Transcript
Speaker: Digital transformation in the middle market. Come learn from Cisco about how companies can start this journey. Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market, which will educate you about the challenges facing mid -sized companies and help you take advantage of new opportunities.
Speaker: Welcome to the market that moves America. My name's Doug Farron, managing director for the National Center for the Middle Market. And today we're coming live from the Fawcett Center on the campus of the Ohio State University, where we just completed a Fisher summer series event on digital and data transformation, along with several of our other centers at the Fisher College of Business, including the Risk Institute, the Center for Innovation and Entrepreneurship, and the Center for Operations Excellence.
Speaker: Joining me today is Jeremy Astin. Jeremy's the Senior Director, Go to Market Planning and Operations at Cisco. And we're going to talk a little bit today about the presentation that he delivered at our event. So first, Jeremy, I just want to ask you, tell us a little bit about your role and background at Cisco.
Speaker: Well, thank you. Yeah, it's been an evolving role for me. I've been with Cisco quite a while, coming up on 17 years. And most of that time was spent in the sales force dealing with customers, dealing with our partners, both as a sales rep and then a sales leader. And like I mentioned earlier today, I noticed a few years ago that the conversations were really starting to change pretty radically with our customers. They were not as interested anymore about
Speaker: Features on boxes maintenance questions it was like hey I have legitimate outcomes I need to leverage technology for and I need to drive to the business I'm being held to new standards from the c -suite and you as one of my strategic partners I'm gonna have to hold you to those new standards as well
Speaker: So I really started thinking like, wow, we're having to evolve our portfolio sets, our products, how we deliver them. And it got me thinking. And then about this time also, a new group was forming within Cisco to really drive new types of consumption, new types of offers, especially with software as the base of that. So I took this role a few years ago to really help with
Speaker: new go -to -market strategies, how do we monetize our offers differently, and how do we give customers flexibility in how they consume. And so that's been my journey at Cisco. It's been a really exciting time for us, and it was a great event that you guys held today. You focused your presentation mainly on Cisco's own digital transformation and really how it applies to others. Can you talk a little bit about those four components that you shared in terms of those tenants?
Speaker: Yeah, well, as we know, we are a big tech firm, and in a lot of cases, we are the incumbent. And so, we have definitely seen a huge rise in disruptive technologies, disruptive companies that are out there trying to get into various spaces that Cisco plays in and wants the customer market share.
Speaker: But when you think about how do you change models, it's not just about throwing new products or acquiring companies, it's having a very thoughtful strategy about how you go drive that. Now, what I highlighted at the beginning was this discussion around this digital vortex, which is causing a lot of disruption to a lot of companies. Not only big incumbents, but anyone who has older type of business models not embracing digital processes as much.
Speaker: So at Cisco, we knew that this was going to be key for us to make this transition. And our CEO, Chuck Robbins, made a very strategic hire when he was new into the role a couple of years ago by bringing a digital officer on to look at, hey, how do we reimagine the business within Cisco and delivering value to our customers? And B, just as important, how do we adjust our operating model to be more agile and flexible to support our customers, our partners, and our employees?
Speaker: And that's the journey we've been on. So once we got through this idea of, OK, there is a vortex happening. There is a lot of disruption. Now we have to innovate on our business models. We have to be more agile with our operating model. And when we deliver new products and services to our customers, we've got to have this concept of continuous innovation so that they see value throughout their lifecycle with us.
Speaker: Yeah, I want to spend a minute maybe talking about the digital vortex and specifically the research associated with it. The National Center for the Middle Market as a research organization, we're constantly looking at data about and for mid -sized companies. Can you tell us a little bit about that, what you've learned? You shared some interesting changes that have happened even in the two years that data has been collected. Just touch a little bit about that research.
Speaker: Yeah, we started about two years ago in partnership with IMD. It's a business school that focuses on executive education out in Switzerland. And together, we partnered up for this Global Center for Business Transformation, really focusing on digital processes. And we gathered up about 900 executives globally and really went into some in -depth research on like, hey,
Speaker: What is this thing called digitization? Is it just hype? What is really going on with there? Is it really causing a lot of issues? And a lot of the readbacks and the research revealed that it is happening, and it's actually happening much faster, which was validated by some of the research we did just recently to check back from 2015. In 2015, we found that
Speaker: 40 % of those surveyed said they were absolutely going to be facing major changes in their industry in the next few years. Some said it would happen in about five years, but almost all said that they would start feeling it within the next three. When we looked even further though and when we revalidated some of those stats in 2017, they actually said, it's happening much faster, it's happening now. I think the sobering
Speaker: stat though was that two years ago when we started the research, only about 25 % of the companies had an active plan in of how to address digital disruptors, new companies trying to take away their business.
Speaker: that has not actually moved that much. In the two years, it's now only a little bit less than a third, a little over 30%. So still, a lot of companies are still waiting on the sidelines, they're still trying to figure out what is their strategy going to do, because I think a lot of companies
Speaker: try to balance when do I really move off of my core business, which has been the bread and butter for me for many years, into these new types of offers, these new types of programs to attract new customers or keep competitors out. And it is a real tough decision to make that senior leadership at all types of companies have to think about.
Speaker: You mentioned the importance of these two twin imperatives, the business model innovation as well as the agile operating model. Can you tell us a little bit about what those two things share, maybe some of the implications, and maybe specifically what happens if you have one but not the other?
Speaker: That's a great question. When you think about business model innovation, it really is, what are the new ways that you are going to deliver value to your customers? We talk about the three forms of value, cost value, experience value, and now this new thing that's coming up more and more around platform value.
Speaker: And the real leaders in their industries are combining aspects of each to deliver that new type of experience. If you're just a cost leader and you lead because you have the cheapest product, that has scaling limits, that has a lot of inhibitors to you. Or if you're just an experienced provider, same thing. The organizations that are bringing all of those together
Speaker: are really driving that innovation to their customers and that is a huge uptick to their business, to their growth in order for them to remain competitive in the marketplace. However though, if you start to combine these type of value propositions and you're not
Speaker: innovating on your back end with how you process orders, how your supply chain works, how do you bring new products to market, who is your channel now, who is your route to market. If those aren't seriously thought through, you will hit choke points very fast and your operations will come to a crawl and everything will be manual and you'll be losing all the benefits that digital processes, you know, bring to your business. So it's a double -edged sword that has to be looked at at the same time and it's not a
Speaker: It's not an either or, it's a both, it's an and value prop.
Speaker: You also mentioned this concept of the disruptors versus the incumbents. Cisco being basically an incumbent in the digital space. At the center, we focus a lot of our attention, obviously, on mid -sized companies. We've seen examples of them being either of those. What can middle market companies do to prepare themselves if they're the incumbent? They may see something coming down the road. You mentioned a lot of companies in the Digital Vortex survey.
Speaker: being on the sidelines and not doing a whole lot to prepare, but as a mid -size business, maybe doesn't have the resources or scale as a large company, what do you think these companies could be doing to prepare themselves?
Speaker: That's a great question as well. If you consider yourself an incumbent, then you fundamentally have an advantage of you have customers. You have people that are consuming your products and services, which is a great place to be. Now, as long as you start to think differently, and at Cisco we do this every day, it's like, how do we become more innovative
Speaker: and more agile, which are typically two traits that the disruptors have, right? They're innovating quick, they're being agile in their business model, and they're willing to take some risks. And so incumbents don't necessarily have to go full bore on all three of those, but if they're mixing in aspects of new innovation, of agility, and they're willing to take some risks and some experimentation in their markets, they're setting themselves up for good success and a good way to build a solid practice, keep their customers, grow wallet share,
Speaker: and expand. A company can always get more revenue out from an existing customer than outgoing and trying to find net new. The ability to do that creates huge value and upside for incumbents.
Speaker: Let me just wrap up our discussion on a somewhat related question. What type of advice would you have for companies that are looking to prepare, approach, and start this journey towards digital transformation? What are the things they should be thinking about first? What are the first types of steps they should take? In general, what type of advice would you give?
Speaker: I think it does start with just taking a hard look in the mirror. Is your core business something that is in a growing market, a flat market, or is it in a declining market? And if it is there from there, you can then take your decision tree and go make those hard decisions. If it's in a growing market, then great. How do you keep it growing? What is the innovation? How is the channel going to play in? What are other ways that you're going to touch your customers?
Speaker: Those are questions you'll have to ask. Maybe it's in a declining market, but it's still a very profitable business for you. How do you gracefully continue to get that profitability out of that business unit, but knowing over time that's going to wind down and then move to something new? That is a real balancing act that the business development team, along with finance, along with product management, has to really think through as they take this journey.
Speaker: If you're not thinking through those, companies can easily find themselves, disrupt their market share, can then plummet, and then suddenly they have a declining business with no profit as well, and then that's an even worse story. So as long as they're always thinking, what's the next big thing to go after either in their growth engines or how do we wind down gracefully out of some of our maybe less growth engine businesses, I think they're in pretty good shape.
Speaker: Great. We really appreciate the time. I want to thank Jeremy for joining me today and for visiting Ohio for the event and being part of the podcast. We would invite anyone to subscribe to our podcast. You can find the Market That Moves America wherever podcasts are found. Subscribe, rate us, like us. For more general information, visit our website, middlemarketcenter .org, where you can get all types of research, benchmarking tools, data about middle market companies in the U .S. Thanks for joining us today.
Speaker: And thanks, Jeremy.
