Beware Cisco of how the mighty fall

The press adores Cisco and for good reason. $33.5 billion of cash, cash equivalents and investments on its balance sheet. 66,558 employees worldwide. Ranked #1 on 2009 Fortune List of most admired networking communications companies. Ranked #6 on 2009 Fortune List of 100 best companies to work for. Its Chairman and CEO John Chambers ranked #28 on the 2009 TIME 100 List of the world's most influential people, just ahead if you can believe it of #29 ranked Kate Winslet, even more remarkably ahead of #30 ranked Britney Spears, however most importantly and perhaps most scandalously, ahead of #41 ranked Miley Cyrus (i.e. Hannah Montana). Ranked #31 on 2009 Fortune List of most admired companies. Ranked #57 on the Fortune 500 List in 2009. Cisco just oozes the image of success. A company that the adoring press considers to be at the top of its game. Heck just this week, Cisco announced its new pursuit of building out smart grid utility networks, a $100 billion opportunity according to Cisco. Earlier this month, Business Week published a book excerpt written by author Jim Collins: How the Mighty Fall: A Primer on the Warning Signs Watch Video - 5 Stages of How the Mighty Fall After reflecting on the video and studiously examining the 5 page book excerpt, I'm thoroughly convinced that Cisco has entered the 5 Stages of How the Mighty Fall.

Stage 1: Hubris Born of Success Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place. An Example of Cisco Hubris:

Fast Company December 2008: Taken to its ambitious conclusion, Chambers wants customers to remake their companies in Cisco's image, a prospect possible only because of their dependence on Cisco technology. "Without changing the structure of your organization," Chambers told the analysts in September, "I would argue that [innovation] will not work."

Stage 2: Undisciplined Pursuit of More Stage 2 leads to more scale, more growth, more acclaim, more of whatever those in power see as "success." "We're so great, we can do anything." An Example of Cisco's Pursuit of More:

Business Week May 2009: Chambers tells BusinessWeek that Cisco likely will hit a total of 50 fresh markets within a year. "We're moving into new [areas] with a speed nobody has ever attempted," he says.

Stage 3: Denial of Risk and Peril As companies move into Stage 3, internal warning signs begin to mount, yet external results remain strong enough to "explain away" disturbing data or to suggest that the difficulties are "temporary" or "cyclic" or "not that bad," and "nothing is fundamentally wrong." In Stage 3, leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. An Example of Cisco's Denial of Risk and Peril:

Starting with a 2007 sales base that was $22 billion less than Cisco's 2007 sales base, Huawei grew its 2008 sales $880 million more than Cisco grew its 2008 sales. For the first 9 months of its FY09, Cisco net sales plummeted $1.59 billion while simultaneously Cisco net income sank $985 million.
Stage 4: Grasping for Salvation The cumulative peril and/or risks gone bad of Stage 3 assert themselves, throwing the enterprise into a sharp decline visible to all. Those who grasp for salvation have fallen into Stage 4. Common "saviors" include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a dramatic cultural revolution, a hoped-for blockbuster product, a "game-changing" acquisition, or any number of other silver-bullet solutions. Initial results from taking dramatic action may appear positive, but they do not last. Stage 5: Capitulation to Irrelevance or Death The longer a company remains in Stage 4, repeatedly grasping for silver bullets, the more likely it will spiral downward. In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future.
I believe Cisco has entered Stage 3 of How the Mighty Fall, what's your opinion? BradReese.Com Cisco Refurbished - Services that protect, maintain and optimize Cisco hardware Contact: Brad Reese | Twitter: http://twitter.com/BradReese
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