Strategic Challenges
The analysis of the industry shows that the Cisco Smart Cities initiative can experience some challenges which are directly connected to its factors of success. First of all, the company needs to become one of the most valuable innovators in the field of the Internet of Things (IoT). As the industry is extremely innovation-driven, new software and hardware produced and introduced by Cisco have to challenge other companies to remain competitive (Paroutis, Bennett & Heracleous 2014). While in other markets the business remains one of the most influential competitors, the IoT technology is a place for various up-and-coming enthusiasts, where start-ups and big corporations rival with each other on the grounds of technological advancements. However, if the company chooses to use the wrong strategy here, its technological progress may fail to reveal itself (Kane et al. 2015). The idea of a smart city involves a number of possible types of equipment and software, and Cisco should work on each of them to remain competitive.
The importance of innovation is flashed out in Cisco’s strategy, but the company focuses on acquisitions as the primary process of knowledge and resources acquisition. Thus, the business’ second challenge lies in its risky purchases. While Cisco acknowledges that its purchasing options may be unsustainable, it pursues them regardless. The field of the IoT changes very fast which further puts the corporation in a strained position. Its focus on software and cloud services, for instance, is reasonable (Moore 2017). However, some of the hardware developments should not be overlooked as well. As Cisco expands its activities, it may lose sight of the significant shifts in the industry. Currently, Cisco Smart Cities does not present anything that other similar projects cannot suggest. Therefore, its need for innovation, mentioned above, pushes the company not to reconstruct its existing structure but to acquire more interesting emerging businesses (Toppenberg, Henningsson & Shanks 2015). Such a strategy may lead to adverse outcomes if Cisco makes one wrong step.
Finally, the initiative of Smart Cities requires security and protection even more than other types of technology. For example, if one firm experiences a breach of security and believes that its data is compromised because of Cisco’s unprotected services, the damage usually expands to its partners and clients. It is a major problem as well. However, if someone successfully discovered a weakness in a smart city’s system, then that could put the whole urban area at risk (Albino, Berard & Dangelico 2015). In this case, financial losses and data exposure could be accompanied by equipment tampering and a failure of the city’s infrastructure. Even such a small problem as a malfunction of the traffic lights can lead to accidents, injuries, and other grave consequences. Moreover, the Smart Cities initiative often offers multiple solutions for one city, making it open and vulnerable to a plethora of dangers. This issue concerns not just money and information but also the citizens’ safety.
Current Strategy
The strategy of Cisco Smart Cities is similar to the primary objectives and goals of the corporation as a whole. It is understandable as Cisco leads in a number of related markets, being one of the most recognised providers of equipment for the Internet access, company communication, and data storage. Thus, its current goals for the Smart Cities initiative resemble those of its overall strategy (Willems 2017). First, the company places the primary focus of its innovations on developing a single and fully operational city network (Willems 2017). It is a reasonable strategic move as city governments may want to have all operations connected to each other and available at all times. The developments in the field of the IoT centre on the same objectives – structuring the system to unify all activities into one network (Albino, Berard & Dangelico 2015). The drive to innovate puts Cisco on the path of following the customers’ needs. Therefore, it realises the need to overcome the first strategic challenge outlined above.
The company’s desire to implement various technologies into its network also leads to acquisitions. However, as the growth strategy of Cisco has been based on purchases for many years, the corporation has become acquainted with the benefits and drawbacks of this procedure (Moore 2017). While this strategy may seem unstable for many reasons, Cisco manages to sustain its profits while aggressively acquiring new businesses almost every year (Cisco 2017). In this case, the Smart Cities programme calls for the growth of the company as its acquired resources may not be compatible with its new objectives. While software developers and programmers can manage to perform the same tasks, the range of operations that should be performed to equip a city with all necessary functions entirely is simply too big. Moreover, as the speed of completion is also of the essence, acquisitions help Cisco to present new developments in a shorter amount of time through working with other businesses. Cisco partners with many brands as well, which also raises the pace at which it can deliver the latest solutions.
Lastly, Cisco puts a significant amount of effort into developing a reliable security system. As Willems (2017, para. 5) notes, the “fundamental importance of network security” is outlined in every strategic plan of the business. Cisco admits that the risks following the installation of software to support the city are extremely high and incorporates safety concerns into its primary objectives. This part of the strategy directly addresses the central challenge of the company. The security programs protecting the smart city should be even more advanced than those that operate in current products of Cisco. For that purpose, the company focuses on finding new businesses that can be acquired to develop new security options. The corporation studies the treats that endanger its business products and implements this knowledge into the basis for the new programme. Also, Cisco already has 11 cities which it can use for further research (Moore 2017). Currently, there are no known accidents where the security system of these cities’ networks was breached or compromised.
Strategic Options
The current strategy seems to rely on the issues of innovation and security heavily. Therefore, a number of possible adjustments can be presented. While Cisco’s chosen direction is in line with the latest trends and concerns, it still can be improved. First of all, the company needs to present its efforts on a more global scale. It is not surprising that Cisco implemented its Smart Cities initiative in a number of European countries and the US, as these places have urban areas with a highly-developed infrastructure. Moreover, these territories have the necessary funding to consider these projects. However, the reach of Cisco’s innovation can be spread to attract other countries and cities. For instance, Cisco works with a number of Asian countries and Australia. However, these regions can be explored further to present more options to their governments. Canada is another state that does not currently have any engagement with the company. Cisco can benefit from concentrating on unexplored areas.
It is possible for Cisco to develop new solutions that would answer the safety requirements of its new products. One of the latest initiatives presented by the corporation is Kinetic for Cities, introduced in 2017 as a “first-of-its-kind Internet of Things (IoT) operations platform” (Cisco 2017, p. 3). This project combines all monitoring and operating processes that are spread out through the entire city into one system that is easy to manage. This product can attract a significant amount of attention from towns that are interested in the Smart Cities programme. Implementing a new security system that should be developed by the company in the upcoming years would provide urban areas with a more protected environment.
The Smart Cities initiative is interested in improving the environment of the urban areas. Therefore, the company can focus on creating new smaller projects that would work on the parts of the programme that are not as highly developed. For instance, current products are concerned with air quality, hazardous situations and noise levels (Moore 2017). Cisco can take other possible environmental issues and devise a structure for their monitoring and prevention. The prediction of various natural disasters can be implemented into the system along with other assessments. While these programs may exist in the market, the unification of all services can be more attractive to consumers.
Options Assessment
Consistency
The proposed options of strategy adjustment fit in with the main vision of the corporation. It is clear that Cisco wants to be a leader in the IoT technology on the global market. Therefore, the proposition to engage more countries and cities seems logical. Furthermore, the suggestion to add new safety measures also adheres to the company’s strategy. A new solution would be helpful to push Cisco’s innovations forward. Finally, new environmental features for the Kinetic would be a nice addition to an already broad range of services that Cisco markets to its consumers. The corporation is always looking for new opportunities of acquisition. Thus, this option seems relevant to the primary objectives.
Competitive Advantage
A global strategy would put all competitors below Cisco in their place on the IoT market. The focus on security could attract more customers and ensure more prominent and financially prosperous cities in the high quality of Cisco’s products. The company already defeats many competitors because of its aggressive acquisition policies. Therefore, by obtaining new technology and resources, Cisco can become even more competitive than before. All three propositions add to the level of competitiveness of the corporation.
Financial Viability
The options outlined above require some additional financial resources to be implemented. However, Cisco’s latest income statement shows that the corporation increased its gross profit as it lowered the cost of revenue and decreased its operating expenses (Table 1). While its net income declined in comparison to 2016, it is still bigger than it was in 2015. The proposed suggestions for improvement align with the primary strategy of the company. Thus, it has most likely included similar expenses into its future plans. The recommendations remain viable because they do not ask for any drastic or risky changes.
Table 1: Cisco Operating Income. (NASDAQ 2017).
Customer Needs Satisfaction
The suggested options are all targeted at acquiring more customers. The proposition to focus on global marketing will allow Cisco to attract a new niche of interested clients. Also, security concerns remain one of the most significant parts of customer satisfaction in this market. By following these suggestions, Cisco may enrich its current customer base with new clients. The idea to add more environment monitoring software may help attract customers who are currently considering other products and want to have a single platform for all services. Moreover, a wider range of functions can satisfy clients who are using products from other companies which lack the same quality of technology.
Response of Competitors
As rivalry in the market of the IoT technology is continuously becoming more and more vigorous, competitors’ responses can vary from one firm to another. Some companies may try to purchase businesses that are similar to Cisco’s acquisitions. Others may focus on different environmental features or present a solution that will somehow make software management even more comfortable. Cisco is known for its acquisition policies, which makes the first possibility low. It will be difficult for smaller firms to compete with Cisco in the global market, as they may not have the same stability of income sources.
Feasibility
The options outlined above are feasible as they correspond with the corporation’s ideas. Cisco’s strategy can easily handle the addition of new products and solutions for its customers because it always looks for new ways to expand its product line. Furthermore, the company has already entered the global market and focusing on it more than before will not stray from the current mission significantly. Environmental concerns and sustainability are currently at the centre of attention for Cisco (Cisco 2017). Therefore, adding new features to its Kinetic seems like a reasonable idea as well.
Robustness
Currently, the market for the IoT and smart city technology still seems new and underexplored. New opportunities arise every year, and the speed of innovation increases as well. The proposed changes do not oppose the current strategy and are based on existing resources and abilities of the company. By following these additional changes, the Smart Cities project can become more profitable and be a viable source of income for the corporation. Improved software and equipment will further promote Cisco’s growth, while its newly acquired businesses may lead the research in areas where global recognition and a broad range of products matter the most.
Options Implementation – Summary
The proposed changes should be implemented simultaneously to yield the best results. However, if the company has to focus on one suggestion, Cisco should start by developing new security options for its products as security improvement is already a part of their future strategic plan. Cisco can become a leader in the IoT market worldwide if it ensures that its software is almost impossible to hack. Moreover, a new range of products can also make the business’ products appealing as environmental issues become more and more serious every year. All in all, Cisco’s implementation plan should start with security, be followed by new services and finished with entering new markets.
Reference List
Albino, V, Berardi, U & Dangelico, RM 2015, ‘Smart cities: definitions, dimensions, performance, and initiatives’, Journal of Urban Technology, vol. 22, no. 1, pp. 3-21.
Kane, GC, Palmer, D, Phillips, AN, Kiron, D & Buckley, N 2015, ‘Strategy, not technology, drives digital transformation’, MIT Sloan Management Review and Deloitte University Press, vol. 14, Web.
Moore, J 2017, ‘Cisco strategy bets on software to deal with cloud shift’, TechTarget, Web.
NASDAQ 2017, CISCO income statement, Web.
Paroutis, S, Bennett, M & Heracleous, L 2014, ‘A strategic view on smart city technology: the case of IBM Smarter Cities during a recession’, Technological Forecasting and Social Change, vol. 89, pp. 262-272.
Toppenberg, G, Henningsson, S & Shanks, G 2015 ‘How Cisco Systems used enterprise architecture capability to sustain acquisition-based growth’, MIS Quarterly Executive, vol. 14, no, 4, pp. 151-168.
Willems, C 2017, Getting smart on the future of cities, Web.