John Chambers on navigating times of economic uncertainty, McKinsey

As CEO of Cisco Systems from 1995 to 2015, John Chambers transformed the technology company into one of the great internet-era success stories, growing annual sales from $1.2 billion to $47 billion. In 2018, Chambers founded JC2 Ventures, which invests in a wide range of start-ups. Besides advising the leaders of his start-ups, Chambers has also partnered with government officials around the globe, working to accelerate efforts that broadly extend the benefits of a digital economy. Chambers recently sat down with McKinsey senior partner and chief marketing officer Tracy Francis and executive editor Rick Tetzeli to discuss the challenges of spurring growth amid economic uncertainty. An edited version of the conversation follows.

Rick Tetzeli: Early last year, you said that 2022 would be a really unpredictable year, and it certainly turned out to be that. Is unpredictability the norm now?

John Chambers: I don’t think so. The speed of change is the new norm, and I think the speed of change with agility is very important.

I hope I’m wrong, but my prediction for 2023 is that we’re coming in for a bumpy landing. We’re going to go into an economic slowdown, which is something that people were in denial mode about as recently as three months ago. So companies have to prepare for a bumpy landing, do scenario planning, and be prepared to act with agility.

“We’re going to go into an economic slowdown…. So companies have to prepare for a bumpy landing, do scenario planning, and be prepared to act with agility.”

Uncertainty is a factor, but the real challenge is more that we’re dealing with such a high number of variables and that changes are occurring at faster speeds across all those variables. That’s why, to me, agility is the key. You’ve just got to be more agile than ever.

Tracy Francis: John, I want to build on this point. You have written a lot about reinvention and how important that is as a skill for leaders. How do you think about reinvention in a context that’s also extremely uncertain?

John Chambers: I love it. That might sound surprising but breaking away during good times is very hard—you struggle for two or three points of market share, and it often costs you a lot. Breaking away during the tough times is when the next generation of great companies gets formed. If you were to go back and look at Facebook or Google or Cisco or many other great companies, you’ll find that they often broke away during periods when it was tougher.

My start-ups are doing strategic alignment at a very rapid rate. They’re positioning themselves for the future. The opportunities for innovation are coming at a dramatically faster speed than before. So I’m being very aggressive with my start-ups, but with a lot of financial conservatism built in.

Rick Tetzeli: Tell me about that conservatism. Are you talking about scenario planning?

John Chambers: I am. It’s almost a new skill set after 12 years of the greatest economic growth people have ever seen. We were in a growth market. You had to really struggle not to be growing rapidly.

So, very few people developed the skills for this agility I talked about, because they haven’t managed through it. Most of the companies that I know, including big ones and smaller ones, made this classic mistake.

There’s a playbook for dealing with an economic downtrend. You have to ask yourself how much is self-inflicted? How much is due to the market? Then you have to quickly bring your cash flow and your head count in line with the new reality. And then you ask, “What plays are we going to run through this transition, and how will these position us for the future?” If you were investing in too many things before, shrink back down where you are. Paint your North Star. Make one big bet. And communicate to all your groups on a regular basis, at least every other week for the first couple of months of the downturn.

Yet most every enterprise was way too slow in bringing their expenses back in line. And now, candidly, they’re in a tough spot.

Tracy Francis: John, how are you and your start-up companies navigating geopolitics? How are you thinking about that changing environment?

John Chambers: One of the nice things about not being a CEO of a public company is that I can be very candid. Company leaders have to be very careful. You can’t mix your politics with your technology and your company’s future. You can get your company, and even the industry, into trouble. My rule was always, “Republicans or Democrats, I love ’em both.” You have to be very careful not to play politics, and to understand the political implications of the decisions you might make. Several of my prior peers are on thin ice with some of the positions they’re taking.

Today’s geopolitical instability will accelerate deglobalization in technology, which could create inflationary pressure. When you can’t have the kind of open architectures we have now, you create more expense. It’s not necessarily good for the industry or for smaller countries, but I think that’s what’s coming.

Rick Tetzeli: Tell me about your work in France and in India. You’ve played key roles advising both countries on technology.

John Chambers: When I was at Cisco, I believed that every company would become a digital company. And I think that every country will become fully digital as well.

In France, President Emmanuel Macron asked me to play the role of his global ambassador of French tech. We outlined a digital France, working with start-ups, changing the education curriculum, and reducing the friction of doing business. And France went from being one of the worst places in Europe to do business as a start-up to the best. It took them five years. People who think that this kind of shift can only occur over decades don’t understand the speed of change when it comes to technology.

When [Indian prime minister] Narendra Modi got elected, I was asked to be the chairman of the US–India Strategic Partnership Forum, and I almost turned it down. But then I thought, “Wait a minute. I believe in India. Six hundred thousand engineers a year. A democracy. Average age at that time was 24 or 25. If this guy is as good as I think he is, [turning down this role would be] a huge mistake.” So we ended up becoming very good friends. And [as chairman] I have helped on his 11-phase plan on a digital India—digital manufacturing, smart cities, start-up community, education, the environment, electrification, inclusive of all 28 states and eight territories. I help work on bringing this together architecturally, on making sure all the pieces play together.

I’m also working on something similar in West Virginia. We’re changing the whole state, changing the education system, the universities, Democrats and Republicans working together, projects worth billions of dollars coming into the state, 35 start-up ventures at the university level—the speed of economic transformation has been dramatic. It’s all about what technology can do as far as changing society, changing average income, accelerating inclusiveness. That’s what excites me most at this point.

It’s all about what technology can do as far as changing society, changing average income, accelerating inclusiveness. That’s what excites me most at this point.

Tracy Francis: That’s really exciting, John. Talk to us about your personal learning agenda. What do you do to stay fresh?

John Chambers: You either reinvent yourself or you get left behind. That’s true of individuals, states, and countries. There’s no entitlement in this new world that the internet has enabled.

I’m on a constant learning cycle. Working with the start-ups is like playing 20 chess games that seem independent but actually overlap in interesting ways. That’s how I constantly learn. You learn from others. You don’t learn when you talk.

CT Bureau