Innovation Strategy and the Cisco Case, Essay Example

Introduction

Cisco, known as a world leader of business networking solutions needs continuous innovation in order to maintain its market position. The below paper is outlining the main challenges and advantages of the company in creating a feasible long term innovation strategy that attracts new customer and takes advantage of the global trends in information technology.

  1. Analyze the firm, global context, and industry dynamics

The company’s intent to create value has been based on the global demand for networking and internetworking solutions, business platforms and the improvement of customer service in the past decades.

The company was founded in 1984, as a small network solution business. Cisco was among the first companies making it possible to establish network connections through Internet Protocol. (Busquets and Blanco, 2013) Innovation was always one of the main strengths of the firm. Developing large scale routers and switches, building collaboration with communication technology firms, creating partnership all over the world, the company constantly extended its services and market share.  Cisco currently employs 60,000 people, has 52,000 partners, and operates offices in 150 countries (Busquets, 2013). However, in the fast changing information technology market, there is a need for developing a core competency to respond to change. These capabilities are called dynamic competencies.

The main industry dynamics in the tech-enabled business have been examined by Bughin et al. (2010). Some of these Cisco can build on are networking throughout organizations, collaboration platforms, Internet applications and big data storage.  While the information technology market is moving towards simpler solutions, cloud storage and is becoming more competitive every year, the company is planning to double its revenue from services and software by 2019. (Busquets and Blanco, 2013)

  1. What is the global competitive context in which the firm carries out its business?

The global competitive context of the company lies in the industry specific dynamics, detailed by Lessard (2003, p. 2.). These are the geographic scope, locations of markets and competitive advantage within each location, sustainability of internationalization, as well as the global integration level. It has already been stated that the company is present in 150 countries and has over 52.000 partners. (Busquets and Blanco, 2013) The main globalization drivers are described by Lessard as:

  1. market similarity
  2. scale/scope
  3. comparative advantage
  4. Regulation

In the information technology industry, the scale of the market is one of the main drivers. Cisco, however, needs to focus on market differences and regulation in different countries, as it provides business solutions and data storage for international firms, organizations, government agencies as well as NGO-s. The division of markets into three regions:  three regions  the Americas; Europe, the Middle East, Africa, and Russia; and Asia Pacific, Japan, and China (Busquets and Blanco, 2013) Creating dynamic capabilities would allow the company to quickly react to changes on the market, the size and type of demand.

  1. Formulating technological innovation strategy

Managing global innovation is not without its challenges. Project management on a global scale can require vigilance regarding local regulations, market differences and expansion strategies. There is a need for creating a stable organizational context, (Wilson and Doz, 2013) and the local/global organizational strategies need to be aligned. The global leverage points (Lessard, 2003) need to be considered in the process. There are efficiency, knowledge leverage and responsiveness. The ability to respond to changing local and global customer demands needs to be implemented in the technological innovation strategy of the company. Therefore, communication with customers, gaining market feedback, user data and analysis of product preference of each customer has to be completed before the innovation is put in place. This can create a challenge for Cisco, as the information technology market is constantly changing, therefore, a constant monitoring of the market demand, size and customer preferences is recommended.

According to SkyHigh (2013), there are several technological challenges the company is facing in the global market. These are: assessing and addressing risks created by the use of cloud services, DPL monitoring, eliminate the risks caused by using different platforms, for example SugarSync and DropBox, measuring usage and traffic of different systems, for example Salesforce.com and creating policies and usage profile policies for customers and employees that reduce risk and improve productivity, server performance and client experience.

            2 a. What is the R&D function in Cisco? What is the “core technology”?

            Between 2008 and 2012, Cisco spent $14.5 billion on R&D (Busquets, 2013). These funds are allocated to determine emerging markets, consumer needs, and create innovative solutions for customers and partners. (Busquets, 2013). Gawer and Cusumano (2008, p. 32.) recommend that while protecting the main source of revenue and profit, the company should also find solutions for essential business problems with many industry players. Online businesses and stores is an emerging market that the Cisco R&D department should be focusing on; creating compliant and customer-focused solutions for time and money-conscious businesses. Monitoring the needs and preferences of online businesses, internet-based government and NGO platforms should be one of the main tasks of the research and development department. As Cisco already has several business software solutions, it has to continue creating ideas, tests, pilots and products for the gaps identified on the market of online business process platforms.

2 b. Why move to a platform strategy? What are the main components? Products or projects?

According to a recent report, (Cisco, 2009) the company managed to create new capabilities and add value to its services for all stakeholders. By creating the  Unified Computing Systems (Busquets, 2013) full IT telephony management, unified communications manager, a platform development that allowed users to handle the full session management in one platform (p. 8.), the collaboration, social networking, mobility, Web 2.0 and centralization of routing, the platform created cost-effective solutions for many businesses worldwide. Instead of companies having to integrate different software and applications, the system was provided for them handling all business and B2B collaboration functions. Cisco ONE, a platform strategy developed by Cisco, has the ability to attain strategic success through the emergence of Smart Cities. Other projects that emerged at this time were cloud customer connection, cloud to cloud connections, and network management and automation (Busquets, 2013)

            2 c. What are the firm’s core capabilities? How does this digital platform leverage the company’s resources and capabilities?

The company has dynamic core capabilities, as it is able to quickly respond to market changes, competition and customer demand. It allowed Cisco to break into emerging markets and extend the company’s boundaries by identifying gaps in the global IT industry. The core capabilities of Cisco consist of simplicity, flexibility, accessibility, security and business-to-business, Web 2.0 API development. (Cisco, 2009) Cisco One and business platform development are the main sources of the company’s global competitiveness. The company is also able to build and use strategic alliances to gain a competitive advantage on global markets.

            The four dimensions of core capabilities, according to Leonard-Barton (1992) are skills and knowledge base, technical systems, managerial systems integrated into business values and norms. The challenge for Cisco lies in the integration of innovation and development projects and core capabilities.

  1. Implementing technological innovation strategy

Technological innovation strategy should be based on creating ideas, managing pilots, tests and implementation of change. For this to achieve, the company needs to focus on the security and could storage, business to business collaboration. Focusing on platforms that integrate all the emerging technologies, Cisco needs to create an implementation project. It is recommended that the changes would be introduced on a small scale first. Distributed cocreation is the most effective approach in this case. (Bughin et al., 2010) Integrating word-of-mouth marketing, Web 2.0 and providing a cloud storage with sharing capabilities is a project the authors would like to propose.

3 a. How would you position Cisco in the Smart City context?

Platform strategies help Cisco leverage their business through increased profits, acquisitions, and services that the consumer needs. There are two types of models to consider when contemplating Smart Cities. They include the Brownfield and Greenfield Models. The Brownfield model depends upon an existing infrastructure within the area (Busquets, 2013). They also provide cost-effective solutions for customers, however, the needs of the market have to be continuously reassessed. The Greenfield Model is an opportunity which Cisco could seize and become extremely successful. This model is dependent on building the infrastructure within the urban area from scratch, an approach that would require trillions of dollars of investment (Busquets). T This approach would allow Cisco to use a combination of their solutions and technologies and create advanced platforms. Having a platform in place would allow Cisco to easily venture into this new segment of the IT industry.

3 b. What strategy is represented for positioning Cisco in the ecosystem of innovation for a Smart City? What horizons would you propose?

The company’s Smart City innovation strategy is based on market share expansion and growth. According to the company’s website (Cisco Smart Cities, 2012), the main driving forces for Smart City development are: increased urban population, polarized growth of economies, increased greenhouse gas emission and lower budgets. Successfully tackling these challenges with providing cost-effective and feasible solutions, the company can build on its existing knowledge base, technologies and innovation investments to create a standardized but customizable platform for Smart City development. The challenges urban management has to deal with can be turned into an advantage in the case of Cisco. Creating a platform that monitors, assesses and analyzes ecosystem impact of urban areas, creates planning and according to the firm, “Cisco is one company that has ignited the Smart City debate. In 2006, Cisco, along with several innovative city leaders, launched “Connected Urban Development,” (Cisco Smart Cities, 2012, p. 3.) Green policy implementation might create a challenge for the company, as there are different regulations in various states, however, assessing the needs of the market, the company is able to create a competitive advantage based on its customer-focused and market-sensitive approach. By providing solutions for creating social, environmental and economic pillars (Cisco Smart Cities, 2012) Taking into consideration policies, regulators, developers, owners and operators (all stakeholders of Smart Cities), the market position of the company can be further strengthened.

Conclusion

Cisco needs to manage collaboration with consumers, knowledge of any emerging markets, and the technological know-how to advance the company to its maximum potential. In the highly competitive global business platform solution market, there is a need for advanced dynamic core strategies, innovations, and a successful R&D strategy. The development of a centralized technology research and training team studying new technologies, customer demand and managing change need to be put in place in order to create research and development strategies that would be implemented by the “Venture Engineering Team”. (Achtmeyer Center, 2004)

References

Busquets, Javier & Blanco, Juan (2013) “Cisco: Bridging a Gateway between Europe and India.” San Jose: Esade , February 2013.

Busquets, Javier. (2013) Strategic management in Knowledge and Technology. Bangalore: Esade, 2013.

Cisco Site.  www.cisco.com Cisco Smart Cities Report. http://www.cisco.com/web/about/ac79/docs/ps/motm/Smart-City-   Framework.pdf  Web.

Wilson, K., Doz, Y. (2012)”10 Rules of Managing Global Innovation” Harvard Business Review.

Gawer, A., Cusumano, M. (2008) “How Companies Become Industry Leaders” MITSloan Management Review. Winter 2008.

Achtmeyer, Center (2004) E-Business Innovation at Cisco.  Excellence in Strategic Innovation Series. no. 1.

Leonard-Barton, D. (1992) Core Capabilities and Core Rigidities: A Paradox in Managing New  Product Development. Strategic Management Journal (1986-1998); Summer 1992; 13, SPECIAL ISSUE; ABI/INFORM Global pg. 111

Next-Generation Cisco Unified Communications Platform Accelerates Return on Investment (2009) Cisco White Paper. Web.

Lessard. D. (2003) Frameworks for Global Strategic Analysis. Journal of Strategic Management   Education. 1 (1) Senate Hall Academic Publishing.