Cisco Systems: Web-Enablement
When John Chambers assumed the CEO position, he outlined some very specific objectives for Cisco’s future success. His plans included creating a one-stop shop for business networks by creating a comprehensive product line, to make acquisitions an efficient business process, to create industry-wide software standards for networking, and to choose the right strategic partners. All of these efforts would change the way companies and industries operated by creating an infrastructure of networked voice, data and video. Chambers’ vision of truly global networked companies would lead to improved productivity and profitability.
The main focus, however, was on the end result, which was high customer satisfaction. In addition to planning for the business improvement and process continuity they would eventually enjoy, Cisco focused on improving internal communications and web access of information for their employees. With the enhancement of their intranet and communication capabilities, employees from all regions could pull real-time reports, monitor live corporate information, and join meetings more effectively. This increase in data at their fingertips led to increased employee satisfaction.
When employees are happy, it tends to influence their motivation to work hard and remain loyal to their jobs, ultimately resulting in increased corporate profitability and success. Enhancements to the external customers were also a huge success. Customers were now able to resolve technical issues via web-based support, and this led to happier customers, and more profitability by those who were more likely to remain loyal to Cisco. The case analysis to follow ventures into more depth with some of these web enhancements and business processes that made Cisco what it is today, one of the great providers of web-connected business applications.
After investing $15 million implementing an ERP system, Cisco spent the next two years investing $100 million in web-enablement initiatives. Why did they do that? How did standardized web protocols contribute to the success of these efforts? Cisco wanted to be the “Global Networked Company”. Their hope was to experience higher productivity and profitability without sacrificing stability during the company’s growth. They wanted to be ahead of the industry in terms of speed, delivery methods and customer service.
They did this by revolutionizing the existing processes and creating new end-to-end capabilities for Cisco customers, partners, suppliers and employees. Improvement in IT and the organizational structure benefited both the company’s overall business and the customer’s overall satisfaction. The web enhancement focused on several internet and intranet web applications.
- Employee Self-Service – The Corporate Intranet (Cisco Employee Connection, CEC) provided centralized access to information, tools and resources needed to streamline processes, facilitated knowledge exchange and maximized employee productivity. Communication and Distance Learning – It enhanced the ability to communicate with employees and added an important dimension to training where distance learning was made available to its employees.
- Customer Self-Service – Customers were allowed to pull reports and live data from the internet. It also allowed Cisco to focus on its customers where the Cisco website would be used to diagnose and answer customer issues worldwide.
- Net Commerce – Cisco was able to ship their products online. Supply Chain Management – This allowed for the automation of tracking, new product introduction, testing, direct fulfillment and dynamic replenishment. Standardization of internet business solutions across functional areas allowed for Cisco to become a true global-networked IT company by increasing their competitive advantage and shareholder value. They decided to manufacture its product line through the process of standardization, which set industry wide software principles for networking. This was a smart move because it forced all other vendor products to integrate with Cisco’s product lines.
In addition, Cisco only chose partners that complimented their abilities to integrate their expertise and products with those of Cisco’s in-house product line in order to gain a market share for their own product lines. One of the main successes of standardization was the acquisition process. Most acquisitions were fully integrated within 60-100 days. Cisco acquired many small and medium size businesses that brought technology into its product line. It allowed them to gain R&D for a relatively low cost.
Standardization allowed Cisco to be systematic about the way things were done which helped to make it an easy, repeatable process that could be duplicated quickly. Select two of the five benefits resulting from the Cisco Supply Chain Initiative and explain how these contributed to the efficiency of the supply chain and increased profitability. Explain how the two benefits you chose contributed to supplier and/or customer satisfaction. Cisco acknowledged that there were initial barriers to the flow of information and the ease of supply operations between them and their business partners who produced products for Cisco’s consumers.
They initiated a Supply Chain Management Initiative to improve their operations by automating the supply chain and improving information flow between Cisco and its partners.
- Direct Fulfillment: One result of the initiative was creating direct fulfillment for product orders. Instead of having the orders shipped from the originating partner to Cisco, then on to the customer, Cisco opted to ‘take out the middle man’ by shipping orders from the provider directly to customers. This saved half the time in shipping, provided significant cost savings, and most importantly, provided better customer satisfaction. The reduction in operating costs due to direct fulfillment was $15M in FY 2000, a small portion of the overall reduction $760M that this initiative saved the company overall.
- Dynamic Replenishment: Dynamic replenishment was another result of the initiative. Cisco’s implementation of supply chain automation provided real time information on inventory levels and product demand. Instead of past issues with errors in supply information resulting in delayed product re-supply, Cisco’s system communicated market demand directly to the manufacturers, and they could in turn replenish inventory quickly and efficiently.
This also resulted in cost savings in that there was a reduction in inventory overages, and a more streamlined ability to replenish product in a timely manner. Wal-Mart implemented a similar dynamic replenishment system, resulting in their being the leader in supply chain management to this day. Focusing on the two intranet initiatives, Employee Self-Service and Communication and Distance Learning, discuss how these initiatives might improve employee productivity, contribute to building a sense of community at Cisco, and aid in employee retention.Employee productivity significantly improved when Cisco focused on the Employee Self-Service initiative. This initiative focused on providing centralized access to information, tools, and resources. By having immediate access to these sources, processes were streamlined, knowledge sharing improved, and employee productivity was maximized across 40,000 employees. Communication and Distance Learning improved employee productivity by upgrading training modules and making them available on employee desktops.
Personalized homepages were offered to employees providing up-to-the-minute news reports and access to quarterly company broadcasts either in a live or delayed broadcast. This allowed for twice as many employees to view Cisco’s quarterly addresses.The employee self-service initiative helped contribute to a sense of community by the facilitation of knowledge sharing among teams, departments and Cisco overall. Communication and Distance Learning helped contribute to a sense of community by improving employee communication through the desktop distance learning modules and offering personalized home pages for all employees.
Easy access to attend quarterly meetings in real time or during a recorded broadcast allowed for twice as many employees to attend quarterly meetings and improved the relationship between Cisco and its employees.The employee self-service initiative aided in employee retention by continuing to upgrade employee used tools improving efficiency and productivity and ultimately allowing for optimized performance across all employees.
Communication and Distance Learning aided in employee retention by making communication across all employees easy and effective and by regularly empowering employees with information and updates about Cisco. Employees had access to worldwide breaking news at their fingertips. CEO John Chambers believed that “by providing the end-to-end network plumbing, we can change the way entire companies and industries operate. ” How did Cisco’s IT web-enablement initiatives reinforce and demonstrate that belief?
Soon after John Chamber became CEO in 1995, he started working on his vision of “New World Network”, “Internet Experts: the Global Internet Company” with the following four-point plan to provide the end-to-end internet based infrastructure in which voice, data, and video would be delivered through one network. Assemble a broad product line so Cisco can server as one-stop shopping. Systematize acquisitions as an efficient business process. Set industry wide software standards for Networking. Pick the right strategic partners.
