John Chambers Illustrates New Regulatory Influences on Business Strategy

Talking about why Cisco and Ericsson have created a massive global partnership, Cisco Executive Chairman John Chambers pointed out the key impact regulatory considerations now have on business strategy.

Noting that the technology industry requires speed, and while acknowledging that small acquisitions still make sense, Chambers said neither Cisco nor Ericsson could have positioned themselves globally for the anticipated coming markets by making big acquisitions.

The problem is that such deals simply take too long to get clearance. "If it takes six months to get through a regulatory board and then another year to combine,” Chambers noted.

If one believes “this industry will be won and lost in the next three years,” a big acquisition or merger is a recipe for failure. In fact, Chambers believes a partnership, not a joint venture or big acquisition, is the only way forward, if the market is moving so fast.

“While we are a huge believer in big-to-small and big-to-medium acquisitions, partnerships, if you can do them, are the way to go large-to-large. Joint ventures add an extra level of complexity, you have an over-riding group, a board, and that slows you down," said Chambers.

Ericsson and Cisco might be wrong about the required speed. They might yet find the partnership fails to deliver the expected benefits.

But the point made by Chambers about regulatory clearance is instructive. Business strategy in a fast-moving industry now is shaped in profound new ways by the time it takes to win regulatory approval of major acquisitions or mergers.  
Post a Comment

Popular posts from this blog

Voice Usage and Texting Trends Headed in Opposite Directions

What to Do About Industry Challenges? "Take the Package," One Exec Quips

Verizon has a Brand Promise Problem