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We are committed to manufacturing in India: John Chambers

Livemint:  January 05, 2016

John Chambers is executive chairman of networking equipment pioneer Cisco Systems Inc. and the chairman-designate of lobby group US India Business Council (he takes over in January). Chambers was recently named the second-best chief executive in the world by Harvard Business Review. In an interview over Telepresence, Chambers discussed technology, management, India and Prime Minister Narendra Modi. Edited excerpts:

How do you become a good CEO? Is it something you have to work on consciously?

You should never lose sight of your vision and strategy for the company and what your sustainable competitive advantage is. I believe a CEO has four key responsibilities. Vision and strategy. Develop, recruit and maintain the leadership needed to execute the strategy. Something which I didn’t understand at first, the (need to create) a company culture. And then communicate all of the above.

Interestingly, that’s similar for CEOs or government leaders. What was interesting this time was that the (HBR) ranking wasn’t just based on financial results. It was also based on social impact. Corporate social responsibility, environmental responsibilities, the corporate governance. To me, the role of the CEO can’t be just economic. It’s a more a ranking for the company, though, especially since only three American companies are in the top 10.

How do your days look like, now that you are not the CEO? Are they any less hectic?

Yes, they are. Even though I am teased about the term senior statesman and the image of a grandfather kind of role within the company in terms of providing guidance... My day is really focused on three main category groups that Chuck (CEO Chuck Robbins) and I have agreed I need to focus on.

The first is digitization. The second is the next-generation of strategic partnerships (for Cisco). And the third is security. Those are three areas where you’ve got to think exponentially as opposed to linearly; and then, whatever else Chuck wants me to do.

The most important thing for me, after having built Cisco from 400 people when I joined the company and $70 million in sales to $50 billion in sales approximately and around 70,000 (people), is that we make this transition smooth, especially because most CEO transitions in the US in hi-tech have gone poorly (Robbins took over from Chambers in late July).

One of the other things I focus on as part of being an industry leader is changing the world. We are about to see the second phase of all-round digitization, (including) the digitization of countries.

Those are the three areas I focus on as executive chairman. I am also chairman of the board and am also active in the US India Business Council.

My day is very focused. I still follow key issues within the company. But it’s more fun for me. The day Chuck was named CEO, my text alert that I have always on vibrate (mode) next to the bed at night... I no longer heard it. For 20 years, I always got up and read it. I might respond to it or might not, but I always read it.

The role I am in now is a senior statesman, a senior role for the company, to make sure we do this transition (of leadership) in a way others have not, without missing a beat on where we want to go as a company. We have a chance of becoming the No. 1 IT company in the world. I think the odds are 50:50 that we will do that, but it requires all of us pulling in the same direction, and building off our strengths as a company of getting market transitions right, being customer driven and building architecture.

So, I still spend a fair amount of time meeting customers. That’s something I enjoy.

So that’s how a typical day looks like, but it is down from an average of 80-110 hour weeks to something more reasonable... and I will eventually get it down to 50% of that.

The transition of leadership has so far gone right for Cisco. What have you done differently?

I would start with the realization that the transition would be challenging. Over the 20 years (I have been at Cisco), we changed CFOs six times, head of sales eight times (I was the second and Chuck was the seventh), we changed the lead of engineering six or seven times. The point I am making is we made these transitions seamless and the market didn’t even realize we were going through them. We set a goal of making this one (the CEO transition) seamless. So I watched through the years as other companies went through such transitions, watched what they did right and wrong, talked to the leaders involved on their learnings.

We planned for this one very carefully. A little bit over three years ago, when my board asked me whether I would sign up for another five years, I said, “this time I need to sign up for just two to four”. I said it is time for a transition to occur for a number of reasons. So, we have been planning this for three years.

The last (of the three) was very intense. We looked at a number of internal candidates and some external ones. The board ran the process; it was not my process. At the end of the process, Chuck surfaced as the clear leader among both the internal and the external candidates.

And then we communicated this—internally and externally—very effectively. The stock didn’t even twitch when Chuck was named.

You spoke about the digitization of countries. Where do you think India stands with reference to other countries on this aspect?

The first country to move aggressively on this was Israel. All three political parties came together to focus on the future of Israel and as they did that, it was a learning curve for us too... because Cisco was their partner.

This was not about technology. This was not about connecting devices. It was about outcomes. Their focus was GDP (gross domestic product) growth. Their focus was job creation, 420,000 over 10 years. And also inclusion of the entire population.

It was focused on smart cities. It was focused on innovation, on start-ups for the next generation. It was focused on broadband, connectivity for healthcare and education. It was focused on security. That was the model we learnt with.

Prime Minister Modi has probably done the best job I have seen done in terms of outlining a vision and strategy for the country.

I’ve dealt with almost every government leader in the world, but Prime Minister Modi was able to tag all the pieces together—in terms of digital India, what it means for GDP, job creation, understanding the implications of broadband (access) for every citizen and how that could change education and healthcare, and especially how you re-skill India to create a million jobs a month, and how you drive this through the system using smart cities, not one or two, but 100, what Make in India really means, and a willingness to listen.

We are very candid about how things have to change within the country—logistics, free movement of goods, the tax system.

He also has the courage to challenge. He told me he wanted India to be the first country that grows GDP at a rapid pace and improves the environment.

I am not sure that’s too ambitious a goal. Because if you connect everything, you can reduce traffic, you can control emissions, you can change the way natural resources are used.

He outlined among the most complete visions I have seen. I have had chance to meet with him a number of times on this. He also understands that this has to be owned by the country’s leader.

Everbody has unrealistic time frames on how quickly you can do all this. It will take time. Each one of these, Digital India, Skilling India, providing healthcare, etc., is a complex algebraic equation.

I think he (Modi) is very realistic. He knows he has to move faster but he also knows he has to get the base right, otherwise you will build it up and it will collapse on you. We are extremely positive on India’s approach to this. It is extremely ambitious, but also very realistic.

Some of these big projects, take Smart Cities, for instance, are very complex and require both multi-functional expertise as well as an understanding of how people behave. Do you think we have that kind of expertise in India?

The hurdles are, number one, cultural. The second hurdle is breaking down silos. The third element is that you have to think about how you change the organizational structure to achieve that (digitization). You have to think exponentially, not linearly to make it happen. And you have to have the right kind of resources.

This is what I tell heads of state when I meet them. It takes time. But having said that, India has to move faster. But I find it interesting that for the first time there is a vision of where India has to go in this digital evolution.

Cisco was a pioneer in outsourced manufacturing. We see such electronics manufacturers as lead indicators of how good a manufacturing system is. A few of these are in India now. Given this, how do you see the manufacturing ecosystem in India?

Electronics is different (from almost any other kind of product). Because wherever we put down manufacturing, we will then put logistics and we will then put engineering. This is why our ecosystem is different from that of old-world manufacturing.

If we manufacture things in India today, it will cost 25-40% more than it costs to manufacture in other places. The issue is not the cost of labour. It is how you move goods around, how you get the ecosystem there with you, how do you get the scale. More than half of my product costs are based on very high-end complex silicon, for which there is no capability of producing in India now. It’s the ability to have taxes, legislation that helps flow of goods, etc., that is realistic...

But wherever we go, our ecosystem will follow and our peers will follow.

If manufacturing is really important to your government , to your people, part of our responsibility is to say “here’s how we can do it together”. And to be candid and say it will not make good economic sense at first. But you have got to break down barriers for me to stay and scale, and for others to follow. But we are committed to manufacturing in India. I’d like to see things move faster, but I also realize the challenges.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.