John Chambers joined Cisco in 1991, it had 400 employees and $70 million in revenues, when he left in 2015 after 20 years of being CEO, the company had $47 billion in revenues and Cisco is the backbone of the internet. Along the way, Cisco acquired 180 companies and beat out its competitors. How did he do it and can you learn something from Mr. Chambers? The answer to learning is yes and reading his book Connecting the Dots by Hachette books, NY, 2018 will help.

You may notice some chapters were jumped not because they tend to be about internal operations of the company rather than seeing the company from afar.

In Chapter 11, Mr. Chambers asks a number of questions of entrepreneurs to see if the information he expects and if the fit he is looking for happens. After the great idea, it moves to the market, then what?  The following questions come from an investors point of view:

1. What do you believe the job of the CEO is? – 4 components (1) responsibility for owning and developing the vision and strategy of the organization; (2) Develop, recruit, retain, and when appropriate change the management team to implement the vision and strategy; (3) the leader must own the culture and walk the talk; and (4) constantly communicate all the above.
2. How do you build trust? – It starts with the basics. Never sell something that is not right for your customers or tell them things that you really do not believe or you are not going to be able to deliver.
3. Where do you spend your time? – where does your time go towards top priorities or squeaky wheel or things that you enjoy doing?
4. What do you do when you have a member of your team who is failing? Do you coach them or remove them? – loyalty both ways.
5. How do you deal with multiple cultures in different locations, functions, or the companies you acquire? Mr. Chambers view is simple – one common culture and set of core values across the company.
6. How do you set targets for your team and do you use stretch goals? – the targets are important, if set there is an expectation of meeting them. Mr. Chambers is a believer in dreams, but to reach them you have to encourage and team people how to make dreams happen.
7. What are the 3 most important things for success and what the biggest mistakes? – Success – clear visions of and strategy for where you are going, the priorities to achieve that, and setting measurements. Power of the internet to be a digital organization and getting market inflections right. Mistakes made – everyone having different goals and targets, operating in your own silo; not having quality leadership that you need to win.
8. How do you decide when to hire new people? – balancing act between risk and reward.
9. How do you do acquisitions and strategic partnerships successfully? see Chapter 6
10. Strategy versus culture, which is more important? both are important.
11. How do you find advisers and coaches? The most basic answer is you have to ask and you have to earn the right to ask. Constantly learning from others.
12. How do you ensure the longevity as a CEO? it is hard because you have to reinvent yourself to get the basics right. Get the results and business outcomes of your organization. Disrupt or get disrupted. Grow or die. And get market transitions right.
13. How do you identify and capture market transitions? – by staying close to startups you can see changes in innovation. business models, and new technologies to help connect the dots.

Linking to dividend paying stocks,  in the book Mr. Chambers has many bullet points at the end of the chapter and when evaluating the companies you invest in, they may help in narrowing the field. It is often hard to figure out the culture from the outside, but you can see if the company is successful on its year end targets and expectation from outside investors. It is easier to pick profitable companies with a monopoly or near monopoly however advise from Mr. Chambers helps you pick a choice of two equals, which one is better?

There are more questions than answers, till the next time – to raising questions.

 

John Chambers joined Cisco in 1991, it had 400 employees and $70 million in revenues, when he left in 2015 after 20 years of being CEO, the company had $47 billion in revenues and Cisco is the backbone of the internet. Along the way, Cisco acquired 180 companies and beat out its competitors. How did he do it and can you learn something from Mr. Chambers? The answer to learning is yes and reading his book Connecting the Dots by Hachette books, NY, 2018 will help.

In Mr. Chambers time at Cisco, he signed off on over a 180 purchases most of them were successful, how did he do it? what processes did he use?

You have to start off why are you buying the company? In any deal, you have to understand the core asset you are buying and protect it. If the core asset is people, then measure the attrition rate. At Cisco the number was 5% and other companies the number reached 20%. Fortunately, Mr. Chambers recognized early on the most important success factor in any technology acquisition is retaining the founder and core leadership team.

In the technology field, many acquisitions are difficult and fail because a company is acquired for its people and what you hope they can do. It is a bet on leaders you do not know and market shifts that have yet to occur. Even if you get it right some acquisitions just do not work out. Cisco record was 1 in 3 did not meet their targets, but that was better than everyone else.

If the reason for acquiring to innovate or enter a new space, it is critical to be the leading player in the market. If you are not, it is time to leave the space and do something else. It is also important the price of any acquisition is not just its stand alone value, but also for its strategic and future value to you. An example is buying Crescendo at $90 million and it became a corner stone of a $13 billion a year business.

Culture is very important, the first step of Mr. Chambers playbook was once identifying companies that were attractive, to meet with the founders and leadership team. I wanted to listen to the leader’s vision for the company’s future. What he was looking for was the leadership team to be partners to reach the next level for their customers, employees and investors. The most important aspect is if you do not like what you hear, if it does not feel like a win for everyone be willing to walk away for it likely will not work.

One method Cisco used was called spin-in. These were startups we funded to allow a proven team to work outside of Cisco on breakthrough products that would be sold back to Cisco at a predetermined price, assuming they were successful. 3 examples turned out to multi billion dollar products.

The toughest part of an acquisition is deciding what to actually buy. The key to making better and faster decision is to follow a replicable process. It starts with 4 key principles (1) focus on acquisitions that let you enter or expand new markets that are in transition; (2) follow the lead of your customers: (3) unless you are intentionally buying a stand alone asset, immediately integrate what you buy into your architecture; and (4) maniacally ensure a match with your culture and values.

7 Golden Rules that guided Cisco in deciding what deals to pursue:

1. Each Acquisition must align with your vision and strategy  – you and your target company must have a similar vision and strategy for how the industry will evolve regarding the focus are of the acquisition.
2. Focus on market transitions and technology disruptions – disruptive technologies and shifting business models create opportunities for newcomers to gain market share.
3. Listen to your customers in deciding which companies to acquire – getting reference from early innovative customers of the acquired company is a must before you make the decision.
4. Create a win-win for both companies…their leaders, investors, employees and customers – understand what a win for the target company will be. As the process moves on, revisit the goals for both sides and ensure both sides see the process as a win-win. If you do not see win-win walk away.
5.  Prioritize companies and technologies that fit with your portfolio – truly understand what it will take to integrate a product with your existing products. Cisco has a strong sales team which is an asset, but the real sustainable differentiation in the long run was the ability of their product to work with our other products to deliver customer results with speed, agility, limited risk.
6. Look for a strong cultural match – the way to do this is ensure the culture of the acquiring company matches or is very comfortable with yours. If you do not trust the leaders, walk away, even though the opportunity looks sexy.
7. Geographic proximity to your headquarters or key operational centers – remember unless they are a stand alone company, the idea is to integrate into your technology. If the company is a plane ride away, ensure a plan which has very frequent visitors to ensure the fit into the company.

Strategic Partnerships – Cisco’s guiding principles that increase the odds of success:

1. The partnership must truly move the needle on both the top and bottom lines for each company and truly be strategic for both companies.
2. Only strategically partner with companies that understand and are committed to strategic partnerships. Ask the company what other companies they have a relationship with which is successful.
3. The strategic partnership must be accepted and driven by top management in both organizations. The people who will be executing the partnership must believe in what they are doing.
4. Focus on 3 to 5 needle moving projects for both companies: it is unlikely all will be 50:50 it will be 30:70 or 40:60.

Mergers of equals in Technology.

They do not work and are good for the competitors. If you own the stock look for alternatives as Mr. Chambers in over 40 years only remembers one than worked out.

Linking to dividend paying stocks, in all investments how you narrow the field is the toughest choice. With dividend paying stocks, that takes away companies that do not pay dividends. Understanding how large technology companies see the world and look to change it, can help you in your investing. Mr. Chambers and Cisco has guiding principles and when to walk away, you can do the same.

There are more questions than answers, till the next time – to raising questions.

 

John Chambers joined Cisco in 1991, it had 400 employees and $70 million in revenues, when he left in 2015 after 20 years of being CEO, the company had $47 billion in revenues and Cisco is the backbone of the internet. Along the way, Cisco acquired 180 companies and beat out its competitors. How did he do it and can you learn something from Mr. Chambers? The answer to learning is yes and reading his book Connecting the Dots by Hachette books, NY, 2018 will help.

The easiest thing to do is managing a company when things are going well, the hardest but most important is how does the decision maker handle a crisis, either personal or company related?  One of the biggest mistakes that all of us make is we personalize every crisis.

The first thing to do in a crisis is stay calm and investigate what is really going on. If you stay calm, then others will tend to be calm.

The next thing is stay close to your customers. If you have been trying to build a trusting and transparent relationship, then the people who pay the bills need to be kept informed what you are doing. One it is good to talk to your customers because they need to hear from you. They need to hear you can still serve their needs. Even if you can not share much information, do not disappear.

One of the biggest mistakes is to equate an external crisis with internal problems. In one crisis, once they understood the scope and cause of the crisis, swift and painful action to survive was taken. What was not done was to change the basic strategy for building out the business and internet. In every crisis, you have to examine how much was self-inflicted and how much is due to external issues.

It is how you handle the setbacks that determines who you are, even more than your successes.

Linking to dividend paying stocks, we look for the best in investing – higher profits to translate into dividend and increase in total assets. However, all companies suffer downturns and crisis, how did you company handle it?

There are more questions than answers, till the next time – to raising questions.

John Chambers joined Cisco in 1991, it had 400 employees and $70 million in revenues, when he left in 2015 after 20 years of being CEO, the company had $47 billion in revenues and Cisco is the backbone of the internet. Along the way, Cisco acquired 180 companies and beat out its competitors. How did he do it and can you learn something from Mr. Chambers? The answer to learning is yes and reading his book Connecting the Dots by Hachette books, NY, 2018 will help.

The most critical factor is to understand what your are competing against: market transitions, new technologies, and time – not a  competitor. Remember market transitions is the potential of what the technology could do.

Cisco the network of the internet was focused on market transitions, customers and tying products together to speed implementation, lower costs and reduce risk while delivering the service, innovation and outcomes our customer need to thrive and stay ahead in the market.

Cisco had 4 things going for them: (1) an ability to anticipate and get ahead of market transitions; (2) innovation processes that could be replicated at scale; (3) a culture that promoted trust and empowered teams; and (4) a focus on solving problems rather than simply pushing products.

Cisco was crystal clear on what the company stands for and the mission that your company exists to fulfill. 25 years ago, it was the Cisco would change the way the world works, lives, learns and plays.

How you define your expertise and your value to customers is critical to how you grow your company. When you focus on a mission that is authentic, impactful, differentiated, and aspirational, people understand why they are with you.

For Cisco, they made a decision to the most effective reference and user of our technology by using it to close our books in 24 hours. The virtual close allows a snap shot on any day, not just month end.

Linking to dividend paying stocks, how does your company dream big? If it not dreaming are you contented what they are doing? Do you understand or have a crystal clear understanding of where they stand and do not stand?

There are more  questions than answers, till the next time – to raising questions.

 

aaaaaaan an abian

John Chambers joined Cisco in 1991, it had 400 employees and $70 million in revenues, when he left in 2015 after 20 years of being CEO, the company had $47 billion in revenues and Cisco is the backbone of the internet. Along the way, Cisco acquired 180 companies and beat out its competitors. How did he do it and can you learn something from Mr. Chambers? The answer to learning is yes and reading his book Connecting the Dots by Hachette books, NY, 2018 will help.

In Chapter 3, Mr. Chambers discusses one of the biggest mistakes he sees is people do not dare to imagine a bold outcome and understand what they need to do to achieve it.

Before Mr. Chambers makes a move, he plays out the game in his head, then replay it under different scenarios, forward and backward, in order to anticipate not only my moves but movers of others in the game. This helps in learning to anticipate the hurdles and see different ways to achieve the outcome you want. You also learn to recognize when an outcome is no longer achievable and make a decision to either change your strategy or even to concede the game and move on to another opportunity.

The first step is talking to customers and if your customers are interested in something new, you become very interested. For example, Cisco was very good at switches but Ford mentioned Fast Ethernet, which they were not. When Mr. Chambers was at Boeing they mentioned the same thing. Next was to investigate the companies and buy one as this was a market transition.

Rule No 1 in acquisitions – Understand what you are acquiring and protect it at all costs. In the tech industry , it is talent, the next generation of their products and the leadership team to make it happen.

Execution is tough. It is even tougher when your vision and strategy are out of sync with the execution. In the acquisition protecting the team was important and Cisco agreed that no one could be fired in an acquired company without the permission of leaders on both sides of the deal.

To break away from competitors and catch market transitions, you have to be bold. If you make the moves one or two steps at a time, your odds of success are low. Your competitors are watching you, they will offer the same things and your will not be able to differentiate yourself from the competition. Your competitors and you are trying to understand each other’s strategy – what moves you typically make or the patterns the company’s typically undertake.

When examining your competitor’s the key is to focus on what the other player is likely to do (based on your research) not what you would do in their situation. Understanding the cultural and strategic differences of your competitors, customers, peers, and partners to success. You look for pattern of behavior from your challenges, anticipate all the different scenarios of what could happen and plan your moves in response to what is happening in real time. The more confident you are about how things will play out, the more ambitious your bets can be.

The sound bites of leadership

1. You grow or die.
2. Disrupt or get disrupted.
3. Most companies fail from doing the right thing for too long.
4. Every company and country must become digital.

On one trip, Mr. Chambers was sitting next to Henry Kissinger and put aside his briefing books to ask Mr. Kissinger what he had learned about leadership over the years.

Mr. Kissinger stars with 3 scenarios – most likely, favorable, and least likely. He maps out probable outcomes for each. This helps him understand the mindset of the person he is negotiating with, he tries to find common ground. The process helps achieve better outcomes for both sides.

Focusing on the outcome makes it easier to get people aligned around a strategy. If there is disagreement which is okay, but if it miscommunications it can be fixed. If it is cultural or a personality problem, you might need to part ways.

Most of the time in negotiations you are not looking for a winner and a loser, you are looking for a outcomes that offer shared success and enlist the help of those who stand to benefit.

Linking to dividend paying stocks, profit companies have money to do acquisitions and many do not work. Trying to understand why and the bold vision will help you decide to keep the stock or look for other alternatives.

There are more questions than answers, till the next time – to raising questions.

 

 

John Chambers joined Cisco in 1991, it had 400 employees and $70 million in revenues, when he left in 2015 after 20 years of being CEO, the company had $47 billion in revenues and Cisco is the backbone of the internet. Along the way, Cisco acquired 180 companies and beat out its competitors. How did he do it and can you learn something from Mr. Chambers? The answer to learning is yes and reading his book Connecting the Dots by Hachette books, NY, 2018 will help.

Chapter 2 is called Act like a Teenager and Think Like a Dyslexic. What does that mean? Mr. Chambers has met many people starting out in business and the thing that impresses him is their curiosity and ability to handle multiple random data points as well. They have visions, but can move from one topic to another at lighting speed.

Teenagers do not believe in incremental change, they want to disrupt the status quo and generally believe they can change the world.

4 responsibilities of a CEO: (1) to set the vision and strategy of the organization; (2) to develop, retain and replace the management team to execute the vision and strategy; (3) to create the culture; and (4) to communicate all of the above,

How well it is done it is the critical aspect to any company.

The No 1 driver in how we developed products and grew our business was and always should be our customers. If we did not give them what they wanted or needed, plenty of competitors would have happily stepped in to serve their needs instead. Cisco’s success was about trying to understand where the market is going and working with customers to get there. You compete against market transitions, not against other companies.

First step – collect data from a wide variety of players. Collect data from customers, study competitors, seek out disrupters, and look at pertinent factors to get a sense of the big picture. Then zoom in on a few points to see what is moving the needle, pick some options to explore and check in with customers. Once you understand how the market is changing, you can develop the right product and strategy for where the world’s going to be. The facts are usually all there to let you see the big picture.

It is hard to connect the dots if you do not know where to look or whom to trust. The first step is focus on the big picture and the possible end result. Look at where are the clusters? are common themes emerging? What matters is the trend and links that your find. Pay attention to broader shifts in the market, especially where 2 or more are related, and seek out more data or experts to fill in the gap. The challenge is to figure what matters. What is signal and what is noise? You need to stay calm and seek multiple perspectives particularly from customers.

Data might not tell you why something is happening, but it does tell you what is going on.

Remember most of talk to people who think like us, you need to talk to people who do not cross your path everyday. It is easier to spot opportunities and changes when you are on the outside. Teenagers for example, have limited power, so they are more inclined to look beyond the people in charge. There has to be some discomfort to be creative.

How do you walk into an unfamiliar situation and connect the dots? The short answer is you prepare. Mr. Chambers uses a briefing book – bios of the people I was scheduled to meet, data on what Cisco was doing for that client or community, background clips related to Cicso’s presence in the community, observations from the local team, summary of the objectives for the meeting, and any other material. This allowed Mr. Chambers to better tailor his insights to connect with whom he was talking to.

If you really want to learn, let your guard down and be humble. To get to the CEO’s spot you have to be confident, but remember there is always someone smarter in the room.

Linking to dividend paying stocks, for the companies you invest in, your will tend to read the reports more, you might even meet some or all of the executive team, do you believe they embrace curiosity? How did the person connect with you?

There are more questions than answers, till the next time – to raising questions.

 

John Chambers joined Cisco in 1991, it had 400 employees and $70 million in revenues, when he left in 2015 after 20 years of being CEO, the company had $47 billion in revenues and Cisco is the backbone of the internet. Along the way, Cisco acquired 180 companies and beat out its competitors. How did he do it and can you learn something from Mr. Chambers? The answer to learning is yes and reading his book Connecting the Dots by Hachette books, NY, 2018 will help.

In the introduction, Mr. Chambers says when I look back on the incredible competitors who later disappeared, I realized that most of them did not fail because they suddenly did the wrong thing. They failed because they kept doing the right thing for too long. The biggest mistake we all make is that we get comfortable and we get disrupted because we do not disrupt ourselves. Take risks, challenge the status quo and never stop learning.

Chapter One   The Lessons of West Virginia (Disrupt or Be Disrupted)

Mr. Chambers tells a story when he was 6 years old and fishing. He lost his footing and fell into the river, a fast flowing river, his Dad called Hang on to the fishing pole. When there was a spot to get him out, his Dad rescued him. Why hang on to the fishing pole? It was not the cost of the fishing rod, but as long as Mr. Chambers focused on the pole , I was less likely to panic and that is not the worst thing to do in rapids. You have to go with the flow and look for opportunities to go out. You need to manage the fear.

In the 1950’s West Virginia’s Wanawha River Valley was the chemical center of the US. If you were in the valley working in the industry, you felt like you were sitting in the engine room of the next industrial revolution. They were producing fuels, polymers, disease resistant seeds and many other materials. You could not imagine a day that would change. The state did the right thing for too long – it was dependent on chemicals and coal. New competitors were coming to beat West Virginia where we thought we were untouchable. It was cheaper to mine coal elsewhere, owners started using more machines or less jobs. Utilities began to use natural gas or solar or saving energy which meant less coal was needed.

To address the real problem, you have to investigate the specific underlying issues and learn to step back to see the patterns and trends that point to the big picture. In other words, you need to connect the dots.

One way to try to think is what signs are that things are changing and how will those trends play out in 5, 10 or even 15 years? If you can you will see there are many opportunities to be found.

Mr. Chambers worked for IBM, for a long time with big mainframe computers, IBM was the world’s leader. Then along came microcomputers and customers began to want to change. IBM did not want to listen and that is why Microsoft stepped in; IBM was interested in the hardware, not the software.

Mr. Chambers moved to Wang Computers in the Boston area. For a time the Boston tech center was more important than Silicon Valley, but they did not realize Wang computers were not competitive against PCs that ran Microsoft. Wang was so focused on stealing market share from its peers that it underestimated the impact of a new crop of competitors. When the next innovation came, Wang was no longer relevant.

Mr. Chambers moved to Cisco and there was many competitors in the early days, anyone of them could have but did not. One reason is they failed to capture a market transition. The companies kept improving a technology which their customers did not want anymore. They diversified into the wrong business or picked the wrong partners. They held fast to analog technologies as the world went digital. They did not disrupt, so they were disrupted.

A market transition is not a threat. It is a period of movement from one state to another, when the skills needed to do your job change, when your customers move on to a new technology, or when an economy shifts to a new model. It can happen on its own, or as part of a wide trend. What is important is your recognize it is both reality and an opportunity. The ability to figure out the change will look like in 3 to 5 years before it happens and act on it is how you will win.

Linking to dividend paying stocks, when you think about change you often think how many companies do not exist anymore. It is difficult to continually make profits particularly if the company does not have a monopoly. A government mandated monopoly such as utility company is where you should have some of your investments. What are those companies doing to keep their monopoly? how do they change their businesses and as you answer those questions you can see which companies are providing the services. Investing can be easy.

There are more questions than answers, till the next time – to raising questions.

 

 

In late May, the President unveiled more aid to farmers in a $16 billion package. The tariff President wants to ensure some people receive help for changing trade deals with China. In an article by Humeyra Pamuk of Reuters, said payments rates to farmers would be determined by where they farm rather than what crops they grow.

If you want to be cynical, you would say an election is coming soon and some farmers were a key voting block and they might swing some states to the President. The big crop is soybeans which more than 60% of the crops went to China. The decrease is partly due to tariffs as well as soybeans were going for food to pigs. There is an pig virus in China which has reduced the number of hogs or less demand for soybeans.

The Secretary of Agriculture Sonny Perdue said the aid was based on feedback of last’s years aid package and will have a single payment rate for the county calculated by the damages in that area, instead of a rate for every commodity across the country.

Linking to dividend paying stocks, governments can and will pursue different policies depending on their agendas. For all policies, there are some that benefit and some that lose, on the expectation in general it will be better in the future. It can be good that the aid packages have been changed because of crisis, but the crisis is one of the government’s making. so aid should be given. When you invest in agriculture companies which is good because we all need to eat, government policies need to be taken into consideration.

There are more questions than answers, till the next time – to raising questions.

In the US, there is an opioid crisis which law makers agree, President Trump has even signed executive orders and by partisan support in Washington, which is often hard to find, agrees with the President. Part of the crisis is linked to Purdue Pharma which makes the OxyContin pills. It is alleged in many lawsuits that Purdue Pharma knew the pills were addictive and pushed their distribution system as much as possible to sell more of the drugs.

If the drugs helped with the pain, but there was a small side affect, no one would complain that much. The issue is the addictiveness and suicides have resulted.

All large companies need an infrastructure to work with; in Purdue Pharma it included the largest US bank – JPMorgan Chase. In an article by Mike Spector and Jessica Dinapoli of Reuters, JPMorgan Chase’s commercial bank managed the cash and bill payments as well as investor services as well as the private banking looked after the Sackler family, the owner of the Purdue Pharma.

Similar to most companies, Purdue Pharma has banking relationships with more than one bank and as profitable company, its banking services have competitors wanting to bank with them. One example is Comerica of Dallas.

Purdue Pharma denies it contributed to the opioid crisis pointing the US Food and Drug Administration approvals of labels for the company’s drugs that carried warnings about risk and abuse associated with treating pain. Many states disagree as more than 400,000 people have overdosed between 1997 and 2017, according to the US Centers for Disease Control and Prevention.

Linking to dividend paying stocks, it seems some form of new standards of being ethical are being brought to the marketplace. While no company is perfect, there are clearer lines which company overstep and they will pay a price. It is important to remember how your company reacted to the last crisis it faced and whether the problem which came to light was very recent or lasted years before being corrected.

There are more questions than answers, till the next time – to raising questions.