A presentation by Joe Deklic Vice President, Strategic Investments Group Cisco Systems Canada Co.

1. Build, Buy or Ally
Growth Strategies
for Business
Joe Deklic
Vice President, Strategic Investments Group
Cisco Systems Canada Co.
Presentation_ID © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 1

2. Cisco: A culture of innovation
 Cisco’s corporate
culture encourages
innovation
 Innovation is the
engine that drives
growth
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3. “Philosophically, I don’t partner
and then compete later. I won’t
enter into strategic partnerships
that I think will not have lasting
evolution. … We share what we’re
doing with them very closely and
they share what they’re doing
with us very closely.”
John Chambers, President and CEO
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4. “Companies that use both acquisitions and
alliances grow faster than rivals do – as
companies like Cisco have amply
demonstrated.”
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5. Evolution Components of Innovation
 Cisco’s innovation
model has evolved
beyond the 3 “Build
– Buy – Ally” pillars Build Ally
 Collaboration
Portfolio Market
internally and Dynamics
Management Collaborate
externally with
customers and
partners is essential
for innovative
leadership going
forward Buy
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6. Why Collaborate : Differentiation
 Power of many
 Time to execution
 Alignment
 Multiple competitive scenarios
 Customers win
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7. Partners who Collaborate with other
Partners…
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8. Why Build: Technology Leadership
 Pioneer in the field
 Patentable technology
 Need to own the intellectual property
 Core business
 Have time or can build in increments
 Have in-house expertise
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9. Innovation at Cisco
The Cycle of Innovation
Manage
Deploy
Differentiation
Advanced Foundation Mission-critical
at Scale Technology Technology Processes
at Scale
2. Deploy 3. Manage
1. Invent 4. Offload / Repurpose
Funding Extract
Invent
Differentiated
Emerging Reinvent Resources
Offering Technology Technology to Reinvest
for Core
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10. Innovation at Cisco
 This study has found that Cisco has laid a strong
foundation for innovation by organizing its efforts around
three elements critical to innovation success:
–People and Culture
–Process and Organization
–Products and Technology
 Cisco does not exclusively establish innovation through
acquisition but fosters and encourages innovative
thinking, development, collaboration, and
entrepreneurship throughout its organization.
Wharton study 2009
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11. Why Buy: Core to business
 Core to business
 Need intellectual property
 Time critical
 Shortage of in-house expertise
 Acquire market leadership
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12. Innovation at Cisco
ETG Pursues a New Growth Model
ETG
Focus
New Partner, Internal Venture,
Acquire Financial Investment
Market
Develop, Acquire,
Existing
Acquire Partner
Existing New
Technologies
Source: Prof. Ed Roberts, MIT Sloan School
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13. Why Partner: Speed
 Fastest Time to Market
 Reduce Risk
 Leap Frog Competition
 Customize for Specific Markets
 Customers buy best of breed
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14. Four Key Dynamics of Alliance Strategies
should be Monitored to understand the Driving Forces in Market Space
Value Migration in the Market Space
Competitive Scenario Mapping
Ecosystem Evolution & our position in the this relative
to the Customer
Life Cycle Management of each Alliance itself
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15. Value Migration
We must view Value Migration from the Customer’s Perspective
Process Migration
Design Cycle Time
Quality Systems (Six Sigma)
Fulfillment (Supplier-Distributor Delivery)
Market & Customer Needs Migration
Providing route-to-market for sales and service
-vertical expertise
-solutions integration
-unique geographic access
Providing complementary hardware and software
Providing integrated solutions for products and services
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16. Competitive Scenarios
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17. Where are Our Alliances?
Ecosystem Evolution Where are the “Points of
Power” in the network?
Create Competitive
Competitor
Advantage by Optimizing
Parallel
Manufacturer Customer
Strategic
Supplier
Advertising
Agency
CISCO Distributor
R&D
Customer
Co-
Marketing
Outsourced Service
Manufacturer & Customer
Support
Provider
Service &
Development Logistics Distribution Sales
Support
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18. Lifecycle Portfolio Management
Future Sales Goal
$1.0B
Borrow
(Alliances)
Buy
Sale
(Acquire)
s
Build
Internal (internal
$.5B
Growth growth)
BU's Current Sales Level
Divestitures Bow-Out
(exit)
Time
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19. Every individual alliance goes through a
unique life cycle
Evaluate Form Incubate Operate Transition Retire
Define Partnering Structure Executive Review Conduct
Cisco value prop alliance comms & strategy & management
strategy governance boards value prop discussions
Analyze Secure Build Business Value curves Determine
portfolio sponsors operations planning & trends exit
model strategy
Evaluate Negotiations Plan Alliance Update Build
ecosystem & agreements communication solutions strategy exit plans
& initiatives goals
Evaluate Intellectual Partner Field Confirm Define
partner properties engagement engagement joint activities &
model & marketing commitment timeline
Build Announce New alliance Metrics & Determine Create
business alliance launch performance future messaging
case marketing reporting investment
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20. Evaluate Before negotiations begin
 Determine value proposition
 Develop joint win-win
 Build solid business plan
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21. Form Stages of successful negotiation
 Pre-negotiation
 Problem solving
 Decision making
– Create mutual benefit
 Alignment
– Revise and ratify agreement
 Implementation
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22. Operate Delivering results
 Develop operational dashboard
Clear metrics a must
 Evaluate long-term returns
Variable model
Partner-dependent
 Adjust resources to match results
Know when to call it quits
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23. Transition Confirm joint commitment
“70% of alliances either fail outright, fall
captive to shifting priorities, or achieve only
initial goals, and 55% fall apart within three
years after they are formed.”
The CEO Refresher
Vantage Partners
Presentation_ID © 2009 Cisco Systems, Inc. All rights reserved.
2006 Cisco Confidential 23

24. Decision Criteria
We need clear reasons to decide among alternatives
IF
These
Conditions
Speed of Internal
Expansion
Risk Required Resource
Similarity
Change in the Growth
Level Availability Environment
Make Low Slow High The Same Slow
Low to High to High M&A
Buy Moderate Moderate
Moderate Moderate Similarity THEN
High to Moderate to
Ally Fast Different Extensive
Moderate Low
Alliance
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25. In conclusion
 Don’t win the negotiation and lose the alliance.
 Each alliance has its own life cycle . Find it.
 Find ways to win together; collaboration. Play for
keeps.
 Alliances is a learned skill (practice + training).
Invest in it.
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27. Q and A
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