Chapter 43 Section 2 Sustained Development Tricks

After Cisco went public, the two founders immediately became billionaires.Cisco's stock price today is 500 times higher than when it was listed.Its early employees, as long as they don’t take too many risks in financial management, such as buying a lot of Internet junk stocks (called Internet concept stocks at the time) during the Internet bubble era, they also became multi-millionaires or millionaires.Many of these people will choose to leave the company to start a business or simply retire after they become rich.In fact, the two founders of Cisco have chosen this path themselves and left the company.

Early employees of a successful company are invaluable assets.They are generally very adventurous people, otherwise they would not choose to join a new start-up or even a small company that has not yet invested. Their technology and ability are very strong, and each person can often stand alone, because early companies require employees. All must be capable.They are also very sensitive to new technologies, otherwise they would not have picked the successful ones among the many emerging companies.However, they also have their weaknesses.Although they are good at pioneering, they are not good at or unwilling to be conservative, and the latter is crucial to the development of a large company.They do things quickly, but they are not precise enough, because when the company is small, time is more important than anything else.Therefore, when the company develops to a certain stage, they will conflict with the new management-the new executives will feel that they are difficult to manage.This is like those who fight the country may not be able to govern the country.These employees are likely to go out and start their own companies.And even if these early employees who stay in the company are already rich, the original motivation will be greatly reduced.Therefore, how to retain early employees and mobilize their enthusiasm has become a difficult problem for every listed technology company.

In addition, when a company grows to a certain extent, it is not easy to reflect the contribution of each person. The phenomenon of "big pot rice" is almost a common problem all over the world.Although some employees have very good ideas, they don't bother to push it forward, because they spend several times more time and energy and can get a few percent more bonus at most.Occasionally one or two people come out and try to push it, but they will find that there is a lot of resistance in a large company.Therefore, once some employees have a good idea, they would rather start their own business than contribute to their own company.These two problems are common in Silicon Valley, and Cisco is the company that solves them best.

Cisco's approach is very similar to how the kings of Spain and Portugal treated explorers in the Age of Discovery.At that time, many navigators including Columbus and Magellan received royal patronage.Many of these adventurers are desperadoes, and the purpose of their voyages is not to be famous in history, but for real benefits.They reached an agreement with the royal family that once they discover new islands and land, they will declare these lands to be owned by the king in the name of the Spanish or Portuguese royal family. At the same time, the king will make these discoverers governors of that island or land and grant them tax collection power.In this way, the territories of the kingdoms of Spain and Portugal were enlarged.Cisco's specific approach is that if someone in the company is willing to start their own business, and the company thinks what they are doing is a good thing, let them stay in the company to start a business instead of going outside, and Cisco will be an investor instead of an investor. Managers to treat these entrepreneurial people.Once these small companies succeed, Cisco has the priority to buy them back, and Cisco's territory will be expanded.And the founders and employees of these independent small companies can get high returns.In this way, people who originally wanted to leave Cisco to start a business don't have to worry about it, and then go to their own class, but change to a company above the name.Of course, if these small companies fail to manage and close their doors, Cisco will have no additional burden except for losing some venture capital money.This approach not only mobilizes the enthusiasm of various employees, especially the early employees, but also prevents these employees from becoming their own opponents or joining the opponent's camp in the future.

Cisco itself announced more than 100 acquisitions since 1993, which did not include many small acquisitions.Take Cisco's $7 billion acquisition of Cerent in 1999 as an example.The latter itself was founded by former Cisco vice president Bhadare, a company engaged in the manufacture of data transmission equipment on the Internet, and received an investment of 13 million US dollars from Cisco in the early stage. Cerent's technology and products are clearly what Cisco wants.In fact, these small companies spun off from Cisco are more likely to be acquired by Cisco than other start-up companies.Because, on the one hand, these founders know what technologies and products Cisco wants best, and they also know Cisco's own products best so that they can be tailored for Cisco.On the other hand, they are easy to get the support of venture capital, because venture capital firms can see clearly where the companies they invest in will go out in the future—sell back to Cisco.Therefore, some people in Silicon Valley who want to make a fortune through the listing and acquisition of emerging companies, when they are not sure which company will make a fortune, the simple way is to join those Cisco people, especially the small companies opened by Cisco executives and technical backbones.This trick was quite effective in the first few years of the millennium. Of course, these trendsetters have to be seen by other companies.

At Cisco, people often meet their colleagues who are "second in the palace" or even "three in the palace".Because an employee transferred to a small company supported by Cisco, he was temporarily not considered a Cisco employee in terms of name, but as Cisco acquired that small company back, this employee "joined" Cisco again.This employee went out for a few years and returned to his original position, but he became rich. By doing this, Cisco essentially has a monopoly on technology for Internet routers and other essential devices.Because once there is a newer and better technology, Cisco can always have money to buy it back.If Microsoft directly monopolizes the market nakedly, then Cisco indirectly monopolizes the Internet equipment market through technology.In the general impression, the profits of hardware manufacturers will not be too high, but Cisco's gross profit is as high as 65%.Not only ranks second among large companies in the entire IT field, second only to 80% of Microsoft, but also far higher than the highly profitable oil industry (35%) that most people imagine.This kind of high profit can only be achieved by companies in a monopoly position.

You may ask, since Cisco's approach has proven effective, why can't other companies learn from it.Of course, this is because not all company leaders have the vision and vision of Cisco CEO John Chambers, and more importantly, Cisco's genes.Cisco's own creation is the use of the two founders' job inventions.Although Stanford University wanted to monopolize the invention of the "multi-protocol router" at the time, it finally shared this technology with two inventors very enlightenedly.Of course, after Cisco went public, Bosack and Lerner donated a lot of money to Stanford. In addition, Stanford also owns a lot of Cisco stock, so Stanford, Bosack and Lerner achieved a win-win situation through Cisco.This is why Cisco can tolerate employees using their own job inventions to start a company.In addition, the inventions of Cisco employees are generally difficult to become a product alone, but must be applied to existing network communication systems or equipment, so their best way out is to sell them to Cisco.Therefore, Cisco is not afraid that these small companies will turn against the sky in the future.

Tolstoy said that happy families are all alike, but unhappy families are unhappy in their own way.In the information industry, this sentence should be reversed. Successful companies have their own unique skills, but failed companies have a lot in common.Cisco's successful approach cannot be copied by ordinary companies.