Cisco CEO and Cheerleader John Chambers have a gift for understatement.
In a recent mea culpa of insight, Chambers declared that Cisco had “disappointed investors and confused employees.” This is akin to saying nuclear bombs annoyed some Japanese during World War II. As evidenced by the chart below, Juniper Networks has been soaring, the tech heavy NASDAQ has been rising, and even the leadership spasmodic Hewlett Packard has been doing better than Cisco in terms of share price.
And with little wonder. Cisco, the once (and maybe future) king of network plumbing did what many large companies do, namely make the erroneous decision to diversify. Diversification is not inherently incorrect, but it makes sense mainly for consumer products, markets where brand consciousness requires different brands for different products or price points, or where the primary market is completely tapped. Cisco did not face a saturated network hardware market (if anything, it is growing out of control; it is data and its transmission). Their brand was largely elastic throughout business networking and perhaps even into consumer gear.
Which is why they decided to make servers (and compete against their former partners) and pocket video cameras.
Old adages exist for a reason, and such is the case with “stick to your knitting.” Every company and most humans need a narrow scope of things with which to deal, be it product lines or children. Too many of either leads to overload, confusion, a lack of focus and occasional temper tantrums. Companies that successfully diversify are those who do it incrementally into adjoining segments or markets, where they can leverage their expertise and brands to completely conquer said markets.
The largest maker of high-speed, enterprise-grade networking gear did not need to make consumer video cameras (which Cisco now won’t).
Diversification is a C-suite decision, but marketing is always involved. Sometimes marketing is the instigator, though their proper role should be the voice of reservation. When a CEO begins mismanaging their minions with Bonaparte-style bravado about diversifying, marketing should question how this impacts the brand, how a marketing team will serve multiple markets and masters, and what this takes away from their core business and vision. CEOs who can’t address those questions in advance need bridles attached, and no organization in an enterprise is better at breaking horses than the marketing cowboys.
The burning branding iron of unemployment likely keeps them from objecting loudly … or at all.
The marketing lesson herein is that CEOs, determined to ever grow shareholder wealth, occasionally take the wrong road. Cisco could have edged into adjacent markets (especially into the ever-expanding mobile markets) instead of extremes such as consumer cameras and home print servers. (I have one by Cisco … it rarely works right). Marketing is the best speed bump available and needs to keep such mistakes from tanking share price.
Guy Smith is founder of Silicon Strategies Marketing. Guy has led marketing strategy for a variety of technology companies vending high-availability backup software, wireless middleware, enterprise software, infrastructure software, mobile applications, server virtualization, secure remote access, risk management applications, application development tools and several open source ventures. Before turning to marketing, Guy was a technologist for NASA, McDonnell Douglas, Circuit City Corporate Headquarters and other organizations.