Cisco Systems: A Novel Approach to Structuring Entrepreneurial Ventures

This business case study focuses on Cisco’s strategy of using acquisitions and alliances to gain access to world-class technologies and people. In June 1997, Mike Volpi, vice president of business development, was considering how Cisco Systems, based in San Jose California, could pursue the development of a solution for a new product idea: a networking opportunity in optical routers. In the case, Volpi considers whether or not Cisco should develop the product internally or pursue external talent more familiar with the technology and market segment. He wonders if the external route is the best strategy for getting the right product to market on time or if Cisco should build its own external venture, or perhaps even acquire another firm outright. To answer these questions, Volpi reviews a similar situation faced a year earlier when Cisco created a made-to-order company, Ardent Communications, with a mandate to create a product to answer a specific market need. Volpi reviews the deal because he believes that, with strategic and structural improvements, the spin-in model could be an effective way to address the challenges of raising funds, recruiting the right people and successfully executing with customers.