Latest / C-Suite Perspectives / What Will Define AI Winners: Former Cisco CEO John Chambers

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What Will Define AI Winners: Former Cisco CEO John Chambers · C-Suite Perspectives

0:00
AI's going to make the internet look boring.
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If you give up, you might as well fold the company.
0:04
There are gonna be train wrecks, both of large companies and smaller companies, and
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that's something I think both the market and leaders have to be prepared for.
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Welcome, John Chambers, former executive chairman and CEO of Cisco Systems.
0:17
John, thanks for coming today.
0:19
Steve, it's gonna be a lot of fun.
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We haven't done one of these in a couple years, and it was fun being
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with you in New York City honoring Lisa Su when she was CEO of the year.
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A great pick.
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I'd been her mentor and sponsor for nine years when she took the job at AMD.
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I'm just very proud of how she did.
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And she's awesome.
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But John, people don't realize you almost invented the internet-- i'm being only a
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little bit silly-- through Cisco Systems back when you were CEO beginning in 1995.
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You've been here as part of AI from the very beginning and into today,
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and then you've led start-ups.
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I just wanna hear all of this great experience as it relates to first the
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internet and then now leading into AI.
1:02
It'd be my honor.
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Interrupt me at any time.
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I'll do a line of thought.
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If your listeners agree with everything you and I cover today,
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Steve, number one, I'll be boring, and number two I'm not gonna do that.
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I wanna make them uncomfortable.
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I really wanna challenge it.
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I didn't have a front row seat in these changes.
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I was in the middle of the playing field.
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And so with the internet, when we said at Cisco, "It's gonna change the way you
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work, live, learn, and play," people said, "You're moving around zeros and ones.
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Not gonna happen." But we became the most valuable company in the world.
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We used the internet capability across every major function.
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Our profitability was much higher than everybody else's because of how we not
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only used the internet technology, but how we changed the business process,
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how we ran our company at speeds others could not match, how we could do M&A to
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complement our architecture, et cetera.
1:51
Then I bet on AI about 10 years ago, and very candidly, at first
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I thought maybe I'd missed it.
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I bet on AI and cybersecurity connected to AI, and people couldn't even spell it.
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And I really mean that only half teasing.
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We forget how much it's been a four or five-year phenomena to the current date.
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But it was the same game except, in my opinion, that what I've used
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from the beginning, five times the speed and three times the outcome.
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I think that five times the speed is gonna be right.
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Three times the outcome is too conservative.
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It's gonna be five times the outcome.
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It would disrupt every company, every industry, and we make our predictions each
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year on the AI segment for the next year.
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And about the time I think I'm being extremely aggressive and people say,
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"You're not even close on six or seven of the transitions helping the
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next year," and here we are eight or nine months into 2026, and they're
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almost all have already happened.
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I focus on market transitions driven by changes in technology which
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require changes in business process.
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If you implement technology and don't change your business process, guess what?
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Not much productivity.
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So that'd be my summary.
3:01
You were CEO of Cisco Systems back, what, 30 years ago, when it was one of the most
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valuable companies ever for one thing.
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But secondly, it was the basis, the foundation of everything that's
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happened since in the digital transformation and the development of AI.
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It was in many ways.
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We were fortunate that our competitors stayed focused on products and technology.
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We focused on products working together and architectures, data, voice,
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video, disrupting whole industries.
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And we did 180 acquisitions to complement our development engine at the time most
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people felt acquisitions would fail.
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Ours were, I think, still the model.
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As Walmart even said a year ago, it's a model not just for the tech
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industry, but for the industry as a whole, and some will fail within it.
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And then we strategically partnered, and we moved with other industry peers or key
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customers in ways that others did not.
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And the takeaway is 40% to 70% market share and leadership in
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the business transformation.
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We were very fortunate, but I built a great team and
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they executed extremely well.
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And you talk about having been involved with AI for over a decade but really
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it's been three decades, John, because everything that Cisco did enabled
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everything that came afterwards, right?
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In a way, you were there at the start.
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Agree.
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And I would actually say there have been two major technology eras.
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We talk about mainframes, minicomputers, PC, the internet, the cloud, et cetera.
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On it social media and then AI, but I think the two big ones
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are purely the internet and AI.
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They do have complementary type of concepts.
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I've got 24 start-ups now.
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Eight are cybersecurity.
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All 24 are AI-driven, including a company like Now, which is an AI company
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at the heart of the network that is completely autonomous, great security
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built into it, much lower total cost of ownership of the transition, and AI at
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the heart of everything they do on it.
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So taking those concepts, bringing into the start-up world, mentality of number
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one or number two or don't compete, and building those into start-ups is a rush.
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It's just really fun.
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Yeah.
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24 start-ups.
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Wow.
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And They are successful start-ups.
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You've got some unicorns and decacorns in there, John.
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We all have been very fortunate, but I've seen every movie, Steve, and after
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doing 180 acquisitions, if I can't pick out good companies to invest in based
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upon the strategy, the vision, the CEO, what customers say about them, I would
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have personally been disappointed.
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I am a risk taker on the approach, so I expect a certain amount to fail.
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Two have failed out of the 24.
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A couple more than that will occur.
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But I did just for fun on the AI models, I asked what are the mathematical
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odds that-- it looks like we're gonna have 12 unicorns, maybe 13 or
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14 in the not too distant future, and two decacorns already in Bloom
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and Rubrik in terms of investments.
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What are the mathematical odds of that overall?
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And it came out with a number that I didn't even know what it meant.
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It's 10 to the 15th factor.
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So I don't think it's that high a number, but it is unusual where only
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one out of 1,000 start-ups get to be unicorns, and those that become
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unicorns, only 10% get to be decacorns.
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So you do the math.
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And then if you combine it with being the CEO and long-term CEO of the most
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valuable company in the world from $70 million in sales to $48 billion,
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you hit numbers that are unusual.
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And what it says, right spot, right time.
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I am lucky.
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Luck is partially when opportunity meets preparation.
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And fortunate to live at this time in life, and I think AI's going
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to make the internet look boring.
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So excited about the next chapter.
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Let's talk about that because, you've seen it all.
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You've been there from the beginning through all of these things.
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You've demonstrated huge success both in the companies you've run
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as well as your 24 investments.
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There's digital evolution that's been going on for a long time.
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Remember when we started, there were deck riders and it was all big iron and it
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went from there to, they started dropping these little beige boxes in the middle
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of departments, and people would tiptoe around them, saying, "What are those
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things, and what do you do with them?"
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You've seen it all.
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You said this does feel different.
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Talk to us about how it feels different.
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I think the most important one for your listeners to understand is the
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speed is going to be undeniable.
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I think people are beginning to get a feeling for it, but the well-run companies
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began to implement their vision and strategy on AI two and three years ago.
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And if a company isn't well into its implementation of AI, focused on key
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areas and producing good results, and by the end of this year the majority
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of its employees using AI in some ways in their business every day, they're
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really behind in terms of the direction.
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So I think that speed is important for people to understand,
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including how fast AI changes.
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Steve, if you were in The Conference Board and you and I were interviewing some
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start-ups and one of my start-ups would say, ""John, I've got a new strategy I
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want to use this year," I would say to them, "If you're changing your strategy
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every year, you don't have a strategy.
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You're chasing the new shiny object."
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That changed five years ago.
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Now if the CEOs don't evolve their strategy dramatic-- both of the
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start-ups, and you know where I'm going with this, of the bigger companies--
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every nine to 12 months, they're behind.
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And so that speed of change where what used to occur in five years occurs in
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one, and the outcomes that used to take you much faster than pre-internet--
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in other words, the internet was three times the speed of traditional business,
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but the outcomes that even with the internet that have taken place over
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the last couple decades, now will be at five, five times the results as well.
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And so I think that's what people are missing.
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I think the CEOs who get it are beginning to really make a difference.
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Unfortunately, that bell-shaped curve you and I learned in business
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school and in our practices, where if you're in the middle you'd
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have a good future, solid returns, maybe two to five times valuation.
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The far right, maybe 15% would do great, far left 15% would fail.
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That's getting flattened even with the $1 trillion valuation companies.
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I think there are now a dozen of them.
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And as it flattens, many more are gonna fail but the ones who are
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successful are gonna be obscenely successful in terms of the financials.
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There are gonna be train wrecks, both of large companies and smaller companies,
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and that's something I think both the market and leaders have to be prepared
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for, and the key is how do you avoid them.
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A lot of that can be applied just to the AI industry, if you think
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of it that way, the tech industry.
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But the vast majority of companies are not actually in the industry,
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they're users of the technology.
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Your point, I think, is a really important one, which is speed.
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Now, what do you do if you feel like you're behind?
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'Cause every CEO I talk to said, ""Ah, I just, I don't know.
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I don't know how to benchmark it, but I feel like I'm behind."
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Do they just give up or is it a matter of pedaling faster or is there
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something else they should be doing?
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And a great setup question because you know it's well
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between those two scenarios.
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If you give up, you might as well fold the company.
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You stay stagnant in this world, you're going to be roadkill, and the changes
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that your peers will go through, both the small ones and the big ones, will be so
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fast that after a couple years, quote, "giving up," if you're a Fortune 500
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company, you won't even be on that list.
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And so that's not an option.
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The second is you need to think about it differently in terms
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of your organization structure.
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What do you do?
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If you think of this traditional CIO, she or he was up the vertical stack.
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Your chief security officer went horizontal.
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When you think about AI, you've got to think about the CEO being the champion.
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You might put the responsibility for strategy into a chief AI czar,
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or you might ask the CIO, chief information officer, to help lead
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that from a technology perspective.
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Or you might have your business unit leads, functional leads lead it,
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like CFO and finance, engineering and engineering, head of sales and that group.
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Or you might put a COO over top of it.
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But all these groups have to work together, and the CIO has to have a common
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data architecture and an architecture for how they're going to use AI.
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It can't be a whole bunch of separate products.
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Same thing is true on cybersecurity.
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Your members of The Conference Board are going to see next year most
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complex cybersecurity docs ever on it, and if they aren't well ahead of
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thinking how they're going to handle the cybersecurity for agentic agents,
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both ones that they do themselves for productivity and the numbers that come in
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externally, they're already in trouble.
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One of my companies, PinDrop, which did the leadership in deepfakes, does it for
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Zoom, does it for Cisco, Microsoft, and others in terms of is that the person
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you're talking to the right person?
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Is it a machine?
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Is it a combination of the two, etc.?
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You're going to see the same thing occur with third-party agentic AI agents and you
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saw with Huggy Face the other day, just 1,000 agents literally brought it down.
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People think that's just the exception.
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It was a unique technology issue.
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Out of PinDrop's 100 customers, they did a formal investigation with and trying
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to understand how many third-party agents they had seen in the last two months,
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out of 100 customers, they had seen 750,000 unique AI agents, third party.
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And so the same scenario applies there.
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Most of them were justified, and most of them, the companies
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wanted it in their environment.
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But the ones that aren't who they say they are, that are in there
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for the wrong intent and the wrong action, you've got to block and
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prevent them from really accomplishing challenges in your environment,
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like the US FBI, the Australian government, and Hugging Face as well.
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So same scenario when you think about security on that, and Pindrop
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has a chance to really lead this in terms of these third-party agents.
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It will be about identity verification.
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It will be about intent, what are you coming in to do, and whether or not
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that's justified and they wanted to do it.
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And third, what is the action?
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Except it's got to be at AI speed and close it down or prevent it if you get
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outside any one of those three areas where you should be implementing.
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So that speed comes back again and again, Steve.
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Yeah.
13:53
No, it does.
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You may disagree with me, but the other way this feels different, and you touched
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on it a bit ago, but the early phases of the digital evolution was more hardware
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based, you're trying to get the right machinery in place and that sort of thing.
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A CTO and CIO need to focus on that.
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And then you had the cloud, and nobody knew where the heck that
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was anyway, but that was out there.
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And again, it was more the IT department.
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AI is all about the business, and in a multi-constituent world--
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customers, employees, owners, community-- you're trying to use
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AI to serve your constituents.
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So yeah, you've got the CIO, CTOs, they're involved from an implementation
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of the tool, but this is different because in order to affect it, you
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have to touch every work process.
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It goes well beyond IT implementation
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Absolutely does, and well beyond just data organization on it, and
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it has to grow across every function together, not in independent silos.
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It's got to be owned by the CEO.
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That makes CEOs uncomfortable.
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But even if you're not into, quote, "AI" as something that excites you,
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you've got to have working knowledge of it as a CEO, and then you've got
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to build an organization that can help you drive it through your company.
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It can't be something buried in the bowels of an innovation
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officer or a direct report to the CIO or the CIO him or herself.
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It needs to be owned by the functional leads, as we said earlier, and the
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top ownership needs to be the CEO.
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Yeah.
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You've Gone from a period of time when CEOs couldn't spell AI, as you said, and
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that wasn't that long ago, to holy cow, we've got to invest like crazy here.
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We can't dump enough money into it fast enough.
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And then all of a sudden people are going, "Where's the ROI?" Is it too early to be
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asking for some ROI on this investment?
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No.
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I Think it was John Doerr that said if it's important,
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measure it and quantify it.
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And I admire John Doerr of Kleiner Perkins in many ways, a great leader
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here in the Valley and a great friend.
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But basically, you should be looking at the productivity on it, and
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you should also be looking at new revenue generation because of it.
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And at a session with CIOs the other day, of 45 CIOs at a location of one of the
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venture capitalists and who said what was off the record, but the total I can
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share out of the people in the room.
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Now, these were leading-edge CIOs.
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They get together twice a year at the sponsorship of the VC, and
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the VC gets to run a couple of their start-ups by them as well.
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But in going around the room, the average productivity increase by the
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end of this year, in other words, what their run rate is, will be about 15%.
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It was spread between 10 and 20%, depending on the group, and only
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one of the CIO's productivity increase for their company will exit
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the year at a run rate below 10%.
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Now, these are leading-edge CIOs.
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So key takeaway, for the leading-edge companies and those that are leading
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regardless of industry, you better be well along the way in productivity.
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Secondly, it isn't just about how do you do more with less, it's how do you use
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resources and move resources to where additional revenue's going to come from,
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new revenue streams, market adjacencies.
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And that's what all my start-ups are doing.
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In fact, Uniphore, which is one of the hardest start-ups I have, going
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for an enterprise AI company that runs architecturally much like Cisco did
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in terms of productivity into every function their run rate's going to go
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from about $200 million annual recurring revenue this last year to $500 million.
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And it's accelerating, and that's 150% growth.
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Guess what their headcount increase has done in the last two and a half years?
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Down 17 people.
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Now they use that headcount productivity, and they'll move
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it into market adjacencies.
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Raj out of FedEx Express, who's a great friend and he really gets it
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in terms of what Fred Smith started with a great CIO in Rob Carter, and
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then Raj, as the successor to Fred.
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He looks at it more for FedEx Express, how they use this productivity
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to generate dramatically more revenue and move into adjacencies.
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And I think that's the other transition you're seeing occur, Steve, that in your
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membership as an example, probably the CEOs were first focused on, "Am I gonna
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be able to get productivity increases?"
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And if you aren't already getting that in terms of areas like programming,
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customer success, et cetera, coding, you're already in trouble.
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And they'll begin to go across the whole gamut in terms of the opportunity.
18:34
But now they're looking at new revenue generation, new markets that they
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enter, and the integration of that.
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The race is not only on.
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Most companies by the end of this year will have a lot of their employees,
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in fact, the majority of their employees, starting to already use AI.
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And most people, when I said that in December of last year, they said,
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"John, not gonna happen." In fact, all the models I asked the question
18:58
of gave it less than a 10% probability of being even close to right.
19:02
That gives you an idea of how fast this market moves.
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So what I hear you saying is that if you're a CEO today, you can't
19:09
just focus on either innovation or productivity or, in other words, revenue.
19:14
It's all of the above.
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It's how do you use these AI tools in every aspect of your business in order
19:22
to obviously get more productive, so therefore you can redeploy resources
19:27
and drive higher levels of growth, higher levels of customer satisfaction.
19:30
It's all of the above.
19:32
These are tools to enable all of that, right?
19:35
Yes.
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And just like with the internet at Cisco, where we used the internet to
19:39
redefine supply chain using outside third-party contractors as though they
19:44
were our own manufacturing site, and we invented outsourcing, unfortunately,
19:49
of high-end technology there.
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We could close our books in 24 hours any time we wanted.
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That's great for the CFO, but the reason Larry Carter and other CFOs
19:59
who worked for me did that was so we could run the business better, and
20:03
we could see to the day how was the business running in every function.
20:06
And we could see problems develop as opposed to wait for an end of
20:09
quarter and say, "Dang, we got surprised," when it's too late to move.
20:12
And technical services is an example where Joe Pinto did an amazing job of
20:18
integrating all this capability and constantly growing 60%-plus growth for the
20:24
decade that he ran technical services for me with almost no increase in head count
20:28
because of productivity and direction.
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So every function, and then the real benefit is when you change
20:34
the process of the whole company.
20:35
True in the internet, true with AI in my opinion.
20:39
But then you've got the speed issue, and you've got how fast
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these things are changing.
20:43
So it seems to me that you've got to have a ton-- I'm not going to
20:47
put a number on it-- but a ton of experiments going on all the time.
20:51
And then you've got to have somebody sorting it through because you
20:54
can't just throw your whole business model up in the air forever.
20:57
You do have to anchor and implement some of these tools, but you've got to stay
21:00
ahead on the experimentation, don't you?
21:03
You do, but you've got to have a replicatable process.
21:07
Steve, you and I talked about it in the last session.
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One of the things that I did, I think many people were surprised, I'm dyslexic.
21:14
And it Has weaknesses, but it forces me to go A, B, Z. So what I
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learned early on in life is develop playbooks that I can modify as I
21:22
go, but move with tremendous speed.
21:24
So you've got to have these experiments under a playbook in a
21:28
process, common data architecture, cybersecurity to really work, that
21:33
then you can run with tremendous speed.
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So as you begin to think about not experimentation, but as you begin to
21:40
think about pilots, because we're past the experimentation stage in what AI means.
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But as you begin to think about running several pilots at a time,
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you want to think about what are the industry's top payback areas, such as
21:54
coding, customer success, etc., but realize it's in every function now.
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It goes deep into legal.
22:00
It goes deep into government affairs.
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It goes deep into supply chain.
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And so you better begin to think about projects that you're testing
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the waters on and then growing, and you better track them with metrics to
22:13
see if you get the results, and hold people accountable for both either the
22:16
increased revenue or the productivity, and use it to free up resources.
22:21
So it's a process that is moving at speed and outcomes that are, I
22:26
think, only going to accelerate.
22:28
Okay, so there's this need for speed, but at the same time, you can't just
22:31
do this willy-nilly because there's risks around all of this from a
22:35
security, governance, trust, execution.
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How do you balance all of that and still get the speed?
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I think you've got to be realistic where there are valid concerns.
22:46
And if you remember back to the internet era, the data I remember, and we tend to
22:51
remember favorable data, but in the mid to late '90s-- and it was the objective
22:56
of President Clinton, he got the internet, how it changed the economy of the US and
23:02
drive up GDP growth and productivity, etc.
23:05
And he was absolutely right, and I was honored to be at the White House
23:08
stage, scared to death, announcing that area with him, with he and Vice
23:12
President Gore, who, quote, "invented the internet," both of them beside me.
23:17
And it was spectacular because of his buy-in and the direction.
23:22
I think you're now gonna see that productivity number that peaked about 2%
23:26
in the internet era go to as high as for the nation of 3% to 5% being a given.
23:32
That has huge implications, standard of living and otherwise, and all the
23:36
way down through education as well.
23:38
So that's a little bit how I'm seeing it evolve.
23:42
I know I'm on the bleeding edge at times, but even that projection
23:46
is looking something that is more likely to be a given as opposed to
23:49
a long-term projection that people are saying, no, never gonna happen.
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Okay, final question.
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Look forward a decade and what is going to differentiate the successful companies
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from the non-successful companies?
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Is it simply speed?
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Is it brilliance around implementation?
24:07
But what's going to separate the winners from losers?
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Okay.
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I can give you my cut based upon my experience, and remember part
24:15
of my experience isn't just the successes which you were so kind to
24:18
mention, it was the mistakes I made because you learn more from your
24:21
mistakes, and I've made a lot of them.
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So what's going to differentiate?
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The first one is the companies who are in a leadership position 10 years from
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now or even as close as the end of this decade will be those that are constantly
24:35
driving innovation, using AI not as a tool but as a part of their transition
24:42
of technology and business together, that build into that cybersecurity
24:46
capabilities, that create a culture and empowerment of how do they structure
24:52
the organization and their workflows to the various elements of their functions
24:57
in a way that gets the productivity.
24:59
A small company, like I mentioned PinDrop earlier, has 18 different workflows
25:03
across the company that they focused on AI, six of which are in engineering, and
25:08
they're using their productivity to fund all their new movements into deep fakes
25:12
and third party agentic AI protection.
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You will see a culture which Warren Buffett talked about but most people
25:20
forgot about, a culture in the company that accepts and learns to be
25:26
comfortable with this speed of change.
25:29
And you'll see the company focus on how do they build, using my words, process
25:34
and playbooks to run at a fast speed.
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That's what I think the winners and losers will be like.
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The majority of companies will not exist in anywhere near their leadership
25:44
they have today 10 years from now.
25:46
There'll be new movers and shakers, but there'll be some that just really
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evolve into tremendous powerhouses.
25:51
So this is one you better change or you get left behind, and if you're going
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to change, you've got to do it with a replicatable process using AI and business
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process change together for your goals.
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Okay, we're going to leave it there.
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John Chambers, thanks for being with us today and sharing all your wisdom.
26:12
And thanks to all of you for listening to C-Suite Perspectives.
26:15
I'm Steve Odland, and this series has been brought to you by The Conference Board.