I’ve been fascinated for years by how some companies can do well by expanding offshore; sadly, most don’t succeed. It’s also interesting that becoming a national player seems to be an evolutionary process for a company before moving into the international space — a feat that only or two companies are able to achieve. I watched this with Japan in the 1960s and ‘70s. Sony made the transition from national to international brand quickly, while Japan’s car companies struggled to break out to international customers.
I worked for IBM long after it had become a multinational company. I learned that the company’s success was tied to a strategy of establishing entities as local businesses in countries they wanted to expand to. This process allowed them to function far more successfully than competitors who just tried to open up sales offices. Up until now, that IBM process was my gold standard; one that Lenovo, arguably the most successful Chinese company in terms of multinational acceptance, emulated.
Cisco’s has executed IBM’s strategy even better with the launch of its Country Digital Acceleration Program in relatively insular South Korea. It is now my gold standard for how to achieve foreign market penetration.
Cisco’s CDA Miracle
While I’ve been covering Cisco’s CDA program for some time, I’d only recently been briefed on its origins. Chuck Robbins, Cisco’s senior vice president of sales, conceived it — a seemingly impossible feat. Sales are typically a tactical organization focused on monthly quotas, quarterly sales, and then annual performance. A program like CDA is strategic, meaning there is a ton of investment upfront with the full benefits appearing years in the future.
An expensive strategic program like CDA should be outside the purview or interest of sales. It is a CEO-driven program, which partially explains why Chuck Robbins has been such a great fit as CEO. He has the sales experience, which is critical to the CEO role, but also the ability to think strategically. He is uniquely suited to run Cisco with these typically contradictory skills.
A tactical sales approach paired with quid pro quo is also typical in multinational expansion planning; you give something to the country in exchange for a rapid return on that investment in commensurate sales. The CDA program isn’t built on this approach, but rather focuses, initially, on building and sustaining trust. Once trust is established and maintained, the relationship can lead to sales and long-term engagements.
Think of how often a company entered into a trial with a new product; they will often co-fund to build advocacy. CDA works similarly, but on a large scale and without that product focus. It is funded, but unlike these other programs, the budget comes from corporate. It doesn’t impact the local branch’s income statement. Like the IBM approach, part of Cisco’s approach is to build local resources to meet local requirements that typically include the company’s contribution to the local economy. This approach is critical given CDA’s government focus.
Cisco then co-funds efforts the government prioritizes to government specifications. By doing this, Cisco demonstrates three things: it does what it says it will do, resources being used in the project are legitimately locally sourced, and product representations align with product performance. In short, they build trust. Once trusted by the government, they now have a significant beachhead to sell into the country as a trusted and favored government partner. And, they gain advantages in line with a local company.
Cisco in South Korea
In South Korea, this program is still in its early stages (they have yet to execute), but they had already established a presence in the country. That presence, as noted, is critical to the success of the effort. They then located someone who had the contacts, reputation, technical education, and initial trust of the government and brought them on board as a liaison. This liaison is a keystone to this process, and it took them over a year to locate and acquire this critical talent. Many other companies churn and waste time finding the right people in government to work with; Cisco’s process appears to avoid that problem.
The initial effort is focused on showing the government Cisco is worthy of trust for national government-level projects, which often substantially exceed what a typical enterprise would be willing to undertake. You might call it “kicking the tires” at a corporate scale. This liaison also helps establish partnerships with other critical local players and helps the local unit of Cisco pivot to understand the unique needs of the country hosting this effort.
In this case, one of the things that make South Korea different from the U.S. is the expectation of speed. For instance, unlike the U.S., if you order cable, you get it in seven hours. In the U.S., you’d be lucky to get it in a month. South Koreans expect and generally get a response level unmatched in most of the world. If you don’t get that one critical difference, you won’t be successful in the country. Another example is South Korea’s version of Amazon, which delivers in six hours, not six days.
What Cisco is doing in Korea can be found here; I’m not going to cover that until it is implemented.
Making International Moves
Moving out of your home country is always tricky. Establishing a viable local presence that is presented as local, is a best practice. Cisco takes this much further with CDA and has built a government-focused trust practice that appears to create a far more robust foundation. This practice isn’t directly focused on building sales but on creating a validated trust that can prequalify the company for other large commercial or government projects at scale. Once trusted, a foreign company can approach the status of a local company and gain many of the benefits. This approach creates a better foundation for future sales, which should eventually exceed what the sales-focused process is capable of creating.
Put another way, focusing purely on sales tends to damage trust and the company’s long-term opportunities. It is why most firms fail to go multinational. By focusing on trust it is possible to create a far stronger foundation for long-term relationships in a foreign country like South Korea.
Having the CDA program designed and proposed by the head of sales should have been impossible, but instead turned out to be the best path to assuring the program’s success; the most potent likely detractor is instead the primary advocate. Chuck Robbins continues to impress as a very different kind of CEO, further validating him as my CEO of the last decade. This program also requires an executive who can execute it. The in-country executive Bum Coo Cho and the program leader Dr. Guy Diedrich ensures all of this works. Helping to secure the future of the CDA program is Cisco’s Chief People, Policy, and Purpose Officer EVP Fran Katsoudas, who has become a substantial internal supporter of this effort and approach.
Something else to consider is whether elements of the CDA program can be applied to speed up acceptance in new enterprise accounts that don’t know your company yet. Trust is one of the most critical parts of getting the deal and keeping the customer; maybe a process that focuses on trust first, rather than closing deals, would have a more robust and longer-term result.