According to recent headlines from Forbes, Cisco — and in particular, shares of the company’s stock — has been on a bit of a roller coaster of late, with investors first riding euphoric highs following news that the networking giant beat Wall Street projections with better-than-expected quarterly earnings results. Just as quickly, however, stock prices took a nosedive after it was announced the company is laying off 6,000 employees, a total of eight percent of its workforce.
Short-term bumps aside, there’s also increasing, long-term pressure for the company move past what some — specifically, Cisco’s customers — consider to be an outdated business model.
Cisco has long been an innovator in IT networking hardware, but with the increasing popularity of Cloud-based solutions, the old way of doing things won’t lend itself to a competitive edge moving forward. The company seems to understand this, given its capitulation to big-name client demands and the claims that it is “delivering more flexible options for buying,” according to a spokesman quoted in BusinessWeek.
Therefore, the question becomes: Can a transformative shift — one that entails disruption in the way of an evolved business model — be successfully executed to not only ensure long-term solvency, but also solidify a competitive advantage? Furthermore, can such an undertaking, one of large-scale strategic innovation, be quickly and efficiently deployed, especially when smaller, less entrenched competitors such as Huawei, VMWare, and Cumulus Networks are rapidly developing and bringing next-gen software and networking solutions to market?
As advocated in the book, The Power of Strategy Innovation, strategy innovation helps organizations — especially those in the position of Cisco — identify new opportunities for growth and can systemically develop a structure to support it, particularly where one does not exist.
Cisco may very well need to reinvent its approach to innovation, and there are signs it is on the right track. The company’s planned innovation centers for the Internet
of Everything in smart cities shows the breakthrough thinking we applaud. However, long-term sustainability almost surely necessitates that the company shake up its business model completely to uncover new opportunities and avoid losing ground and revenue to competitors.
Either way, Cisco needs to act now before it becomes swallowed by the increasingly creative competition in the IT networking industry. When polled, 87% of executives in a recent survey recognized that innovation is necessary to their company’s ability to succeed over the next three years. However, only 15% are prepared to execute on that innovation.
If Cisco isn’t willing to reframe its strategy and prepare itself to face the future of networking, competitors in the way of Huawei and others have shown that they are — and it’s likely Cisco’s customers could very well follow.