[ChuckMcM]

Congratulations guys (if you're reading). I'm sure this has nothing at all to do with Ruckus going public [1] :-) Its a great exit and Cisco certainly has the manufacturing and marketing reach to take you to the next level.

That said, I find it fascinating that my first experience with wireless gear was with Aeronet (which was also $1B+ buy for Cisco) And of course Linksys ($1B+). And now Meraki ($1B+) So here is the multi-billion dollar question, "Why does Cisco keep spending billions of dollars on WiFi companies and still they aren't leading the market in WiFi innovation?"

[1] http://www.ruckuswireless.com/press/releases/20121116-ruckus...

[jauer]

Cisco as a company can't do the kind of "out of the box" R&D that's necessary for significant innovation. When Cisco wants something truly new they go acquire a outside company.

That said they've done a fairly good job of growing those companies within their area (Aeronet as Enterprise, Linksys as Home) through incremental improvements.

This may be intentional behavior on Cisco's part to control their exposure to large project failures. IIRC there've been cases where Cisco employees couldn't get support to develop something new so they quit and once Cisco saw their success they were acquired back in.

[sinkercat]

Cisco has the highest market share in wireless and it is Cisco's innovation in wireless that's keeping it ahead of Ruckus, Aruba and Motorola. Don't understand the conclusion that Cisco can't do "out of the box" R&D, at least in wireless.

[indiecore]

I think what he was trying to say is that Cisco's R&D efforts are largely focused on refining the wireless stuff that it already does, if it wants something radically new AND that something is being done already it's easier to just buy the company and their research instead of spinning up a new R&D effort to reinvent the wheel.

[daemon13]

That is Cisco's innovation strategy for the last 10-15 years.

They "outsource" R&D/Innovation to smaller companies and then buy those.

Hence, their special skills as a company are:

1. Identify future growth areas [market segments] and potential leaders.

2. Seamlessly merge the acquired company into Cisco operations.

There was a good article about this in Fortune/Forbes 6-8 years - did not keep the link.

[SatvikBeri]

The Innovator's Solution goes over this in detail, using Cisco as a prominent example.

The incentives at large companies basically make certain types of innovations very difficult to create from within. Large companies tend to have a very fixed set of cost structures and margins. That means that products that would be lower margin are almost automatically deprioritized-even with specific CEO attention it's nearly impossible to change resource allocation processes to foster this kind of innovation.

Instead, the recommended option is to create a subsidiary with no existing cost structure or processes. That subsidiary can then focus on making the new product succeed since it's the only way for them to survive.

Once the subsidiary takes off, you usually do not want to fold it back into the main organization-you'll lose all the advantages that allowed it to succeed in the first place! (There are exceptions, and the book goes into detail on when to integrate and when to give the subsidiary autonomy.)

Buying up new companies is another alternative to starting subsidiaries yourself.

[gonzo]

I'm one of two people to explain to Cisco why they should buy Aironet (spelling, Chuck!), instead of Symbol...

largely on the fact that their software was better.

[jamie]

It's even worse than that:

http://newsroom.cisco.com/dlls/2005/corp_011205.html

Airespace wireless for $450MM.

[ChuckMcM]

Interesting, I mis-remembered the Aeronet price apparently it was $799M [1]

[1] http://news.cnet.com/Cisco-buys-Aironet-for-799-million/2100...

[jamie]

Inflation since 1999 should easily tip you over the $1B mark :-)