Gary Daichendt: Connecting the World With Cisco

In December 2000, Gary Daichendt left San Jose-based Cisco Systems after six years. As executive vice president of Worldwide Operations, Daichendt was responsible for sales, distribution, manufacturing, and the global alliances of Cisco. He previously held the positions of senior vice president, Worldwide Operations and vice president intercontinental operations.

Before joining Cisco, Daichendt spent 10 years with IBM in various sales, marketing, and management positions. Subsequent to that, he spent eight years at Wang Laboratories as vice president for central Operations and vice president for worldwide marketing.

Daichendt received a B.A. degree in mathematics from Youngstown State University in Ohio and a M.S. degree in mathematics from Ohio State University.

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Ethix: Tell us about Cisco Systems.

Gary Daichendt: If you think of the Internet as the plumbing through which information flows — like water flows through physical plumbing — Cisco provides components and equipment that enable the Internet plumbing to work. We’re not into the application arena like SAP or Oracle.

Think of Cisco more on the systems level — hardware and software that physically moves the information. We don’t necessarily have to know what that information is. In that sense it’s an amoral view of what’s moving through the pipes. We’re just moving it through to its chosen destination.

Do you have any concern about how your infrastructure is being used?

Absolutely. I am concerned, for example, that so much pornography lives on the Internet. Cisco does develop tools that can help filter Internet content and we assist other companies that help screen that kind of stuff. It can’t be just a single effort.

There is also a growing “dot con” syndrome.

We must caution people that not everything they see on a web page is actually true. People could always be deceptive; now they can be deceptive at a much quicker pace. I do believe in a balance of privacy and freedom — allowing people free access to information but also trying to protect children, and trying to protect people from con artists. The best screening available is your own family structure, of course.

Let me give another example. Would a knowledgeable investor pour money into a company that openly stated it was not making a profit and didn’t anticipate a profit in the foreseeable future, that didn’t have a sustainable business model? Would you buy an ice cream shop from me if I told you that in 200 years you’d get your money back? You’ve got to scratch your head! Even for new economy advocates, the fundamentals of business are not dead.

Phil Johnson writes about the difference between reason and rationalization. Reason is when you follow the evidence and logic wherever it leads; rationalization is when you decide the conclusion in advance and then go build a case for it. Reason will show us that some of this stuff is a con, that some of these investments aren’t good, and that we should use some good screens at home to protect our family. It is not right to say that the whole world has changed and that none of the old stuff that we learned is true anymore, that one plus one doesn’t equal two anymore. We need to use our reason.

As Internet traffic increases, Cisco’s role has been increasing.

The world has woken up to the power of the Internet and has wanted to see what companies are behind it and fueling it, and certainly Cisco is one of the premier leaders along with others like Sun Microsystems and Oracle. People became very interested in these companies and they have received a lot of stock market attention. Cisco also is known as one of the most wired companies, using its own equipment and having some very leading edge applications. I coined the phrase “I-Operations” — Internet Enabled Operations — to describe our model. We are an operating model for a company on the Internet — capital “I” — by which I mean all internets, extranets, intranets and all forms of information — data, voice, and video — the whole communication span, inclusive of the World Wide Web.

The Cisco routing capability is built primarily on a server architecture. How do you see the move toward peer-to-peer and how does Cisco’s role change?

Our technology spans a whole lot in the plumbing and we already play strongly in peer-to-peer computing. Whether you look at server-based technology for hosting applications, or traditional peer-to-peer like much of the music business today, you still need to route and direct traffic from one place to another. Achieving that in the fastest, most efficient, effective, and secure way is what we do.

Whom do you see as your emerging competitors?

There are fifty or sixty competitors we watch in our arena right now. I believe that we are and will be the leader in our market. As markets mature I believe you end up with three to five key players. Remember how the automobile industry went from hundreds to less than a dozen manufacturers. We’re moving on Internet time here but the trend still applies. There are some good young companies like Juniper, Redback, and Etcetera and it will be interesting to see what permutations happen with them. Nortel has done a commendable job and must be taken seriously. Lucent is facing some challenges but if they make the right changes they certainly could be successful. So our competition is a combination of start-ups and some of the existing players. I expect some mergers. And you always look for the surprise in this fast paced market. Some of the more established and promising companies of three or four years ago have not stepped up to become key players.

In my view, we’re at the front end of the development of the Internet, not the back. What do you think it will be in ten years?

I also believe very strongly that we are at the front end. Every generation in history has believed that the technological revolution going on in their own time was the most profound thing that ever happened — and they were right. Their mistake was to think that their revolution was the most profound thing that ever could happen. Daniel Webster thought that the railroad was the most significant innovation in the history of mankind. When the automobile arrived at the turn of the twentieth century, many thought that that was the greatest innovation in history.

So it is with the Internet revolution today. But even in the midst of those earlier revolutions, a really reflective person could have seen the limits of the change. Just in terms of the technology, how many railroad tracks are you going to be able to lay down? Will they be side-by-side or stacked? How many directions can a train go on the railroad track at the same time? How many trains will the track accommodate? Same for the automobile.

I want to ask the same things about the Internet. How fast is too fast? What direction? You can take a single fiber and ask what is the restriction? The speed of light? Well, what color light? How many colors of light are there? (They’re infinite!). We can go on and on. I think what we grapple with today is that we can’t yet see the technological limitations.

And what about the applications? The railroad and automobile could be used for distribution of goods and services to the marketplace, for personal travel, and so on. But pretty soon you start to fill up your sheet of paper and you say I think I’ve about hit it. What are the limits of the applications of information technology? We don’t know yet.

Will this revolution slow down? Absolutely. But my belief is that it will slow down not because of technological limits or application limits, but for lack of skilled people. We’re going to run out of people. So we’re really at the beginning of the information age that gets “anytime/anywhere” communication to “anyone.” Where we will be in ten years is hard to imagine. I do believe data, voice, and video images will be moved around at the speed of light and we’ll have unprecedented access to information.
If you think of the Internet as the plumbing through which information flows – like water flows through physical plumbing – Cisco provides components and equipment that enable the Internet plumbing to work.
The consequences of this revolution are significant. Information overload is something we already face. Organizational structures of companies are changing. Today, instead of staying on your level in the corporate hierarchy (like the IBM in which I came up in the 1970s), everybody sends everyone e-mails and voice mails. We no longer believe that technology will increase our productivity so that we will all go to four-day work weeks. Today people work longer hours than ever! When asked how many hours we work per week we really don’t know anymore. We check voice mail and e-mail on weekends. People feel free to call us any time. A few years ago, if you went on an international trip it was like you were on Mars; nobody expected you to call. Today you will be beeped or paged no matter when or where you are.

I believe the rapid pace of the growth of the use of technology will continue at least through 2001 and the curtailing factor that will start to slow things down eventually, will be not having enough skilled people. But I don’t know when that will be. By the way, I am talking about growth in the use of technology, not growth in stock market valuations or economic growth.

Are you speaking now only of the so-called “developed” world? How does this internet/information revolution look to Cisco in a global perspective? Is it one world or is it divided into technological “haves” and “have-nots”?

I think that what we grapple with today is that we can’t yet see the technological limitations.
There are some divisions. For example the majority of web sites are in the English language. The Internet was born in the United States and we are ahead in the use of this
technology. But one prediction I will make is that in the next decade the rest of the world will catch up. It is not always a disadvantage in technology to be two generations behind because you can leapfrog two generations. Thus India could immediately go to a packet voice system without continuing to proliferate circuit. Circuit may be getting cheaper each year and we have the capacity for more phone connections. But without a legacy investment in circuit they may have an opportunity to skip forward.

The challenge is to get skill sets inside these countries around the world. I believe those who want to view this with ethics and integrity should feel a corporate moral responsibility to help educate people. And we should also feel a corporate and moral responsibility to keep the people indigenous to their own countries. We should not educate people and then bring them to Silicon Valley. That doesn’t help their home country.

But we can spread this knowledge. The technology is universal. When I first did international assignments I thought we would have to translate our instruction manuals into Hindi or Chinese. But although that’s a great goal, much of the technology is acronyms and symbols. Technicians around the world learn this language. So I believe that others around the world will leap frog forward. Those in the United States should not rest on their laurels. Just because we’re ahead today doesn’t mean we’ll be ahead tomorrow.

One argument for reaching out globally with education and technology is that these are potential future markets. But is there also a moral argument that doesn’t depend on a bottom line market justification?

I support the market argument because for-profit institutions tend to put out high quality products or else they go out of business. But, secondly, there seems to be a growing consciousness in corporate America today of a responsibility to others. I would like that to be a heartfelt sense of responsibility as a human being — that the skills and resources we’ve been given carry an obligation to help those who are less fortunate. When an organization (or a people) starts to lose its sense of responsibility for the well being of those who can’t help themselves, it is one of the warning signs that that entity is on the decline. When you are making the right judgments on a moral basis and helping out others, the economic reward falls right in place. I believe this very strongly.
In the next decade the rest of the world will catch up. It is not always a disadvantage in technology to be two generations behind because you can leapfrog two generations.
Let’s face it: a lot of companies “do good” because it’s cheap advertising. I’d rather we were motivated by heartfelt gratitude and care but I still say it’s ok, just so the work gets done. We can’t say that every company doing charitable or educational work must be composed of really great people. We have to look at their motivation. But I am someone who wants to see it done even if it is viewed primarily as good advertising and good business. We must remember also that business has an ethical responsibility to stockholders. It is not a charity. The stockholders who own the company made an equity investment for a return. To take the proceeds and go feed the people of India may bring tears to a lot of eyes, but the stockholders would be justified in demanding, “how dare you do that?”

As chief of worldwide operations at Cisco, do these values take a specific institutional or programmatic shape around the world?

What I am most proud of are our Network Academies. Cisco develops and manages the Network Academy curriculum, trains the teachers, and then gives the program to a school system, ranging from junior high school to junior college level. This program has been very successful in all fifty states and in almost eighty countries around the world. The Network Academies address one of the greatest shortages: educated workers. I don’t want to minimize the need to feed and clothe people, or build infrastructure for public health systems. Those certainly are needs prior to communication systems, computers and the Internet. But if we can meet those basic needs, education is a fundamental requirement to move ahead. Once the people are educated the equipment will follow. Success begets success.

I also encourage our employees not just to come up with great ideas on how Cisco can give of its financial resources to help the world but to step forward personally and ask “how can I give of my skills and resources to help the world?” Often if I believe a cause is really worthy, I’ll donate to it myself rather than ask Cisco. And I often give anonymously because I don’t want anyone to think they should give me business just because I gave them financial support. To me the most heartfelt gifts are the ones you get and have no idea where they came from. That’s what I would encourage.

Isn’t it sometimes valuable to do things publicly to set a good example?

Of course, but you have to watch the internal presentation. If someone says “look at the wonderful thing we’re doing here — and how much money we’re saving on advertising!” and “look at the good press we’re getting — I’m going to be on a magazine cover shaking hands with…” Employees see and hear that. It is a terrible example. Why should they give another five hours after working 90 hours a week if you’re only doing it because of the payoff!

I think the greatest example of a corporation standing forward would if billions of dollars were given to some big telethon or campaign by seven of the Fortune Ten — but they were all anonymous so we don’t know which seven of the ten gave. That would be an example — not seeking advertising, not seeking publicity, but taking a responsibility seriously in corporate America.

David Bunnell’s Making the Cisco Connection comments that high-tech workers do not often serve as volunteers in community, school, or church organizations because of the hours required by their jobs. Is there a responsibility in this area?

I would never hold up Cisco as the paragon, standing above all other companies in the world. The larger we grow, the more we’re a microcosm of the world. So we have a lot of wonderful people who work long hours and still give back to their church, their family, their community. We have others, just like any company, who do not.

What a company can do is promote its set of values. Ours are leadership, integrity, teamwork, and trust. I’m very proud of that statement of values. It’s also very scary because once you publicize it, you can be held accountable for it. We cannot guarantee that five years from now we will all represent those values as well as we should. But it’s there today and anyone can call on it and challenge employees and company to represent and reflect it.

The Internet enables people to play games at work. At the same time it enables people to work at home. Have you thought about policy related to this boundary blurring between home and work?

Here at Cisco we are all very busy and when people are so busy they tend to police themselves. If somebody comes in and takes advantage of the company, they are likely to end up turning themselves in and saying, “I can’t do this anymore.” On the other side, I do worry that some people will become workaholics. When I hire people I tell them that there will be spurts when you’re going to have to give me seven days a week for a couple of weeks — but if that becomes your pattern something is wrong. I’ve either given you the wrong responsibility or you are inept at managing your time. There is absolutely no way I expect you to do that all the time.

I believe very strongly that if you’re doing the right things in your home and you’re balanced you’re going to be productive here. I have yet to see a human being that can put in ninety productive hours in a week. At the end of a long day it may take you forty minutes to write one more letter to a client before you go home — but the next morning it takes two minutes. God didn’t intend for us to work these hours and I’m not going to be party to somebody becoming a workaholic; when somebody tells me that I don’t reward it.

Cisco handles acquisitions in an impressive way, seeking to create win-win situations — not just taking the assets but taking care of the people.

We try hard to avoid any arrogance on the part of Cisco. These companies cost hundreds of millions of dollars. This means these companies have something we don’t have, some valuable intellectual capital in their people. All Cisco employees must respect that fact. We don’t ever say “Welcome to our great train! You’re just a small car, very fortunate to be here.”

How degrading! People would cash in their options and get out quickly. Just because we’re big and successful doesn’t mean we have a corner on intellectual property at Cisco. Many brilliant people are working outside of Cisco. We try to make people aware that we sincerely need them. We’ve got a lot in our system to acclimate them quickly. We don’t want anybody, not a single person, to leave.
There seems to be a growing consciousness in corporate America today of a responsibility to others. I would like that to be a heartfelt sense of responsibility as a human being – that the skills and resources we’ve been given carry an obligation to help those who are less fortunate.
Of course, it must be clear that they were purchased and are now part of Cisco. We expect the same amount of respect that we give. There’s a lot of due diligence done up front to be sure that the chemistry of the new organization will adapt to our environment. No matter how good their technology is, we don’t want them if our culture is going to suffer.

Is Cisco able to operate and treat people this way only because it is in a growth market? Would your approach be impossible in a more traditional merger and acquisition market?

In only a small number of acquisitions have we had to lay off workers. In these circumstances, I believe in treating the people with dignity and explaining that you have duplicate functionality here, that it’s one of the harsh realities of business and you’re sorry about it. You communicate immediately and personally and do what you can to take care of them as well as being fair to your stockholders.

What is wrong is to drag it out. You need to do it right away or set a deadline, say in thirty days. Invite people to ask questions. Have employee round tables. One of the worst things a company can do is announce a layoff of fifteen thousand people over the next eighteen months! This scares the daylights out of sixty thousand employees.
I encourage our employees not just to come up with great ideas on how Cisco can give of its financial resources to help the world but to step forward personally and ask “how can I give of my skills and resources to help the world?”

Bill Hewlett and David Packard crafted something called the HP Way as a distillation of their mission and values. How do you ensure that your acquisitions get on board the “Cisco Way”?

Values have to be reflected in the leaders. People watch you walk your talk. No matter what people may hear, eventually they want to know if we are doing what we say. I worked for a fellow once who would come up with platitudes like “the customer is always right.” But the customer is not always right. The right thing to say and do is “put the customer first.”

Another platitude says, “give the customer what they want.” But taken by itself, this would put us out of business. Instead, “treat the customer fairly, as you’d want to be treated.” Deliver the value that you commit to for the price. If you enter a contract and later find out that the letter of the law allows you to do something that is not in the spirit of what you agreed, don’t take advantage. That’s when you live it and employees see that.

There is a difference between heroes versus superstars and celebrities. Heroes are defined by inner values and integrity. Henry Kissinger discusses this in his memoirs. I believe that integrity counts the most when it costs the most. Too many people only have convenient integrity. When I get into a really tough situation where I have to make a call or do something that’s dramatic and the world may not understand, that’s the time that it really counts.

The culture is built and sustained by interpersonal relationships and by watching leaders and colleagues. But eighteen thousand employees can’t all be watching you directly.

I believe that integrity counts the most when it costs the most. Too many people only have convenient integrity.
Yes, but anybody can leave me a voice mail seven days a week, twenty four hours a day and unless it’s an outside broker they get an answer. I get several hundred e-mails every day and we try to get them all answered. If an issue is raised by an employee we look into it — not always me personally but trusted people that I know. I give a lot of speeches throughout the company and every time I can I greet our new employees. Every month we bring them in here and I tell them to remember two things. First, I expect you to focus on the client’s success and, second, I expect you to operate with integrity. I don’t tell you to win every single bid — but if you follow these two principles you will not lose very many.