John Chambers Expects Crisis to Persist Through December

The inaugural online roundtable hosted by Techonomy Media last Friday featured longtime Cisco CEO John Chambers, who now spends much of his time advising 18 startups in which he has invested. He tried to remain his normal upbeat self, but it was tough.

Speaking of the country and American businesses, he said, “if we really work together, we can not only win, but in a shorter time period than most anticipate – possibly three or four quarters.” Pressed on when we’d emerge at the earliest, given that his “optimistic” appraisal was three quarters, Chambers replied “late fall, the December time frame.”

Many of the 100+ viewers of the Zoom digital roundtable no doubt gulped. I know, as moderator, that I did.

In an excellent recap piece on Medium, tech analyst (and sometimesTechonomy contributor) Roger Kay shared his reaction: “for me, an important takeaway is that most Americans still have yet to grasp how fundamental the change we are about to undergo is.”

Chambers emphasized a variety of lessons he learned over more than three decades helming Cisco through four major crises: the 1987 stock market crash; the Asian financial crisis of 1997; the bursting of the dotcom bubble in 2001; and the 2008 global financial crisis.

On this crisis, here is his advice for leaders and CEOs: “Normally I’m a believer in moving right now. However, I think we’re going to know a lot more in 30-45 days – do we flatten that curve? [He was referring to the societal rate of COVID-19 infections.] Then you’ll get a lot more predictability of what the economy will look like later in the summer. So make this decision 30-45 days from now. But think about what you’re going to look like on the other side.”

Chambers offered a variety hard-earned lessons gleaned from past crises:

“Do it decisively. Those that move a step at a time will exhaust their employees and shareholders and others.”
“Don’t hide. Leaders have to be visible. You have to be very transparent.”
“Be realistic. How many of the issues you’re currently facing were self-inflicted?…Use this opportunity to reinvent yourself, if appropriate.”
“Hope for the best but plan for the worst. These crises tend to be deeper and longer than you think.”
“Deal with the world as it is. Don’t focus on the symptoms, but the underlying issues.”

“In my previous companies we used downturns to break away,” Chambers said, but noted that it was never easy. During the Asian financial crisis, Cisco doubled down on the region while other companies were bolting. “We powered through the downturn and a year later we were number one in every category and never gave it up.”

But in 2001 Cisco and Chambers’ situation was quite different. “I kept doing the right thing for too long,” he confessed at the roundtable. “My numbers had never lied to me…We’d never, during 20 years, ever, missed our earnings projection.” Cisco was growing at a 70% rate and was the world’s most valuable company. But when earnings unexpectedly dropped 30% in the first quarter of 2001, “I’d never seen it coming.”

During that episode, the stock dropped more than 80% and Chambers reputation plummeted. While some had been calling him the world’s best CEO, analysts began saying he should be replaced. But then he acted decisively. Cisco laid off 7,000 people. “We made all the changes in 51 days,” Chambers explained, “and on day 52 we began gaining market share.” His competitors, he says, failed to move as quickly.

But Chambers warns CEOs: “It was the loneliest year of my life.”

Startups, the sector of business which Chambers spends much of his time on now, have both opportunities and genuine challenges, he said. Those that can help bigger companies save money will thrive and may gain significant market share. Those that are just selling “cool technology” that might not pan out until 2-3 years from now will be more likely to struggle. But for companies that are “very early stage with unique products for digitization, it’s likely…you’ll be fine.”

“Long term, it may be the big companies that have the worst challenges,” Chambers said. While he thinks they may be more insulated in the short term since many have lots of cash, “10 years from now, many…won’t exist. And this will dramatically accelerate that.” Grim stuff, indeed.

Sadly, Chambers is not optimistic about corporate social responsibility programs. “I think in the short term [they] will get hit. I think it’s wrong.” But he expects only a few of the best companies have a culture that can keep such efforts alive.

As for this crisis, “We aren’t even in the first inning,” he warns. “We’ve…just had a few pitches…GDP growth will be a number neither you nor I, David, have seen in our lifetimes – negative.”

He added this sobering thought: “It’s probably the biggest challenge we’ve ever seen as a country.”

Techonomy drew on its live audience during the roundtable to conduct two polls. Here are the results: