The Cisco Kid offers an insider

Computerworld’s James Cope recently spoke with John Chambers, the president and CEO of internetworking superstar Cisco Systems Inc. in San Jose, Calif. about how his company works, touching on topics as varied as the need for speed, employee empowerment and Bobby Knight. Here are some excerpts from that conversation.

Cope: You frequently point to speed as a key success factor for companies competing in an information economy. Why is that?

Chambers: It’s really very simple: The faster a business can go to market with a product or service after recognition of an opportunity, the greater its chances of gaining meaningful market share and pulling away from the pack. We could do 10 acquisitions a month if we had to. Then, of course, we have the virtual close [of our financial books].

Cope: Exactly what do you mean by “virtual close”?

Chambers: You can capture within eight hours … exact earnings per share, revenues, expenses, margins by every single product, by every single function across the company. So you know where you are at any point in time. What it allows you to do then is to react – to address issues when you still have time to do it.

Cope: Can you elaborate on how the virtual close works? Can other companies do the same thing?

Chambers: Yes, but the leaders of the business have to believe it’s worth the investment to implement. And then you go with common data architecture and data applications designed to lead up to getting the virtual close. You have to tie together your e-commerce capability with customer support, with your head count, with your virtual manufacturing. All that together adds into the virtual close.

But the real power of the virtual close that people miss on their first cut is this: it isn’t just for preventing surprises for the CEO and CFO. That’s what gets the headlines. The real power is, once you have the data in an appropriate format, you empower decision-making as far down in your corporation as you want to – decisions that used to have to come to the CEO or CFO. But empowerment only works when you have a mission and goals – you know where you’re going. Otherwise, you get chaos.

Cope: You received an MBA from Indiana University, and when we were chatting informally earlier you mentioned its former basketball coach Bobby Knight. What can business leaders learn from Knight’s demise?

Chambers: You have to decide what kind of culture you want for your leaders. When the leaders get outside the culture, I think you have to step up to the issues. The question is, how do you lead very talented but challenging people? Once you let them get outside the box too far, it’s very difficult to bring them back in. That’s one of the important things to learn as a leader.

Cope: What do you like most and least about your job?

Chambers: What excites me is interfacing with the customers and potentially changing the way the world works, lives, learns and plays. The toughest thing to do as a leader is to make the management changes that need to be made. If you ever have to lay off anybody, that’s even harder. I had to … lay off 5,000 people when I worked at Wang. It about killed me.