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Retiring Cisco CEO delivers dire prediction: 40% of companies will be dead in 10 years

John ChambersBusiness Insider/Julie BortCisco Executive Chairman John Chambers

Cisco’s giant customer conference, Cisco Live, began on Monday in San Diego and was the last time that 20-year outgoing CEO John Chambers would impart his vision in a keynote speech.

And was it ever a speech, filled with fire-and-brimstone predictions.

The upshot: He says more than one-third of businesses today will not survive the next 10 years. The only ones that will survive will turn their companies into digital, techie versions of themselves, and many of will fail trying.

“40% of businesses in this room, unfortunately, will not exist in a meaningful way in 10 years,” he told the 25,000 attendees, adding that 70% of companies will “attempt” to go digital, but only 30% of those that try it “will be successful.”

“If I’m not making you sweat, I should be,” he said.

“It will become a digital world that will change our life, our health, our education, our business models at the pace of a technology company change,” Chambers said. He warned companies that they could not “miss a market transition or a business model” or “underestimate your competitor of the future — not your competitor of the past.”

“Either we disrupt or we get disrupted,” he said.

Startups want to upturn every existing business, from taxis (Uber) and hotels (Airbnb) to banking, Chambers said.

He quoted JPMorgan Chase CEO Jamie Dimon’s annual letter to shareholders, in which he warned that “Silicon Valley is coming.” Dimon meant that startups were creating new banking apps for everything from loans to payments.

Cisco’s own painful reorg

Chambers talked a lot about the painful transition that Cisco underwent over the past three years, which culminated in a massive reorganization of its 25,000-person engineering team in which “24 of 92 leaders” were let go.

He said that similar reorgs took place in the sales and administrative ranks.

Cisco has “changed 41% of our client-interfacing execs,” he said. “We had to change or we would have been left behind.”

Cisco John ChambersBusiness Insider/Julie BortCisco executive chairman John Chambers

Chambers explained that the company had cleaned up its 62 business units — product-oriented fiefdoms and silos that had sprouted up from Cisco’s love of acquisitions. He reorganized them into two huge groups: enterprise and service provider. The divisions now make 18 product “families,” and all of those products must work together.

“We had to tie together our silos, we had to change our culture, we had to lead by example,” he said.

And we’ll see if Cisco is done. On July 26, Cisco will get a new CEO, Chuck Robbins, who has been hinting that he plans to tighten the belt in some way, shape or form, even further.

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