Chuck Robbins, the present Senior VP of Operations, Cisco, will succeed John Chambers as CEO of Cisco from July 26, 2015. Chuck Robbins will take the reins at a time of captivating, charming, and controlling period for technology as a field as well as technology as a changing element in Cisco.
From Cisco, the routing specialist, to Cisco, the dominant networking giant, has been the ‘signature accomplishment’ of John Chambers during his remarkable 20 years period as CEO.
Veritable transition from a purely hardware business to a highly profitable union between software & hardware ( just as the analog and digital computers of the 1980s ) will probably be the perceptible ‘ shift ‘ that will mark Chuck Robbin’s task.
There are challenges – technological & organizational – for every big organization when leadership changes take effect.
Let me give my take here :
1. Organizationally speaking : For Cisco, this is a seamless transition marking the leadership change with ‘ continuity ‘ as the mantra. Both John Chambers and Chuck Robbins have sales background and Chuck Robbins has been a close adviser to John Chambers. Chuck Robbins knows the business and culture of Cisco well. ‘ Breaking-in ‘ period will not be needed. He enjoys immense credibility and empathy. Cisco has an imaginative, well crafted plan and a talent pipeline that is strong in many areas, and Chuck Robbins as CEO can effectively ‘ leverage ‘ these internal advantages. He may also take less time to get up to speed to the challenging tasks ahead. Cisco’s strong resources and loyal customers also can make his task relatively easier.
Leadership change has all the positive ingredients of a smooth transition and performance after the change will only mark the grade.
2. Technologically speaking : Most analysts see R&D and Marketing in ACI ( Application Centered Infrastructure ) and SDN ( Software Defined Networking ) technologies as the decisive, transitional, and turning point in Cisco’s growth now. Last July, Cisco introduced the ACI product line of Switches & Software. It competes with SDN technology for VMware and smaller players like Switch Networks and Cumulus Networks. SDN, Open Source Technology, and White Box Switching are the three key aspects likely to lead the way for disruptive transitions in the ‘ Networking Industry’ in future. To put this in clear perspective : (a) Enterprises need a new approach to network their expenditure and that may be fulfilled with SDN; (b) Open Source Technology is a wholly new approach to development that promises faster development, better customization, and improved functionality; and (c) White Box Ethernet Switches offer IT the advantages of flexibility, lower Capex, and potential of lower operating costs as compared to traditional ‘ Black Box ‘ Ethernet Switches. Dell, HP, and Juniper are also entering White Box economies.
These could well contribute in a significant manner to the changes from Cisco in future. Analysts also cite Analytics, Computing Power, and Software for the IoT continuing with an accelerated pace.
Final Word : Cisco Live, the grand Customer Event, to take place in San Deigo in June 2015 – a month before the leadership change – where CIOs, Network architects, and rank & file admins from thousands of Cisco’s customers will be at the show. This will probably where one can get more information on their future strategies and listen to the speeches of the leaders while the baton is being passed.
” Dieu avec nous “
Tuesday, May 12, 2015 – 8. 39 a.m. ( IST )
Tidbit : ” Vendors to watch in the White Box scenario ; Cumulus, Big Switch, Pica8 as well as associate hardware chip manufacturers like, Broadcom, Intel, Accton, Quantum, Mellanox, XPient, and Centex.”
Come September 1, 2015, Reserve Bank of India’s directive ( RBI, May 7, 2015 ) to the banks to push aside magnetic stripe cards and bring in new ‘Chip based’ and PIN enabled Credit/Debit and Domestic/International cards will take effect in respect of issuance of new cards. A new time-line will also be set up for phased mitigation of the existing magnetic stripe cards. The chief aim is to protect the customers from frauds of skimming & cloning of cards as also data theft. While some banks have already adopted the new EMV Chip and PIN based cards, a large number of them still continue with the magnetic stripe cards.
There are 27 Public Sector Banks, 22 Private Sector Banks and about 45 Foreign Banks with branches in India.
“The number of cyber crimes in India may touch a figure of 3 lakhs this year, almost double the level of last year. Phishing attacks of on-line banking and cloning of ATM/Debit cards are common. Financial transactions done via mobile devices will be 55 – 60% in 2015 increasing the level of risks.” says Assocham, the Industry body in India. As checks and balances to minimize the impact of such attacks and to arrest the damage, RBI in March 2013 asked banks to bar the International usage of Credit & Debit Cards unless customers specifically ask for this feature.
The new cards will have a microchip embedded using authentication technique to help prevent data thieves from stealing the card holder’s confidential information. Chips are not swiped, but inserted in to a terminal with a chip reader. When used with such readers, chip cards are more secure than magnetic stripe cards. Chip card will provide a special code every time a purchase is made which will make it difficult for scammers to play foul games of fraud. Merchants, however, need to change and install new readers to work in tandem increasing the cost and time factor.
About 80 countries are already using this EMV Chip and PIN based cards. Europe started early in 2002. Canada and Mexico also had for many years. Surprisingly U.S.A. has remained far behind in adoption ( reasoning for inducement like costs/benefits and logistics delayed the process of adoption for long ) and has now set a deadline to move wholly to EMV Chip and PIN based cards by October 2015.
Our memories are still fresh with the December 18, 2013, event of Payment Card Data stealing from nearly 1 million customers of the major retailer, Target Corp ( U.S.A.) starting on the busy Black Friday weekend ( from Nov 27 to Dec 15 actually ) involving their 1797 stores and 2 credit Card Issuers. Precautionary measures of protection to eliminate such security breaches have been in the forefront of concern for the policy makers and financial administrators.
The new technology is mature. Identifying information embedded in a microchip is more difficult to counterfeit. Magnetic stripe cards are vulnerable to data theft and other frauds. EMV Chip & PIN based cards are more secure.
Let’s now turn our attention to the three key factors I see :
1. India is a super growth large economy now. Crime elements could organize themselves and create havoc to the financial stability of the merchants/organizations/individuals.
Early measures of prevention like this one by the RBI will remain a prudent action curtailing the credit card frauds.
2. Young millennials are leaning more towards debit cards and try to keep themselves away from borrowing money heavily as was the case, specially, before the financial melt down of 2008. They are more anxious and concerned about the frauds and seek ways to protect their financial wealth.
The present move by the RBI may well be a step in the right and safe direction.
3. New chip can provide a fillip to the entrepreneurs who will begin thinking of new ways of financial services offerings by new players/startups/even legends of hi-tech like Microsoft, Google or Apple that can pose stiff competition to banks and may even try to push the banks away wholly on this aspect. All one needs is to create an acceptable mode of service with an appropriate software that will pay the merchants for all purchases made by individuals.
This move has the potential to bring cheers to the new generation and improve the financial services.
In sum, while lauding this effort of RBI, may this be said that ‘universal acceptance of cards in different countries for business in shops for purchasing, business in restaurants for dining, and business in railway stations for ticketing and the like(s) will be far less painful and could well turn to be enduring and enlightening’.
” Dieu avec nous “
Saturday, May 9, 2015 – 11. 39 p.m. ( IST )
Tidbit : ” Biggest Credit Card breach at US retailer was an attack against TJX Cos; the parent of TJ Maxx and Marshalls in March 2007. The company disclosed that data from 45. 7 million payment cards have been stolen by hackers over 18 months. It could have been more than 94 million account numbers, the banks later asserted.”
Steve Easterbrook’s, President & CEO of McDonald’s’, turnaround plan details ( spelt out on May 4, 2015 ) lay more emphasis on ‘Brand Building’ ( Image ) and ‘ Corporate Restructuring ‘ ( Organizational ) than on food quality, consumers’ taste or speed of delivery. Confidence gained and reputation held by McDonald’s over the years on these aspects may well be the morale booster for it.
McDonald’s CEO has preferred to take a ‘ Slow ‘ ( steady and a reasonably long-term ) approach to solving the problems rather than a ‘ Quick ‘ ( focus on menu although CEO has broached on the possibility of pre-determined topping combinations TasteCrafted as an opportunity ) approach.
Reason(s) for the turnaround :
Underutilized assets or poor management performing below what is expected and an early need to avoid a future crisis or trauma.
Some Obvious Details :
– McDonald’s has 14,300 locations in U.S.A.
– Chipotle ( a recent competitor) has 1800 locations.
– Shake Shack (another recent competitor) has fewer than 40.
– McDonald’s has annual sales of $ 2. 5 million.
– Wendy’s has annual sales of $ 1. 6 million.
– Burger King has annual sales of $ 1. 2 million.
– Shake Shack has annual sales of $ 4. 6 million (because of its concentration in New York and high volume sales).
– Chipotle’s annual sales is also higher (because of fast moving line and higher product prices).
What is proposed :
(1) A new Organizational Structure from July 1, 2015, with different segments built more around business similarities rather than simple geographical locations. (a) U.S. market ( with 40% operating income ); (b) International Lead Market comprising Australia, Canada, France, Germany & U.K. ( with 40% operating income); (c) APMEA or Asia Pacific and Middle East & Africa, comprising high growth markets like China, Russia, Italy, Poland, South Korea, Spain, Switzerland, & Netherlands (with 10% operating income ); and (d) Foundational Markets comprising remaining countries – India finds itself in this division ! (with 10% operating income).
This proposal is expected to enable quicker and bolder decisions on market by market level.
(2) Changing the ratio of Company Owned and Franchisee restaurants. (a) A net addition of 300 restaurants by 2015 end; (b) An expenditure of $ 2 billion in capital to open 1000 new restaurants around the Globe; (c) Plans to sell 3,500 Company Owned restaurants to Franchisee restaurants. Franchisees will make 90% to the present 81%.
This proposal is expected to drive energy, ownership pride, and accountability of franchisees. Focus on value and innovation to improve Core Quality becoming a Chief part of franchisees.
(3) McDonald’s may make money by selling its assets (though the route is not clear at this juncture); Can achieve employee reduction by virtue of increasing the percentage of franchisees; and may give $ 8 billion to $ 9 billion back to shareholders as part of a buy back plan.
This proposal is expected to emphasize Human Resources Effectiveness producing optimum performance instead of adding more resources. Expects cost to be cut by $ 300 million per year.
What are the Expected Benefits and Advantages ?
(1) Image improvement and growing reputation in addition to creation of a better marketing plan to build and sustain the organization.
(2) Reduction in costs and improvement of services with a systematic approach to be followed by operations realignment, plants closing, and divestiture of assets.
(3) Better utilization of employed resources by the 4 Corporate Segments.
(4) Further strengthening of Financial Control.
(5) Refocus on Marketing/Advertising Campaigns & Digital efforts with a view to build ” Brand Trust “.
(6) Renewed focus on sourcing of ingredients, reformulation of recipes, and innovation.
What are the expectations of Analysts/Investors/Shareholders/ and others ?
(1) Felt the plan woefully short on details regarding ‘operational turnaround’ widely expected by them. The turnaround can actually take more time than anticipated.
(2) Stephen Anderson of Miller Tabak & Co described the sentiments of investors as “prove it”.
(3) No clear enthusiasm to Steve Easterbrook’s plan.
(4) Shares went down by 1. 7% after the announcement of plan details. Stock closed at $ 96. 13.
What is the final Word ?
McDonald’s with its Golden Arch is an established Brand Name. McDonald’s is also synonymous with ‘burgers’.
Will the turnaround plan help McDonald’s stay on top will be what everyone would like to watch.
” Dieu avec nous “
Wednesday, May 6, 2015 – 6. 39 p.m. ( IST )
Tidbit : Watch out for McDonald’s April sales details on Friday – May 8, 2015.
Steve Easterbrook, President & CEO of McDonald’s Corp (MCD), U.S.A., strongly, forcibly, and impressively stressed on April 22, 2015, ( 1st Quarter results revealed a 2. 3% decline in Global sales and reduction in guest traffic ) about revitalizing the company with lasting quality and maximum performance recording higher growth soon.
Labor, Social, Environmental issues, and even attracting the existing customers are posing new challenges and causing concern now and hence the CEO’s reassurance.
McDonald’s is world’s leading Global Food Service Retailer with over 36,000 restaurants in about 120 countries serving approximately 70 million customers each day. More than 80% of McDonald’s restaurants worldwide are franchisees. It employs about 1. 9 million people. Its Golden Arch as a Brand Symbol has a strong Brand Identification with the arch embedded strongly in customers’ minds. People found McDonald’s friendly and nurturing. Its burger is popular everywhere. It could do with its famed products with minor variations in countries due to taste and culture differences. It could have a marketing/publicity campaign easily in most countries without big changes.
With modern trends like networking and friendly culture reigning supreme coupled with changing tastes and personal health preferences of specially the younger and older groups equally, McDonald’s offerings need to be loaded high on value expectations now. The more conventional or usual approach of ‘cost cutting’ may not be adequate to make it profitable. McDonald’s has also made its good intentions public to increase the hourly wage of employees by $ 1 from July 2015, but that didn’t much enthuse the workforce at this juncture.
McDonald’s is now compelled to think and act in terms of new ideas. Perhaps, revisiting its glorious days of 1980s/1990s may be in order. Remember the many programs that helped crystallize and reinforce its Corporate Image through Community Support Events.
– Ronald McDonald Houses providing free rooms to families visiting Children’s Hospitals; McDonald’s brought ‘Happiness’ to families.
– McDonald’s was the Corporate Sponsor of 1988 Olympics. It also sponsored other Gymnastics/Swimming events; McDonald’s brought a sense of ‘Festivity’ to the Sports persons and the viewers.
– McDonald’s promoted Monopoly Games and National Football League Sweepstakes; McDonald’s created an ‘Exalted’ appeal to the baby boomers.
– McDonald’s claimed nutritional value of its food through publicity; McDonald’s gained special ‘Honor’ for the nutritional facts and its concern for health.
– McDonald’s mix of sales promotion, advertising, and publicity couldn’t be matched by any of its peers in quality and quantity; McDonald’s ‘Glory’ was cast swiftly and effectively.
All of these helped promote goodwill for McDonald’s which pushed sales and guest traffic.
This brings my focus to the new ideas that McDonald’s can push to stay relevant and innovative as the leader. Three focus areas can be identified for the purpose. (1) Health Orientation/Nutritive Value of its Offerings; (2) Promotional mix with a different approach; (3) Enhanced focus on a new market.
1. Health Orientation/Nutritional Value : Notwithstanding the fact that McDonald’s tries to bring minor variations in regional markets, a scientifically based approach to adapt its offerings to local tastes and preferences may be in order. McDonald’s is a company known to take a study of norms, tastes, preferences, and language of customers before entering a market. Enhancement and more in-depth nature of assessment in terms of peoples’ receptiveness, demographic changes, and political & socioeconomic features may be cited as important. Youngsters all over the world are getting more familiar with the tastes of McDonald’s which can be taken advantage of.
2. Promotional Mix : A bottom-up approach to the promotional budget giving more leeway to the front line associates in selecting the technologies for setting the budget may be appropriate. Recent studies on innovation and newfangled approaches to problems identify the front line associates/managers as more equipped to meet the challenges and force the pace with bold initiatives. McDonald’s may already be on this course and the specifics relating to each of the mix parameters can be emphasized. Store layout or operations need to be based on set guidelines but can be less controlled. Franchisees have to be innovative on this aspect and prove themselves.
3. Enhanced Focus on New Market : McDonald’s proven Channel System of franchisees in bringing services to customers needs to be driven more energetically. Expanding the “India” market beyond the limit of experience can well be a priority. Indian market will be a challenging one for McDonald’;s. It entered India in 1996 as a JV and it has now about 250 restaurants. Growing Indian Middle class; fascinated teenagers holding a visit to McDonald’s as an act of high social prestige; general mental belief to perceive anything foreign as more than worth attempting and likable; penchant for on-line booking orders in this digital era; increasing number of social celebrations/birthday parties etc., – afford a great opportunity that is waiting to be tapped. When American youngsters now go in crowds to Zaxby’s and Chiptole leaving McDonald’s, Indians are gathering frequently in McDonald’s – a perceptible shift that can shape McDonald’s strategy. If it can prosper well in India, the confidence and experience gained will be immense for it to succeed in any other place with just a fraction of the effort. A target to double the number of restaurants in two years is practical. McDonald’s is a household name now and the interest coincides with the present climate of providing new experiences and improving the quality of life of citizens here.
Just recollect the ads which popularized McDonald’s in India : ” Toh Aaj McDonald’s Ho Jaye ” ( Translated in English it reads : ” Today we can do with McDonald’s ” ); or ” McDonald’s Mein Hai Kuch Baat ” ( Translated in English it reads : ” There is some matter in McDonald’s ” ). India’s fast food market will touch $ 78 billion by 2018. Currently it is $ 48 billion.
With India’s infrastructure getting better, advertising & communication becoming more popular and easier, making deep inroads in India will be more than satisfying and profitable. McDonald’s is also trying to move from ‘big to small’; from ‘disacknowledgement to acknowledgement” ; from ” disapproval to approval/agreement” . Confluence of thinking is the positive sign.
Steve Easterbrook, President & CEO, McDonald’s Corp, is expected to reveal and share his turnaround plans in just two days from now – on May 4, 2015. On 22 April, 2015, he reiterated firmly the words of Founder Ray Kroc : ” Take calculated risks; Act boldly and thoughtfully; Be an agile company “. He is also committed to making efforts to deliver ‘Contemporary Customer Experiences’ – in his own words.
Will McDonald’s make customers visit more frequently is what everyone will be concerned now.
Can McDonald’s force others in the same league to just be content to work around it and not compete will also be worth watching.
” Dieu avec nous “
Sunday, May 3, 2015 – 2. 59 p.m.
Tidbit : McDonald;s Corp (NYSE:MCD) Stock Price : $ 97. 80 ( May 1, 2015 closing ); Market Cap : $ 92. 60 billion; P/E Ratio : 21. 93; EPS : $ 4. 46; Shares Outstanding : 961. 12 million.