"Given its track record with other institutional innovations such as acquisitions and outsourcing, Cisco has a good chance of coming to exemplify a new world of “co-ordinate and cultivate” in the same way that GE stood for “command and control”."

Reshaping Cisco: The world according to Chambers | The Economist

How, exactly?

Instead of going back to a structure based on lines of business, it has developed an elaborate system of committees made up of managers from different functions. The job of most of these groups is to tackle new markets. “Councils” are in charge of markets that could reach $10 billion. For “boards” the number is $1 billion. Both are supported by “working groups”, which are created as needed. There are about 50 boards and councils, with some 750 members. Cisco has given up counting the working groups, because they come and go so quickly.

Such attempts to combine a functional structure with cross-functional groups, called a “matrix”, have mostly failed… But Cisco seems to have avoided such blockages.

For one, the firm developed what Mr Galbraith calls a “culture of collaboration” from the top down. Mr Chambers cultivates a co-operative management style. Some councils do without a formal leader and function more like a sports team. Many managers have leading roles both in a function and on a council or board, which fosters co-operation. How well managers do in teams determines 30% of their bonuses. There have been casualties: whereas those who work well with others have been promoted, lone fighters have been pushed out. As a result, a fifth of Cisco’s leadership has left the company.

Second, Cisco has given itself a kind of constitution. There are “replicable processes”—jargon for rules covering how the groups are set up, how their work is evaluated and how decisions are taken. There is also a “common language” in which groups must describe their work. Each has to come up with a statement that includes a five-year vision, a two-year strategy and a ten-point execution plan. This not only imposes discipline but also makes decisions transparent.

Third, the firm—to borrow a choice Silicon Valley expression—eats a lot of its own dog food: digital tools that allow cheap and efficient communication. These include wikis, social networking and web-based collaboration services, of course. But the most important tool is TelePresence, so that nuances such as body language and tone of voice, essential ingredients of face-to-face meetings, are no longer lost. The number of TelePresence meetings at Cisco averages 5,500 a week. This has also helped the firm to cut its annual travel budget by $290m, or more than half.