building chris dedicoat, europe 2 - cisco · * internal estimate source: press clippings; jp...

© 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 1

BuildingEurope 2.0

Chris Dedicoat, President European Markets,Cisco


Innovation Heritage

The European Union Is 50 Years Old


Globalisation

Global Warming

Encouraging Democracy and participation

Europe in the World

What Will The Next 50 Years Bring Us?


Highly competitiveexternal growthenvironment

Highly concentrated EU economy International expansion already exploitedAvailability of talent

Constrainedorganic growth

Increasing customer acquisition costDeclining success of new product launchesOff-shoring of key functions

European EconomyMixed GDP growthSlow population growthLimited productivity gainsHigh Unit Labour Cost

* Period 2000–2005Source: Flash Euromonitor Survey on Entrepreneurship, The Economist;

2211 33

The European Climate


Business Leaders’ Greatest Concerns

Pricing pressures

Decreasing customer loyalty

Competition from lower-cost markets

Commoditisation of products and Services

Lack of productivity growth

Disruptive potential of new technologies

0% 10% 20% 30% 40% 50% 60% 70%

Level of threat the follow risks pose to your company between now and 2020 [survey Q2]

25-10-06


The Productivity GapWill Continue To Be An Issue

Growth of Overall Productivity of Labour(%-age change from previous year)

0.0%

Source: EIU

1.0%

2.0%

3.0%

4.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

United States

Western Europe

25-10-06


The Growth of Personalisation

Customer priorities now and in 2020

Personal relationships with employees

Brand values

Quality of customer service

Price competitiveness

Quality of product/service

Now (select up to three)

2020 (select up to three)

Personalisation of product/service52%

34%

25-10-06


Global Information Technology Report 2006/2007

Networked Readiness Index 2006-2007 (Top Ten)

Countries Rank 2007-06 Rank 2006-05 Change

Denmark 1 3 +2

Sweden 2 8 +6

Singapore 3 2 -1

Finland 4 5 +1

Switzerland 5 9 +4

Netherlands 6 12 +6

United States 7 1 -6

Iceland 8 4 -4

United Kingdom 9 10 +1

Norway 10 13 +3

+23028Portugal


Early Internet Days…

Universities Finance Enterprise SP

Consumers Become

Driving Force in Latest

Disruption

Today…

Consumer SPUniversities Enterprise

Changing Pattern of Technology Adoption


Europe Is In Transition


What’s Hot And What’s Not In

Peer production, co-creation, clip culture

Passive consumers,subscription content

Personalised products, niche marketing, dynamic advertising

Mass production, mass marketing, mass advertising

Cross channel content; mobile to web, TV to Mobile, IPTVParallel channels

Consumer driven supply chains

Supply chains basedon historical data

Virtual business modelsCommand & control business models

InteractionsTransactions

Euro

pe 1

.0


The New Economic Drivers In

People Power Social networkingNew B2C

interactions,virtual models

Intelligent IP architectures

Description Business Impact Cisco Solution

Video UnlimitedAny video, anywhereany format

New ways tocommunicate

VT Advantage, ANS Video Ready

Networks

Personalise ItLoyalty from

unique experiences

Customisable products +

services

IP/NGN – SEFUnified Comms,

Data Centre

Carbon Reduction Eco-efficiency Reduce travel,

telecommutingTelePresence

Unified Comms

Buy it Now Innovation throughacquisition

M & A to enternew markets

Experience of buying

120 companies

All Access Economy

Applications on theweb

Easy-to-use onlinecustomer tools Everything on IP

Source: Wired, Cisco


* Concise Oxford English Dictionary

Easier access to information

Growing influence of social networks and communities

Changes in media consumption

Increasing expectation of unique experience

Polarization of shopping behaviour

Consumer Power Has Created New Environments and Opportunities

EmpoweredConsumer /

Individuation


Serving the Long Tail

Mainstream luxury through customisation

Maximum convenience for minimum effort

Individual experience at universal store

Peer communication with customers

1

2

3

4

5

Early Strategies for Individuation

http://www.unilever.com/ourbrands/personalcare/Axe.asp

http://www.tesco.com/

http://www.pg.com/main.jhtml;$sessionid$HJXPYQVLGXRJPTCHEC1SQ14MI2QLMKEX

http://www.progressive.com/


Source: Forrester; Team analysis

57%

2002

84%

2005

31%

2002

51%

31%

2005

65%

50%

2002 2005

28%

42%

FINANCIAL PRODUCTS EXAMPLE

The number of individuals evaluating alternative products before purchasing has increased by 50-80%

Easier Access To Information


Source: Neopets Youth Study; Annual Reports; Press Clippings; McKinsey analysis

… as individuals switch to online media…

General population

Teen population

Daily hours spent at activity

5.0

2.0

TV

0.5

2.5

Internet

450

21777

900

450

21777

900

2003 2004 2005 2006

… resulting in increased online advertising spend

Google UK advertising revenue

£m

1,300

800

TV advertising is losing effectiveness…

1990 2010

Advertising rates increaseDVR penetrationMulti-taskingSaturation

Indexed impact of TV advertising

100

40

-60%

Channel4

ITV 1

Changes In Media Consumption


0

5

10

15

20

25

Apr

-03

Nov

-03

Jun-

04

Dec

-04

Jul-0

5

Jan-

06

Source: Veronis Suhler; Forrester; IntelliSeek; McKinsey analysis

The number of blogs doubles every 6 months

Number of blogsm

Consumers trust peer referrals 2x as much as traditional media

USTrust level by advertising medium%

DoublingDoubling

Newspaper

Branded web sites

Recommendation from consumers

Online banner ads

Search engine ads

TV/Radio

56

70

90

10

35

47

Doubling

Doubling

Growing Influence of Social Networks and Communities


25 industries or product categories – 10 in Europe, 9 in North America, and 6 at global level; Growth rate for each tier represents weighted average of industries and product categories studied; CAGR = Compound annual growth rateSource: McKinsey analysis

9%High end

-6%Middle

4%No frills/value

Market average

Value growth of tier products and services*CAGR 1999–2004; %

< € 200

> € 900

€ 200–900

Volume growth Value growth

Volume and value growth by price pointCAGR 1999–2004; %

EU REFRIGERATOR MARKET

5%

-3%

21%

24%

2%

14%

The middle-market is shrinking as the luxury and value segments grow

This trend is true both in value and volume terms

Polarization of Shopping Behaviour


* Data compiled for food and beverage categories in France, Germany, UK, Italy and SpainSource: Information Resource, Inc. (IRI); World Retail Banking Report, Cap Gemini; Global New Products Database; McKinsey Analysis

Number of segments Number of food and beverage launches*

Companies are using micro-segmentation to satisfy individuals…

…and launching ever more new products to target niche customers

66

3,000

1995 2006 2006

100,000

Tesco Capital One

10,972

18,197

2000 2005

+66%

Increasing Expectation ofUnique Experience


My Son’s Mini

Enterprises are Capturing the Empowered Consumer Opportunity


By applying luxury BMW configurability to the mainstream Mini . . .

. . . Mini has established a profitable and successful model

* Internal estimateSource: Press clippings; JP Morgan;

Dresdner Kleinwort; Global Insight; company interviews; company websites

Units sold since launch yearThousand Mini

BeetleSmart

Profit per car£’000

1.8No rebate

0.5 0.5Extra options

1-3Brand premium

0.53.3Total

Revenue

Gross profit

Incremental value vs. competitors£’000

900

450*

-2,700

050

100150200250300

0 2 4 6 8 Years

Pric

e

Configurability for luxury cars

Customisation for mainstream cars

Luxury To Mainstream Through Customisation Is Good Business


BMW spend 4 times more than their counterparts on Cisco’s technology

Targeted demographic advertising

Consumer driven

Limitless personalised combinations

Active, creative social blog network… customer feedback/user generated content affecting next generation cars

The Mini Experience


John Chambers,President and CEO, Cisco Systems

“Cisco’s strategy is a story based on change—the market transitions that affect our customers. Through multiple transitions in the last decade and over the next 3–5 years, the network will evolve from the plumbing of the Internet—providing connectivity—to the platform that enables people to experience life.”

Delivering the Experience: The Network as a Platform…


From the Plumbing to the Platform

In the First Phase of the Internet, Networks

Provided the pipes to connect people with personal computers to the World Wide

Web—transporting data around the globe and enabling pervasive and ubiquitous e-mail, e-

commerce, instant messaging and other Web-based applications.



Are capable of moving more sophisticated forms of human expression - voice and video -

beyond personal computers to Internet telephones, cell phones, PDAs, iPods, video game consoles, and televisions.

The Networks in the Next Phase of the Internet



Life’sExperiences

Life’sExperiences

People Are Co-Creating, Collaborating and Communicating

On networks that inextricably link them to a human network of family members, friends, colleagues, customers and partners.


0%

4%

8%

12%

16%

20%

CQ4 '06 CQ3 '06 CQ2 '06 CQ1 '06

Intel Microsoft IBM Dell Cisco

R&

D a

s %

of R

even

ue

$4.06B R&D SPEND

Source: Yahoo Finance, Company Financial Statements *Total FY’06

*R&D Commitment


Cisco—The Technology Innovator

$4.06 billion R&D investment, annually

Over 16,000 engineers working in more than 1110 labs worldwide

120 acquisitions to quickly enter new markets and add talent

More than 2000 patents have been issued to Cisco inventors

TelePresence— IP-based visual conferencing

CRS-1 Carrier Routing System

IOS XR—self-defending, self-healing operating system software

Recent Innovations

Development

Acquisitions


AON,IP Telephony, WirelessTelepresence

Develop New Technology

Different Types of Innovation

Network Admission Control(Microsoft, Symantec, others)

Partner w/ Other Companies

Design New ProductsCRS-1, IOS XR,IntegratedServicesRouter

Start New Business Models

Linksys, Meeting Place, NetSolve

Andiamo

Spin in Investments

Pursue Acquisitions

120 Acquisitions


Process Starts with Acquisition StrategyCisco Core Competency: 120 Acquisitions Since 1993

SharedVision

Short-Term“Win-Win”

Geographic Proximity

Long-Term “Win-Win”

ChemistryAnd

Execution


New Market Entry Market Expansion

Acquire leadership, channels and experience necessary to succeed

Access to large, new revenue sources

Expand product line

Strengthen current advanced technologies

Acquire technology and talent to drive leadership

Allow expansion into adjacent growth markets

ALL DEALS STRENGTHENOUR CORE BUSINESS AND PRODUCTS

+The Role of Acquisitions at Cisco


Wireless

New Market Entry Market ExpansionStorage Networking

Home Networking

Digital Video

Security

Data Center Networking

Voice

Home NetworkingCore Business

BCN Systems, Inc.

Voice

Acquisitions Since 2002

http://wwwin.cisco.com/HR/EC/EmpNews/Display/Ds.cgi/102002/1098310222002?Db=1098310222002&C=WC66848&Do=html&Dl=102002

http://actona.com/Index.html

http://www.procket.com/index.shtml


Hercules Sales Centre

– European Sales Operations Centre, Lisbon, Portugal

– € 24-36 million investmentover 3yrs

– Provides Sales SupportthroughoutEurope fromApril 2007

34

Investment in Europe


Play Learn

LiveWork

Changing the Way We Work, Live, Play, and Learn

The Cisco Vision is a Reality


Welcome To The Human Network

The Human Networkrelies on The Network as a Platformto deliverThe Quadplay everywhereto enableLife’s Experiences

Our Positioning Of Cisco’s RoleIn Web 2.0 To The World


In Government

In Business

We are the Pioneers

Europe 2.0will change the face of Europe and Europe’sglobalposition

Europe 2.0 is happening NOW


Our Key Objectives for Capturing the Next wave of Opportunities

Using network as a platformto enable business transformation

Developinglong termstrategicrelationships

Enhancing the way we sell


Europe is transitioning to a 2.0 world

Productivity growth & personalisation are key competitive drivers

The Network is the Platform to enable this change

In Summary

building chris dedicoat, europe 2 - cisco · * internal estimate source: press clippings; jp...

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