How Cisco helps acquired startups keep their creative spark

Cisco acquires a lot of startups as part of its overall acquisition strategy. One of the issues any large company faces when buying younger companies is how to preserve the core innovation that makes that company worth buying in the first place. During our interview on FastForward on PPN last month, Cisco president and chief product officer Jeetu Patel talked about his approach.

Patel says as he looks at how to bring acquired companies into the fold, he is fully aware that he can't let the big corporation crush the acquired company's spirit. "What you can't do is let the processed bureaucracy that every company has supersede the creative spirit. That cannot happen,” Patel told me on FastForward on PPN.

One way to do that is to buy something that you don't have already. If there is a competing product internally, that creates a negative political dynamic from the get-go. "You have to have the product not be superbly overlapping because then you have to kill one product to go out in favor of the other. And that gets to be very hard to do," he said.

The idea is to give the acquired team a purpose inside the larger organization. "If we had figured everything out, then we wouldn't be buying you," he said. "The internal people at Cisco have to know that you're making an acquisition so that you can give those people agency so that they can expand and stretch our thinking, and in the absence of that, we will actually stagnate."

Patel says he doesn't actually look for cultural fit when it comes to startup acquisitions. Instead, he looks for cultural expansion, and he's buying the company to gain an understanding that the organization was lacking. "They're thinking about the problem way deeper than I am," Patel said of the founders he brings in.

When Microsoft bought Yammer in 2012 for $1.2 billion, it was about more than business communications software. At the time Yammer was very advanced in terms of producing cloud software with regular updates as fast as weekly, while Microsoft was stuck on multi-year software update cycles. While the Yammer product acquisition wasn't ultimately a game changer, the team helped Microsoft modernize its software delivery. 

That's the kind of change that Patel hopes to get from his startups when he acquires them, and he wants to elevate them, not quash their spirit. "The yardstick that I always have is that a new company coming in should actually do their life's best work and innovate at the fastest velocity possible, but also operate at scale at Cisco compared to what they were doing as a startup."

Editor's note: Some of the quotes were lightly edited for clarity.