May 31, 2006
John Chambers

Ipek Cem recently traveled to the Silicon Valley to meet John Chambers, one of the leading figures in the technology field today. Chambers not only keeps Cisco growing and on the cutting edge, but has also been a close advisor on trade and technology issues to both Presidents Clinton and Bush. Education is another global cause that is very dear to Chambers' heart. Tune in to get a flavor of how innovation changes our lives today and tomorrow.

Ipek Cem: Our guest today is John Chambers who is the President and CEO of Cisco Systems. Welcome to the show.

 

John Chambers: It's an honour to be here, and if you'd call me John, I'd be honoured as well.

 

Ipek Cem: OK. John, we're sitting here at the heart of the Silicon Valley which is very much related to the internet, and the fortunes of the internet, and so is also Cisco's path, and the path of the internet. How is your feeling now about the pace of the growth of the internet sector, and whether governments and companies and even individuals, are we able to keep up with this increase?

 

John Chambers: Well, I think technology will not be the limiting factor on how quickly we can apply the technology of the internet to change education or healthcare, or even government. I think it's more how we learn how to change our underlying business process; our governmental process; our healthcare process, that will be the key limiting factor on how fast we grow. In terms of the internet, I think it will merely drive a level of productivity for the next, probably, two to three decades.  You almost want to think about it like a highway system of the past, where how well your railroads or your highway systems were, you airports, your harbours, determined the large part of the economic strength of your country. I would say your infrastructure in terms of your high-tech will do this the same.

 

Ipek Cem: And when you look at emerging markets, emerging countries such as Turkey, and many other countries, we see that technology and the internet are actually great opportunities to foster growth, and maybe catch up. So in your opinion, I know that Turkey you have chosen as one of your most eminent (Yes) emerging countries, how is Turkey keeping up with this pace, and what can be done to turn in into more of a competitive advantage?

 

John Chambers: When we look at successful countries, in terms of future direction, we often see leadership at the top being very very key. Your Prime Minister truly understands the capability of the internet brings to the country. We also see the focus on education, the willingness to say how do you raise the standard of living for all the citizens of a country. So unlike, perhaps, business of old where you made all your profits and your growth in the top twenty countries,.........

 

So if you look at what occurs for many of the countries around the world, in the past, a company made its growth in its business profits, if you will, from the top ten countries around the world. Now you see the world as truly becoming flat, and I believe progressive companies will focus as much on the emerging countries as the do, quote, "on the established countries". How well that country builds up its infrastructure in terms of broadband, the ability really to change an education system, or healthcare system, would determine its economic future. Do the top leaders of government really understand that? Do you have a Prime Minister who truly understands what the power of the internet can be? And how do you say – not only in government, but also in education, healthcare and for the general standards of living of the citizens. So I'm very optimistic about the role that emerging countries will play in the future growth of the internet. I think it's not like the past, where emerging countries will follow the, quote "developed countries", I think emerging countries will often lead: whether they're in China, or in India, or in Turkey, or other parts of Eastern Europe.

 

Ipek Cem: When you look at Turkey, we have over seventy million people, and a very young population, (Yes) but at the same time the internet usage is about five million people, about one point seven million of them is broadband. In your opinion, when you look at a country at our growth level, at our penetration level, what are the potentials? What is the potential for this?

 

John Chambers: Well I think the potential is for every citizen of every major country around the world having access to the internet. And I think that when that occurs you'll suddenly be able to train people faster, you'll be able to do job creation. The jobs will go where the best educated work-force is, to the best infrastructure, that creates and environment of innovation and supportive government. And so I think this opens up a way that countries can participate in economic growth in a way, perhaps, it would not have been capable of in the past. So I'm clearly, in many ways the champion of the internet, and very proud to be known as that, and I'm the optimist for what it can do for all members of society. So I really believe it can change the standard of living, productivity, education systems, in ways that people are just beginning to imagine. And I actually view the fact that internet penetration is just on a rapid uptake in Turkey, in a very positive way. It means that we can build up a structure for the future, in terms of capabilities, as opposed to build up a structure for the past. Much like dirt highways versus the modern four-lane highways. I think Turkey has the opportunity to build a four-lane highway system that will benefit the majority of its citizens, Government, and businesses as a whole.

 

Ipek Cem: When you look at globalisation, several years back the word "digital divide" was very much in use. And some people argued that globalisation, and the advance of technology, is helping poorer nations or developing nations, and others argue that actually the divide is just getting larger. I know that Cisco has many initiatives having to do with education and other issues. How to make the best of technological advances, who is further: poorer countries, or developing countries?

 

John Chambers: I think if you use India as an example of where a country has taken perhaps a generation of young people that were behind on the global economics scale, and suddenly by putting in these new highways, if you will, suddenly started to participating in a much more rapid phase. But there's Prime Minister Singh at the top, and the Ministry of Communications, the individual business leaders where there is CARTAR, or Reliance or other groups there. They clearly are a country in transition with a standard of living and a GDP growth occurring very rapidly. I see Turkey in the same scenario. I see the chance to suddenly participate in ways that were not capable before. And we have a terminology in high-tech called Moore's Law, which is a very nice way of saying that the capability of a product doubles in performance, or the price gets cut in half every eighteen months. That's a very nice way of saying something that cost ten times too much five years ago is completely affordable today. And so I'm the optimist of what this means for the average citizen around the world. I think we'll be able to participate whether it's as simple as phone calls over the internet, or as complex in terms of how we would do education, or healthcare or entertainment over the internet for the majority of the world's citizens. So I'm the optimist here. I think there is a challenge in terms of global interdependencies, if you will, I think it will benefit most countries, and most people, as opposed to be a negative.

 

Ipek Cem: In 2005 you accepted a prestigious prize from the State Department, and this was linked to Cisco's involvement in the Jordan Education Initiative. I know that you prize this highly (Yes) and you talk about your involvement with Jordan, and with King Abdullah as well and his involvement with this project. Can you give our audience a sense of what the mission of this project was and how it has progressed?

 

John Chambers: Well we were honoured this last year to receive the State Department's Corporate Citizenship Award. We also won the top award as a large company for American business CEOs: in terms of which company was doing the best job on giving back on a global basis. What was really exciting about that is that when you have a government leader who really gets it - and King Abdullah and Queen XXX clearly do, in Jordan. They understand that this really offers an opportunity for the future in terms of where markets are going. They understood that it's about education, but also venture capital, job creation, and how do you change a country. And in a very challenging environment they GDP is growing at seven per cent. So where you have a leader like King Abdullah – who truly is a visionary and understands how the world is evolving; an ability to work with government where we led seventeen companies from the World Economic Board, combined it with seventeen companies from Jordan and ten non-government organisations, if you will, working together, not just to wear these clothes, but to create jobs, and create an equal opportunity for all the people in Jordan. It was extremely successful that it has now been expanded to places like Egypt, to India, to Turkey etc. Where in Turkey with have fifty Network Academies, probably fifteen hundred graduates at your universities, and three thousand five hundred people in the schools. What it really says is that education - my parents taught me who are both doctors – is the equaliser in life. I would argue that education with the internet suddenly makes time and distance irrelevant. So it allows us to produce a debate in a global society.

 

Ipek Cem: Yes I was read... I was going to ask you about the Network Academy and I read a research report which was showing the gap between the demands for educated and expert workers versus (the supply) the supply (Yes) and there was a big discrepancy, and especially in Turkey, so do you feel that the Network Academy  is working towards that goal, and do you anticipate that there will be more of them in Turkey?

 

John Chambers: Yes I do. I think very often our education system developed as like they develop our parents and that was nice creating jobs for the industrial revolution. Now you want to think about the next generation of jobs. A large amount of these jobs will be tied to technology. The ability to use technology to change society. To improve the effectiveness of businesses in Turkey, or around the world on a global basis. To improve the healthcare that the average citizen can get etc. But that only works if you have the people who have the foresight to train the people who can take this technology and apply it to government or apply it to business and to make it run properly. So what we do with the Network Academy is where we have four hundred and fifty four thousand students in a hundred and sixty three countries around the world is really our corporate gift-back programme. Corporate social responsibility, which I believe in very strongly, gives you the capability to prepare students who can use the technology and make a difference in the country. The neat thing is, it's what we all want to believe. It was fascinating to me in Afghanistan where the students had not attended schools for six years, when they went into the Network Academies, they scored higher than in Paulo Alto, right here in the heart of Silicon Valley! And it shows... if you give young people a chance to use education where they can get jobs, regardless of where we art in the world, they really prosper and do well. So that's how you overcome the issues of "digital divide" – where you have to be born in the right city, in the right country, to participate in the economic growth of this world. So I'm an optimist on global interdependencies, and I am clearly an optimist in terms of what technology, especially the internet, can do.

 

Ipek Cem: What are some of the... You often talk about Cisco being able to ride the wave of transitions in the industry, and you were able to grow and you made one hundred acquisitions over the past decade. What are some of the new and hot trends, or transitions as you call them, that we must watch out for?

 

John Chambers: Well I think that you are taking it in very well, catching market conditions and high tech are what the future's all about. That's what Silicon Valley's done very well. The PC transition, the semi-conductor, the internet, the search engine transitions, etc. from our perspective we see a couple of basic transitions coming on. The first is that you will communicate whether it's over the telephone, or by TV, or by data-line over a single connection that is both fixed and wireless, and you won't care as a user. The second transition that is occurring, you will plug, physically or virtually into this network, any device that you want, and you'll be able to get access to the whole world's data. And those transitions are huge in technology. It will allow us to communicate, you'll be able to communicate back to your father from here in Silicon valley, not just by video conferencing, but what we call "tele-presence", which is almost like the person you are talking to back in our home countries, whether it's family, or other government, or other business leaders. Almost like we are here together. And so I think the internet will allow not only a level generation of productivity applications, but a generation of what we call collaboration. The ability to communicate with family, or with experts, or government leaders around the world in ways that cut that distance down to almost makes this a virtual world, if you will. You almost have to see it to believe it, but if you can imagine how effective this medium would be, if you wouldn't have to fly all the way to Silicon Valley, or I wouldn't have to fly all the way to Turkey, then we can really do it late one afternoon your time, or early in the morning, my time. In a session. That makes us more productive, or it allows a person with a healthcare issue to be able to get the best healthcare regardless of where they are located in Turkey, in Istanbul, from the very best doctors. Or the best doctors on a global basis to consult with the local doctors to be able to deal with issues. It changes the world largely in a much better way.

 

CEM? How about security over the internet? Because while we improve communications, it's much more seamless and easier, (Yes) there is concern for data security and there are advances in this field as well. Many advances. How to cope with the security issue?

 

John Chambers: Well, I would break the security into two segments. First is the security of the network and the data centres themselves, and then secondly how do we make this a safer world to live in? From the first one, we view it that it almost has to be like the human body. You can't protect each element, each PC, or each IP, telephone, or each data centre by itself. You almost have to have it like the human body where everyday our body is attacked by thousands of viruses – and yet we're not even aware of it. It's an automatic immune deficient, immune capability that protects us. The network should be the same way. Every element of the network should have elements of security which tie together like the human body, so it's the exception we take a couple of Aspirin, we go to the doctor. In terms of society as a whole, I know that in Istanbul as an example, looking at everything from the traffic flow to protecting the citizens you're going to have a network architecture that combines video with data and voice and mobility to better service and protect the citizens of your country would be another example.

 

Ipek Cem: You have done a project like that for the Istanbul Police Department (That's Correct). How did that project go, compared to other countries and other such projects?

 

John Chambers: What is interesting is that the projects where we were in Chicago where we have done a similar project and Istanbul are very similar. The issues to protect us in our society are very similar and the ability really to be able to see your city, if you will. So if there is a problem, you can deal with it very quickly and protect your citizens. Almost identical in terms of what they are trying to accomplish, and candidly, both of them are going very well.

 

Ipek Cem: In Turkey, in addition to the e-government initiative, and in addition to advising the e-government committee which was led by, I believe Abdullah Gul, the State Minister, you, I believe were also invited to participate in the Investment Advisory Board. Will you be involved in this interview which is very important for Turkey?

 

John Chambers: Well, we very much, whenever we participate, we try to make a difference. Not just to have our name associated with it. So my very top person within my company, in terms of development is Charlie G Carloak . He heads up all of our research and development. He's our Chief Development Officer. And so he will be going to Turkey, and if he feels that we can really make a difference, he will be attending this session, then we will be honoured to be a part of it. But we want to make sure that when we sign up for something, whether it's the World Economic forum, and take the lead for global education, or the development that you're asking to participate in Turkey, we want to make sure that we never let a country down, or a business or government unit down. One of the neatest things about your Prime Minister is that I found him to be very candid. When we talked to the World Economic Forum, he was very direct. He said, "John. Can you be very specific on where you can make a difference? And then hold us accountable for that". And that's the way it should be done: in business, or in government. So if I make commitments about supporting, I want to be able to make sure that we can deliver. And we would be honoured to be part of it, but we really want to make sure that we can make a difference. So I'm sending a key decision-maker, which is my research lead, and Charlie is like my right arm in this sense. So we're going to make that decision.

 

Ipek Cem: OK. I was reading that , now, more Turkish people are going up the ranks in Cisco and getting international responsibility, for example Mr Can Terzioğlu, I think in Central and Eastern Europe, and there are a number of other professions...... When people from a certain country start going up the ladder, does that increase the visibility of that country vis-à-vis the company?

 

John Chambers: It very much does. One of the neat things about the internet in terms of basic principle, nobody knows your age, what country you are from in the world, and we're trying to become the first truly global company. Not a multi-national, or a European, or a US, or Asia company doing business globally, which truly globally in terms of our directions, so we want to get the best and the brightest in terms of leadership from wherever they exist in the world. And too your point, people like Can Terzioğlu have been tremendously successful in Central Europe, and by the way he's having a great year in terms of economic growth. And so we try to track the best and the brightest and create them into this virtual company called Cisco, and then to lead. And that's what Cisco's about. We have a very strong culture that focuses on customer–market transitions, getting the best and the brightest who will play like an extended family. Truly an extended, global, virtual family, perhaps.

 

Ipek Cem: I know that you are also keen on the admission to emerging groups. You know the Middle East as a market (That's correct). What are all the countries and projects that you are involved with – in that region?

 

John Chambers: Well, one of the things we were most excited about is King Abdullah of Jordan really was the first one to share with me his vision of Jordan, of what was possible across much of the Middle East. And, in my view, education is at the heart of allowing citizens to, for every country, to participate in economic growth; in more fun entertainment; as well as the job creation. And so now we're involved across most of the Middle East in terms of the opportunities: it is something we're honoured to be leading in, it's something that we have to earn the right and the trust of every country we are in. whether it's countries such as Jordan, or Egypt, or Saudi Arabia, or places like Dubai etc. We often take very much a leadership role in helping on first education, then healthcare, then e-government, their service providers and business competitors. So we are very active throughout the Middle East, and I think that it's an example of life, that if you do what is right for society, and you do a good job of getting back also, society often rewards you in terms of being successful.

 

Ipek Cem: You were just talking about the entertainment industry and we know that Cisco recently made an investment in TV set-top boxes, and this was discussed in the media, where does this strategy moving with Cisco, how does it combine with the existing strategy of Cisco and convert, many convergence issues that came up. What do you see the entertainment industry and technology, or the internet kind of combining or complementing each other?

 

John Chambers: Well the neat thing about the internet is time and distance doesn't matter. When you think about entertainment, most of us would like to watch the entertainment when we want, and how we want, and where we want, on whatever device we have. And that is very much empowered by the internet. When I was in Egypt just a couple of weeks ago as we went through even some of the poor sections of the country you saw a satellite dish on top of the houses. And then you saw a wire going to the next house and the next house and a wire going to the next house. The internet can bring not just entertainment, but it could bring the capability to do education and healthcare with the same type of, I think, effectiveness. And so what you see is, the ability to combine the entertainment, the movies, or whatever a person wants to watch, with the data, the healthcare capabilities, with the voice so that you can make phone calls anywhere in the world with a very low cost, with mobility. And so I think they all come together. Video is an art, as much as it is science. There are only a couple of people in the world that can make that work well, in my opinion, Mass Scientific Atlanta, the company we acquired is one of these.

 

Ipek Cem: You invest a lot in R and D (Yes, we do) about three point five billion dollars, that's the figure I read, on a revenue of about twenty five billion dollars. This is a huge amount. (Yes). We know that you have research centres not only in the US, other places around the world. What are your other top research centres, which ones are they? And going back to Turkey, do you anticipate at any point that you will make a R and D investment in Turkey?

 

John Chambers: We tend to make R and D investments where we see start-ups. And so where we see very aggressive start-ups, whether it's Scientific Atlanta in Atlanta, in the US, or investments in Bangalore, or in Shang Hai, which are two of our other major investment centres around the world,  we tend to go where the start-ups are. And we tend to go next to the universities who train the people. So we try to attract the best and the brightest of a country whever they are in the world. Some of them will be in physical location such as Bangalore or Shang Hai, or Raleigh, or San Hose, or Boston, or Texas. This would be virtually around the world where we attract the best and the brightest, perhaps they work in Turkey, or we attract them to work in one of our other centres around the world. So our goal is to attract the best and the brightest and get them to be a part of Cisco.

 

Ipek Cem: In the coming years, what is you vision for Cisco?

 

John Chambers: My vision for Cisco ha not changed in fifteen years. (OK?) I view that Cisco can play... if we are effective and if we do what is right.... The leading role in changing the way the world works, lives, learns, and plays through the internet. And we would like to be the company that helps that happen, both from a success on the financial side, but also a success on the corporate/social responsibility side. There can be no higher goal in life than changing people's lives on a global basis, and I believe the internet is that equaliser along with education. So that is our dream for Cisco. Time will tell whether we can achieve that or not.

 

Ipek Cem: Well on that note, I want to thank you very much for this candid interview, and for your time.

 

John Chambers: In fact it's a pleasure. Thank you for allowing me to share my views.

 

This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, NTV networks and Ipek Cem cannot vouch for its accuracy.