Customer transformation means looking beyond technology into culture, talent, and information sharing. We speak with the former Chief Information Officer of Cisco Systems to explore business transformation at scale.

Bio of Guillermo Diaz, Jr.

Guillermo Diaz, Jr., is responsible for Cisco's global Information Technology organization and services. The focus is on transforming the overall IT experience by strengthening foundational business capabilities; enabling new business models such as service, software, and SaaS; and accelerating innovative business outcomes for Cisco customers, partners, and employees.

Guillermo is a primary leader of the Cisco Diversity Council and the executive sponsor of Conexión, Cisco's Hispanic/Latino employee resource network.

Since joining the company in 2000, Guillermo has been a major driver of the development of Cisco's world-class IT organization by leading initiatives to build and manage significant business foundations. These include the Cisco IT infrastructure, network and management systems, enterprise resource planning (ERP), large-scale platforms, and Cisco's Internet and intranet network foundations: Cisco.com and Cisco Employee Connection. Additionally, he has led primary business IT application areas such as Cisco's $45B+ electronic commerce, technical services, professional services, service sales and marketing, customer service, Cisco Capital, and cloud/SaaS platforms.

Prior to Cisco, Guillermo held senior IT leadership positions with some of Silicon Valley's most respected companies, including Director of Global Network Services for Silicon Graphics, Senior Director of IT for Intelligent Electronics (Ingram Micro), and Manager of Telecommunications for Alza Corporation. He began his career in telecommunications with the U.S. Navy, where a military scholarship led to his bachelor of science degree in business administration from Regis University in Colorado.

Guillermo is the recipient of the 2015 Hispanic IT Executive Council (HITEC) "Estrella of the Year" award for outstanding individual leadership in the information technology field. He was also honored as one of 100 CIO/CTO Leaders in STEM. In addition, he has been recognized by the Silicon Valley Business Journal as 2014 Best CIO Community Champion and as one of the Top Hispanics in IT from 2009-2014 by HITEC. Other awards include the National Eagle Leadership Award in 2010 and CIO Magazine's "Ones to Watch" Award in 2007.

Transcript

Michael Krigsman: Today, on CXOTalk, we're speaking with Guillermo Diaz, who is senior vice president of customer transformation for Cisco Systems. Guillermo, how are you? Thank you for being here on CXOTalk today.

Guillermo Diaz: Michael, good to be here and good to see you again.

Michael Krigsman: I think everybody knows about Cisco, but just give us the quick rundown and tell us about your role.

Guillermo Diaz: Any time you connect to any application over the network, you're pretty much connecting over a Cisco network. As you can see behind me here, Cisco is based on, we started from, the city of San Francisco. I don't know if you know that, but that's what Cisco is based on.

I'm an infrastructure; I'm a network guy at my core. Being able to really be the network person at the network company really gave me great insights and a great foundation to do other things that I wanted to do and move closer to the business and business applications, really running most, if not all, of those applications and then, ultimately, becoming the CIO at Cisco, which was my role, previous to this, for the last four years. Now, over the last few months, creating and crafting this role with Irving Tan, who is the chief operating office here.

We said, "Hey, we've learned a lot of things. We haven't figured everything out, but we figured out a lot of things." Relative to transformation, we have also transformed and we're transforming. We've booted up, as a hardware company, for over 30 years. Now we're shifting to software. We're shifting to subscriptions, to SaaS operating models.

In that, we are shifting our models. We're shifting our technology. We're shifting our processes. More importantly, we're shifting our culture. When we think about transformation, that cultural aspect, Michael, is really important.

Sharing Transformation Lessons with Customers

Michael Krigsman: In effect, you're taking the lessons of transformation that Cisco has learned and now you're helping and support customers with their transformation, based on those lessons.

Guillermo Diaz: I think the notion is, in IT, we're a technology company so, really, the lessons learned from Cisco IT, but not just IT. We've built a great technology foundation. We have a world-class supply chain and we've transformed our supply chain using our own technologies and shifting our processes and our culture.

We have a world class customer experience organization. We have an employee experience. We have a great procurement, world-class, leading procurement organization. All of those things have shifted and moved toward our business objectives.

Having moved those business processes, those business models, using our own technology is what we want to be able to do. Demystify this word of "transformation," but do it in a way that takes our practical knowledge, packages that up into some actionable blueprints that we could share, and then work with our customers, and even internally, but do it in a way where we're also learning because we haven't figured out everything. There are things that our customers have figured out that we also want to incorporate. It's part educating and part learning, so it's almost like a 360 continuous learning process.

Michael Krigsman: I want to remind everybody; we're speaking with Guillermo Diaz. He's responsible for customer transformation at Cisco. He is the former CIO of Cisco. When we talk about transformation, you just described kind of a very broad range. What are we really mean? Maybe drill down into that for us.

Guillermo Diaz: I describe what the charter is of our customer transformation, my role. We struggled with that. What do we name this organization if we want to be able to go do that and help drive the digital narrative and demystify using our own practical knowledge?

We talked about, "Well, are we evangelists or what are we?" We're taking our own knowledge of how we're transformation toward these new business models because I think the word "transformation," if you ask 10 people, Michael, you'll get 30 different answers.

Part of even demystifying the word of "transformation," it's about, are we changing? Are we changing? Are we adding net new revenue? Are we adding net new business models? Are we shifting the mindset and the culture? Are we using digital technologies to do that? It's how we've aligned to our strategy; shifting our business model, our operating model, and our technology; and really driving the gaps, shrinking the gaps between that transformation and how we're helping our customers adopt those technologies.

Michael Krigsman: That's really interesting. You say transformation includes business models, new revenue, changing the culture. It's a very all-encompassing evolution of an organization, really, if you drill into all those pieces.

Guillermo Diaz: Sometimes we refer to transforming our process. Basically, yeah, we optimized it, but did we change it? Did we actually add a new revenue stream from it? If the answer is no, then did we really transform or did we just optimize?

As we look at this, how are we shrinking the gap between that major change, the digital technologies that we're driving at Cisco and partnership with our ecosystem partners? How are we putting together that technology foundation, that digital foundation in order to help ourselves and help our customers meet their business outcomes and their objectives?

Transformation Creates New Sources of Revenue

Michael Krigsman: For you, would it be accurate to say, based on what you've been describing, that revenue is the difference between transforming and optimizing processes?

Guillermo Diaz: I think there are new revenue streams for us. If you think about our models, we have a number of software as a service platforms now. We have our Meraki platform. We have our AppDynamics, which allows us to really dig into the application and the business process to get insights into running our organization, our operation much better. We have, obviously, our world-class WebEx, which allows us to collaborate and it's continually moving more toward a cognitive collaboration platform.

These are all models that we have historically not had because we've been a hardware company. Bringing these together, shifting the mindset, shifting the revenue streams, the business model, and how we operate, all of that sort of encapsulates the cultural shift. Transformation is also--and probably more importantly, Michael--about the mindset shift. It's about the culture.

When I ask this around the world, I get a chance to talk to many of my peers, of our peers in the CXO land. I ask the question, "What is your biggest impediment to driving transformation or change?" I ask for a word cloud and the biggest word in that word cloud always comes up as "culture."

Michael Krigsman: Why? Why is that?

Guillermo Diaz: It's a mindset. If I wake up every day and I do the same thing over and over again, am I changing? I took a shower. I brushed my teeth. I combed my hair. I drove to work. I do that every single day, but did that change? Did I change?

Now, we've looked at, "Oh, wait! There's a much simpler way to do that. We can automate that; we can get insights, analytics, and data to take action; and we are continually innovating." How do we use that to continually innovate and continually improve, ensuring that, around that, encapsulated is a security mindset? All of those things, how do we continually drive a learning process to simplify, to make things simpler and make things faster, but also, at the same time, ensuring they're secure?

Michael Krigsman: How is this different from change management? You spoke about the cultural aspects and the difficulty of adapting to change and absorbing change. How is that different from traditional change management?

Guillermo Diaz: We may have moved to a new technology, but did we shift to a new business model? Did we shift to a new revenue stream? That's one of the things that we will continually do in this role, Michael, is to help to demystify that. What is the difference between traditional change management and transformation? I think we're also learning that as we go. As we work with my peers and our customers to do this, I want to be able to incorporate that back in.

I would say, we haven't figured it all out yet, but I think traditional change management is changing more of the same and transformation is really breaking through these new business models, new streams.

Transformation and Customer Experience

Michael Krigsman: We have a question from Twitter. Sal Rasa is asking, "What's the link between this type of transformation and how does it affect customer experience?"

Guillermo Diaz: The thing around customer experience, and I'm guessing that the question is a broad industry question, but I think it's really looking at what are your north stars. What are you trying to accomplish?

For us at Cisco, as an example, when Chuck Robbins became CEO, he said, "I want to really accomplish three things. I want to accelerate the pace of innovation, I want to really transform and showcase the power of the network, and we're going to be shifting our business models from a hardware-based mindset to a software-based mindset. While we're doing that, we're going to build a culture around that," and we've now used the term "conscious culture." Those were the three things.

What I continually ask myself and ask the teams are, are you getting there with that? Are you actually driving toward that north star, and are you then shifting our business model to drive the experience that our customers want, the customers and the employees? Are our employees actually experiencing something better, more transformative, and more digital than they have before? We have to ask that. How does that translate into the technologies that support that? I think that that experience, at the end of the day, you have to be able to provide the best experience possible to our customers and, importantly, to our employees because our employees are what make our customers productive and drive that big impact.

The one thing that I would say is, while we're driving that customer experience or that great experience, we have to drive the mindset of pervasive security. In every board conversation, if you're not talking about security and what you're doing to manage risk in your business, then you're missing the boat. It's about going faster. It's about driving that experience and doing it securely.

Michael Krigsman: I think that many organizations have trouble when they try to take these concepts or the goals of transformation and customer experience and then put it into practice. For example, you have compensation that's based on doing things the old way rather than the new way, and you have just habits and so, as you talk with customers and you see transformation inside Cisco, how do you overcome these kinds of inherent obstacles? It's inherent in almost every company and, especially as companies get larger, it gets even more difficult.

Guillermo Diaz: Going back to the question about change management versus transformation, I think you could take your current set of processes and lift and shift them to new technologies but you really didn't change anything. The change management is, okay, now we're using a new tool.

A lot of times when I talk to folks, they're saying, "Well, we're going to move everything to the cloud," and actually point up toward the clouds. The reality is, there are no clouds up there. Behind every cloud, there's a data center. That data center might be owned by you or it might be outsourced or it might be owned by the partner that you have moved your applications out to.

The challenge is, if you do that, did you actually transform? Did you shift your business processes and the model that supports that?

We just launched a major procurement platform. One of the things that we learned was, it's not just about lifting and shifting the old way we've always done it. We have a broad ecosystem of partners that supply our capabilities and we needed to really rethink our whole method, our whole process of how we operate, even the skills, the talent that we have in the organization to really run that new ecosystem.

We've learned a lot in that. It's not just about lifting and shifting. It's about how are we using those digital technologies, but how are then we shifting our processes? How is that model shifting? Then how does that drive--back to the experience question--a world-class, great experience for our employees and, ultimately, for our partners and our customers?

Michael Krigsman: How do you do that, make those changes, drive those kinds of changes in a practical way?

Guillermo Diaz: First, you have to sort of get smaller to get faster, I think. We've moved more and more toward an agile approach in how we deliver. We used to call them two-pizza teams, but then we found out that some people eat two pizzas by themselves, but we really use more and more of an agile approach, smaller teams and then start to build up.

What are the key outcomes that we're trying to drive? Not just about the technologies, but what are the north stars, as I mentioned earlier? How do you then drive the business model? How do you then shift our operating model and then the technologies that support that? Don't just move the old stuff over to the new platform because all you're going to do is make bad stuff go faster.

Michael Krigsman: Do you find that when you talk with customers that, very often, they're focused on not so much business transformation but, oh, let's buy a new tool? As you were saying, "Let's buy a new tool," and now we've changed.

Guillermo Diaz: We saw a lot of that with cloud. That's one of the things I think we're learning and we're demystifying is going back to the cloud analogy, the cloud and pointing up to the ceiling. What we've found is that some folks have said, "You know what? I went too far and I didn't really think through the implications on my procurement process, my operating model. I didn't think through the talent that I needed to support that and the security around that."

Now, some folks are rethinking and having to retool back to, "Well, let me go think about this from a hybrid perspective.

My view is, in the cloud, there is this myth that the data center will go away. It's like, "Well, I haven't seen that quite yet," and I actually think more of a hybrid approach will be the norm going forward.

I think a lot of times we start going into the buzzword of the day. Even "transformation," the buzzword of the day. "We're going to transform." What does that mean? That's what we really want to continually clarify.

Customer Transformation and the Cloud

Michael Krigsman: Let's talk about cloud because it's such an important topic. You said that moving to the cloud requires a cultural shift and a mindset shift. Why is that? You said, behind every cloud is a data center, but users don't care where the data lives, and so what is the enterprise transformation part of that?

Guillermo Diaz: Users don't care where the data lives until the data is compromised and they find that my data is not secure. They find that, well, that application isn't working as it should work.

The cloud is not just about an infrastructure move. It's about how do you use the power of the infrastructure, the digital infrastructure, but how do you think through your data? How do you ensure that that data is in a place that's secure? How do you ensure that that data is serving up those applications and those applications are easy to use?

When I get on my iPhone, you want to just press the button and it just works. If you press Angry Birds and you can't get to it, you get angry. That goes back to the experience. That is a great experience when things just work. When they don't, that's not good.

A lot of times, we don't always think about the secure part of that. I want a great experience but, from my perspective, we also have to ensure that our users, our customers, that we're protecting them, we're protecting their data, and so you have to be thinking about cloud from all aspects of that, not just about lifting and shifting applications.

That's what I think we're starting to see more of is, let's architect for not just cloud but cloud-native. Start from the experience down versus the infrastructure up.

Michael Krigsman: Please elaborate on that. That's a very interesting point. You said start not just from the infrastructure but start with -- I'll let you say it.

Guillermo Diaz: Again, going back to transformation. Start with the outcome. What are you trying to drive? What do you want when someone comes to your application or someone comes to your website? What do you want to see?

For example in our case, if it's a commerce application, it has to be available. We shifted our commerce applications more and more toward cloud native, which means that we can't afford any downtime. We have to ensure that we're architecting from the experience down, not just looking at, well, wait, what data center does it live in? It shouldn't matter. You're right, but we have to be thinking about that from the application, from the data, from the insights that we get.

Ultimately, then we can talk about what cloud does it live in. Does it live in my private cloud or does it live in a public cloud? Thinking about that from the top down.

Michael Krigsman: That's the piece that requires the rethinking mindset. It's not just approaching the problem, the migration to cloud as being a technical solution but, rather, from a business standpoint, what are you trying to achieve and how are you going to get there?

Guillermo Diaz: Yeah. I think you start from, what are your business north stars? But you also have to be thinking through, like I said, the security aspect of that and how you operate.

There's the other piece that I continually harp on, which is the talent. We use the term "software-defined" everything. We want everything to be programmable. We want everything to be easy but you also need to make sure that the organization is prepared for that.

For me, I come from an infrastructure background, so I learned my way on routers, routers and switches. I was a router hugger and I didn't want to let go of my router. But, over time, you have to learn that, by the way, that router is part of an ecosystem that contains compute, storage, applications, and security. The more that you can drive that programmability and learn those concepts, the more valuable you are and the more fun you have in your job, I think.

Driving Excellence Beyond Efficiency

Michael Krigsman: We have another question from Twitter. Gus Bekdash is asking the question, "You're productizing your know-how in transformation to help other companies transform. What's involved for them to drive excellence beyond efficiency?"

Guillermo Diaz: We're sharing our knowledge, again. As we're doing this, as we think about this transformation and we educate what we've learned, we're also, in reverse, working with many of our customers who are our peers as well. We look at this as a peer-to-peer conversation.

In the role that I'm in, we're not in sales and we're not in services, but we're an enabler of that because the things that we are talking to customers about, whether it's data center, whether it's the transformation of the network, we're also doing inside. The more that we could share our knowledge because we are customer zero, we could share our knowledge but also learn, "Oh, wait. This customer has that challenge," and feed that back into requirements, help our own engineering teams, help our supply chain teams, our services teams. It's sort of a 360.

I think the one thing which is I believe what the question is getting after, and this is something that we're really digging into, is if I see a blueprint. Okay, now how do I take that as a customer and what do I do on Monday? What are the steps that I have to take? Those are the blueprints that we're starting to establish.

What we'll be able to do then is help as much as we can and then have strong APIs to other parts of our organization to be able to take that, for example, for our services organization called customer experience or CX. If we can package that up and then hand that through a strong API to CX, then they could carry that over and help you get through steps one through five.

Michael Krigsman: The blueprints, then, are the practical guidelines for, okay, you've been to a workshop. Yeah.

Guillermo Diaz: Yeah, and they're the practical guidelines for what we've learned and how that has transformed our own organization, our own business model, and our own outcomes. We want to be able to share that as much as we can.

Chief Information Officer Role and Business Transformation

Michael Krigsman: Let's shift gears slightly. You have a long history of being involved with IT, including being CIO. Let's talk about, if you were advising your customers, for example, where can CIOs fit into this process of business transformation that we've been talking about?

Guillermo Diaz: The business transformation, digital transformation, I have a strong belief that the CIO role continually moves to become more of that business leader. Being at the table, being strategic, helping really translate between what are those outcomes and then the digital technologies that support that. I think that translator role, the orchestrator is the CIO because technology is foundational to every company. I don't care who you are.

I talk to my peers in oil and gas, in retail, in technology. Technology, the digital foundation, it's the foundation. The more that we could influence up the stack toward the CXO, toward the CEO, the CEO could experience that value.

We want to be able to influence value and they want to be able to experience that value. I think the CIO role is that translator and that orchestrator to be able to drive business transformation.

Michael Krigsman: Do you have any advice? Again, I realize you're not a CIO, but you've had that experience. Any advice, in general, for CIOs to become that translator or that orchestrator?

Guillermo Diaz: Well, I think it goes back to, you also have to be the inspiration for your team. You have to be able to show that I'm also changing. I'm also learning new things. If I understood those north stars, what skills do I have to learn?

You talk about the organization shifting. You also have to be able to shift. You also have to be able to learn up into the business layer. What are those outcomes? How do you define an outcome? How do you then bring those two things together; shrink the gap between the transformation and the adoption?

I have a strong belief that you need to be the example. In Spanish, I have a hashtag, Michael, called #ejemplo. Ejemplo is example. What I always say is, find the examples that you want to be like. Be the example and then show the examples. Show the examples of how you've actually made that gap smaller. So, #ejemplo or #example, find the examples, the north stars. Be the example. Then show examples of that.

Technology Adoption

Michael Krigsman: Now, you mentioned the word "adoption." We often think about adoption as adopting technology but, when it comes to transformation and innovation, is it also fair to say that what we're fundamentally talking about is adopting this new mindset?

Guillermo Diaz: I think, for us, in our charter, so the customer transformation charter, again, we're not in sales but we're plugged very closely into sales. We're not in services or customer experience, which is the organization inside of Cisco, but we're very tightly connected there.

What we are is, we bring the knowledge. We bring the practical learnings. We say, we are going to be able to demystify through the digital narrative to drive the blueprints and to get the 360 feedback. The way I think we get measured is by helping ourselves, as customer zero, and helping our major customers adopt the digital capabilities and the digital technologies that we're producing because when we can help them adopt, then we're really driving customer success.

That adoption, I think, is one of the key things that I know that we're going to be working with sales and our service organization, but we have to drive the adoption. In the software world, adoption is key. Adoption is critical to customer success and those plays and emotions are what we're after, but I think adoption is going to be a key metric for us.

Michael Krigsman: As we finish up, you're talking with lots of customers. You're becoming kind of a repository for lessons and customer experiences. What advice do you have for customers, whether it's Cisco customers or anybody's customers? What advice do you have for organizations who want to drive change to go beyond efficiency, and it's such a hard and very daunting task?

Guillermo Diaz: I want to try to get back to the frame. The frame, you could think about it from, "Yeah, I'm going to go to the cloud," or, "I'm going to go do mobile first," but ask yourself why. Why am I doing that?

I think the first thing to do is ask yourself, "Why am I doing this for the company? What are those north stars?" Really lay those out. Then how are those translating into the outcomes? Maybe there are specific outcomes that I need to be able to shift and drive the change. What are those practical sort of roadmaps that we have to go after? Then those are going to drive what technologies; what clouds do I use?

I think you start with "why." Why am I here? What I like to do is make sure that it's not just about I'm coming in every day and I'm building code or I'm putting in a new data center or a new cloud. Why am I doing it? I want everyone to understand that inside of Cisco.

We say we're our first and best customer. Actually, we talk about being customer zero. Using the same things that we're talking to our customers about, that's what we want to be able to do. Sometimes, we learn from that. Sometimes, it doesn't work exactly as we want it to the first time. Then you ask yourself, how is that going to get to our outcome?

I think you start with "why." You drive it through really understanding how it drives to the strategy, the business model, the operating model, and then the technology foundation. If you can help thread that through as a CIO, translate that or orchestrate that, and then, as a customer, our customers are CIOs, are leaders of IT, are infrastructure leaders. We want to move IT from the back-office, continually move IT from the back office to the boardroom. That's, I think, what I would say.

Michael Krigsman: We're almost out of time, but this question of why, why is this so hard for many organizations? It seems to me, if you answer the question, "Why?" in the right way, just as you were describing it, then the follow-on questions of, "How do we align the activities to our strategy?" are difficult, but they're within the realm of the known difficulties that we can manage. The "why" question seems the really hard one.

Guillermo Diaz: It seems easy. When you can answer that and you can show not just, "Yeah, we moved to a new cloud," or what have you but, "Yeah, we shifted our whole operating model and our culture," the mindset is different, we're operating different, and we boot up differently. We don't boot up every day like just the hardware company. Yes, hardware is going to be key to our business but, also, we think about software. That's a mindset shift and we have to continually ask why.

I go back to the three things I mentioned when Chuck laid out the three north stars. Our business model changed, and it is changing. We just announced our earnings and we can show that. We show the power of the network because we launched a brand new product line that is software driven that is subscription based. That we had to shift not only the actual product to software, but how we built it, how we operate it, and the skills that we need to do that.

The last piece about driving innovation, we rolled that product line out in record time and it's been the fastest growing product line in our history. We could go back and actually say, "Yes, the pace of innovation has dramatically increased because of the culture change, the operating model change, and the technology change. Yes, we are showing the power of the network because we're not only using it, but we've enabled it and we've rolled it out in record time. It is a new business model, and we're gaining net new revenue. We're gaining net new subscription models."

Then you go, "Oh, that's why. That's why we did it," right?

Michael Krigsman: All right. The ultimate, then, the ultimate test is to look over a period of time. The metric becomes the business results. Those business results we laid out at the beginning, downstream we need to look back and see, okay, have these activities accomplished those goals?

Guillermo Diaz: I think it's the business results, but I also think, do people want to be there? Is the culture shifting?

In the last few months, we have moved from, like, number 87 in the best places to work in the United States to number 6. If you go around the world, about 18 different countries, we're the number one place to work. Now, you start to see not only the business results but the cultural shift as well and where our folks want to be.

Michael Krigsman: Fantastic. A very nuanced discussion of business transformation, culture transformation, and customer transformation. Guillermo Diaz, thank you so much for taking time to be with us today.

Guillermo Diaz: Thank you, Michael. Always good to see you.

Michael Krigsman: Likewise. You've been watching Guillermo Diaz. He is the senior vice president of customer transformation at Cisco. A very interesting discussion. Be sure to subscribe on YouTube and please hit the subscribe button at the top of our website and subscribe to our newsletter as well. Thanks so much, everybody. I hope you have a great day. We'll see you back next week. Bye-bye.

Michael Krigsman: Today, on CXOTalk, we're speaking with Guillermo Diaz, who is senior vice president of customer transformation for Cisco Systems. Guillermo, how are you? Thank you for being here on CXOTalk today.

Guillermo Diaz: Michael, good to be here and good to see you again.

Michael Krigsman: I think everybody knows about Cisco, but just give us the quick rundown and tell us about your role.

Guillermo Diaz: Any time you connect to any application over the network, you're pretty much connecting over a Cisco network. As you can see behind me here, Cisco is based on, we started from, the city of San Francisco. I don't know if you know that, but that's what Cisco is based on.

I'm an infrastructure; I'm a network guy at my core. Being able to really be the network person at the network company really gave me great insights and a great foundation to do other things that I wanted to do and move closer to the business and business applications, really running most, if not all, of those applications and then, ultimately, becoming the CIO at Cisco, which was my role, previous to this, for the last four years. Now, over the last few months, creating and crafting this role with Irving Tan, who is the chief operating office here.

We said, "Hey, we've learned a lot of things. We haven't figured everything out, but we figured out a lot of things." Relative to transformation, we have also transformed and we're transforming. We've booted up, as a hardware company, for over 30 years. Now we're shifting to software. We're shifting to subscriptions, to SaaS operating models.

In that, we are shifting our models. We're shifting our technology. We're shifting our processes. More importantly, we're shifting our culture. When we think about transformation, that cultural aspect, Michael, is really important.

Sharing Transformation Lessons with Customers

Michael Krigsman: In effect, you're taking the lessons of transformation that Cisco has learned and now you're helping and support customers with their transformation, based on those lessons.

Guillermo Diaz: I think the notion is, in IT, we're a technology company so, really, the lessons learned from Cisco IT, but not just IT. We've built a great technology foundation. We have a world-class supply chain and we've transformed our supply chain using our own technologies and shifting our processes and our culture.

We have a world class customer experience organization. We have an employee experience. We have a great procurement, world-class, leading procurement organization. All of those things have shifted and moved toward our business objectives.

Having moved those business processes, those business models, using our own technology is what we want to be able to do. Demystify this word of "transformation," but do it in a way that takes our practical knowledge, packages that up into some actionable blueprints that we could share, and then work with our customers, and even internally, but do it in a way where we're also learning because we haven't figured out everything. There are things that our customers have figured out that we also want to incorporate. It's part educating and part learning, so it's almost like a 360 continuous learning process.

Michael Krigsman: I want to remind everybody; we're speaking with Guillermo Diaz. He's responsible for customer transformation at Cisco. He is the former CIO of Cisco. When we talk about transformation, you just described kind of a very broad range. What are we really mean? Maybe drill down into that for us.

Guillermo Diaz: I describe what the charter is of our customer transformation, my role. We struggled with that. What do we name this organization if we want to be able to go do that and help drive the digital narrative and demystify using our own practical knowledge?

We talked about, "Well, are we evangelists or what are we?" We're taking our own knowledge of how we're transformation toward these new business models because I think the word "transformation," if you ask 10 people, Michael, you'll get 30 different answers.

Part of even demystifying the word of "transformation," it's about, are we changing? Are we changing? Are we adding net new revenue? Are we adding net new business models? Are we shifting the mindset and the culture? Are we using digital technologies to do that? It's how we've aligned to our strategy; shifting our business model, our operating model, and our technology; and really driving the gaps, shrinking the gaps between that transformation and how we're helping our customers adopt those technologies.

Michael Krigsman: That's really interesting. You say transformation includes business models, new revenue, changing the culture. It's a very all-encompassing evolution of an organization, really, if you drill into all those pieces.

Guillermo Diaz: Sometimes we refer to transforming our process. Basically, yeah, we optimized it, but did we change it? Did we actually add a new revenue stream from it? If the answer is no, then did we really transform or did we just optimize?

As we look at this, how are we shrinking the gap between that major change, the digital technologies that we're driving at Cisco and partnership with our ecosystem partners? How are we putting together that technology foundation, that digital foundation in order to help ourselves and help our customers meet their business outcomes and their objectives?

Transformation Creates New Sources of Revenue

Michael Krigsman: For you, would it be accurate to say, based on what you've been describing, that revenue is the difference between transforming and optimizing processes?

Guillermo Diaz: I think there are new revenue streams for us. If you think about our models, we have a number of software as a service platforms now. We have our Meraki platform. We have our AppDynamics, which allows us to really dig into the application and the business process to get insights into running our organization, our operation much better. We have, obviously, our world-class WebEx, which allows us to collaborate and it's continually moving more toward a cognitive collaboration platform.

These are all models that we have historically not had because we've been a hardware company. Bringing these together, shifting the mindset, shifting the revenue streams, the business model, and how we operate, all of that sort of encapsulates the cultural shift. Transformation is also--and probably more importantly, Michael--about the mindset shift. It's about the culture.

When I ask this around the world, I get a chance to talk to many of my peers, of our peers in the CXO land. I ask the question, "What is your biggest impediment to driving transformation or change?" I ask for a word cloud and the biggest word in that word cloud always comes up as "culture."

Michael Krigsman: Why? Why is that?

Guillermo Diaz: It's a mindset. If I wake up every day and I do the same thing over and over again, am I changing? I took a shower. I brushed my teeth. I combed my hair. I drove to work. I do that every single day, but did that change? Did I change?

Now, we've looked at, "Oh, wait! There's a much simpler way to do that. We can automate that; we can get insights, analytics, and data to take action; and we are continually innovating." How do we use that to continually innovate and continually improve, ensuring that, around that, encapsulated is a security mindset? All of those things, how do we continually drive a learning process to simplify, to make things simpler and make things faster, but also, at the same time, ensuring they're secure?

Michael Krigsman: How is this different from change management? You spoke about the cultural aspects and the difficulty of adapting to change and absorbing change. How is that different from traditional change management?

Guillermo Diaz: We may have moved to a new technology, but did we shift to a new business model? Did we shift to a new revenue stream? That's one of the things that we will continually do in this role, Michael, is to help to demystify that. What is the difference between traditional change management and transformation? I think we're also learning that as we go. As we work with my peers and our customers to do this, I want to be able to incorporate that back in.

I would say, we haven't figured it all out yet, but I think traditional change management is changing more of the same and transformation is really breaking through these new business models, new streams.

Transformation and Customer Experience

Michael Krigsman: We have a question from Twitter. Sal Rasa is asking, "What's the link between this type of transformation and how does it affect customer experience?"

Guillermo Diaz: The thing around customer experience, and I'm guessing that the question is a broad industry question, but I think it's really looking at what are your north stars. What are you trying to accomplish?

For us at Cisco, as an example, when Chuck Robbins became CEO, he said, "I want to really accomplish three things. I want to accelerate the pace of innovation, I want to really transform and showcase the power of the network, and we're going to be shifting our business models from a hardware-based mindset to a software-based mindset. While we're doing that, we're going to build a culture around that," and we've now used the term "conscious culture." Those were the three things.

What I continually ask myself and ask the teams are, are you getting there with that? Are you actually driving toward that north star, and are you then shifting our business model to drive the experience that our customers want, the customers and the employees? Are our employees actually experiencing something better, more transformative, and more digital than they have before? We have to ask that. How does that translate into the technologies that support that? I think that that experience, at the end of the day, you have to be able to provide the best experience possible to our customers and, importantly, to our employees because our employees are what make our customers productive and drive that big impact.

The one thing that I would say is, while we're driving that customer experience or that great experience, we have to drive the mindset of pervasive security. In every board conversation, if you're not talking about security and what you're doing to manage risk in your business, then you're missing the boat. It's about going faster. It's about driving that experience and doing it securely.

Michael Krigsman: I think that many organizations have trouble when they try to take these concepts or the goals of transformation and customer experience and then put it into practice. For example, you have compensation that's based on doing things the old way rather than the new way, and you have just habits and so, as you talk with customers and you see transformation inside Cisco, how do you overcome these kinds of inherent obstacles? It's inherent in almost every company and, especially as companies get larger, it gets even more difficult.

Guillermo Diaz: Going back to the question about change management versus transformation, I think you could take your current set of processes and lift and shift them to new technologies but you really didn't change anything. The change management is, okay, now we're using a new tool.

A lot of times when I talk to folks, they're saying, "Well, we're going to move everything to the cloud," and actually point up toward the clouds. The reality is, there are no clouds up there. Behind every cloud, there's a data center. That data center might be owned by you or it might be outsourced or it might be owned by the partner that you have moved your applications out to.

The challenge is, if you do that, did you actually transform? Did you shift your business processes and the model that supports that?

We just launched a major procurement platform. One of the things that we learned was, it's not just about lifting and shifting the old way we've always done it. We have a broad ecosystem of partners that supply our capabilities and we needed to really rethink our whole method, our whole process of how we operate, even the skills, the talent that we have in the organization to really run that new ecosystem.

We've learned a lot in that. It's not just about lifting and shifting. It's about how are we using those digital technologies, but how are then we shifting our processes? How is that model shifting? Then how does that drive--back to the experience question--a world-class, great experience for our employees and, ultimately, for our partners and our customers?

Michael Krigsman: How do you do that, make those changes, drive those kinds of changes in a practical way?

Guillermo Diaz: First, you have to sort of get smaller to get faster, I think. We've moved more and more toward an agile approach in how we deliver. We used to call them two-pizza teams, but then we found out that some people eat two pizzas by themselves, but we really use more and more of an agile approach, smaller teams and then start to build up.

What are the key outcomes that we're trying to drive? Not just about the technologies, but what are the north stars, as I mentioned earlier? How do you then drive the business model? How do you then shift our operating model and then the technologies that support that? Don't just move the old stuff over to the new platform because all you're going to do is make bad stuff go faster.

Michael Krigsman: Do you find that when you talk with customers that, very often, they're focused on not so much business transformation but, oh, let's buy a new tool? As you were saying, "Let's buy a new tool," and now we've changed.

Guillermo Diaz: We saw a lot of that with cloud. That's one of the things I think we're learning and we're demystifying is going back to the cloud analogy, the cloud and pointing up to the ceiling. What we've found is that some folks have said, "You know what? I went too far and I didn't really think through the implications on my procurement process, my operating model. I didn't think through the talent that I needed to support that and the security around that."

Now, some folks are rethinking and having to retool back to, "Well, let me go think about this from a hybrid perspective.

My view is, in the cloud, there is this myth that the data center will go away. It's like, "Well, I haven't seen that quite yet," and I actually think more of a hybrid approach will be the norm going forward.

I think a lot of times we start going into the buzzword of the day. Even "transformation," the buzzword of the day. "We're going to transform." What does that mean? That's what we really want to continually clarify.

Customer Transformation and the Cloud

Michael Krigsman: Let's talk about cloud because it's such an important topic. You said that moving to the cloud requires a cultural shift and a mindset shift. Why is that? You said, behind every cloud is a data center, but users don't care where the data lives, and so what is the enterprise transformation part of that?

Guillermo Diaz: Users don't care where the data lives until the data is compromised and they find that my data is not secure. They find that, well, that application isn't working as it should work.

The cloud is not just about an infrastructure move. It's about how do you use the power of the infrastructure, the digital infrastructure, but how do you think through your data? How do you ensure that that data is in a place that's secure? How do you ensure that that data is serving up those applications and those applications are easy to use?

When I get on my iPhone, you want to just press the button and it just works. If you press Angry Birds and you can't get to it, you get angry. That goes back to the experience. That is a great experience when things just work. When they don't, that's not good.

A lot of times, we don't always think about the secure part of that. I want a great experience but, from my perspective, we also have to ensure that our users, our customers, that we're protecting them, we're protecting their data, and so you have to be thinking about cloud from all aspects of that, not just about lifting and shifting applications.

That's what I think we're starting to see more of is, let's architect for not just cloud but cloud-native. Start from the experience down versus the infrastructure up.

Michael Krigsman: Please elaborate on that. That's a very interesting point. You said start not just from the infrastructure but start with -- I'll let you say it.

Guillermo Diaz: Again, going back to transformation. Start with the outcome. What are you trying to drive? What do you want when someone comes to your application or someone comes to your website? What do you want to see?

For example in our case, if it's a commerce application, it has to be available. We shifted our commerce applications more and more toward cloud native, which means that we can't afford any downtime. We have to ensure that we're architecting from the experience down, not just looking at, well, wait, what data center does it live in? It shouldn't matter. You're right, but we have to be thinking about that from the application, from the data, from the insights that we get.

Ultimately, then we can talk about what cloud does it live in. Does it live in my private cloud or does it live in a public cloud? Thinking about that from the top down.

Michael Krigsman: That's the piece that requires the rethinking mindset. It's not just approaching the problem, the migration to cloud as being a technical solution but, rather, from a business standpoint, what are you trying to achieve and how are you going to get there?

Guillermo Diaz: Yeah. I think you start from, what are your business north stars? But you also have to be thinking through, like I said, the security aspect of that and how you operate.

There's the other piece that I continually harp on, which is the talent. We use the term "software-defined" everything. We want everything to be programmable. We want everything to be easy but you also need to make sure that the organization is prepared for that.

For me, I come from an infrastructure background, so I learned my way on routers, routers and switches. I was a router hugger and I didn't want to let go of my router. But, over time, you have to learn that, by the way, that router is part of an ecosystem that contains compute, storage, applications, and security. The more that you can drive that programmability and learn those concepts, the more valuable you are and the more fun you have in your job, I think.

Driving Excellence Beyond Efficiency

Michael Krigsman: We have another question from Twitter. Gus Bekdash is asking the question, "You're productizing your know-how in transformation to help other companies transform. What's involved for them to drive excellence beyond efficiency?"

Guillermo Diaz: We're sharing our knowledge, again. As we're doing this, as we think about this transformation and we educate what we've learned, we're also, in reverse, working with many of our customers who are our peers as well. We look at this as a peer-to-peer conversation.

In the role that I'm in, we're not in sales and we're not in services, but we're an enabler of that because the things that we are talking to customers about, whether it's data center, whether it's the transformation of the network, we're also doing inside. The more that we could share our knowledge because we are customer zero, we could share our knowledge but also learn, "Oh, wait. This customer has that challenge," and feed that back into requirements, help our own engineering teams, help our supply chain teams, our services teams. It's sort of a 360.

I think the one thing which is I believe what the question is getting after, and this is something that we're really digging into, is if I see a blueprint. Okay, now how do I take that as a customer and what do I do on Monday? What are the steps that I have to take? Those are the blueprints that we're starting to establish.

What we'll be able to do then is help as much as we can and then have strong APIs to other parts of our organization to be able to take that, for example, for our services organization called customer experience or CX. If we can package that up and then hand that through a strong API to CX, then they could carry that over and help you get through steps one through five.

Michael Krigsman: The blueprints, then, are the practical guidelines for, okay, you've been to a workshop. Yeah.

Guillermo Diaz: Yeah, and they're the practical guidelines for what we've learned and how that has transformed our own organization, our own business model, and our own outcomes. We want to be able to share that as much as we can.

Chief Information Officer Role and Business Transformation

Michael Krigsman: Let's shift gears slightly. You have a long history of being involved with IT, including being CIO. Let's talk about, if you were advising your customers, for example, where can CIOs fit into this process of business transformation that we've been talking about?

Guillermo Diaz: The business transformation, digital transformation, I have a strong belief that the CIO role continually moves to become more of that business leader. Being at the table, being strategic, helping really translate between what are those outcomes and then the digital technologies that support that. I think that translator role, the orchestrator is the CIO because technology is foundational to every company. I don't care who you are.

I talk to my peers in oil and gas, in retail, in technology. Technology, the digital foundation, it's the foundation. The more that we could influence up the stack toward the CXO, toward the CEO, the CEO could experience that value.

We want to be able to influence value and they want to be able to experience that value. I think the CIO role is that translator and that orchestrator to be able to drive business transformation.

Michael Krigsman: Do you have any advice? Again, I realize you're not a CIO, but you've had that experience. Any advice, in general, for CIOs to become that translator or that orchestrator?

Guillermo Diaz: Well, I think it goes back to, you also have to be the inspiration for your team. You have to be able to show that I'm also changing. I'm also learning new things. If I understood those north stars, what skills do I have to learn?

You talk about the organization shifting. You also have to be able to shift. You also have to be able to learn up into the business layer. What are those outcomes? How do you define an outcome? How do you then bring those two things together; shrink the gap between the transformation and the adoption?

I have a strong belief that you need to be the example. In Spanish, I have a hashtag, Michael, called #ejemplo. Ejemplo is example. What I always say is, find the examples that you want to be like. Be the example and then show the examples. Show the examples of how you've actually made that gap smaller. So, #ejemplo or #example, find the examples, the north stars. Be the example. Then show examples of that.

Technology Adoption

Michael Krigsman: Now, you mentioned the word "adoption." We often think about adoption as adopting technology but, when it comes to transformation and innovation, is it also fair to say that what we're fundamentally talking about is adopting this new mindset?

Guillermo Diaz: I think, for us, in our charter, so the customer transformation charter, again, we're not in sales but we're plugged very closely into sales. We're not in services or customer experience, which is the organization inside of Cisco, but we're very tightly connected there.

What we are is, we bring the knowledge. We bring the practical learnings. We say, we are going to be able to demystify through the digital narrative to drive the blueprints and to get the 360 feedback. The way I think we get measured is by helping ourselves, as customer zero, and helping our major customers adopt the digital capabilities and the digital technologies that we're producing because when we can help them adopt, then we're really driving customer success.

That adoption, I think, is one of the key things that I know that we're going to be working with sales and our service organization, but we have to drive the adoption. In the software world, adoption is key. Adoption is critical to customer success and those plays and emotions are what we're after, but I think adoption is going to be a key metric for us.

Michael Krigsman: As we finish up, you're talking with lots of customers. You're becoming kind of a repository for lessons and customer experiences. What advice do you have for customers, whether it's Cisco customers or anybody's customers? What advice do you have for organizations who want to drive change to go beyond efficiency, and it's such a hard and very daunting task?

Guillermo Diaz: I want to try to get back to the frame. The frame, you could think about it from, "Yeah, I'm going to go to the cloud," or, "I'm going to go do mobile first," but ask yourself why. Why am I doing that?

I think the first thing to do is ask yourself, "Why am I doing this for the company? What are those north stars?" Really lay those out. Then how are those translating into the outcomes? Maybe there are specific outcomes that I need to be able to shift and drive the change. What are those practical sort of roadmaps that we have to go after? Then those are going to drive what technologies; what clouds do I use?

I think you start with "why." Why am I here? What I like to do is make sure that it's not just about I'm coming in every day and I'm building code or I'm putting in a new data center or a new cloud. Why am I doing it? I want everyone to understand that inside of Cisco.

We say we're our first and best customer. Actually, we talk about being customer zero. Using the same things that we're talking to our customers about, that's what we want to be able to do. Sometimes, we learn from that. Sometimes, it doesn't work exactly as we want it to the first time. Then you ask yourself, how is that going to get to our outcome?

I think you start with "why." You drive it through really understanding how it drives to the strategy, the business model, the operating model, and then the technology foundation. If you can help thread that through as a CIO, translate that or orchestrate that, and then, as a customer, our customers are CIOs, are leaders of IT, are infrastructure leaders. We want to move IT from the back-office, continually move IT from the back office to the boardroom. That's, I think, what I would say.

Michael Krigsman: We're almost out of time, but this question of why, why is this so hard for many organizations? It seems to me, if you answer the question, "Why?" in the right way, just as you were describing it, then the follow-on questions of, "How do we align the activities to our strategy?" are difficult, but they're within the realm of the known difficulties that we can manage. The "why" question seems the really hard one.

Guillermo Diaz: It seems easy. When you can answer that and you can show not just, "Yeah, we moved to a new cloud," or what have you but, "Yeah, we shifted our whole operating model and our culture," the mindset is different, we're operating different, and we boot up differently. We don't boot up every day like just the hardware company. Yes, hardware is going to be key to our business but, also, we think about software. That's a mindset shift and we have to continually ask why.

I go back to the three things I mentioned when Chuck laid out the three north stars. Our business model changed, and it is changing. We just announced our earnings and we can show that. We show the power of the network because we launched a brand new product line that is software driven that is subscription based. That we had to shift not only the actual product to software, but how we built it, how we operate it, and the skills that we need to do that.

The last piece about driving innovation, we rolled that product line out in record time and it's been the fastest growing product line in our history. We could go back and actually say, "Yes, the pace of innovation has dramatically increased because of the culture change, the operating model change, and the technology change. Yes, we are showing the power of the network because we're not only using it, but we've enabled it and we've rolled it out in record time. It is a new business model, and we're gaining net new revenue. We're gaining net new subscription models."

Then you go, "Oh, that's why. That's why we did it," right?

Michael Krigsman: All right. The ultimate, then, the ultimate test is to look over a period of time. The metric becomes the business results. Those business results we laid out at the beginning, downstream we need to look back and see, okay, have these activities accomplished those goals?

Guillermo Diaz: I think it's the business results, but I also think, do people want to be there? Is the culture shifting?

In the last few months, we have moved from, like, number 87 in the best places to work in the United States to number 6. If you go around the world, about 18 different countries, we're the number one place to work. Now, you start to see not only the business results but the cultural shift as well and where our folks want to be.

Michael Krigsman: Fantastic. A very nuanced discussion of business transformation, culture transformation, and customer transformation. Guillermo Diaz, thank you so much for taking time to be with us today.

Guillermo Diaz: Thank you, Michael. Always good to see you.

Michael Krigsman: Likewise. You've been watching Guillermo Diaz. He is the senior vice president of customer transformation at Cisco. A very interesting discussion. Be sure to subscribe on YouTube and please hit the subscribe button at the top of our website and subscribe to our newsletter as well. Thanks so much, everybody. I hope you have a great day. We'll see you back next week. Bye-bye.