The Best Team In The Business?

It's bad form to work up a sweat in paradise, but Cisco senior vice president Paul Mountford sure found Hawaii to be one hell of a hot, nervous place one day last February.

The setting: Day two of his company's annual partner conference. The mission seemed simple. Walk out on stage, warm up the crowd for a few minutes and then introduce Cisco CEO John Chambers. Trouble was, one of the servers that was supposed to support an IP-based interactive polling system for Chambers' presentation was on the fritz. Mountford kept his composure, but there was no way he was going to send his ultimate boss out to address 1,500 trusted allies assembled in the Honolulu Convention Center hamstrung by a product glitch that would make his technology look crude, his company ineffective. A better option: find someone who could stall.

Enter Kevin MacRitchie, vice president of Cisco's channel operations. An engineer by training, the 11-year Cisco veteran is perfectly comfortable on stage and can soothe a restless crowd with a calm, measured tone--the same one he has found useful when rounding up obstinate buffalo that roam his Michigan ranch.

After what must have seemed like an eternity of watching MacRitchie "test" the IP-based interactive polling system, team Cisco was finally ready. Up came a video of sweeping images of landscapes, horses and ballet dancers. A vocal track of partners expressing wants and wishes followed. Then, drummers hidden behind white scrim cloth pulled tightly over metal scaffolding could be seen pounding huge, native Hawaiian drums. The words "Incredible Things Happen" scrolled across the screen. Then, a very relieved Mountford strode across the stage while AC/DC's "Back In Black" rock anthem poured through massive speakers suspended from above.

Thanks to a little teamwork, Cisco's channel team stared down a challenge and produced a positive moment. It's something they've been doing since they came together as a cohesive unit last year. As Mountford enters his third year on the job as head of worldwide channels, he's firmly convinced that he has assembled the most knowledgeable, talented and committed partner-management team in the business. That's tough, if not impossible, to prove. But a close inspection of various partner-management teams suggests something noteworthy is going on at Cisco, which faces a host of challenges in the channel ranging from territory saturation to program complexity.

After looking at the philosophies, pedigrees and plans of members of Cisco's team, we find a core of executives intent on rebuilding not only their partner programs, but the very foundation of the partner community. The ideas and initiatives they are hatching could very well impact the channel for years to come--that is, as long as Cisco gets its arms around longstanding problems, including partner profitability and satisfaction.

Cisco claims progress has been made on both fronts. Recent internal surveys indicate that satisfaction has reached its highest level in two years, while profitability across the board is up 10 percent.

Credit Team Mountford, which treats partnering as though it were product development. For example, Mountford has launched a relentless internal review process designed to root out program bugs and defects. Not all, of course, works as planned. An idea to have partners differentiate themselves by technology discipline resulted in too many "specialists" all pursuing the same opportunity: wireless infrastructure. To overcome setbacks, Mountford has become an immense believer in measuring everything from profitability to customer contentment to partner satisfaction. While others claim to do the same, none do it in as formalized a manner as Mountford. He knows, for example, the margins his company's top allies derive from partnering with Cisco (18.8 percent), thanks to rigorous examination of dozens of their books and what level of customer satisfaction they produce compared with Cisco's own direct sales force (4.5 vs. 4.6 out of 5, respectively).

Why he's so focused on identifying and deploying the industry's best practices when it comes to partnering is simple: Cisco derives 90-plus percent of its revenue from partners, or roughly $17 billion per year. That's more as a percent of sales than AT&T, HP or Sun. Only HP, IBM, Intel and Microsoft generate more revenue through partners. But none of them has centralized partner management quite the way Cisco has. Unlike Microsoft, which spreads responsibility for partners around several groups and managers (see "Inside the Idea Factory," page 36). Mountford has sole responsibility for both sales and marketing of all partnering efforts the world over. Furthermore, Mountford says none boast the expertise, influence or diversity that Team Cisco does today. If he's right, he could be setting up his company for a break from the pack the likes of which Chambers can only dream of.

The Axis of Power
In an Atlanta conference room during a meeting of Mountford's direct reports last year, Surinder Brar, senior director of worldwide channels, achieved a remarkable breakthrough. The Cisco channel team was hunkered down to study new research on partner profitability. What it found surprised most members. Partners, the research showed, could make money in a variety of ways, pursuing a multitude of business models. Trouble was, Cisco's team couldn't graphically depict the market dynamic in any meaningful way to show to others, including Cisco's senior management. That's when Brar stood and drew on a whiteboard a simple diagram consisting of three axes joined at a single point. He marked the three simply as "technology," "partnership" and "opportunities," and noted that the further a Cisco partner pushed on any of the three axes, the higher his or her return on investment would likely be. These organizations would likely be the ones that helped Cisco sell more VoIP technology, more higher-end switches and security solutions, the executive concluded, so that's where they decided to target new and expanded incentives. It was, in the words of Cisco's head of U.S. channels, vice president Chuck Robbins, a "galvanizing moment" for both the team and its strategy.

"That's when all our ideas and people really came together," Robbins recalls.

Since then, the axes have not only made it into every PowerPoint presentation on the channel that Cisco executives deliver, but, moreover, they have become a bit of a rallying point around which Cisco is building to address longstanding challenges involving partner profitability and, by way of extension, partner satisfaction. Ironically, the idea came from one of the team's most junior members, at least by title anyway. Only one of two of Mountford's direct reports who is not a vice president, Brar is nonetheless looked to as the team's intellectual center. A resident of Berkeley, Calif., Brar is one of only two managers who predates Mountford on Cisco's partner-management team (the other is MacRitchie).

Mountford kept Brar on board because he recognized his lieutenant's ability to think ahead of the market. Take the company's move to a value-based channel strategy from a volume-based one, for example. It was Brar who proposed that Cisco abandon the time-honored practice of lavishing the most rewards on partners who generated the highest sales of products. Brar proposed rewarding partners based on the amount of value they delivered to customers, regardless of top-line sales. In an aggressive sales-driven culture like Cisco's, the notion was considered heresy. Luckily for him, Brar proposed the idea right before the dot-com bubble burst, when sales of all kinds were pouring in. Had he launched the idea just a few short months later, he likely would have been rejected.

Brar, however, kept advancing the idea and found an ally in Mountford, who took on oversight of Cisco's partner programs and strategies in 2001 after the departure of Tom Mitchell. Like Brar, Mountford quickly recognized that some of Cisco's highest-selling partners, including SBC and WorldCom, were actually damaging the market for Cisco products with their relentless price-warring and low-margin sales practices. And he agreed that classifying partners based solely on sales volumes was tantamount to awarding degrees of higher learning that had no particular distinction. Bestowing traditional distinctions upon partners meant little to customers because they couldn't distinguish among Cisco's "Gold," "Silver" and "Premier" classifications, or which partners were skilled in specific technologies or vertical markets.

Mountford signed on to Brar's plan, which has since been embraced by Microsoft and others, and has kept him in his inner circle ever since. Mountford has recruited other members from a variety of places, some within Cisco, and some from places where Cisco rarely looks for talent: the headquarters of its chief rivals.

Building a Team
If ever there were a student of channels, it would have to be Edison Peres, vice president of advanced technologies with Cisco's worldwide partner team. Within Mountford's organization, Peres is the one who will accept nobody's version one of anything. To his globe-trotting colleagues, that can be frustrating. Peres, for example, concedes that he phones MacRitchie as many as 15 times a week. And, he adds, he hunts down Robbins on weekends. Truth be told, Robbins says he relies on Peres for ideas, which never seem to stop coming. One recent idea Peres came up with while on a bus: Cisco's new Solution Technology Integrator program, which promises to hook up third-party OEMs building solutions around Cisco's core products with resellers.

A former vice president of alliances with Cisco rival Avaya, Peres has worked in channels throughout most of his career, including stints at AT&T, Lucent, Panasonic and Texas Instruments. His contribution to the team has been to pick up the baton from Brar, who first recognized that one monolithic approach to treating companies was flawed, and devise programs that individual partners could embrace as they see fit. Most notably, he's the architect of the company's successful attempt to improve partner profitability, the year-old Value Incentive Program (VIP). The rebate program, launched last year, is partly responsible for helping to improve the overall profitability of partners' Cisco business by more than 10 percent, according to Cisco. Many partners, including Michael Fong, CEO of Phoenix-based Calence, swear by it. Calence, for example, has hired new people and quadrupled the training it provides to engineers and others, thanks to money it has received through the VIP program.

Following on the success of that program, Peres has since launched a deal registration program, known as the Opportunity Incentive Program (OIP), and sketched out other initiatives. The former is intended to reward partners who create demand for Cisco products, however OIP has created some controversy because it requires partners to hand over detailed data on partners, while adding another layer of complexity to partners' lives. While he concedes that he's complicating Cisco's partner programs with his amalgam of acronyms-based initiatives, he's convinced it's exactly what Cisco and its allies need.

"I'm the person that challenges the status quo and finds the creative ways to solve problems," he says. Case in point: When he first proposed VIP, people outside Mountford's group told him to abandon the idea because the project would require buy-in from 40 or so other vice presidents, any one of whom could have effectively derailed the notion. Undaunted, Peres systematically went through the ranks of Cisco, soliciting buy-in from fellow VPs. Eventually, he secured approval from his peers and put Mountford in a position where he could take the case for asking for more money directly to the top executives at the company. Cisco insiders, including Rick Justice, senior vice president of worldwide field operations, says convincing Cisco management to allocate additional sums of money for rebates for partners amid budget constraints was a major coup for Mountford and Peres.

Not all bets, however, have turned out. Although none of Mountford's team will discuss it, Paris Arey, head of the company's distributor programs, left the team. Chemistry may be one reason. To get along on Mountford's team, an individual must be willing to accept a lot and part with nearly as much. Travel, for example, is intense. Team members say they rarely get by on anything less than 60-hour work weeks, and that doesn't include time in the air, which is significant when you consider they frequently huddle together all over the world for team meetings. Often, there are requisite get-togethers that are not considered part of the job, but merely adjuncts to it. That would include the weekend that members of Mounford's team spent skiing in Chamonix, France, where he maintains a ski chalet.

Then there are the rigors of the job, which can be intense. They're compounded by the competitiveness of the individual team members. Take Robbins, for example. A former collegiate basketball player, Robbins is the team's numbers man. Unlike some of his teammates at the University of North Carolina who spent their time in school hoping to land coveted spots on NBA rosters, Robbins spent his time collecting a degree in mathematics. When one of his colleagues blows a presentation or statistical analysis, Robbins is sure to pounce. Not that he doesn't take his share of ribbing from Peres, who likes to joke about the fact that Robbins has a size 15 shoe and yet cannot match Peres' drive on the golf course.

Mountford wouldn't have it any other way. Each evening at midnight in Hawaii, for example, his team gathered in Mountford's 14th-floor suite in the Sheraton Waikiki Hotel to review the day's events and to trade notes.

They shared stories about partner concerns and ideas to improve their presentations before turning to their cell phones. Some dialed Asia to check with colleagues who were just getting home for dinner, while others phoned Europe to check on those who were beginning their workdays. They tossed as many phones around as they did nightcaps. But they went to bed confident that they were on top of their games. "The first year, you sort of spend your time just getting to know the job and what the expectations and conditions are. Then in the second year, you make the changes that are needed, based on your knowledge and input from your team," Mountford says. In the third year, again what is often the final phase of a stint at many companies, you're supposed to reap the rewards of what you have sown, he adds.

While it's too early to tell what kind of harvest the company can expect, the crop in the ground is starting to blossom.

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