35:17,160
I'm a voice and video person.

867
00:35:17,360 --> 00:35:20,490
I keyboard in fifteen words a
minute with lousy spelling.

868
00:35:20,690 --> 00:35:23,160
But I can talk 200 words a minute.

869
00:35:23,360 --> 00:35:26,690
And do you know what my primary
communication with our employee base is?

870
00:35:26,890 --> 00:35:29,060
Video on demand.

871
00:35:29,760 --> 00:35:33,890
So the ability to gain access
to information anytime, anywhere,

872
00:35:34,090 --> 00:35:38,260
and for it to be completely unaware
whether the processor is in your device,

873
00:35:38,460 --> 00:35:40,230
or in the data center,
is what networking is about.

874
00:35:40,430 --> 00:35:41,690
So catching that transition and saying,

875
00:35:41,890 --> 00:35:45,190
how do you play it to
your advantage as a company.

876
00:35:45,390 --> 00:35:48,090
The ability literally
to enter two new markets.

877
00:35:48,290 --> 00:35:51,030
And this is where we made
two bets at the same time.

878
00:35:51,230 --> 00:35:53,490
So when you're doing things that
no one else has ever done before,

879
00:35:53,690 --> 00:35:56,420
don't kid yourself.
You're not going to be smarter or work harder.

880
00:35:56,480 --> 00:35:58,820
You've got to say,
How do you do them differently?

881
00:35:59,020 --> 00:36:03,050
We made a decision that we
thought this virtualization

882
00:36:03,250 --> 00:36:04,120
or of resources

883
00:36:04,320 --> 00:36:06,220
was going to occur a decade ago.

884
00:36:06,420 --> 00:36:08,120
And we began to say as we did this,

885
00:36:08,320 --> 00:36:10,350
we wouldn't just build
what our technology

886
00:36:10,480 --> 00:36:11,920
of is routers and switches.

887
00:36:12,550 --> 00:36:15,780
But we felt that we had to move
in areas such as storage,

888
00:36:15,880 --> 00:36:17,780
such as wireless, such as security.

889
00:36:17,980 --> 00:36:20,750
And we went with the GE philosophy,
of one or two,

890
00:36:20,850 --> 00:36:23,080
or not to compete, and what
are the sustainable differentiations.

891
00:36:23,280 --> 00:36:26,820
But we also dealt on
the transition after that,

892
00:36:27,020 --> 00:36:29,350
which is we thought these
would first be loosely

893
00:36:29,550 --> 00:36:31,180
and then tightly coupled together.

894
00:36:31,380 --> 00:36:32,880
So as we went into this market,

895
00:36:33,080 --> 00:36:36,120
we designed from the beginning the
concepts about tying them together

896
00:36:36,320 --> 00:36:37,780
in terms of direction.

897
00:36:37,980 --> 00:36:39,850
Now, no high tech company in history

898
00:36:40,050 --> 00:36:41,165
in the last two decades

899
00:36:41,200 --> 00:36:42,280
has ever been number one

900
00:36:42,480 --> 00:36:45,520
in more than two major product areas
that have high growth margins

901
00:36:45,720 --> 00:36:47,220
and rapid growth.

902
00:36:47,420 --> 00:36:49,920
We're number one in ten.

903
00:36:50,120 --> 00:36:52,420
Innovation to us wasn't just
about doing it ourselves.

904
00:36:52,620 --> 00:36:54,220
It was saying, How do you partner?

905
00:36:54,420 --> 00:36:56,750
How do you take complex ideas

906
00:36:56,950 --> 00:36:59,450
and understand how the
market's going to play out?

907
00:36:59,650 --> 00:37:00,550
For us,

908
00:37:00,750 --> 00:37:03,250
understanding security was
not about a pinpoint product,

909
00:37:03,450 --> 00:37:04,550
a firewall,

910
00:37:04,750 --> 00:37:06,550
or VPN capability,

911
00:37:06,750 --> 00:37:08,185
or intrusion detection,

912
00:37:08,220 --> 00:37:09,620
or intrusion prevention,

913
00:37:09,820 --> 00:37:12,245
or how you handle a
denial of service attacks.

914
00:37:12,280 --> 00:37:15,250
It has to be an architectural
play like the human body.

915
00:37:15,450 --> 00:37:17,820
It is embedded in each of your products,

916
00:37:18,020 --> 00:37:20,350
that then has the interaction
of your own products

917
00:37:20,550 --> 00:37:22,180
with your peers' products,

918
00:37:22,280 --> 00:37:24,350
and then is adaptive,
like the human body is,

919
00:37:24,550 --> 00:37:25,880
to unknown threats.

920
00:37:26,080 --> 00:37:30,020
And designing that across the
board sounds pretty simple, right?

921
00:37:30,880 --> 00:37:32,220
Try fifteen acquisitions,

922
00:37:32,420 --> 00:37:34,115
1500 engineers,

923
00:37:34,150 --> 00:37:36,480
and over 300 partners,

924
00:37:36,680 --> 00:37:38,750
into building a human body
that's self-sustaining.

925
00:37:38,950 --> 00:37:42,280
And the ability then to anticipate

926
00:37:42,480 --> 00:37:43,450
that in the future

927
00:37:43,650 --> 00:37:44,820
when you buy a networking device,

928
00:37:45,020 --> 00:37:46,150
whether it's in your home,

929
00:37:46,350 --> 00:37:47,980
or in your business,

930
00:37:48,180 --> 00:37:50,320
it won't be about a router or a switch,

931
00:37:50,520 --> 00:37:54,090
or wireless capability,

932
00:37:54,220 --> 00:37:54,480
or a PBX voice replacement.

933
00:37:54,680 --> 00:37:56,450
They'll all be in the same device,

934
00:37:56,650 --> 00:37:58,220
integrated together.

935
00:37:58,420 --> 00:38:01,370
And so it's catching that
transition before our peers did,

936
00:38:01,570 --> 00:38:03,540
and then understanding
how customers purchase,

937
00:38:03,740 --> 00:38:05,810
understand what's a value to them,

938
00:38:06,010 --> 00:38:07,740
understanding that in my business,

939
00:38:07,940 --> 00:38:09,410
25% is the cost of the product

940
00:38:09,610 --> 00:38:10,540
50% is support,

941
00:38:10,740 --> 00:38:13,240
25% is physical space.

942
00:38:13,440 --> 00:38:14,310
If I'm doing my job right,

943
00:38:14,510 --> 00:38:15,370
and we do as a company,

944
00:38:15,570 --> 00:38:17,770
my competitors can give
the product away.

945
00:38:17,970 --> 00:38:20,670
And if I can cut their
support cost from 50% to 30%

946
00:38:20,870 --> 00:38:22,370
because they have one preferred vendor,

947
00:38:22,570 --> 00:38:25,970
and cut their physical space
cost by 10 out of the 25%,

948
00:38:26,170 --> 00:38:27,940
I can still win every deal.

949
00:38:28,140 --> 00:38:31,370
So it's the ability to catch
transitions before they become obvious,

950
00:38:31,570 --> 00:38:33,810
understand what you're
going to do differently,

951
00:38:34,010 --> 00:38:35,770
and not to repeat the mistakes of the past.

952
00:38:35,970 --> 00:38:37,510
But you've got to understand
that innovation

953
00:38:37,710 --> 00:38:39,210
is not just about doing it yourself.

954
00:38:40,810 --> 00:38:42,770
It's about, how do you realize that

955
00:38:42,910 --> 00:38:43,810
if you're not one of the first to market,

956
00:38:44,010 --> 00:38:45,540
you're never going to
become number one.

957
00:38:45,740 --> 00:38:47,010
Or almost never.

958
00:38:47,210 --> 00:38:49,410
Still having the discipline to acquire,

959
00:38:49,610 --> 00:38:51,540
and the discipline to partner.

960
00:38:51,740 --> 00:38:54,270
And realize that 7 out of 10
of the acquisition we've done,

961
00:38:54,470 --> 00:38:56,240
and we've done 103 of them,

962
00:38:56,440 --> 00:38:59,770
have hit or exceeded what
our Board of Directors expected.

963
00:38:59,970 --> 00:39:01,710
Our peers' acquisitions,

964
00:39:01,910 --> 00:39:03,970
90% of them fail.

965
00:39:04,170 --> 00:39:07,340
There's never been a large
merger of equals in high tech

966
00:39:07,540 --> 00:39:08,870
that have ever worked.

967
00:39:09,070 --> 00:39:11,370
So thinking through what
you're going to do differently on.

968
00:39:11,570 --> 00:39:14,110
So if you're going to do acquisitions
like we did twelve years ago,

969
00:39:14,210 --> 00:39:17,210
because Ford and GM and
Boeing told us to do it,

970
00:39:17,410 --> 00:39:19,640
the first thing I did before
I said I was going to buy them,

971
00:39:19,840 --> 00:39:22,140
I went out and studied what
everybody did wrong.

972
00:39:22,540 --> 00:39:24,270
Five rules of thumb for me.

973
00:39:24,470 --> 00:39:29,090
First is we never acquire a company
unless it's strategic to us

974
00:39:29,125 --> 00:39:33,710
Secondly, understand what you
acquire and protect it at all cost.

975
00:39:33,910 --> 00:39:35,540
When Nations bought Bank of America,

976
00:39:35,740 --> 00:39:37,970
were they acquiring people?

977
00:39:39,270 --> 00:39:43,340
They were acquiring geography,

978
00:39:42,570 --> 00:39:45,170
When I acquire a company,

979
00:39:45,310 --> 00:39:46,610
I often pay as much as
a million dollars per employee.

980
00:39:46,810 --> 00:39:48,470
I'm acquiring next-generation product.

981
00:39:48,670 --> 00:39:51,240
Which means that if
I don't keep the people,

982
00:39:51,440 --> 00:39:53,670
I've made a terrible financial investment.

983
00:39:53,870 --> 00:39:55,240
So as basic as that sounds,

984
00:39:55,440 --> 00:39:57,740
when I make a decision to buy a company,

985
00:39:57,840 --> 00:39:58,370
it's about culture,

986
00:39:58,570 --> 00:40:00,510
and it's our ability
to retain the people.

987
00:40:00,710 --> 00:40:04,800
In our industry
40-80% of the top leaders

988
00:40:05,000 --> 00:40:07,400
and top engineers are gone
after an acquisition occurs

989
00:40:07,600 --> 00:40:09,200
within two to four years.

990
00:40:09,400 --> 00:40:11,800
My voluntary attrition rate is 4%.

991
00:40:12,000 --> 00:40:14,400
So it's understanding what
you're going to do different

992
00:40:14,500 --> 00:40:16,860
when you try to do things that
others have not been successful with

993
00:40:17,060 --> 00:40:20,160
and having the discipline to drive
that through your organization.

994
00:40:20,230 --> 00:40:22,300
Same thing true in strategic partners.

995
00:40:22,500 --> 00:40:25,600
If you can't acquire,
you sure as heck can't partner.

996
00:40:25,730 --> 00:40:28,400
Because at least in theory,
when you acquire you control the assets.

997
00:40:28,600 --> 00:40:30,660
So when you begin to think
about combinations,

998
00:40:30,860 --> 00:40:32,700
like IBM and Cisco working together,

999
00:40:32,900 --> 00:40:35,200
Stanford and Cisco,
Stanford and MIT,

1000
00:40:35,400 --> 00:40:37,230
I believe that will be the future.

1001
00:40:37,430 --> 00:40:39,660
I think organization structures
that really learn how to partner

1002
00:40:39,860 --> 00:40:41,560
will have tremendous
competitive advantage.

1003
00:40:41,760 --> 00:40:44,730
But understand that if 90%
of acquisitions fail,

1004
00:40:44,930 --> 00:40:48,200
you're talking about much higher
level of ¡§partnering¡¨ failing.

1005
00:40:48,400 --> 00:40:51,360
And understanding partnering
must be very strategic,

1006
00:40:51,460 --> 00:40:52,560
the CEOs must believe in it.

1007
00:40:52,760 --> 00:40:55,960
They must have an organizational
structure that implements it.

1008
00:40:56,160 --> 00:40:57,200
You have to be realistic.

1009
00:40:57,400 --> 00:40:59,300
There is no 50/50 deal.

1010
00:40:59,500 --> 00:41:01,360
You have to do a bunch of 30/70s,

1011
00:41:01,560 --> 00:41:03,300
60/40s, that add up to 50/50.

1012
00:41:03,500 --> 00:41:05,300
And thinking through
how you do it differently.

1013
00:41:05,500 --> 00:41:07,360
So again, the example isn't so important

1014
00:41:07,560 --> 00:41:09,560
for my industry specifically.

1015
00:41:09,660 --> 00:41:10,400
It's to get you to think about,

1016
00:41:10,600 --> 00:41:13,500
when you think about directions
of whichever company you join,

1017
00:41:13,700 --> 00:41:17,160
or whether you say in
academia or government,

1018
00:41:17,360 --> 00:41:20,430
how do you think about process change,
and how do you think about:

1019
00:41:20,630 --> 00:41:22,500
What are your sustainable
competitive advantages?

1020
00:41:22,700 --> 00:41:23,900
What will commoditize?

1021
00:41:24,100 --> 00:41:28,230
How do you out-execute your
competition on market transitions?

1022
00:41:28,430 --> 00:41:30,960
Now let me walk you through
the most basic example.

1023
00:41:31,160 --> 00:41:32,360
You're a customer.

1024
00:41:32,560 --> 00:41:35,760
I'm about to share with you

1025
00:41:35,960 --> 00:41:38,460
My ability to differentiate
that product in ways

1026
00:41:38,560 --> 00:41:40,195
that people clearly understand,

1027
00:41:40,230 --> 00:41:42,260
what is an advantage today and what
will be an advantage over time,

1028
00:41:42,460 --> 00:41:43,860
becomes very key.

1029
00:41:44,060 --> 00:41:47,930
So I'm talking to you about
an example of architecture.

1030
00:41:48,130 --> 00:41:50,500
I'm trying to get you to
feel the architecture.

1031
00:41:50,700 --> 00:41:52,930
I'm  buy a car.

1032
00:41:53,060 --> 00:41:53,760
And I'm going to walk you
through the example buying a car

1033
00:41:53,960 --> 00:41:54,960
over the network.

1034
00:41:55,160 --> 00:41:58,560
I walk through why it has to be
tied together architecturally.

1035
00:41:58,760 --> 00:42:00,900
I'm going to log on from my home.

1036
00:42:01,100 --> 00:42:02,930
It will identify that
I'm an authorized user,

1037
00:42:03,130 --> 00:42:05,230
power over Ethernet to connect.

1038
00:42:05,430 --> 00:42:08,600
Then as I enter into your network,

1039
00:42:08,800 --> 00:42:11,220
be it the MIT network here,

1040
00:42:11,420 --> 00:42:12,750
or the service provider network,

1041
00:42:12,950 --> 00:42:14,420
you're not going to let me in

1042
00:42:14,550 --> 00:42:17,190
unless I'm already at the
right virus control level,

1043
00:42:17,390 --> 00:42:18,490
anti-spam level,

1044
00:42:18,690 --> 00:42:19,720
authorized user,

1045
00:42:19,920 --> 00:42:21,350
network emission control.

1046
00:42:21,550 --> 00:42:23,190
So then, as I enter the network,

1047
00:42:23,550 --> 00:42:25,690
I'm going to do what
84% of Americans do.

1048
00:42:25,890 --> 00:42:28,090
I'm going to study the car
at their data center.

1049
00:42:28,220 --> 00:42:29,520
I'll go into their data center

1050
00:42:29,720 --> 00:42:31,690
and look at the material
in the demilitarized zone,

1051
00:42:31,890 --> 00:42:36,360
the segment, which is where
they let customers get into

1052
00:42:36,420 --> 00:42:39,050
Then as I started to do that however,

1053
00:42:39,150 --> 00:42:41,950
my company will not
let me go out of my home

1054
00:42:42,090 --> 00:42:43,320
since I'm paying for
the network connection

1055
00:42:43,520 --> 00:42:45,590
through whatever
service provider they select,

1056
00:42:45,790 --> 00:42:48,690
without having the capability
for day-zero activities

1057
00:42:48,890 --> 00:42:51,890
in terms of viruses.

1058
00:42:52,090 --> 00:42:55,890
So we have something
called Cisco Secure Agent,which checks for pattern recognition

1059
00:42:56,120 --> 00:42:57,620
So as I go through that,

1060
00:42:57,820 --> 00:43:00,420
the company has that capability in.

1061
00:43:00,620 --> 00:43:01,590
Before I buy the car,

1062
00:43:01,790 --> 00:43:03,850
I've got to make sure I've got
enough money in the checking account.

1063
00:43:04,050 --> 00:43:07,990
I go through a VPN capability

1064
00:43:08,090 --> 00:43:08,690
with encryption so nobody sees my passwords.

1065
00:43:08,890 --> 00:43:11,190
Find out I've got enough money
in the checking account to do it.

1066
00:43:11,390 --> 00:43:14,520
I then research and get
authorization to go into

1067
00:43:14,720 --> 00:43:16,390
the databases of a company

1068
00:43:16,590 --> 00:43:19,390
and decide if it's a GM or a Ford
or a Lexus that I'm going to buy,

1069
00:43:19,590 --> 00:43:20,620
or BMW.

1070
00:43:20,820 --> 00:43:22,850
I then begin to look about

1071
00:43:23,050 --> 00:43:25,350
what is the local dealers around,

1072
00:43:25,550 --> 00:43:27,320
how to go over whatever
network I want to go

1073
00:43:27,520 --> 00:43:29,590
to locate who has the car that I want,

1074
00:43:29,790 --> 00:43:31,220
to be able to see it on video,

1075
00:43:31,420 --> 00:43:33,850
very shortly with the
location capability on it.

1076
00:43:34,050 --> 00:43:35,950
Find out where that car is located,

1077
00:43:36,150 --> 00:43:39,720
and then I'm able to literally
look at what is the pricing on it,

1078
00:43:39,920 --> 00:43:44,150
click to talk and be able to
look with the capability

1079
00:43:44,350 --> 00:43:47,190
to talk to a salesperson,
maybe even close the deal.

1080
00:43:47,390 --> 00:43:49,120
Pretty simple transaction.

1081
00:43:49,320 --> 00:43:51,350
Right?

1082
00:43:51,550 --> 00:43:53,890
I went across six different networks.

1083
00:43:54,090 --> 00:43:57,450
Security in every single segment
of it has to tie together.

1084
00:43:57,650 --> 00:43:58,850
The ability to take action,

1085
00:43:59,050 --> 00:44:00,320
implementation.

1086
00:44:00,520 --> 00:44:02,150
What is the exposure in each category?

1087
00:44:02,350 --> 00:44:03,790
Present the products for that,

1088
00:44:03,990 --> 00:44:05,290
and tie it architecturally together

1089
00:44:05,490 --> 00:44:06,620
is a sustainable competitive advantage

1090
00:44:06,820 --> 00:44:08,220
across the whole OSI stack,

1091
00:44:08,420 --> 00:44:10,220
layers one through seven.

1092
00:44:10,420 --> 00:44:12,350
But if you didn't design your products

1093
00:44:12,550 --> 00:44:13,880
to get them to work together,

1094
00:44:14,080 --> 00:44:16,610
if I didn't build teamwork into
the DNA of the company,

1095
00:44:16,810 --> 00:44:19,240
if the employees of our Cisco family,

1096
00:44:19,440 --> 00:44:20,480
and we are a family.

1097
00:44:20,680 --> 00:44:22,210
I know every onus in the company,

1098
00:44:22,410 --> 00:44:25,210
of any employee,
their spouse and their children.

1099
00:44:25,410 --> 00:44:27,080
And we argue like a family, too.

1100
00:44:27,280 --> 00:44:29,210
But if each of us didn't
understand the role we're playing

1101
00:44:29,410 --> 00:44:30,680
and how does it feed into
the bigger system

1102
00:44:30,880 --> 00:44:32,240
this could never come about.

1103
00:44:32,440 --> 00:44:34,310
This is also how we'll move faster

1104
00:44:34,510 --> 00:44:37,810
than our peers on a global
basis to tie it all together,

1105
00:44:37,910 --> 00:44:39,540
in a way that others,
I believe, cannot do it.

1106
00:44:39,740 --> 00:44:41,680
But it's also about
business architecture.

1107
00:44:41,880 --> 00:44:44,940
It's about the ability
to understand in each industry

1108
00:44:45,140 --> 00:44:47,340
what are the primary applications

1109
00:44:47,540 --> 00:44:48,910
that will get productivity.

1110
00:44:49,110 --> 00:44:50,710
And your ability to articulate that,

1111
00:44:50,910 --> 00:44:52,510
as we were talking earlier

1112
00:44:52,710 --> 00:44:54,740
with many of your leaders here

1113
00:44:54,940 --> 00:44:56,380
about the healthcare industry.

1114
00:44:56,580 --> 00:44:58,140
Your ability to really understand:

1115
00:44:58,180 --> 00:45:02,280
What are the key applications
in healthcare?

1116
00:45:01,510 --> 00:45:02,710
What are they in manufacturing?

1117
00:45:02,910 --> 00:45:04,310
Healthcare is simple.

1118
00:45:04,510 --> 00:45:06,580
It's going to break the system.

1119
00:45:06,780 --> 00:45:10,110
And the US is in good shape
compared to Europe or Japan.

1120
00:45:10,680 --> 00:45:13,110
And In Italy or in Japan,

1121
00:45:13,310 --> 00:45:16,840
two out of every three
citizens will be retired

1122
00:45:17,040 --> 00:45:18,540
by 2050.

1123
00:45:18,740 --> 00:45:20,240
You can't afford their healthcare systems.

1124
00:45:20,440 --> 00:45:25,080
In the US, it is growing at three
to four times the rate of inflation.

1125
00:45:25,280 --> 00:45:27,810
You're talking about a 1.8
trillion dollar problem.

1126
00:45:28,010 --> 00:45:30,910
So your ability to understand
the market you're going after,

1127
00:45:31,110 --> 00:45:32,810
articulate that on a basis,

1128
00:45:33,010 --> 00:45:34,880
and then say, here's how you attack it.

1129
00:45:35,080 --> 00:45:37,310
You have to start with a common
e-medical record.

1130
00:45:37,510 --> 00:45:40,680
You can't just add technology without
an architecture to build upon.

1131
00:45:40,880 --> 00:45:42,310
Then you address common issues

1132
00:45:42,510 --> 00:45:43,710
such as what we talked about before.

1133
00:45:43,910 --> 00:45:45,510
Sixth leading cause of
death in this country?

1134
00:45:45,710 --> 00:45:47,580
Drug-interaction.

1135
00:45:47,780 --> 00:45:50,140
Usually because you forget to
tell the doctor what you were on,

1136
00:45:50,340 --> 00:45:53,040
or you didn't even know that
you were allergic to something,

1137
00:45:53,240 --> 00:45:55,180
or interactions the doctors only know,

1138
00:45:55,280 --> 00:45:57,910
twelve to fifteen interactions.

1139
00:45:58,040 --> 00:45:58,310
You can eliminate that completely

1140
00:45:58,510 --> 00:46:00,180
as the sixth leading cause
of death in this country

1141
00:46:00,380 --> 00:46:02,280
by a common e-medical record

1142
00:46:02,480 --> 00:46:03,680
online order entry.

1143
00:46:03,880 --> 00:46:06,480
Your ability to understand that
for other industries.

1144
00:46:06,680 --> 00:46:10,205
In the retail industry,

1145
00:46:10,240 --> 00:46:12,380
you can say,
¡§John, it's supply chain, right?¡¨

1146
00:46:12,580 --> 00:46:13,310
Nah.

1147
00:46:13,510 --> 00:46:17,010
If you haven't got a good supply chain,
Wal-Mart already buried you.

1148
00:46:17,210 --> 00:46:18,930
It's in-store inventory.

1149
00:46:19,130 --> 00:46:21,600
And it's recognition of the customer
the minute they come in.

1150
00:46:21,800 --> 00:46:24,130
And your ability to get a bigger
percentage of their spend,

1151
00:46:24,330 --> 00:46:25,700
whether you're Home Depot,

1152
00:46:25,900 --> 00:46:26,930
whether you're Neiman Marcus,

1153
00:46:27,130 --> 00:46:27,930
or you're Wal-Mart.

1154
00:46:28,130 --> 00:46:30,130
All of them are headed this way.
And your ability then to say,

1155
00:46:30,330 --> 00:46:31,200
how do you help them do that?

1156
00:46:31,400 --> 00:46:32,730
Transportation industry.

1157
00:46:32,930 --> 00:46:34,065
What is it in this industry?

1158
00:46:34,100 --> 00:46:38,130
It's understanding 50% of
the 2.9 trillion dollar

1159
00:46:38,330 --> 00:46:43,000
business perbusiness per year
is in the area of highways.

1160
00:46:43,200 --> 00:46:45,200
A fourth of it is in air.

1161
00:46:45,400 --> 00:46:48,230
Rail and sea are about 10% each.

1162
00:46:48,430 --> 00:46:50,500
You take it down and say,
What are the key issues?

1163
00:46:50,700 --> 00:46:53,100
It's capacity utilization.

1164
00:46:53,300 --> 00:46:57,500
Basically, there's about 660 billion

1165
00:46:57,700 --> 00:46:59,770
of the 2.9

1166
00:46:59,970 --> 00:47:01,930
that is utilized ineffectively.

1167
00:47:02,130 --> 00:47:03,070
You can probably,

1168
00:47:03,270 --> 00:47:04,430
through IT and process change,

1169
00:47:04,630 --> 00:47:05,870
address half of that.

1170
00:47:06,070 --> 00:47:08,100
So your ability to understand
how to do it,

1171
00:47:08,300 --> 00:47:13,970
how to deal with the better
utilization of the existing highways,

1172
00:47:14,000 --> 00:47:18,030
how to schedule your airlines
to be a thousand feet apart

1173
00:47:18,170 --> 00:47:19,570
as opposed to two or three
thousand is another example.

1174
00:47:19,770 --> 00:47:22,100
So as you think about
how you combine this knowledge,

1175
00:47:22,300 --> 00:47:23,230
whether you're a business major,

1176
00:47:23,430 --> 00:47:24,500
or an engineering major,

1177
00:47:24,700 --> 00:47:27,430
or an IT major, is,

1178
00:47:27,570 --> 00:47:29,430
How do you understand the implications
of the area that you're an expert on,

1179
00:47:29,630 --> 00:47:30,300
on other segments?

1180
00:47:30,500 --> 00:47:33,100
And how do you articulate
that in a teamwork environment

1181
00:47:33,300 --> 00:47:35,030
to the benefit of your employer?

1182
00:47:35,230 --> 00:47:36,470
Understanding key trends.

1183
00:47:36,670 --> 00:47:39,730
700,000 per employee's great, right?

1184
00:47:39,930 --> 00:47:41,130
If I don't take that to a million,

1185
00:47:41,330 --> 00:47:44,430
I won't be profitable five years from now.

1186
00:47:44,630 --> 00:47:47,830
So it's how do you understand
where you were before,

1187
00:47:48,030 --> 00:47:48,830
where you are today,

1188
00:47:49,030 --> 00:47:50,670
versus all the IT
players in the world,

1189
00:47:50,870 --> 00:47:52,830
and where you must be
in the future?

1190
00:47:53,030 --> 00:47:55,470
And so it's being able to use your skills

1191
00:47:55,670 --> 00:47:58,570
that you developed in
this university,

1192
00:47:58,770 --> 00:48:01,130
and to be able to manage
during periods of rapid growth,

1193
00:48:01,330 --> 00:48:02,830
tremendous contraction.

1194
00:48:03,030 --> 00:48:06,770
I went from 70% growth in the
first week of December of 2000,

1195
00:48:06,970 --> 00:48:09,130
to -45% growth forty-five days later.

1196
00:48:09,330 --> 00:48:11,430
That's mathematically impossible.

1197
00:48:11,630 --> 00:48:13,330
Especially after a decade of growing,

1198
00:48:13,530 --> 00:48:15,430
not 30-50% as we told the market.

1199
00:48:15,630 --> 00:48:17,530
It was 50 to 70%.

1200
00:48:17,730 --> 00:48:20,030
We never built the system to
be able to handle it.

1201
00:48:20,230 --> 00:48:23,860
So, that's back to the number one
issue on a business leaders' mind:

1202
00:48:23,960 --> 00:48:26,120
How do you build for speed both ways?

1203
00:48:26,320 --> 00:48:28,520
And how do you use, in my opinion,

1204
00:48:28,720 --> 00:48:31,420
IT knowledge to really
be able to do that?

1205
00:48:31,620 --> 00:48:34,290
Market cap is the financial
community's expectation of your future,

1206
00:48:34,390 --> 00:48:35,590
regardless which industry you're in.

1207
00:48:35,790 --> 00:48:36,660
Be realistic.

1208
00:48:36,860 --> 00:48:38,620
What's your market cap versus your peers?

1209
00:48:38,820 --> 00:48:41,190
Are you gaining in that,
or are you losing in it?

1210
00:48:41,390 --> 00:48:44,690
And being able to manage
through each of the transitions.

1211
00:48:44,960 --> 00:48:46,190
Culture.

1212
00:48:46,390 --> 00:48:49,090
I didn't understand this
when I first came to Cisco.

1213
00:48:49,760 --> 00:48:52,190
The importance of culture is everything.

1214
00:48:52,390 --> 00:48:56,020
It didn't surprise me
that CEOs were unethical.

1215
00:48:56,220 --> 00:48:58,220
There's a certain
percentage of any population

1216
00:48:58,420 --> 00:48:59,660
that is unethical.

1217
00:48:59,860 --> 00:49:02,920
What surprised me is in those companies,

1218
00:49:03,120 --> 00:49:04,260
there had to be fifty

1219
00:49:04,460 --> 00:49:06,160
to as many as three or
four hundred people

1220
00:49:06,360 --> 00:49:08,360
that knew what was going on was wrong,

1221
00:49:08,560 --> 00:49:11,220
and yet they accepted it.

1222
00:49:11,420 --> 00:49:13,860
Cultures are so important.

1223
00:49:14,060 --> 00:49:17,090
Integrity was on our badge
not in the last two years,

1224
00:49:17,290 --> 00:49:19,390
but for a decade.

1225
00:49:19,590 --> 00:49:23,820
It's socially unacceptable
to do something inappropriate

1226
00:49:24,020 --> 00:49:26,220
in that area.

1227
00:49:26,420 --> 00:49:28,690
The ability to realize that
every decision we're going to make

1228
00:49:28,890 --> 00:49:30,490
is off our customer base,

1229
00:49:30,690 --> 00:49:32,960
and pay every one of our managers on that.

1230
00:49:33,160 --> 00:49:34,360
But notice the cornerstones

1231
00:49:34,560 --> 00:49:36,220
¡§stretch goals¡¨ and ¡§quality of team¡¨.

1232
00:49:36,420 --> 00:49:38,190
The ability to attract
the best and brightest,

1233
00:49:38,390 --> 00:49:40,520
and I'm taking applications by the way,

1234
00:49:40,720 --> 00:49:43,360
and we'll send our team out
here to recruit shortly,

1235
00:49:43,560 --> 00:49:45,590
but ability to get the best and
brightest from the world,

1236
00:49:45,790 --> 00:49:48,060
and I'm very serious about
that last comment by the way,

1237
00:49:48,260 --> 00:49:50,220
but you get the best and
brightest in the world

1238
00:49:50,320 --> 00:49:52,025
who fit into a stretch-goal mentality,

1239
00:49:52,060 --> 00:49:54,960
and challenge them not to say
¡§How do you work harder?¡¨

1240
00:49:55,160 --> 00:49:57,220
or ¡§How do you do something
smarter than others?¡¨

1241
00:49:57,420 --> 00:50:00,120
but how do you really understand
how others have not been successful,

1242
00:50:00,320 --> 00:50:01,460
and you do it differently?

1243
00:50:01,660 --> 00:50:04,960
Catching market transitions
and empowerment.

1244
00:50:05,160 --> 00:50:06,820
You use examples.

1245
00:50:07,020 --> 00:50:08,190
We could talk about market cap.

1246
00:50:08,390 --> 00:50:09,560
Cisco's been very successful.

1247
00:50:09,760 --> 00:50:14,230
But let's also talk about
an area such as giving back

1248
00:50:14,265 --> 00:50:16,190
And how do you reinforce culture?

1249
00:50:16,390 --> 00:50:17,520
You tell the war stories,

1250
00:50:17,720 --> 00:50:19,690
with examples.

1251
00:50:19,890 --> 00:50:21,820
And when the tsunami effect hit,

1252
00:50:22,020 --> 00:50:23,490
we as a company gave
three million dollars.

1253
00:50:23,690 --> 00:50:25,090
You can say, ¡§John, that was nice.¡¨

1254
00:50:25,290 --> 00:50:27,780
But our employees gave over a million.

1255
00:50:27,980 --> 00:50:29,610
We also took our capabilities

1256
00:50:29,810 --> 00:50:32,680
and took it to each of the relief
areas to reestablish communications.

1257
00:50:32,880 --> 00:50:35,550
We sent a lot of our people
to make a difference.

1258
00:50:35,750 --> 00:50:39,250
When the terrible catastrophe
happened in the Gulf States,

1259
00:50:39,450 --> 00:50:41,110
we literally knew within 24 hours

1260
00:50:41,310 --> 00:50:42,280
where every employee was,

1261
00:50:42,480 --> 00:50:43,310
every member of their families.

1262
00:50:43,510 --> 00:50:45,480
We knew seven employees
had lost their houses.

1263
00:50:45,680 --> 00:50:47,650
We immediately started working
with the Red Cross,

1264
00:50:47,850 --> 00:50:49,350
One Economy,

1265
00:50:49,550 --> 00:50:52,075
Community Voice Service,

1266
00:50:52,110 --> 00:50:55,595
and each of the national guard units
and government units.

1267
00:50:55,630 --> 00:50:59,080
and we brought them in
so you could communicate in groups.

1268
00:50:59,280 --> 00:51:00,310
The Red Cross would probably say

1269
00:51:00,510 --> 00:51:03,180
we are the best partner
they have in the corporate world.

1270
00:51:03,380 --> 00:51:04,310
The ability to come in.

1271
00:51:04,510 --> 00:51:06,110
And we've raised already
3 million dollars,

1272
00:51:06,310 --> 00:51:08,150
and now we're going for
our next 3 million dollars.

1273
00:51:08,350 --> 00:51:09,250
The ability to talk about:

1274
00:51:09,450 --> 00:51:14,250
How do you bring education to
the students who are displaced?

1275
00:51:13,480 --> 00:51:15,550
The ability to build it into your DNA.

1276
00:51:15,750 --> 00:51:20,150
The most successful and
the strongest, in my opinion,

1277
00:51:20,280 --> 00:51:21,410
have an obligation to take care
of those who are not as fortunate,

1278
00:51:21,550 --> 00:51:22,950
or periods of toughness.

1279
00:51:23,150 --> 00:51:25,080
The ability also to feel--

1280
00:51:25,280 --> 00:51:26,410
we dream.

1281
00:51:26,610 --> 00:51:28,910
But most of the time
we make dreams come true.

1282
00:51:29,110 --> 00:51:32,210
We think we can make a
difference in the Middle East.

1283
00:51:32,410 --> 00:51:33,580
You know, how do you make
a difference in the Middle East?

1284
00:51:33,780 --> 00:51:35,480
By addressing one of
the top three issues.

1285
00:51:35,680 --> 00:51:37,780
60% of the population

1286
00:51:37,980 --> 00:51:39,410
below 18 years of age

1287
00:51:39,610 --> 00:51:43,910
with no education and no economic future.

1288
00:51:44,780 --> 00:51:46,710
How do you go about it?

1289
00:51:46,910 --> 00:51:48,410
Teamwork.

1290
00:51:48,610 --> 00:51:49,980
You set in place a dream.

1291
00:51:50,180 --> 00:51:51,410
You find a government leader
like King Abdullah II

1292
00:51:51,610 --> 00:51:53,310
and Queen Rania in Jordan.

1293
00:51:53,510 --> 00:51:55,080
You basically, not only
where are all the schools,

1294
00:51:55,280 --> 00:51:57,910
you bring sixteen other
companies to that endeavor.

1295
00:51:58,110 --> 00:52:00,610
As you bring those other companies
with you to the approach,

1296
00:52:00,810 --> 00:52:01,510
you focus on,

1297
00:52:01,710 --> 00:52:04,650
How do you get computer games
and teach math and sciences,

1298
00:52:04,850 --> 00:52:06,650
not in college,

1299
00:52:06,850 --> 00:52:08,750
but in first and second and third grade.

1300
00:52:08,950 --> 00:52:10,950
You bring jobs.
You bring venture capital.

1301
00:52:11,150 --> 00:52:14,180
They're growing at
7% per year GDP growth,

1302
00:52:14,810 --> 00:52:17,480
in the most hostile
environment in the world.

1303
00:52:17,680 --> 00:52:19,680
And so your ability to really
make a difference, and then say,

1304
00:52:19,880 --> 00:52:21,550
How do you take it to Palestine?

1305
00:52:21,750 --> 00:52:24,680
and, How do you take
it into Egypt, etc.

1306
00:52:24,880 --> 00:52:26,110
And so that's really
what I'm thinking about

1307
00:52:26,310 --> 00:52:27,780
when you look at giving back.

1308
00:52:27,980 --> 00:52:29,050
In a culture of giving back,

1309
00:52:29,250 --> 00:52:30,180
and overall approach.

1310
00:52:30,380 --> 00:52:32,010
Susan told me earlier
she had to leave.

1311
00:52:32,200 --> 00:52:34,940
Don't worry, she wasn't
disappointed in the comments.

1312
00:52:35,770 --> 00:52:37,700
But the ability really
to make a difference on

1313
00:52:37,900 --> 00:52:38,700
where you're going and say,

1314
00:52:38,900 --> 00:52:40,070
How do you really drive it through,

1315
00:52:40,270 --> 00:52:41,370
whether it's in Jordan,

1316
00:52:41,570 --> 00:52:43,940
whether it's in terrible
catastrophe events

1317
00:52:44,140 --> 00:52:46,340
and how do you expand
that on a global basis,

1318
00:52:46,540 --> 00:52:47,540
is what it's about.

1319
00:52:47,740 --> 00:52:49,370
The ability to dream.

1320
00:52:49,570 --> 00:52:50,740
The ability to say that

1321
00:52:50,940 --> 00:52:53,440
just because strategic
partnership's with an IBM,

1322
00:52:53,640 --> 00:52:54,970
or an HP or a Dell,

1323
00:52:55,170 --> 00:52:56,270
we view them as competitors,

1324
00:52:56,470 --> 00:52:58,140
we can have one with all of them,

1325
00:52:58,340 --> 00:53:00,000
and make it a win-win.  And we can.

1326
00:53:00,200 --> 00:53:01,400
The ability, honestly,

1327
00:53:01,600 --> 00:53:03,570
to have a very tight
relationship with Stanford,

1328
00:53:03,770 --> 00:53:06,940
where fifteen of the companies that
I've bought have come out of Stanford.

1329
00:53:07,140 --> 00:53:09,170
An ability for them to drive
our product direction,

1330
00:53:09,370 --> 00:53:10,570
a great source of students,

1331
00:53:10,770 --> 00:53:12,700
and to work together in the VC world.

1332
00:53:12,900 --> 00:53:15,840
MIT, identical.

1333
00:53:16,040 --> 00:53:18,870
We just need to learn how to be
a little bit more effective in partnering,

1334
00:53:19,070 --> 00:53:20,400
if you want us.

1335
00:53:20,600 --> 00:53:23,900
And to also realize that we already
have a hundred of your students.

1336
00:53:24,100 --> 00:53:25,600
And that out of thirteen acquisitions,

1337
00:53:25,800 --> 00:53:27,640
they were either outgrowths of MIT,

1338
00:53:27,840 --> 00:53:29,900
or by your founders here.

1339
00:53:30,100 --> 00:53:32,200
So the ability to say,
¡§how do you do partnerships uniquely?¡¨

1340
00:53:32,400 --> 00:53:34,900
is also a key.

1341
00:53:35,100 --> 00:53:36,540
Education and the internet.

1342
00:53:36,740 --> 00:53:38,270
It's changing the world.

1343
00:53:38,470 --> 00:53:40,370
So if I've done my job today,

1344
00:53:40,570 --> 00:53:41,840
I've begun to challenge you

1345
00:53:42,040 --> 00:53:44,240
about what will be some of
the leadership characteristics

1346
00:53:44,440 --> 00:53:46,440
to be successful in the future.

1347
00:53:46,640 --> 00:53:49,600
Your ability to identify market transitions.

1348
00:53:49,800 --> 00:53:51,540
What are you competitive
differentiations today?

1349
00:53:51,740 --> 00:53:52,800
What will they be in the future?

1350
00:53:53,000 --> 00:53:54,400
The importance of teamwork.

1351
00:53:54,600 --> 00:53:57,100
The ability to catch
the transitions in a vast way before

1352
00:53:57,300 --> 00:54:00,240
it's obvious to others
and then be realistic.

1353
00:54:00,440 --> 00:54:01,700
Sometimes you won't be successful.

1354
00:54:01,900 --> 00:54:03,600
And by definition,
if you're taking good business risks,

1355
00:54:03,800 --> 00:54:04,840
you'll miss a certain amount of time.

1356
00:54:05,040 --> 00:54:07,040
Don't create a culture
that penalizes failure.

1357
00:54:07,240 --> 00:54:10,240
Just don't fail twice
on the same idea.

1358
00:54:10,440 --> 00:54:11,470
So what I'd like to do now

1359
00:54:11,670 --> 00:54:13,000
is open it up for any
questions you may have,

1360
00:54:13,200 --> 00:54:16,670
constructive criticism,
or curiosity about other items.

1361
00:54:16,870 --> 00:54:18,800
So who's got the first question?

1362
00:54:21,140 --> 00:54:22,600
Sure.  Please.

1363
00:54:24,270 --> 00:54:25,400
Yeah, I always worry about the person

1364
00:54:25,600 --> 00:54:27,540
that comes from the back
row to ask the question.

1365
00:54:32,070 --> 00:54:34,070
Hi, Mr. Chambers.
My name is Christopher Tsai.

1366
00:54:34,270 --> 00:54:37,830
I graduated in '05 here at MIT in EECS.

1367
00:54:38,030 --> 00:54:38,860
Please call me John.

1368
00:54:39,060 --> 00:54:39,630
John.

1369
00:54:39,830 --> 00:54:41,760
I'm not very formal,
and I'm trying not to be too old.

1370
00:54:41,960 --> 00:54:42,860
Thanks.

1371
00:54:43,060 --> 00:54:43,960
Will do.

1372
00:54:44,160 --> 00:54:45,390
You spoke a lot to

1373
00:54:45,590 --> 00:54:47,660
understanding market
transitions and trends.

1374
00:54:47,860 --> 00:54:48,390
Yes.

1375
00:54:48,590 --> 00:54:49,590
I was wondering if you'd speak to

1376
00:54:49,790 --> 00:54:53,160
some of the lessons you've
learned in predicting the¡K

1377
00:54:53,360 --> 00:54:54,430
or I guess,

1378
00:54:54,630 --> 00:54:57,590
in positioning yourself before the bust

1379
00:54:57,790 --> 00:55:00,130
in the late nineties, early 2000.

1380
00:55:00,330 --> 00:55:00,790
Yes.

1381
00:55:00,990 --> 00:55:03,890
And how you transitioned
from your leadership

1382
00:55:04,090 --> 00:55:06,230
to those trends til now,

1383
00:55:06,430 --> 00:55:08,790
and looking to the future.
Would you speak to that?

1384
00:55:08,990 --> 00:55:10,590
Yes.  So what were the lessons learned?

1385
00:55:10,790 --> 00:55:11,930
And it was a very nice way of asking it but,

1386
00:55:12,130 --> 00:55:14,130
¡§What mistakes did you really make, John?¡¨

1387
00:55:14,330 --> 00:55:17,560
I never model for anything less
than a ten percent decrease.

1388
00:55:17,760 --> 00:55:20,090
And remember, I never had
a decreased quarter ever.

1389
00:55:20,290 --> 00:55:22,760
The slowest growth quarter
I've had was twenty percent growth.

1390
00:55:22,960 --> 00:55:23,890
And so,

1391
00:55:24,090 --> 00:55:27,760
to learn that market transitions up
or down occur much faster,

1392
00:55:27,960 --> 00:55:29,830
much more violent than before.

1393
00:55:30,030 --> 00:55:33,090
Secondly, I let the lead times
in my products get too long.

1394
00:55:33,290 --> 00:55:35,230
And lead times in my
industry is a good way

1395
00:55:35,430 --> 00:55:37,190
of ensuring a good successful quarter.

1396
00:55:37,390 --> 00:55:40,730
But it also can create a challenge
because you lose your visibility.

1397
00:55:40,930 --> 00:55:42,790
So understanding that lead times,

1398
00:55:42,990 --> 00:55:45,330
instead of being sixteen
or eighteen weeks,

1399
00:55:45,530 --> 00:55:46,630
needed to be two or three weeks

1400
00:55:46,830 --> 00:55:49,330
so that I could see the market
transitions as they occurred.

1401
00:55:49,530 --> 00:55:51,490
And third was the importance
of adding new people

1402
00:55:51,690 --> 00:55:53,430
who'd been through transitions before.

1403
00:55:53,630 --> 00:55:55,260
Most Silicon Valley companies did not

1404
00:55:55,460 --> 00:55:56,890
make it through that transition.

1405
00:55:57,090 --> 00:55:58,930
Most of them crashed and burned
and still haven't recovered.

1406
00:55:59,130 --> 00:56:00,330
In fact, there are a lot of
them still doing layovers

1407
00:56:00,530 --> 00:56:01,830
five years later.

1408
00:56:02,030 --> 00:56:05,630
You've got to balance new ideas
and new people and new ideas,

1409
00:56:05,830 --> 00:56:08,030
but also people that come
from different industries.

1410
00:56:08,230 --> 00:56:09,990
And the ability to kind
of listen to their views.

1411
00:56:10,190 --> 00:56:11,360
Those would be my three takeaways.

1412
00:56:11,560 --> 00:56:12,130
Great.  Thank you.

1413
00:56:12,330 --> 00:56:14,690
Sure.  Next question please.

1414
00:56:18,490 --> 00:56:20,090
Hi, my name is Ethan Foreman.

1415
00:56:20,290 --> 00:56:22,090
I'm a reporter with Masi-Tech.

1416
00:56:22,290 --> 00:56:23,290
Local.

1417
00:56:23,490 --> 00:56:25,590
We cover startups and we're wondering

1418
00:56:25,790 --> 00:56:27,660
You see any opportunities

1419
00:56:27,860 --> 00:56:29,330
in New England?

1420
00:56:29,530 --> 00:56:30,960
Either, well, not just for acquisition,

1421
00:56:31,160 --> 00:56:33,130
but for technology,

1422
00:56:33,330 --> 00:56:35,560
understanding some of the technology

1423
00:56:35,760 --> 00:56:37,230
that's being studied by the startups.

1424
00:56:37,430 --> 00:56:38,660
Sure.  Sure.

1425
00:56:38,860 --> 00:56:39,930
In a fun way, of course
I can't tell you about

1426
00:56:40,130 --> 00:56:41,820
which companies we're
going to acquire,

1427
00:56:42,020 --> 00:56:44,320
which stocks to buy
but the question is very fair.

1428
00:56:44,520 --> 00:56:48,050
We go in terms of R&D
where the startups are.

1429
00:56:48,250 --> 00:56:50,620
And one of the exciting things
about here in New England is,

1430
00:56:50,820 --> 00:56:52,720
it's one of our four
locations here in the US,

1431
00:56:52,920 --> 00:56:54,120
and one of our six globally,

1432
00:56:54,320 --> 00:56:56,820
where we find a lot of startup potential.

1433
00:56:57,020 --> 00:56:58,680
And I think you see it
not just in high tech,

1434
00:56:58,880 --> 00:57:00,120
you see it in biosciences, etc.

1435
00:57:00,320 --> 00:57:01,480
along that line.

1436
00:57:01,680 --> 00:57:03,920
So New England and the
Boston area will continue

1437
00:57:04,120 --> 00:57:05,620
to be a key R&D center for us.

1438
00:57:05,820 --> 00:57:07,280
We see lots of opportunities on it.

1439
00:57:07,480 --> 00:57:10,820
We tend to be driven by our
customers in which ones we select.

1440
00:57:11,020 --> 00:57:11,980
Please.

1441
00:57:13,480 --> 00:57:15,080
Thank you for the nice talk.

1442
00:57:15,280 --> 00:57:19,250
My name is Paolo Gonsalvez.
I'm a grad of MIT a couple of years ago.

1443
00:57:19,450 --> 00:57:22,020
And you alluded to

1444
00:57:22,220 --> 00:57:24,180
the strong relationship with customers,

1445
00:57:24,380 --> 00:57:26,150
reducing lead time

1446
00:57:26,350 --> 00:57:29,120
so to avoid losing visibility.

1447
00:57:29,320 --> 00:57:31,780
And I was wondering
if you could talk about,

1448
00:57:31,980 --> 00:57:35,050
to what extent you faced
some phantom orders,

1449
00:57:35,250 --> 00:57:37,480
inflated orders by customers,

1450
00:57:37,680 --> 00:57:40,120
and you alluded to the graph,

1451
00:57:40,320 --> 00:57:43,450
that you had 70% growth
and then a 45% decline.

1452
00:57:43,650 --> 00:57:44,520
70% growth.

1453
00:57:44,720 --> 00:57:48,280
Right.  And it went to
a 40-some percent decline.

1454
00:57:48,480 --> 00:57:49,550
Yeah.

1455
00:57:49,750 --> 00:57:52,120
How was that influenced,

1456
00:57:52,320 --> 00:57:54,980
so the extent that you had
some inflated orders by customers,

1457
00:57:55,180 --> 00:57:58,580
how was that influenced
by the nice financing terms

1458
00:57:58,780 --> 00:58:00,550
that Cisco provided for
the customers?

1459
00:58:00,750 --> 00:58:01,380
Sure.

1460
00:58:01,580 --> 00:58:03,780
And also entering the
long-term contracts with some of

1461
00:58:03,980 --> 00:58:05,120
the contract manufacturers?

1462
00:58:05,320 --> 00:58:06,780
So the question is, Alright, John,

1463
00:58:06,980 --> 00:58:08,720
as you're going through a market bubble,

1464
00:58:08,920 --> 00:58:12,080
which everyone in the
industry got surprised by,

1465
00:58:12,280 --> 00:58:13,820
what were not only some
of your lessons learned,

1466
00:58:14,020 --> 00:58:15,520
but what were some of
the contributing factors

1467
00:58:15,720 --> 00:58:17,080
that you'd want to say
the next time through,

1468
00:58:17,280 --> 00:58:17,950
understand?

1469
00:58:18,150 --> 00:58:20,520
Most important is, don't let
your lead times get long.

1470
00:58:20,720 --> 00:58:22,080
Because your orders, basically,

1471
00:58:22,280 --> 00:58:23,150
they suddenly dried up.

1472
00:58:23,350 --> 00:58:25,350
So it was not a good
indication of the future.

1473
00:58:25,550 --> 00:58:26,880
As you go through it all,

1474
00:58:27,080 --> 00:58:29,620
we're extremely conservative on
the financing side of the house.

1475
00:58:29,820 --> 00:58:32,180
We've always been very
conservative as a company.

1476
00:58:32,380 --> 00:58:34,250
And if you look at our financial approaches,

1477
00:58:34,450 --> 00:58:36,220
whether it's recognizing revenue or others,

1478
00:58:36,420 --> 00:58:37,950
we're most conservative
in the entire industry,

1479
00:58:38,150 --> 00:58:40,080
even through our distribution, etc.

1480
00:58:40,280 --> 00:58:41,620
So that wasn't what surprised us.

1481
00:58:41,820 --> 00:58:45,720
Our inability to react quickly
was a major lesson learned.

1482
00:58:45,920 --> 00:58:47,640
I'm going to leave the last question for you.

1483
00:58:47,840 --> 00:58:48,440
Oh, thanks.

1484
00:58:48,640 --> 00:58:50,510
Now, I'm going to make some
customer calls later tonight.

1485
00:58:50,710 --> 00:58:53,210
It's important I'm in a good mood
and able to sell something.

1486
00:58:53,410 --> 00:58:54,810
We want to send your peers out saying

1487
00:58:55,010 --> 00:58:56,040
that this was a good presentation,

1488
00:58:56,240 --> 00:58:57,040
with some good tough Q&A,

1489
00:58:57,240 --> 00:58:58,610
but you don't want to ask too easy a question

1490
00:58:58,810 --> 00:59:00,470
because you catch a lot of grief.

1491
00:59:00,670 --> 00:59:02,340
So what's your final question?

1492
00:59:02,540 --> 00:59:07,570
So I got a chance to participate in
the Cisco Networking Academy Program

1493
00:59:07,770 --> 00:59:09,740
in high school in China,

1494
00:59:09,940 --> 00:59:12,010
and work on the gender initiative

1495
00:59:12,210 --> 00:59:16,270
to raise public awareness of the

1496
00:59:16,470 --> 00:59:18,940
women's participation
in science and technology.

1497
00:59:19,140 --> 00:59:22,740
I guess that's how I got into MIT.

1498
00:59:22,940 --> 00:59:24,810
Well, thank you.
Was it a good program?

1499
00:59:25,010 --> 00:59:26,370
-What?
-Was it a good program?

1500
00:59:26,570 --> 00:59:28,210
Yeah, it is.   Okay.

1501
00:59:28,410 --> 00:59:32,040
I really like the program.

1502
00:59:32,240 --> 00:59:33,870
And so I'm really thankful,

1503
00:59:34,070 --> 00:59:36,640
and I hope Cisco can do a better job

1504
00:59:36,840 --> 00:59:39,810
and continue doing this great program.

1505
00:59:40,010 --> 00:59:41,610
But since I came here,

1506
00:59:41,810 --> 00:59:42,740
last year,

1507
00:59:42,940 --> 00:59:44,510
I actually learned more about China

1508
00:59:44,710 --> 00:59:47,770
than I did in twenty years in China.

1509
00:59:47,970 --> 00:59:51,740
So, and I realized that¡K

1510
00:59:51,940 --> 00:59:54,440
You'll understand if I don't
go there in the conversation.

1511
00:59:55,540 --> 00:59:58,440
And I realized that
the Chinese government

1512
00:59:58,640 --> 01:00:01,110
actually used the internet technology

1513
01:00:01,310 --> 01:00:03,870
to block the information
from the outside the world.

1514
01:00:04,070 --> 01:00:06,040
So I was wondering if,

1515
01:00:06,240 --> 01:00:12,110
as a networking leader in the world,

1516
01:00:12,310 --> 01:00:14,510
how can Cisco make sure that

1517
01:00:14,710 --> 01:00:17,470
the technology they are creating

1518
01:00:17,670 --> 01:00:20,510
and also the products they have sold

1519
01:00:20,710 --> 01:00:24,940
are used in a morally correct way?

1520
01:00:25,140 --> 01:00:28,110
Sure.  It's a constant balance

1521
01:00:28,310 --> 01:00:30,110
between what can you control,

1522
01:00:30,310 --> 01:00:32,670
what can you influence,
and what can you not do.

1523
01:00:32,870 --> 01:00:35,340
And I knew when you asked
such a nice lead-in

1524
01:00:35,540 --> 01:00:37,470
it was going to be a very tough question.

1525
01:00:38,670 --> 01:00:41,170
And with that question,

1526
01:00:41,370 --> 01:00:44,910
I've been doing business
in China for 22 years.

1527
01:00:45,110 --> 01:00:47,740
Dr. An Wang was the most brilliant
man I've ever met in my life.

1528
01:00:47,940 --> 01:00:50,730
He invented magnetic core memory
walking across the Harvard campus.

1529
01:00:50,930 --> 01:00:52,400
He created a whole industry.

1530
01:00:52,600 --> 01:00:53,760
But he taught me from the beginning,

1531
01:00:53,960 --> 01:00:56,060
you must make money as you go in China.

1532
01:00:56,260 --> 01:00:58,730
And you've got to take it a step at a time.

1533
01:00:58,930 --> 01:01:00,060
Understand that as a company

1534
01:01:00,260 --> 01:01:01,230
we made a conscious decision

1535
01:01:01,430 --> 01:01:03,860
we share our technology
and software with no one,

1536
01:01:04,060 --> 01:01:05,800
not even the US government.

1537
01:01:06,000 --> 01:01:07,000
Secondly,

1538
01:01:07,200 --> 01:01:10,300
while there are different forms
of government around the world,

1539
01:01:10,500 --> 01:01:11,900
we can't change government.

1540
01:01:12,100 --> 01:01:14,130
But I do know the internet and education

1541
01:01:14,330 --> 01:01:16,630
creates capitalism and democracy.

1542
01:01:16,830 --> 01:01:19,530
This last part will surprise you.

1543
01:01:19,730 --> 01:01:22,260
The Chinese leaders
understood that well too.

1544
01:01:22,460 --> 01:01:24,600
They knew that as
they introduced the internet,

1545
01:01:24,800 --> 01:01:26,100
that it would be a gradual movement

1546
01:01:26,300 --> 01:01:28,830
toward democratization and capitalism.

1547
01:01:29,030 --> 01:01:31,700
And they also knew if it occurred too fast,

1548
01:01:31,900 --> 01:01:33,330
they'd have a revolution.

1549
01:01:33,530 --> 01:01:34,430
If it occurred too slow,

1550
01:01:34,630 --> 01:01:35,800
they'd have a revolution.

1551
01:01:36,000 --> 01:01:40,700
So, I'm not in specific knowledge
to what you might be referring to,

1552
01:01:40,900 --> 01:01:42,560
in terms of a transaction.

1553
01:01:42,760 --> 01:01:44,330
But I can say that as a whole,

1554
01:01:44,530 --> 01:01:45,830
I think when you have the internet

1555
01:01:46,030 --> 01:01:47,460
and you have a good education system,

1556
01:01:47,660 --> 01:01:50,460
the end result is pretty amazing.

1557
01:01:50,660 --> 01:01:51,730
Is it a perfect system?

1558
01:01:51,930 --> 01:01:53,060
Absolutely not.

1559
01:01:53,260 --> 01:01:54,360
But is it a system where¡K

1560
01:01:54,560 --> 01:01:55,630
I admire China.

1561
01:01:55,830 --> 01:01:57,900
They're producing the best
education in the world,

1562
01:01:58,100 --> 01:02:00,000
they're producing ten times the engineers,

1563
01:02:00,200 --> 01:02:02,960
they're basically taking the best
and brightest from their own group,

1564
01:02:03,160 --> 01:02:05,300
and educating them locally
as well as around the world.

1565
01:02:05,500 --> 01:02:06,600
And I would say,

1566
01:02:06,800 --> 01:02:10,600
probably 30% of my engineering workforce,

1567
01:02:10,800 --> 01:02:12,700
is of Chinese origin.

1568
01:02:12,900 --> 01:02:14,930
If I wasn't American
I'd want to be a Chinese.

1569
01:02:15,130 --> 01:02:16,960
And I really mean that.

1570
01:02:17,160 --> 01:02:19,500
So thank you very much
for taking the time today.

1571
01:02:19,700 --> 01:02:20,960
I'm greatly honored.

1572
01:02:21,160 --> 01:02:25,530
Thank you, thank you.

1573
01:02:33,700 --> 01:02:35,730
Well John, on behalf of MIT,

1574
01:02:35,930 --> 01:02:38,730
once again we'd like to thank
you for coming and also Cisco

1575
01:02:38,930 --> 01:02:41,860
for all the good support we've been
recipients of over the past year.

1576
01:02:42,060 --> 01:02:43,830
So thank you very much again.

1577
01:02:49,030 --> 01:02:50,800
Thank you very much.  Was it okay?