Cisco’s succession plan, or lack thereof

John Chambers announced recently that he’d stay on at Cisco for another three to five years, and Charlie Giancarlo departed. Cisco now seems back where it started with respect to a Chambers successor. Clearly every company that expects to last more than a couple of decades needs a succession strategy for its top position, but just as clearly there are real problems coming up with one. Cisco’s not the first tech company to have a charismatic and possibly impossible-to-follow leader. Leaders with strong personalities have sometimes fared well, sometimes badly.

John Chambers announced recently that he'd stay on at Cisco for another three to five years, and Charlie Giancarlo departed. Cisco now seems back where it started with respect to a Chambers successor. Clearly every company that expects to last more than a couple of decades needs a succession strategy for its top position, but just as clearly there are real problems coming up with one. Cisco's not the first tech company to have a charismatic and possibly impossible-to-follow leader. Leaders with strong personalities have sometimes fared well, sometimes badly.

Ken Olsen at Digital Equipment Corporation was perhaps one of the giant figures of the 1970s, a man who had taken DEC from essentially nothing to the No. 2 computer company. People seriously talked about DEC minicomputers knocking off IBM mainframes, making DEC the No. 1 tech company in the world. Olsen was no shrinking violet with the media and customers, and he was also someone with strong opinions. It was those opinions that got him into trouble.

Olsen believed in the proprietary. Back in the 1980s he described Unix (the predecessor to today's famous Linux) as “snake oil.” Earlier he made perhaps his most telling error. “There's no reason for any individual to have a computer in his home” is perhaps vintage Olsen. These two statements encapsulated the mistakes that ended up with DEC sold to a personal computer company (Compaq), which was ultimately sold to DEC's smaller competitor, HP.

Then there's Apple. It was started by Steve Jobs and friends Steve Wosniak and Ronald Wayne, but it's Jobs who has come to epitomize Apple. He is highly charismatic, occasionally highly arrogant and always entertaining to the media. His tenure at Apple was interrupted after he clashed with his designated successor, John Scully, and he went on to found Next Computers. But Scully and his successor couldn't make Apple strong, and Jobs came back in 1997. Since then, Apple has been a tech powerhouse.

Jobs illustrates an important point, especially when contrasted with Olsen. It's OK to be charismatic, even arrogant, as long as you don't make any mistakes. An organization with a strong leader can do great things fast as long as the leader's right about everything, but it doesn't do well when that leader commits a major blunder.

Which brings us back to Cisco and Chambers. Neither as charismatic nor as strategic as Jobs, Chambers has nevertheless made some critical decisions in the last year that may have put Cisco onto the right track. It's not the big Scientific Atlanta deal, it's the smaller WebEx deal and the Cisco move into software that may hold the keys to Cisco's future. Cisco stands alone of all the network equipment vendors in its increased software focus, and if software is the key to the future of networking then Cisco is already fiddling with the lock.

There is little chance that the position of Cisco in software will either gel or fail before Chambers' three to five years are up, but that doesn't mean Cisco is out of the woods. Olsen made a catastrophic blunder, but what killed DEC wasn't as much the mistake as the fact that post-Olsen there was nobody to recover from it. Cisco likely recognizes its vulnerability; the “team approach" to senior management that they released with the announcement of Giancarlo's departure seems directed at creating a real professional organizational structure for Cisco. As Chambers said, Cisco has a bunch of young Turks that could surely step up and build such an organization.

So does Apple, and more significantly it did in the mid-'80s when Jobs departed. Why didn't they step up then? Apple thought it was creating a professional structure only to find its professionals couldn't handle the job. Is tech something that must be inspired to work? IBM's experience says it's not. IBM is a giant today and has been a giant from the dawn of the computer industry in the 1940s. While its founder, Thomas Watson, and his son were clearly smart they weren't showmen like Jobs or Chambers. Most users don't even know who runs IBM today (it's Sam Palmisano), and IBM is one of the most professionally managed of all tech companies. But IBM was the first, and it didn't grow up in a consumeristic world.

Chambers knows that the buyers of technology today don't need to be educated — in fact, they really can't be. The best brains at Nike and Reebok make sneakers, not technology. Chambers inspires, and that inspiration moves his buyers to take risks for him and for Cisco that they won't take for others. It may be that Giancarlo, who reasons and explains instead of inspiring, could never have filled his shoes, but who then does? IBM managed to shift the cache from Watson to IBM as an organization. Cisco will need to do the same, and of course so will Apple.

One key reason software may be the key for Cisco is that you can touch it. How much did the success of the iPod, a toy that put Apple into millions of hands and Apple's name on millions of lips, factored into Apple's broader success? Could Cisco, locked in the plumbing of the network, achieve the same thing? I don't think so, but Cisco could make itself a household word by making itself a software brand. If it does, it solves its management problem through charisma transfer, and it also earns it a place next to IBM and Microsoft as movers and shapers of the technology age.

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