Case study on Cisco 2 and Cisco 3

Key issues

Cisco 2 lacked communication across the three divisions in its structure, and this lead to lack of the necessary corporation and awareness. They could not find a shared solution or even avoid repetition. This made them take long to introduce a new product. When Chambers and the managing team reviewed the structure (three-divisional structure), they detected serious work overlap across the product groups. For example, they found out that engineering groups in the three divisions were all working on similar products without knowing it. There was a lot of resource wastage. This is due to the fact that each division was completely independent and so, each had its own vendors and suppliers. There was also duplication of employees who worked on the same projects.

Actions taken

            Cisco decided to move towards a functional structure to address the necessity for efficient use of resources. They did this to be able to create new products and for geographic expansion also. They were able to streamline operations and lower the operations costs.

            Cisco was a reorganized to Cisco 2 in the years between 2001 and 2006. The new structure had reduced the employees by 8000. Vendors were reduced from 1,500 to 200. Suppliers were reduced to 95 from 600. These changes lead to a reduction in the operation costs as well as the overlaps. The company’s major functions of sales, engineering and accounting from the three separate divisions were combined into single groups,centralized, and were to be reporting to the headquarters. Engineering staff was made into 11 functional groups which reflected on the core technologies in which they worked. This reduced the overlaps and increased efficiency. This structure allowed more vertical control in each function. Top level managers could set goals, achieve them and receive the performance bonuses.

Evolution into Cisco 3

Cisco 3 came as a result of expanded globalization and product lines and horizontal movement collaboration. The structure added 12 business councils. Each council was made up of about 14 executive VPs and senior VPs. This was to enhance horizontal coordination across the functions. Since the councils had representatives from each function, they were able to work in the policy level to select and coordinate programmes and products to meet their customer needs,

            Under the business council, 47 boards were created, which consisted of the vice presidents, who implement the new product decisions from the council, from across the functions. Beneath the VP level, temporary “working groups”, composed of 10 people each, were formed to execute the implementation details.

Environment analysis

            The new structure, matrix-type, was viewed as a better way to address a complex environment. Cisco environment was uncertain with rapid changes that required coordination, internal teamwork, information sharing and innovation. The evolutions came with difficult cultural adjustments. Executives stopped concentrating on their own departments but rather cooperated with the others in order to find solutions for their customers’ needs.

            The structure continued to evolve, losing the key managers who were unable to transit to the collaborative new structure. By 2011, Cisco was made up of three business councils and 15 boards. This made Cisco more successful since decisions on the new products were easily made collaboratively.

This structural change was international and covered America, Europe, Asia/Pacific, Africa and even in the Middle East.