At the North America International Auto Show in Detroit
this week, the desperation of U.S.
automakers is palpable. While they roll out hybrid cars, electric concept
vehicles and plans for more efficient products over the next two years, the
inescapable truth is that the Big 3—General Motors, Ford and Chrysler—are
playing catch-up to their foreign rivals and trying to shake off their own
insolence.
The American auto industry has been in steady decline since the 1970s, when
the two OPEC oil embargoes and poor-quality products turned consumer appetites
to smaller, more efficient foreign vehicles. The Big 3’s one bright spot over
the last 30 years came with cheap gas that fueled margin-rich SUVs and light
trucks. In the 1990s, General Motors, Ford and Chrysler even posted profits and
market share gains. During those good times, the Big 3 poured their resources
into more of the same products while their foreign rivals invested in high gas
mileage hybrids and conventional vehicles. It’s a mistake that may cost the U.S.
car companies their very existence.
Cisco Systems CEO John Chambers was faced
with a similar, albeit less dire situation during the last recession when the
dot-com bubble burst. While Cisco didn’t have the overhead cost burdens or the
poor quality problems of the carmakers, it was caught suddenly by the double
whammy of a market collapsing and boxed-in product line.
Unlike GM, Ford and Chrysler, Chamber and Cisco learned when the company got
back on solid financial footing not to take its fortunes for granted. Rather
than doubling down on its core networking companies, it invested in innovation
and breaking out of its Layer 2 and 3 past. Chamber said it best at Cisco’s
2006 partner conference in San Diego:
“The time to change isn’t when times are bad, but when times are good.”
That change came in the form of the Emerging Technology Group, a division
that is part R&D skunkworks and part venture capital incubator. The idea of
this group is to take good ideas that build upon other Cisco technologies and
develop them into billion-dollar businesses.
“What you’ll see come out of the Emerging Technology Group is Cisco’s
innovation engine,” says Steve Benvenuto, the director of sales business development
and worldwide channels for the Emerging Technology Group.
The most visible product coming out of Emerging Technology Group is Cisco’s
groundbreaking telepresence product line. Initially, the high-definition,
point-to-point videoconferencing is revolutionizing the entire concept of the
telecommuting and videoconferencing. Chambers, who has a unit in his home,
promises to bring the expensive technology to the small-business and home
markets within the next 18 months.
Cisco’s push into digital media and physical security technologies is being
born out of the Emerging Technology Group. “Emerging Technology is going to be
the engine for new and innovative technology to leverage the network as a
platform, but it’s not the only place we’re going to innovative,” Benvenuto
says.
Physical security may seem an odd place for Cisco, but not if you subscribe
to the long-standing Cisco position that the network is the platform for all
things in the user’s business. By developing, integrating with and acquiring physical
security technologies that run over IP networks, Cisco is quickly becoming a
leader in converged security technologies and opening new opportunities for
solution providers.
The same holds true for digital signage and desktop video, which the Emerging
Technology Group is gambling will be the next frontier and billion-dollar
business. The explosion of video as an Internet media continues to capture the
imagination. If Cisco is able to integrate desktop video with optimized
networks and its unified communications products, it could have a powerful set
of offerings that are unmatched in the marketplace.
“A lot of these opportunities are coming out of the Emerging Technology Group
that Cisco wasn’t even talking about three years, and it’s happening on top of
the network that has to continue to evolve,” Benvenuto says.
For Cisco partners, the Emerging Technology Group is perhaps a compass for
future opportunities. Already, Cisco is recruiting physical security providers
and matching them up with logical security partners to attack opportunities in
the convergence space. And Cisco is helping to train and equip solution
providers with the tools to take advantage of the new products it is producing.
“We need to give partners an opportunity to build out an entire practice
where I can do everything from end to end,” Benvenuto says.
What Cisco has essentially created is a bridge to its future. Similar to automakers
such as Toyota and Honda that continue
to innovate new, eco-friendly vehicle technologies that are funded by the
successes of their earlier innovations, Cisco will use the Emerging Technology
Group as a means for keeping Cisco nimble and evolving. The recession may
dampen Cisco’s momentum, but the Emerging Technology Group will likely keep
Cisco and its partners from falling into the same state of decline as the U.S.
car companies.
GM and its ilk could learn a lesson or two from the Emerging Technology
Group, if it’s not too late.
Lawrence M. Walsh is
vice president and group publisher of Channel
Insider.
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