- Former Cisco CEO John Chambers, now a big angel investor and executive coach, believes a bloodbath is coming in the business world which will kill off many of today's companies.
- Amazon, and others that rise in its digital image, are taking their places.
- He says that Walmart knew Amazon was a threat over 15 years ago, when he was on Amazon's board, even though Amazon was a pipsqueak upstart in those days compared to the retail giant.
- His dire prediction also carries within it the seed of success that every manager needs to understand.
Former Cisco CEO John Chambers is now a big angel investor and executive coach. And he's got a strong message for everyone in business today: your company is probably going to die.
"There's going to be a new generation of digital players — and it's going to occur remarkably fast — that will unseat the incumbents," he told Business Insider. "40% plus of the large incumbents today and probably 70% of small to medium businesses will not exist in 10 years."
Chambers is of course known for his legendary two-decade-plus reign running Cisco that turned the company into a major tech player worldwide. In 2015 he retired from the CEO job and he stepped off the board in 2017
Since then, he's started a new career working with startups and is an advisor or executive coach for 14 of them and counting, some of them in stealth mode, he says.
We asked him what advice he gives to his advisees when it comes to competing with Amazon, the shark of today's business world. Amazon is a digital conglomerate with its teeth in everything from cloud computing and databases to home repair services and entertainment. It is constantly gnawing into new markets and often named as one of the the key reasons why incumbents are struggling. Those who have struggled to compete against Amazon say everyone should be watching their back.
Chambers' answer: look out as far as you can and be ready to change your company as soon as you get a whiff of an upstart that could become a threat.
Chambers calls this a "market transition" and he just published a book called "Connecting the Dots" about how to spot them and how deadly it is for companies that don't. As he loves to point out, most of Cisco's competitors in its early days no longer exist (you've probably never even heard of them) even the companies that were far bigger than Cisco back in the day.
He warns that companies are being killed off at an ever faster rate today by upstarts with better technology than they had 20 years ago. But, he says, that's also where the opportunity lies — a company today can go from tiny to Amazon-size far faster.
When Amazon was a pipsqueak
More than 15 years ago, Chambers spent a few years serving on retail giant Walmart's board of directors. "This is something that I know. I saw Amazon coming at Walmart," he said.
Chambers left the Walmart board after 2003. At that time, the iPhone didn't exist yet and Amazon was eight years, although it had already grown into a Fortune 500 company, employing 7,800 people. Amazon was more than a bookseller, too, offering everything from electronics to toys. 2003 was a banner year for Amazon: it posted a rare profit that year of $35 million on its $5.3 billion in sales. But it had been losing money for so long it had racked up $2.97 billion worth of debt and liabilities on the books.
In comparison, Walmart had nearly $245 billion in sales in 2003. Its $8 billion in profit was more than all of Amazon's sales that year.
The idea that Walmart would be worried about Amazon in 2003 should have been laughable. But it wasn't. "We knew they were coming and I was on their board," Chambers said.
"It took 21 years for Amazon to become more valuable than Walmart. It took Tesla, what? 14 years to pass GM. It took Uber, what? 7 years to pass Tesla. So it's accelerating," Chambers points out. "This speed is going to accelerate."
How do you deal with this? "You have to understand changing business models," he said. By that he means to always be in the know of the hot and interesting startups that your customers are watching.
Chambers adds, "You have to understand, especially if you are politician, that job growth will come from startups getting bigger. Big companies are not going to add [jobs] in part because digitization will add tremendous productivity, and in part because a number of them are going to go out of business."
