When your company is known for innovation, the role of Chief Strategy Officer is a pretty daunting job. Hilton Romanski was elevated to that position right before Chuck Robbins took over as CEO last July. Network World Editor in Chief John Dix recently caught up with Romanski to get an inside view of how the Cisco strategy engine runs.
Different companies seem to define strategy jobs differently, so let’s start with how it works at Cisco.
The role of the CSO varies substantially from company to company. At Cisco, it is really about helping shape and guide the overall strategy for the company with the rest of Cisco’s leadership team. A lot of what I’m focused on is how we drive the innovation ecosystem to complement Cisco’s traditional engineering motion, how we drive external engagement with startups, how we look at opportunities to augment what we’re doing inside the company through acquisitions, and how we develop next-generation partnerships at global scale, like we have with Ericsson and Apple. We’ve got teams in my organization focused on all of those. We have an outside-in orientation, so that we can bring insights from the market into Cisco.
But you also help the product teams look out to the future?
Absolutely. We’re very much tied to the engineering and services teams. We work closely with both organizations to look at market trends and figure out what we need to build to address those trends.
To give you an example, one of the things we’ve focused on is, how do you take a particular problem you think the market would benefit from solving and start to drive a different way of innovating inside Cisco. We ended up launching a program with engineering called Alpha Projects where we have small teams looking at specific problems across networking, security, collaboration and other areas that are important to Cisco, and we were able to bring in differentiated talent from the outside. Typically the duration of an Alpha is two to three years and then we get a product out to market that we can scale.
In the next couple of quarters you’re going to see us launch at least two of these Alphas into the marketplace and it’s going to be a great testament to having a traditional engineering model but, at the same time, being able to take what we’ve learned from startups outside of Cisco and bring that into the DNA of the company. That’s a good example of where we’ve worked with engineering to drive things differently.
How is your team organized?
The total team is about 200 worldwide. The team consists of the following: We’ve got a Corporate Strategy Team that works with engineering, services and sales to provide a lens into what’s happening in the market.
Corporate Development takes equity positions in the most innovative, interesting companies on the planet and brings what we learn back to the table while influencing and working very actively with those companies. They also drive one of the most significant growth engines for Cisco, our M&A strategy. Our $2 billion investment portfolio gives Cisco a unique way to capture innovation, and Jasper is just the latest example.
We have a Strategic Ecosystem Group, which is responsible for working with partners like Ericsson, like Inspur in China, and with Apple, to drive a differentiated next-generation partner model where we’re building stuff together and taking that in-common to market through our channels. This is all about moving fast at global scale with partners who bring unique value to customers.
We have a Strategic Innovation Team that works on projects that are on horizons further out from Cisco’s current business in areas like cyber insurance or blockchain, as examples. Really trying to prototype different solutions for where we think the markets are going and bringing those back into the company for discussion.
And our Integration Team is a unique project office that allows us to successfully integrate the acquisitions we make as well as run complex programs related to our next-gen partnerships. As you know, we make between 8 and 12 acquisitions a year, so having a talented team in place to help support M&A is crucial. Having a dedicated team in place to help us plan for, manage, execute and then look back on our deals is a strategic differentiator for Cisco.
When you’re talking about long term strategy, what is the time horizon?
You’ve got to be looking three to five years out. Obviously there are gradations based on what domain you’re looking at. We may be in the middle of some transitions, while other transitions are just beginning, but having that long-term view allows us to make portfolio decisions and today to meet timeframes we believe are going to be playing out in the marketplace.
In some cases we may think we have a three to five-year view, but in 12 months you have compression, so having the tools at our disposal -- whether it’s acquisitions or investments or partnerships or Alphas -- to quickly accelerate our activities, is a big part of what the team works on.
You just acquired Jasper, so maybe you can talk a little bit about how they fit in and give us an idea about how an acquisition like that would come about?
We’ve been in IoT from the standpoint of solutions and product for some time. About three years ago we made the decision to be active investors in IoT. We saw the market beginning to percolate and we recognized that, at some point, we would have to make a bigger bet.
Rather than lunging at what was a pretty nascent market at the time, as part of our stated strategy coming out of this team we put $150 million aside for investing in IoT oriented/focused startups. Then the Corporate Development Team identified a universe of companies to consider, everything from suppliers of software stacks that go into silicon, to products that give a digital footprint to physical goods in retail environments. And over time that led to us refining the thesis around IoT.
No strategy is static, so it helped inform where we ultimately decided to go with the strategy. That led us to the conclusion that owning a platform, owning the ability to bridge between the connectivity layer with service providers and application development that enterprises and verticals care about, was a sweet spot for Cisco and the natural place for us to play.
That’s where Jasper lives, in that middle layer, if you will. They’re the largest IoT platform, while at the same time they’re developing incredibly deep relationships with verticals and customers like GM to be able to embed that connectivity into physical platforms, including cars, and then enabling the ability to write applications to that.
That move was really informed by a lot of work we had been doing on the investment side, as well as the work we had been doing within our existing portfolio. We’ve known Jasper for a long time and our process with them was probably longer than average. But in terms of the average acquisition process, from start to finish it usually takes about six to eight weeks. We expect this one to close in the in the third quarter, which wraps up in April.
Let’s stick with IoT for a minute. I haven’t come across a company yet that has an IoT budget, so what are you folks seeing in terms of how large companies are trying to identify and move on IoT opportunities?
Good question. Let me answer from a couple different perspectives. One, look at Jasper and the GM example. General Motors understands the massive disruption that’s happening in the marketplace, where bundles of services going into your car will be a really big deal and an important opportunity for them. They’ve invested heavily with Jasper and AT&T so they have a conduit for those services to be delivered to the vehicle. So they are not only the builder and retailer of the vehicle, but also own the supply chain that delivers services to the end user and can now create relationships with third parties that make those services even more valuable. And the data that comes off of the vehicle is also hugely important to them for maintenance, diagnostics, and upgrades. So there are players today who are implementing and seeing the opportunity and the value.
On the other end of the spectrum, last week I had a conversation with a customer that puts physical infrastructure into buildings and is trying to figure out how to understand the state of those devices, those endpoints. They have rudimentary analytics to be able to, on a batch basis, collect that data, and that’s okay right now, but they know that these have to be IP enabled. So they’re asking us to help figure out how to connect these things in a way that isn’t proprietary and isn’t expensive. That is the sort of conversation we’re having with many, many enterprises and illustrates the potential of acquisitions like Jasper.
You’ve been at this for a long time. How would you rate the IoT opportunity here in front of us compared to, say, the potential of the Internet ten years ago?
The biggest takeaway from the first generation of the Internet is that it’s not the value of the individual thing that’s connected, it’s the exponential value of the network effect of all these things being interconnected.
When you think about it, tens of billions of things and people and processes being interconnected facilitates endless possibilities and new applications and use cases. The opportunity is massive. I think we’re just seeing the tip of the iceberg now. We’re going to see virtual and augmented reality and artificial intelligence come to a very different place as a result of the fact that we’re going to have all these things connected, and that is going to further speed the rate of innovation. You’re going to have plenty to write about as we watch that play out.
Of course the Internet, coming out of DARPA, was not optimized for security, so we had to go in and fix that as an industry. So we’re also realistic that, as more things get connected, there are going to be more vulnerabilities and exploits. But Cisco’s position as the leading security player on the planet with the largest market share will let us really think it through and deliver a secure solution right out of the gate.
You were leading the Corporate Development organization when John Chambers was CEO and then took on your new Chief Strategy Officer role right before Chuck Robbins took over the helm. Any difference in strategies with Chuck versus John?
We’re building on the strategy that was in place. But what you’ve seen from Chuck is an acceleration of what we’re doing around investment activities, M&A and next-generation partnerships. Chuck is obviously focused on moving quickly, as you’ve seen.
It’s really important to put ourselves in a position to act. The importance of having a long-term view is critical, but we also recognize that you’ve got to move now to be able to intercept the opportunities in the marketplace. Many of our peers have felt compelled to use consolidation as a way to defend against innovation; we’ve seen that in other industries historically, and that’s just not a place we’re going to go. So a lot of what you’re seeing in terms of next-generation partnerships, the investments we’re making in IoT, acquisitions like Jasper, are good examples of how we’re trying to be more nimble, more agile, moving faster to be able to address what we think is an accelerated market opportunity—and to embrace disruption and unlock innovation.