Cisco diversifies its internal innovation practices

The spin-ins may be gone, but innovation at Cisco isn’t dead

Cisco diversifies its internal innovation practices
Credit: REUTERS/Albert Gea

Late last year, Cisco CEO Chuck Robbins significantly restructured the company and was quoted as saying the company would no longer be using “spin-ins” to drive innovation. Based on conversations with Robbins and other members of Cisco’s executive team, I believe the media took his comments out of context. There are no immediate plans for another spin-in, but he hasn’t closed to the door to them either.

Robbins reiterated these points in Michael Cooney’s post, Cisco CEO: Spin-in technologies aren’t dead at Cisco, in which he stated Cisco would consider that model if it made sense. 

+ Also on Network World: Cisco CEO Robbins: Wait til you see what’s in our innovation pipeline +

The spin-in has been a very successful practice for Cisco that brought the company billions of dollars from products such as the MDS storage switch when it acquired Andiamo, the Unified Computing System (UCS) through its purchase of Nuova, and Application Centric Infrastructure (ACI) when it spun in Insieme. 

Given the quality of these products and the enormous financial impact they have had on the company, the media’s incorrect reaction to Robbins’ comments left some feeling like innovation was dead inside Cisco. Coupled with the fact that Cisco made 15 acquisitions in Robbins’ first year as CEO, it’s easy to surmise that for Cisco, innovation would come from buying companies.

When this topic surfaced during the analyst roundtable at Cisco Live in July, Robbins was crystal clear: Innovation is certainly not dead inside Cisco; it’s just taking different forms and can now involve the participation of a much broader pool of people compared to the spin-in process. 

All of Cisco’s acquisitions in FY16 were made to complement internal innovation, not replace it. The technology industry is moving at digital speeds, and Robbins has clearly stated that the company needs to keep pace. There are many ways to fuel innovation, and Cisco implements all of them. 

I had a follow-up call with Cisco’s Ruba Borno, vice president of growth initiatives and chief of staff to CEO, and Fran Katsoudas, senior vice president and chief people officer, to discuss how Cisco is driving innovation using several different methodologies, including internal innovation. 

4 ways Cisco drives innovation and products

Cisco currently drives innovation and products four ways. The first, and maybe the most visible for Cisco, is through acquisitions. It’s arguable that no company has monetized acquisitions more than Cisco. Some of Cisco’s biggest revenue products, such as Catalyst switches and CallManager, were acquired by purchasing smaller companies at the right time and catching market transitions.

Partnerships are another source of innovation for Cisco. The company has always maintained a large number of technology partners; anyone who’s ever attended Cisco Live or Cisco Networkers knows this. However, over the past few years, the company has taken partnering to a new level. Its recent partnerships with Apple and Ericsson are great examples of joint development that enables both parties, plus the customer, to succeed.

Innovation also comes from co-development with customers. One of Cisco’s strengths has been its willingness to listen to customers, and now it has developed a process through which it will partner with customers to build a product that can be made commercially available to a broader market later.

An example of this is the xSpeed project where Cisco worked with a web-scale customer on innovating and building products for hyper-scale infrastructure, addressing the 100-gig transition in massive scale cloud data centers. Using an iterative approach with the customer, they built a product that addressed the customer’s need from day one, with half the amount of engineers and in half the typical time period. 

Cisco’s final innovation process comes from fueling the creative juices of the company’s employees. One challenge with the spin-in model was that it required a small set of employees to shoulder the responsibility for innovation. These were smart people, and they did a great job—but Cisco employs tens of thousands of smart people, and the goal of these programs is to tap into the brilliance of all of its employees. 

Innovation programs for Cisco employees

In fact, several different innovation programs are in place for Cisco employees that are outside of Cisco’s normal R&D practices.

Alpha projects 

This program is the closest Cisco has to the old spin-in model. The program was put in place with the intention of disrupting Cisco before someone else does. An alpha project at Cisco is akin to an internal startup designed to help Cisco enter new markets. It has proven to be a great way of motivating internal talent to stretch beyond their everyday roles. 

The difference between a Cisco alpha project and an actual startup is that an alpha team has access to the company’s intellectual property, talent and internal resources. And if the talent isn’t available internally, Cisco will bring in external talent to fill the gaps. For example, the recently announced Cloud Defense Orchestrator was an alpha project where approximately 50 percent of the talent came from outside Cisco. 

Also, the members of an alpha project are treated very much like they are at a startup, where the compensation will likely change to a lower base with more risk but more upside based on how the product performs. Over time, Cisco has refined how it measures success and now relies on financial milestones as well as customer feedback.

At the end of the alpha project, employees can choose to return to an internal role at Cisco. But whether the project succeeds or fails, most choose to move on to the next alpha project. Given the entrepreneurial nature of startup talent, this makes sense. Cisco gives them the vehicle to pursue innovation without the risk of being at an actual startup that could go out of business.

Technology innovation fund 

The CEO’s office at Cisco funds a technology innovation fund. The topics it funds cover a wide range: from new product and features that are just past the current headlights of the businesses to exploratory ideas with long-term payoffs, where the company’s top talent get together to consider a prototype how to solve some of today’s biggest IT challenges. 

In all cases, the fund is used for prototyping—to show the technical and business viability of the idea. For example, Cisco’s market-leading Stealthwatch Learning Networks product was the result of 18 of the company’s leading engineers collaborating to find a way to use machine learning to solve security challenges.

This fund doles out about $10 million annually, though there is no hard limit. This process has been around for four years and has funded about 46 projects to date—17 to completion. Current projects involve work in the areas of security, enhanced telemetry and wireless.

Innovate Everywhere

Cisco’s broadest innovation initiative is aimed at all of its employees, and in my opinion, it’s the one Cisco should be proudest of and could potentially bear the most long-term fruit. The goal of Innovate Everywhere is to capture disruptive venture ideas from any group of Cisco employees and help them bring these ideas to fruition and grow them into something real.

Small teams put together ideas for interesting projects, then Cisco employees voted on them to choose three winners. The winning teams received the tools they needed to incubate the ideas, including three months off from their Cisco jobs, $50,000 in prize money ($25,000 in recognition and $25,000 in seed funding) and corporate services to help remove roadblocks, navigate through the company, and find resources and mentors. 

Cisco just completed its inaugural campaign, and based on the following metrics, it can only be described as a smashing success:

  • Over 2,000 employees submitted more than 1,100 ideas.
  • 48 percent of the workforce from every function in the company engaged in the challenge in some way.
  • More than 50 percent of the submissions were from teams.
  • More than 50 countries were represented in the challenge.
  • 4,147 comments were posted to the entries.
  • 250 judges and mentors participated.

The following were the three winning projects:

  • Enterprise Virtual and Augmented Reality (EVAR): This project enables immersive collaboration by bringing Cisco’s remote collaboration products into the virtual world. EVAR will provide a number of virtual and augmented reality collaboration tools to integrate into Spark, Telepresence and other Cisco tools. Use cases could include virtual shopping aisles, entertainment and customer service.

  • LifeChanger: Helping people and making the world a better place have been part of Cisco’s mission for decades, and LifeChanger does exactly that. The project uses Cisco collaboration technology to empower people with disabilities (PWD). According to the U.S. Bureau of Labor Statistics, more than 1 billion people worldwide have disabilities, and historically it has been hard for companies to tap into this pool of talent. LifeChanger uses Cisco’s collaboration tools to enable PWDs to work remotely and virtually. Companies that embrace this practice can receive some tax benefits as well. When I first heard about this, it seemed like a perfect fit for a company that’s always taken corporate social responsibility seriously.

  • Rainmaker: This deadline-driven digital media logistics platform orchestrates the delivery of digital content. An example would be a company preparing for a worldwide digital media release. Executives need to be concerned with getting the right content in the right place at the right time. Competing with this digital content are a number of other initiatives that need the same infrastructure—most of which can’t be suspended. Rainmaker figures out how to prepare thousands of different media formats for delivery so consumers can stream, download and watch content anywhere, at any time, on any device.

Cisco understands that to stay ahead of the competition and avoid the fate of the Lucents and Nortels that missed many important market transitions, it needs to innovate faster than ever before. The spin-ins may be gone, but innovation at Cisco isn’t dead. In fact, the opposite is true. Cisco has democratized the innovative process so that any one of its employees in any country can participate. Over time, this approach will benefit Cisco’s employees, but it will also keep the company ahead of the innovation curve.

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