Cisco CEO: Firms must evolve to best use technology

Kevin Rademacher

Thursday, May 13, 2004 | 10:47 a.m.

Productivity has become a key component of the U.S. economic recovery.

Fewer workers are doing more to the benefit of the bottom line, and technology companies are rapidly turning out products to assist in the effort to bolster productivity.

John Chambers, chief executive of Silicon Valley giant Cisco Systems Inc., hailed that role in the economic rebound Wednesday night at a keynote speech at the Networld+Interop technology convention in Las Vegas.

Just buying software, however, will not increase productivity, Chambers emphasized. He said companies must also participate in a rethinking of their business processes in order to achieve the true benefits of technological advances.

Chambers pointed to a Cisco study that showed companies that changed their business processes at the same time they implemented new technology saw a 25 percent to 30 percent increase in productivity. Without changing their business processes to fit the new technology, businesses actually lost productivity at a rate of 6 percent to 9 percent.

"That's where a lot of businesses have been disappointed," Chambers said. "Technology enables business strategies ... You have to consider how you are going to tie it together."

A week ago, Michael Maffie, chief executive of Las Vegas-based Southwest Gas Corp., pointed to technological advances as part of that utility's dramatic rise in productivity. By using computer-based scheduling and meter reading equipment, Southwest saw its customer-per-employee ratio increase from 415 to 1 in 1994 to 600 to 1 in 2003. At the same time, the company managed to maintain a strong customer satisfaction rating.

"A lot of the gains have been driven by the judicious use of technology," Maffie said at the company's annual shareholders meeting.

Also a theme at Networld+Interop was the improving economic sentiment. Last year, many of the speeches revolved around the justification of technology expenditures amid a weak economy. This year, Chambers noted that recent executive surveys showed chief executive confidence sitting at a comfortable 73 percent, the highest level in 20 years. More than 70 percent also expected overall improvements in their own industry, Chambers added.

Those numbers are being followed by higher capital expenditures, and he expected a natural transition into new employee hires in the future, putting to rest ongoing fears of a so-called jobless recovery.