During my 25 years as CEO of Cisco, I managed through four major downturns; each time, the company emerged stronger and increased its market share. Over my tenure with the company, annual revenue increased from $70 million to $47 billion, and employees grew from 400 to over 75,000. Now, I serve as an investor, mentor, and strategic partner to startups with my VC firm, JC2 Ventures. In the last two years, I’ve run the same playbook across these startups, and we’ve seen remarkable growth – in fact, the cybersecurity companies I have invested in are growing up to 300% per year, and out of the 20 startups I have invested in, nine have become unicorns.
This is all to say, I have a good track record when it comes to surviving and thriving amid economic challenges – many of which I’ve accurately predicted. For example, I was one of the first to say we were entering a dot-com bubble in 2001, and at last year’s Viva Technology conference in Paris, I said the number one challenge businesses would face would be inflation – not the pandemic – and that a downturn was coming. The merry-go-round always stops, and when it does, you have to be ready.
So, why am I optimistic given the current economic environment? As I shared during my June 15 keynote session at this year’s Viva Technology conference, while we all prefer upturns, businesses need to view downturns as an opportunity. Downturns are when great companies are formed, while the leaders who manage this period wrong will fall from grace; in fact, I predict anywhere from 30 to 50 unicorns will no longer maintain their status, and more than 30 large enterprises will fall off the Fortune 500 list.
Here are my top tips on how leaders can use this downturn to come out stronger than before:
- Create your playbook to deal with the slowdown. Start by examining how many of your issues are due to the market vs. those that have been self-inflicted; then, determine your top five to seven priorities and work to get back on track. This should include prioritizing profitable growth and cash flow, rather than growth at any cost; eliminating non-strategic areas that do not move the needle for your business; and one round of cutting expenses in line with conservative forecasts.
- Define your breakaway strategy. Once you have established your North Star, determine where you want to lead the market two to three years from now. From there, innovate, move quickly and aggressively, and consider how M&A can accelerate progress even further. For both your slowdown and breakaway strategies, be sure to over communicate with all stakeholders – everyone needs to be aligned with the plan in order to execute it properly.
- Increase your speed of innovation. One of my favorite phrases, “Disrupt or get disrupted,” is especially true in a downturn. Success will be measured by the leaders who have a dramatic sense of urgency – I call it “controlled panic” – and strategically pivot to break away from the competition.
- Develop a smart sales strategy, where you’re selling outcomes and not features. Ask yourself: Are you are selling something that clients might fund during normal times, but won’t when money is tight? For customers to get on board, they will need to see growth, expense reductions, and productivity beyond just product features. In a downturn, sales cycles also tend to lengthen. I challenge you to shorten them.
- Leverage new technology to achieve your goals. I fully believe every company will become a digital company, and if you’re not acting now to incorporate AI into your offering, you will fall behind. This is especially true for startups in a tight VC market, as this will be a make-or-break for funding.
Two companies in my portfolio are good examples of how to turn these tips into winning strategies. Uniphore, one of my unicorns with a valuation of $2.5 billion, sells software to call centers for conversational analytics, conversational assistants, and conversational security. The startup’s vision – merging AI with data, video and voice to improve the customer experience – is very clear, timely and profitable. It zeroed in on outcomes and made necessary adjustments for the downturn, including cutting expenses. Its success is clear; in fact, it is one of the only B2B AI companies to achieve over $100 million in annual recurring revenue and over a 100% growth rate.
Another example is Safe Security, an India-based company that JC2 Ventures invested in back in 2018, which offers a cyber risk quantification platform for enterprises that predicts breaches instead of detecting them passively. Just recently, the startup added a generative AI element to its solution, which serves as the industry’s first AI-fueled Cyber Risk Cloud of Clouds platform. Even though Safe is still early stage, customers are able to recognize the simplicity of its offering; the startup has seen 200% growth and received 7 term sheets in its last funding round.
These two JC2 portfolio companies share common characteristics: They sell outcomes, not features; they use AI as a differentiator; and both have a clear and simple vision. To stay ahead, leading-edge enterprises will need to innovate by working with startups like these – creative, disruptive and willing to take risks.
The leaders of the future will be those that use technology and smart strategy to breakaway during this downturn. My message is don’t play defense; instead, dream bigger. Your company can not only survive, but thrive, if you position it for the opportunity a downturn presents. Set your North Star and make it happen.
Former Cisco Executive Chairman and CEO John Chambers, was widely considered one of the best performing U.S. CEOs during his 25+ year tenure at Cisco, As Executive Chairman, a position Chambers held until December 2017, he led the Board of Directors and provided counsel to the CEO and leadership team on strategy, digital transformation and strategic partnerships, Chambers oversaw 180 mergers and acquisitions during his tenure at Cisco and managed the company through multiple economic downturns He currently runs JC2 Ventures as CEO and serves as an advisor to heads of state, including France’s Emmanuel Macron and India’s Narendra Modi. This is the twenty-nineth in a planned series of exclusive columns Chambers is producing for The Innovator.
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