1 © 2003 Cisco Systems, Inc. All rights reserved. Cisco Innovation Patrick Wetterwald Cisco Technology Center France

2 © 2003 Cisco Systems, Inc. All rights reserved. Overview of Disruptive Innovation

333 © 2003 Cisco Systems, Inc. All rights reserved. Disruptive Innovation Business Models and New Markets, not Technology Sustaining innovation – anything that makes current products and services better, faster or cheaper Disruptive innovation – creates new markets or offers more convenience or lower prices at the low end of an existing market

444 © 2003 Cisco Systems, Inc. All rights reserved. Disruptive Innovation and “Overshoot” A Key Driver of Market Transitions Performance Time Performance that customers can utilize or absorb Sustaining innovations Disruptive Innovations Entrants nearly always win Incumbents nearly always win Pace of Technological Progress Source: Innosight

555 © 2003 Cisco Systems, Inc. All rights reserved. Non-consumers or Non-consuming occasions Time Low-End Disruption Target over-served customers with lower-cost business model Performance Time Different Performance Measure Sustaining Innovation Bring better products into established markets New Market Disruption Compete against non-consumption Two forms of Disruptive Innovation Wal-Mart, Costco PC, Wireless Telephony Company improvement trajectory Customer demand trajectory Source: Clayton Christensen

666 © 2003 Cisco Systems, Inc. All rights reserved. Why Disruption is So Powerful Predictive and Pragmatic Can determine if (and when) a market is ripe for disruption Enables firms to tap new growth markets Low-end of existing markets (over-served customers) Brand new markets (non-consumers) Disruption is about business model innovation Much harder for incumbents to change their business models than adopt to new technology Creates “double bottom line” impact As disruptions improve, growth AND margins expand

777 © 2003 Cisco Systems, Inc. All rights reserved. Cisco – History of Disruption “Leading Supplier of Enterprise Internetworking” Late 1980s – Multi-Protocol Router enables LAN internetworking to become Enterprise Internetworking New market disruption that empowers departmental users of IT and eventually displaces interoffice mail and “sneaker net” 1991 – Cisco Blue – low-end disruption of SNA SNA over IP replaces dedicated SNA private line networks – Cisco acquires LAN switching Cisco Fusion was Cisco’s strategy for hybridizing routing and switching, capturing the growth potential of a low end disruption

888 © 2003 Cisco Systems, Inc. All rights reserved. Cisco – History of Disruption (cont.) “Worldwide leader in networking for the Internet” Late 1990s – Ethernet+IP vs. ATM internetworking Low cost, “good enough” Ethernet + IP disrupts ATM in the battle for Enterprise D/V/V convergence 2003 – Cisco acquires Linksys Captures growth of new market disruption (home networking) 2006 – Cisco TelePresence Integrated system that delivers “in person” experiences, simply

9 © 2003 Cisco Systems, Inc. All rights reserved. Technology Center

10 © 2003 Cisco Systems, Inc. All rights reserved. Organization: who we are Technology Groups Access Aggregation Ethernet Access Internet Routing Internet Switching & Services IOS Technologies Network Edge Aggregation & Routing Network Management Optical Storage Voice Wireless Staff of : Engineers BizDev Mgr Program Mgr Chief Development OfficerHorizontal Business Functions Finance - HR Manufacturing Sales - Marketing Tech Center EMEA Technology Center Corporate Business Development Office of the President

11 © 2003 Cisco Systems, Inc. All rights reserved. Cisco : organizational view

12 © 2003 Cisco Systems, Inc. All rights reserved. Technology Center : Mission Nascent Tech/business trends InitiateIncubateAccelerate Disruptive Adjacent markets Adoption Product enhancement Idea generation Idea portfolio Idea Traction Patents Ideas becoming Products New businesses

13 © 2003 Cisco Systems, Inc. All rights reserved. Technology Center : Background … … Partners Engineering Partners Engineering Global Alliances Global Alliances Technology Center Technology Center …2006 Products Partners Standards

14 © 2003 Cisco Systems, Inc. All rights reserved. Growth/Innovation bets Healthcare 2.0 Connected Life Innovation Pipeline Emergent Collaboration

15 © 2003 Cisco Systems, Inc. All rights reserved. Emergent Collaboration

16 © 2003 Cisco Systems, Inc. All rights reserved. Emergent Collaboration - Enterprise focus An Enterprise focused immersive environment, using network intelligence to simplify all forms of communications and enhance collaboration.

17 © 2003 Cisco Systems, Inc. All rights reserved. Healthcare : partnership platform Devices People Telehealth Systems Med 2.0 ACCESS, Network PACS MDC Internet

18 © 2003 Cisco Systems, Inc. All rights reserved. Wireless: MuniMesh Point-to- Point Bridging Point-to- Multipoint Bridging Wireless Mesh Networking Outdoor Wi-Fi Extension

19 © 2003 Cisco Systems, Inc. All rights reserved. Sensor Network today Current situation: Sensor / sensor gateway Connected to PC/patch panel over serial/RS 232 PC is collocated with GW

20 © 2003 Cisco Systems, Inc. All rights reserved. Internet Sensor Network tomorrow sensor Gateway Sensor Network Mesh Network Controller Sensor Application Controller Corp Network Mission Application sensor Management Networking sensing Sensor Router

21 © 2003 Cisco Systems, Inc. All rights reserved.

22 © 2003 Cisco Systems, Inc. All rights reserved. 22 © 2003 Cisco Systems, Inc. All rights reserved.