Skip to content
a16za16z

From the Dot-Com Crash to the AI Era: How Builders Survive Waves of Disruption

What happens when a startup becomes a giant—and then has to reinvent itself all over again? In this episode, a16z General Partner, Martin Casado, sits down with Raghu Raghuram (former CEO of VMware) and Jeetu Patel (President and CPO at Cisco) for a deep, tactical conversation on scaling, disruption, and navigating transformation from the inside. They share hard-won lessons from leading two of the most iconic infrastructure companies in tech—through waves like virtualization, cloud, containers, and now AI. They cover: - How to keep innovation alive inside large companies - Why the best companies operate with a founder’s mindset, even without founders - The difference between selling to buyers vs. practitioners - Why the story is the strategy, and how to tell it at scale - How Cisco is rebuilding its startup DNA in the age of AI If you're building or leading through a major tech wave, this episode is a playbook. Timecodes: 0:00 Introduction 0:29 Mindset Shifts and Weapons of Mass Disruption 2:55 Cloud & Container Disruption 4:18 Cisco's Approach to Market Waves 5:45 Resetting for Innovation at Scale 6:04 Leadership, Teams, and Founder’s Mentality 8:15 Go-to-Market Challenges & Strategies 10:21 Organic vs. Inorganic Innovation 12:34 Defining Insertion Points & Competing in Brownfield 14:05 Structuring for Disruption: Teams & Agency 15:29 Ideal Customer Profile & Product Adoption 19:15 Storytelling as Strategy 19:55 The Consumer/Prosumer AI Wave 22:41 Infrastructure’s Role in the AI Era 25:36 Innovation, Brand, and Scale 27:00 Founder Mindset, Owner Execution 29:55 Truth-Seeking as a Leader 32:26 From Sales-Led to Product-Led 34:14 You Can’t Cash-Cow Innovation 35:42 AI Is Rebuilding the Stack 40:09 Vertical Integration, Horizontal Openness 43:14 Advice for Founders Resources Find Martin on X: https://x.com/martin_casado Find Jeetu on X: https://x.com/jpatel41 Find Raghu on X: https://x.com/raghuraghuram Stay Updated: Let us know what you think: https://ratethispodcast.com/a16z Find a16z on Twitter: https://twitter.com/a16z Find a16z on LinkedIn: https://www.linkedin.com/company/a16z Subscribe on your favorite podcast app: https://a16z.simplecast.com/ Follow our host: https://x.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details, please see a16z.com/disclosures.

Raghu RaghuramguestJeetu PatelguestMartin Casadohost
Aug 6, 202544mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 0:29

    Introduction

    1. RR

      If you look at VMware's roughly twenty-year history, the first decade was us disrupting and growing, and the second decade was others coming after us to disrupt us, right?

    2. JP

      When a company gets large, you get very good at the math of the business, but you've kind of lost the soul of the business, which is, are you innovating at a very impatient velocity? Operate like the world's largest startup. Make sure that you're operating at speed with scale. Don't delegate the storytelling.

    3. RR

      The story is the strategy. [upbeat music]

  2. 0:29 – 2:55

    Mindset Shifts and Weapons of Mass Disruption

    1. MC

      So maybe just to kick it off at a high level, let's talk about running a large operation, both as a disruptor and through a market transition or transformation. So I'll start with you, Raghu. So this is when VMware came out, I remember, like, it was the late nineties, and I could run, like, Linux on my, you know, Windows, and it was the most amazing, magical moment. And then it really changed the industry. I remember when it became a thirty billion dollar company, everybody was running it. It was a monopoly, but it also had to weather a number of transitions going forward. And so maybe just a bit about, like, mindset as a disruptor and then how that you evolved your mindset as a leader and then maybe, um, you know, of the org as you have to go through transformation yourself.

    2. RR

      Yeah, I mean, I think, uh, um, I would say if you look at VMware's roughly twenty-year history, the first decade was us, uh, disrupting and growing, and the second decade was us-- others coming after us to disrupt us, right?

    3. MC

      Yeah. Yeah.

    4. RR

      That's roughly-

    5. MC

      Yeah

    6. RR

      ... the VMware history. I mean, there are three or four, what I call weapons of mass disruption in our industry, especially on the infrastructure side.

    7. MC

      Yeah.

    8. RR

      One is if you introduce a new... It's a piece of software that introduces a new abstraction, right?

    9. MC

      Yeah. Yeah.

    10. RR

      Or a new usage model.

    11. MC

      Yep.

    12. RR

      Right?

    13. MC

      Yeah. Yeah. Yeah.

    14. RR

      And that everything starts to aggregate around that. Or you are able to successfully bring about a new class of users that were previously not consumers.

    15. MC

      Yeah.

    16. RR

      Right? This is the classic innovators, innovators dilemma description or a new business model, right? So in the case of VMware, we did the f-first and the last one, meaning we brought about a new abstraction for the data center, right? Uh, for compute, to be more specific, which was a software-based virtual machine. Um, and then we had a business model that associated software as opposed to hardware, and that was the core of the disruption. And because of the benefits of software, we were able to fundamentally change the usage patterns in the data center. And once you start to change the usage patterns and the, um, uh, behaviors, right, of the practitioners, then you get locked in, and the d-disruption is almost impossible to remove, right? And I would say those weapons of mass disruption were used against us [laughs]

    17. MC

      [laughs]

    18. RR

      Not intentionally.

    19. MC

      No, no.

  3. 2:55 – 4:18

    Cloud & Container Disruption

    1. MC

      Sure. Yeah, yeah.

    2. RR

      When, I mean, the two big ones that we faced was, uh, the first one, of course, was cloud.

    3. MC

      Yeah.

    4. RR

      And the second one was, um, call it, uh, uh, containers and Kubernetes-

    5. MC

      Yeah

    6. RR

      ... right? Um, in the case of cloud, all the same elements were present.

    7. MC

      Yeah. Yeah.

    8. RR

      Right? The cloud... I mean, initially, Amazon, AWS did not change the abstraction. It was still a virtual machine, um, but everything else, the business model changed.

    9. MC

      Yep.

    10. RR

      And the most important change that Amaz- AWS brought about was it made infrastructure available to developers without IT. That was the massive unlock, right, of a whole new class of... And we had no idea how to work with developers, right? We did not know the secrets of how to do that, I think. So that is the point. And then Docker and Kubernetes and things like that changed the packaging and the abstraction. Now, the interesting thing is the industry, nobody made money on either Docker or Kubernetes. I mean, there are some startups, right? But really, there was no big company that was created out of that. But the real fundamental, uh, disruption we had to fight against was, uh, the cloud. And the cloud disruption was so hard for us to fight because it brought in a new class of users, uh, for infrastructure.

  4. 4:18 – 5:45

    Cisco's Approach to Market Waves

    1. MC

      Cisco's been such an iconic company for so long. Um, I mean, it really rode the, you know, the internet wave, and then it rode the data center wave. It's been incredibly successful at riding multiple waves. It feels like it's hard to make a wave, like you can't do that. But, like, once they happen, you can kind of ride them and capitalize on it, and we're clearly seeing one right now with AI. So it seems to me like a great opportunity for Cisco, again, to kind of figure out what to do. So I'd love to hear... A ] I'd love to hear how you're thinking about, like, the waves that Cisco did miss. I would love to hear about how you're thinking about, as a leader, you know, at Cisco, how you're thinking about kind of navigating this.

    2. JP

      Yeah. The obvious one is we missed the cloud wave. If, if you take a step back and go every s- every large company that's successful has to have gone through a startup phase, because ev-every large company was a successful startup at some point in time. But what ends up happening, though, is at some point, when a company gets large, um, they lose touch with the front lines.

    3. MC

      Yeah.

    4. JP

      And you, you kind of get into this mode where you get very good at the math of the business. Everyone knows what the gross margin of the company is.

    5. MC

      Yeah.

    6. JP

      But, but you've kind of lost the soul of the business, which is, are you innovating at, at, at, at a very impatient velocity-

    7. MC

      Yeah

    8. JP

      ... and a very fast velocity so that you can continue to keep, you know, just continuously, um, you know, leapfrogging. And, and when that happens, i-it's, it, it, it's something where you have to, you have to hit the reset button.

    9. MC

      Yeah.

    10. JP

      And I think about five, six years ago, that had happened for us,

  5. 5:45 – 6:04

    Resetting for Innovation at Scale

    1. JP

      and we had to hit the reset button. Um, and l-let me tell you, like, um, what needs to happen when you hit the reset button, which is you have to make sure that you c- you g-get people who have a founder's mentality.

    2. MC

      As execs in the company?

    3. JP

      As execs in the company

    4. MC

      Or, or just throughout? Just any, any level

    5. JP

      No,

  6. 6:04 – 8:15

    Leadership, Teams, and Founder’s Mentality

    1. JP

      uh, throughout. Like, most of the people that are on my leadership team, a lot of them are ex-CEOs of acquisitions-

    2. MC

      Oh, that's great

    3. JP

      ... that we've had that are actually running these pieces. And you have to have a combination of CEOs and people that know how to kind of operate within the machine that is Cisco.

    4. MC

      Yeah.

    5. JP

      But the CEOs can, um, put pressure by being impatient about saying, "This doesn't make sense. I'm not moving fast enough."

    6. MC

      Yeah.

    7. JP

      And then the people that know how to navigate Cisco are able to then guide them through, and if you can make a good team out of those two people, magic starts to happen.

    8. MC

      Yeah.

    9. JP

      And, and so where we've really started to, um, see the tempo pick up is operating, um, you know, like we internally have a, um, uh, a mantra that says, "Operate like the world's largest startup. Make sure that you're operating at speed, but scale." You have to have a great zero to one practice. You have to have a great one to, um, one to 100 practice, and now 100 to 1,000 practice.

    10. MC

      Yeah, yeah, yeah.

    11. JP

      We're actually getting very good at saying, "In nine months, can you get a product from zero to market? And then in the three to four years, can you get it to a billion?" And if you can do that eight, nine, 10 times, you've actually got a pretty healthy additive book of business that you didn't have before, and you can either create a category or you can make sure that you ride a category that's been created.

    12. MC

      Yeah. For sure.

    13. JP

      You know? And that's... I, I think you can do both of those. It takes a little longer to create a category. I think large companies are very good with running many experiments.

    14. MC

      Yeah.

    15. JP

      What they're bad at is doubling down on an experiment works. That's where the startups are good, but they'll, they'll just focus on one problem or we... And then the other thing that we u-u-usually see where things fail in a large company is, uh, if you read one too many TechCrunch articles-

    16. MC

      [chuckles]

    17. JP

      ... you will build a zero to one product that does not keep in mind your route to market that you have available to you.

    18. MC

      Yeah.

    19. JP

      And you have to make sure that you can actually ride the route to market that you have-

    20. MC

      Yeah

    21. JP

      ... so you can say, "If I can build 10 products that actually leverage my route to market-

    22. MC

      Yeah

    23. JP

      ... then I'm gonna have an advantage-

    24. MC

      Yeah

    25. JP

      ... of getting to a disproportionate amount of velocity to get to market." But if I don't leverage the route to market, and if I try to build a new route to market for every single one, then the sales team's gonna feel starved, and then you're not gonna go out and get

  7. 8:15 – 10:21

    Go-to-Market Challenges & Strategies

    1. JP

      to the level you want.

    2. MC

      Okay. So let, let's dig into this very specific. I, I think m-many people don't appreciate how complex this exact thing is-

    3. JP

      Yeah

    4. MC

      ... for a large company. So actually, you said something that I think is exactly right, which is, like, large companies lose touch with the front lines.

    5. JP

      Yep.

    6. MC

      I think Steve Sinofsky has this great model of this, which is for any disruption, you'll have these incumbents, and the incumbents, let's say 80% of the dollars comes from 20% of the customers, and those customers are large enterprise, and they've got, like, very sophisticated needs, and it just drives so much of the business. And so they've got these deep relationships with a few customers, and then a new disruption has, and they're with those customers. They're not with the front lines, which tends to be different.

    7. JP

      Correct.

    8. MC

      And so now you've gotta retool go-to-market product, everything for this new base, even though 80% comes. And so, I mean, I know, Raghu, you had to deal with this. Like, how did you think about how you evolve the company not on, like, a technology disruption, but, like, even just catering to, like, a new base? Like-

    9. RR

      Yeah. I mean, what you said is-

    10. MC

      ... on the go-to-market side, the marketing side, [chuckles] the sales side, the-

    11. RR

      Yeah, yeah. What you said is, is spot on because when you're talking only to your best customers, by definition, that's not where the disruption is coming from.

    12. MC

      Yeah. Yeah.

    13. RR

      Right?

    14. MC

      Right.

    15. RR

      And like any other large company, you get really good at talking to your best customers, and that's where all the incentives are as well. So, uh, which is why companies deal with it in one of two ways, right? One is they fence off a different team to go approach this thing completely different, allowed to break every rule in the book, right? Or they go and buy.

    16. MC

      Yeah.

    17. RR

      Right? So we have at various times done both, right? There are some classes of innovation where you can get by, by what I would say is close adjacencies, where the... if you're building a product that's closely adjacent to your original product-

    18. MC

      Yeah

    19. RR

      ... you can take it from zero to one through the existing sales force.

    20. MC

      Yeah.

    21. RR

      Right? Because it's going exactly to the same user.

    22. MC

      Yeah.

    23. RR

      But if you're, for example, going at a different user like we were doing with the, the Nicira and, uh, networking-

    24. MC

      Yeah

    25. RR

      ... then you need to fence it off, and that's... you know, that study is there.

    26. MC

      You

  8. 10:21 – 12:34

    Organic vs. Inorganic Innovation

    1. MC

      know what's, you know, so interesting about VMware? It's one of the few companies that, that actually did both pretty successfully. Like, vSan was storage.

    2. RR

      Exactly.

    3. MC

      You pulled it off. I don't know how. [chuckles] And then Nicira, like, was inorganic, and you pulled it off. I didn't know how. And so, like, any lessons of, like, inorganic, organic, like, the complexities?

    4. RR

      Yeah. I mean, I think you have to be very careful where organic is gonna work. Obviously, everything starts from the product, right? For s-so many of us in the business-

    5. MC

      Yeah

    6. RR

      ... that's, uh, sort of a truth. And in the case of vSan, to your example, it was a close adjacency, right, to the compute.

    7. MC

      But it's a different buyer, right? Isn't it? Is it?

    8. RR

      Yes.

    9. MC

      You tell me. I mean, you're the expert.

    10. RR

      Yeah. In fact, we had two iterations on vSan, right? Initially, we said, "Hey, let's go after the storage buyer." That did not work as well.

    11. MC

      Mm.

    12. RR

      Then we said, "Look, we're gonna go expand the compute buyers' purview."

    13. MC

      Ah, I see.

    14. RR

      Right?

    15. MC

      Yeah.

    16. RR

      Then it started working. So the go-to-markets start to match together, right? And the other thing about going into existing categories is you gotta be 10X better.

    17. JP

      You have to be 10X better.

    18. MC

      Yeah.

    19. RR

      So in the case of storage, we were 10X better than having an external storage, at least for VMware use cases, right? And so that's why that worked.

    20. JP

      And by the way, that 10X better is a very counterintuitive thing for large companies to think about because they always think about catching up, and no one wins by playing catch up.

    21. MC

      Yeah.

    22. JP

      Right? And so-

    23. RR

      Yeah

    24. JP

      ... the asymmetry of coming at it from a different angle and being at least an order of magnitude better, uh, is something that you have to continue to keep pushing at and be the biggest skeptic. 'Cause most people will tell you when... that they're 10X better when they're actually 15% better, and 15% doesn't createUm, an extraction of an in- incumbent

    25. RR

      Just to finish that thought, in, in the case of networking, as we all know-

    26. JP

      Yeah

    27. RR

      ... it was a different way of operating a network, right?

    28. JP

      Yeah. Yeah, totally.

    29. RR

      So that was the value proposition. Not necessarily 10X better. It was something that could not be done on a physical-

    30. JP

      Yeah

  9. 12:34 – 14:05

    Defining Insertion Points & Competing in Brownfield

    1. RR

      in both cases.

    2. JP

      And you have to... M- the other thing that I would s- say to what Raghu said is you have to define very clear insertion points because-

    3. RR

      Yeah

    4. JP

      ... oftentimes-

    5. MC

      W- you, you mean in the market or in the company?

    6. JP

      In the market, right? So if you, if you have an incumbent that's already in the market that, that's entrenched pretty well, uh, a large company will typically try to say, "Okay, I'm gonna go out and build something for the greenfield with an entire platform." But the reality is the market's not greenfield, it's brownfield. So you have to identify an insertion point where your competitor might be there, and then over time you have to make sure that you extract the competitor, which is not something that's intuitive to people. 'Cause they're like, "Oh, I'm gonna compete with them." It's like, no, you actually have to coexist first before you can displace. And so that requires a very open ecosystem-based mentality, which large companies sometimes can tend not to have.

    7. MC

      So o- one thing I've seen fail consistently, again, like-

    8. JP

      Yeah

    9. MC

      ... you guys are way more expert than I am, but is this kind of notion of, you know, if a engineer spends one day a week experimenting, then maybe they'll come up with a great idea that changes the company. It just feels like that tends to not have enough momentum behind it to do something-

    10. JP

      Yeah

    11. MC

      ... big. You know, I've also see- seen fail, which is like, you know, you take one large org and you say you've gotta do two things. You've gotta do the new thing and the old thing. It's just too hard. And so what seems best is kind of ring-fencing-

    12. RR

      Yep

    13. MC

      ... like, a, a b-

    14. JP

      Ring-fencing works best

    15. MC

      ... and I think that, and Cisco in particular has a lot of experience with this type of stuff.

    16. JP

      Yeah.

    17. MC

      And so how do you think... Let's say you're, like, in the AI wave, you're doing something disruptive. Let's say you've decided not to do inorganic. You're doing it organic.

  10. 14:05 – 15:29

    Structuring for Disruption: Teams & Agency

    1. MC

      How do you think about structuring it?

    2. JP

      So we, the way that we structure it is you, you'll think of a two-pizza team initially that you start with.

    3. MC

      Really small.

    4. JP

      And that pr- that team has agency, that has air c- that team has air cover from the very top. Um-

    5. MC

      Oh, so all the way up, all the, all the way up through the-

    6. JP

      All the way up to the-

    7. MC

      Okay, that's right

    8. JP

      ... to, to the top of the food chain.

    9. MC

      That's right. Yeah.

    10. JP

      And what you have to do, because the, there's enough antibodies that'll be there that'll actually not ha- that'll argue why that's not a good idea and it should be part of the core-

    11. MC

      Yeah, yeah. 100%

    12. JP

      ... that you have to make sure that that team is, um, you know, protected from that and is just focused on go, go drive it. Now, they might be good at getting a version one product out to the market, but they are not gonna be good at getting the entirety of the sales force of 17,000 sellers in Cisco's case to go out and get it. So what ends up happening is you have to be very prescriptive of an ideal customer profile that you wanna make sure that you start this with. And this is where I feel like, you know, not losing touch with the front lines, this is one of the best ways to not lose touch with the front lines. You start with a zero-to-one project. Start from the bottom, because you never start a zero-to-one project from the largest financial services institution.

    13. MC

      [laughs] Exactly. Yeah, yeah.

    14. JP

      Right?

    15. MC

      Yeah.

    16. JP

      You start from the bottom, and when you do start from the bottom, you, you give that team enough freedom, enough agency, and then over time construct enough incentives in the different teams-

    17. MC

      Yeah

    18. JP

      ... for making that thing successful.

    19. MC

      Yeah.

    20. JP

      And when that happens, you start to see, you know, kind of a snowball effect start

  11. 15:29 – 19:15

    Ideal Customer Profile & Product Adoption

    1. JP

      to occur, but it takes a while. Like, one, one of the things we learned that failed the first couple times we did this was we'd have the version one of the product out, and then the field would just reject it, saying, "You know, it's, it's not ready. Uh, it's not a, a complete product." It's, "No, it's actually ready for this segment of the market."

    2. MC

      Yeah.

    3. JP

      But you don't want to sell-

    4. MC

      But would you do, would you do an overlay to help out with this?

    5. JP

      We, we would have an overlay sales team.

    6. MC

      But the core, but the core would keep it out of the account. Is that what it is?

    7. JP

      Core would keep it out of the account 'cause they're like, "Ah-

    8. MC

      [laughs]

    9. JP

      ... it's not gonna go sell to Bank of America." I'm like, "Yes."

    10. MC

      Yeah, yeah, yeah. [laughs]

    11. JP

      "That's actually the wrong account to go sell it in as a version one product because it's not ready for all of the capabilities that-

    12. MC

      Right

    13. JP

      ... are needed there." I don't need to have a data center in China for my first billion.

    14. MC

      Yeah, yeah.

    15. JP

      And so just being very clear on where you're gonna actually make sure that you... So what we do is-

    16. MC

      Yeah

    17. JP

      ... when, n- now, when you have a incubation team, they, they have two jobs: build a great product and define an ideal customer profile.

    18. MC

      Yeah.

    19. JP

      And really make sure that in that ideal customer profile you have initial adoption, um, and, um, you know, a repeatability of a go-to-market opportunity creation motion, um, after you've got the product market fit very, very clearly defined. And once you've got that ICP nailed and you've saturated that market, or you're starting to saturate that market, expand the ICP, and then expand it again, and expand it again. I think that's a very counterintuitive motion for large companies because it's very hard to go to 17,000 sellers and then, and say to them, "You 1,000 of the sellers, I'm only gonna go train you on it."

    20. MC

      Yeah.

    21. JP

      So it, it gets to be a little hard to do.

    22. MC

      Yeah, yeah.

    23. RR

      I think the term ideal customer profile sometimes, especially in larger companies, misleads people into thinking about, "Oh, my customer is JPMorgan. My customer is Home Depot."

    24. JP

      [laughs] Yeah.

    25. RR

      Exactly. That's an ideal-

    26. MC

      That's the ideal use case profile.

    27. RR

      The ideal practitioner profile.

    28. JP

      That's the... Yeah, yeah, yeah.

    29. RR

      Exactly.

    30. MC

      [laughs]

  12. 19:15 – 19:55

    Storytelling as Strategy

    1. JP

      very different.

    2. RR

      Yeah. In fact, I'll go one step further and say the story is the strategy.

    3. JP

      That is the strategy, yeah.

    4. RR

      Right? Because human beings, suddenly ninety-five thousand people together-

    5. JP

      Yeah

    6. RR

      ... are not gonna understand five bullets, right? It is a story.

    7. MC

      So something that's unique to this wave, this AI wave that, you know, Raghu, you've certainly seen, and maybe you saw a little bit at Box, was, um, it's really this kind of consumer/prosumer-

    8. RR

      Yeah

    9. MC

      ... movement, which the internet was, right? Like, which, which certainly Netscape was-

    10. RR

      Yes

    11. MC

      ... to begin with. I mean, it was like-

    12. RR

      Yeah

    13. MC

      ... actually, VMware kind of was.

    14. RR

      Yeah.

    15. MC

      Actually, not... I-- just thinking about that right now, but like it-

    16. RR

      You paid one ninety-nine bucks and then two forty-nine bucks and downloaded the product.

    17. MC

      I know. So I did. I, I did it as a, as a college student, [chuckles] right?

    18. RR

      Yeah.

    19. MC

      And so, like,

  13. 19:55 – 22:41

    The Consumer/Prosumer AI Wave

    1. MC

      um, uh, you know, and a lot of the companies being impacted are not consumer companies. I mean, they're like, you know, deep enterprise companies. And so, like, how do you think about navigating a wave where the buyer's not just, like, ICP for, you know... It's the actual consumer. Is it, like you said, to the people who sell to them? Like...

    2. RR

      Yeah. I mean, I think firstly the-- because danger, I would say, for enterprises, uh, even for startups, is to look at the, um, this AI wave in the lens of previous waves.

    3. MC

      Mm-hmm.

    4. RR

      Yes, for sure, maybe there are some applicable lessons. This thing is so big and so different-

    5. MC

      Yeah

    6. RR

      ... that you gotta look at it from first principles. So I'm not-

    7. MC

      And it's partic- it's particularly dangerous because we have, like... Like, it didn't work in the past, but we created businesses around it. So, like, we have these kind of old, like, AI chatbot, things that are actually quite different, but, like, I think we're used to thinking about the old AI and not the new AI, so it's almost like it's got this... It rhymes with previous stuff, and so it makes us also think-

    8. JP

      It almost, like, open... What- whatever OpenAI did broke every single rule of what was done previously, and they've actually wildly succeeded.

    9. RR

      So I mean, I think this is the new skill to learn for companies-

    10. JP

      Yeah

    11. RR

      ... to learn as well.

    12. JP

      Yeah.

    13. RR

      You've gotta, especially infrastructure companies or, um, uh, application companies, you gotta almost ignore IT.

    14. JP

      Yeah.

    15. RR

      Right? That is the selling to the seller who's selling to the buyer internally. That chain is c- forever broken. I mean, SaaS broke it-

    16. JP

      Yeah

    17. RR

      ... but AI breaks it even further, right? So you gotta... And so what that means is that your product managers and everybody else that's trying to figure out what the product is has to really think about the end user from a direct reach point of view.

    18. MC

      Right. But there's different buyers. Like, you could sell to IT or you can sell to, like, you know, whatever.

    19. JP

      Security or CS-

    20. MC

      Security or marketing. But, like, this is literally individuals with credit cards that are not devel- even developers are a bit of a central buyer that we understand how to sell to.

    21. RR

      Yeah.

    22. MC

      But this is, like, rando, you know, employee, you know, asking ChatGPT to, like, write an email. [chuckles] So it's very, it's very different, right? It seems like Cisco's been able to navigate these because the network is such a point of leverage. If every user uses something, the network TAM grows. And so I'm just kinda curio- I mean, so, like, one option for Cisco is like, "Whatever. You have a new data center, we'll sell you a new switch," and it doesn't matter that, like, a lot of the market is... You know, like, you could argue, like, the entire web is something that Cisco did a phenomenal job with the data center switching, and, like, it didn't go sell to consumers. That was a consumer phenomenon. And so is, is that kind of the way that-

    23. JP

      Yeah, I think the way that we think about our- ourselves is we are the critical infrastructure for the AI era.

  14. 22:41 – 25:36

    Infrastructure’s Role in the AI Era

    1. MC

      Okay.

    2. JP

      And so-

    3. MC

      Still infra, yeah.

    4. JP

      And then you have to look back and say, "Where is AI constrained"-

    5. MC

      Yeah

    6. JP

      ... "right now?" It's constrained in power, it's constrained on compute, it's constrained on the net- o-o-on the network.

    7. MC

      Yeah.

    8. JP

      Because if, if the packet is delayed getting to the GPU, the GPU is idle. The GPU is idle, that's like burning money.

    9. MC

      Yeah.

    10. JP

      Especially in the training runs. So you have to make sure that you actually have a very, very efficient packet flow going over there. So you... So low latency, high performance, high energy efficiency, you know, infrastructure on the networking side, super important on training. As you have more agents in the work, um, your inf- inference demand is not gonna be spiky. It's actually gonna be sustained, because an agent's gonna... Today, probably an agent works autonomously for twenty minutes.

    11. MC

      Yeah.

    12. JP

      In the next six months, it'll work autonomously for maybe, you know, two hours or t- ten hours, and then it'll work for two months, and then two quarters, and then two years. The longer you work, you have a sustained, persistent demand for inferencing, and your, your capacity of network appetite is gonna go up quite exponentially, because if you have a thousand employees and you add ten thousand agents, that's like having eleven thousand employees. That means you have to have your network bandwidth be equivalent to what can serve eleven thousand employees, and so you're gonna just need to make sure that you have more infrastructure. And so we are a direct benefactor of that. And then the second area is keep it, keep it safe and secure.

    13. MC

      Yeah.

    14. JP

      Securing AI is gonna be pretty important. We actually have a core foundation on the safety side. So those two become core foundational elements of the infrastructure. The third one is data, and we've got Splunk. So you've... You... I think you have to find those kind ofFoundational elements which say that no matter what happens on the business model, people are gonna need... As an infrastructure company, the beauty is your business model is not that complicated. As there's a spike in demand and applications, you're just gonna need more infrastructure, and you have to continue to sell the infrastructure to the people building it.

    15. RR

      Yeah. I mean, I think infrastructure traditionally has followed usage models, right?

    16. JP

      That's right.

    17. RR

      So back to your consumer thing, you really have to understand the usage pattern, whether it's human beings typing in chatbots or, or-

    18. MC

      I would say with Cisco, it's also just good to be king, right? I mean-

    19. RR

      Yeah. Of course

    20. MC

      ... if you're in the network, like-

    21. RR

      Yeah

    22. MC

      ... whenever compute grows, the network grows. [chuckles]

    23. RR

      Yes.

    24. JP

      Yeah, but you know, it's not always during the COVID crisis, um, I think it's, it's great to have share, but if you stop innovating, you can actually start to see customers get frustrated. And for about a six, seven-year period, we had just stopped innovating, and I just don't think it was that, um, that, that productive for us. And, and then getting back out to innovation right now... For example, past 18 months, we've probably done more innovation than the previous 10 years combined. Our biggest challenge right now is, you know, sitting down with the customer and giving them the story that says, "Here's where the innovation

  15. 25:36 – 27:00

    Innovation, Brand, and Scale

    1. JP

      has happened." When you sit down with them for 90 minutes, they love it. Doing that for a million customers is really hard.

    2. MC

      Yeah.

    3. JP

      And so at scale, changing perception is hard, and that's, that's kinda one of those things that it took us about a year and a half to do that, you know?

    4. MC

      You know what? One thing that's interesting about this AO, actually, Aaron Levie was sitting in that seat.

    5. JP

      One of my best friends.

    6. MC

      Yeah. Yeah. He brought, he brought this up, which I thought was really good, which is during this wave, you have a lot of the original founders still running the companies, right?

    7. JP

      Yeah.

    8. MC

      You've got Zuckerberg, and you've got Jensen, and, um, you know, you've got Oli Godsey. Like, there's many-

    9. JP

      Yep

    10. MC

      ... and, and so, like, a founder we've seen many times with, like, the Reed Hastings effect can, like, actually navigate a transformation because, well, they know the team. You know, they are product-focused. Um-

    11. RR

      They have the moral authority.

    12. MC

      They have the moral authority. They have support from the board. I mean, it's just... You know, so they can, they can do that. Um, I think... I mean, when you joined VMware, Diane was still running it, right?

    13. JP

      Yeah.

    14. MC

      Right? So I mean, you have... Yeah, and you were there, there. So you've actually seen the founders do it. But, you know, listen, I mean, you were CEO as a non-founder. You know, you guys have worked with non-founders. Like, do you think it's a different job?

    15. RR

      Yeah, there are a couple of things that are-- where a founder has a unique license.

    16. MC

      Yeah.

    17. RR

      Right?

    18. MC

      Yeah.

    19. RR

      But then there's the rest of it, which is how do you make the change happen?

    20. MC

      Yeah.

    21. RR

      Right?

    22. MC

      Like, how did you think about it? I mean, you were this, you know, CEO.

    23. RR

      Yeah.

    24. MC

      I mean, you've been in the company so long, maybe you were virtually a founder.

    25. RR

      Yeah, I mean, so the-- actually, the first element of

  16. 27:00 – 29:55

    Founder Mindset, Owner Execution

    1. RR

      it is what is the technical and product credibility and license that your team is g- giving you, right? In my case, fortunately, I'd been there for a long time and, and driven a lot of the waves that VMware had went through, so I had some of that. But the other important thing that you need is, uh, early conviction on what to bet on, right? Because founders will get much more time. The market gives them more time. Their board gives them more time. Their employees give them more time. Non-founders, for various reasons, and I don't know if you agree, you don't get the same amount of time. So what you gotta do is you gotta develop very early conviction about what the bet is that is gonna drive this transformation, right? And then what is the narrative behind it, to, to your point earlier. And then how do you drive that into every aspect? The other part of it that you gotta do, which founders naturally do, is, I mean, the overused phrase of the, of the year probably is founder mode, right? You really gotta own that change, every little aspect of it, right from every check-in to how the way it gets to the market, right? So those things are all common, but, uh, you're absolutely right. Founders have a better ability to do that because of the fact that they are founders and they're natural entrepreneurs.

    2. MC

      Yeah.

    3. JP

      See, I... Maybe I th- I, I have a slightly different... Like, I, I agree with everything Raghu said, but I also feel like, like, I've never been a founder. I have never felt like I'm not a founder of any company I worked for.

    4. MC

      Yeah, I was about to say, you sure fe-feel like a f-

    5. JP

      I-

    6. MC

      You sure feel like a founder. [laughs]

    7. JP

      I feel like I founded Cisco, and this is my company, and I am gonna-

    8. MC

      I love that. Yeah

    9. JP

      ... I'm gonna make sure that we make it successful. And, um, and I think that owner's mentality is actually what's more important in my mind than a founder. And the, the way that I think about the owner's mentality is you, you gotta, you gotta make sure that, um, you're extremely impatient. You're running out of... You always re-remind yourself you're running out of time. You always market in rather than company out, and you don't tolerate, um, any level of mediocrity, and you don't try to win a popularity contest because you'll never win it. You know? And especially the larger the company gets, it actually is a very dangerous trap to fall into because a lot of people will tell you what you wanna hear, and so you almost have to work hard to surround yourself with people that are almost excessive critics, where they might actually have an extreme version of they look at everything that's wrong with you and keep nitpicking on it, and you need to have some of those people around you that can tell you that so that you are constantly getting better. But I feel like I've never been a founder, and I always feel like I'm always an owner of the company I'm in.

    10. RR

      The other thing is I think finding the truth is especially hard in a large company.

    11. MC

      It's so hard.

    12. JP

      Yeah.

    13. MC

      Yeah.

    14. RR

      Um, and that's another place where I think founders can get to, to the bottom of things eas- more easily.

    15. JP

      And by the way, on that one, that's a really

  17. 29:55 – 32:26

    Truth-Seeking as a Leader

    1. JP

      important point. W- In large companies especially, we start to create, um, versions of the truth and then start believing those versions of the truth, and that happens so frequently. And seeking the truth and going down to the facts of what is, in fact, not working, uh, what ends up happening is, and especially, you know, at a company like Cisco, one of the things that Cisco is really amazing at is it's a very compassionate culture.One of the Cis- things that Cisco is not that great at because of the fact that it's a very compassionate culture, is we might not actually have very direct conversations sometimes. And so you have to make sure that when something is not good, you sit people down and say, "We're failing." There's no... You have to use binary language. "We're failing in this area. These are the three things we need to do to succeed, and if we don't succeed, there's an existential threat. And I need and expect you to do this to make sure that that happens." And I feel like if you... It- it's very unnatural for people when someone comes in and then starts doing that initially, and you have to just break every mode of hierarchy. So I'll, I'll give you an example. When I first joined, um, you know, I said, "Let's start doing design reviews with the Webex team." And they go, "What, what are you talking about?" Like, you know, "This is a member of the executive leadership team. Jeetu, you're too senior. We don't need to do design reviews." Then they started doing design reviews, and the senior vice presidents would come in and do design reviews with me. I'm like, "No, I need to make sure that the designer and the PM and the engineer are actually doing the design reviews."

    2. MC

      Yeah.

    3. JP

      And so then they would... They started working with and doing eight meetings for prep before they came to me because every layer would do the prep.

    4. MC

      [laughs]

    5. RR

      [laughs] That is a very common disease.

    6. JP

      Yeah. And so then one of the guys who was there said, "Stop this madness."

    7. MC

      Yeah.

    8. JP

      His name is Ty. He was... He's a great engineer. And he said, "We're gonna learn when Jeetu learns. And this is a safe space, and all of us are editors. We keep our titles out."

    9. MC

      Yeah.

    10. JP

      "Let's just start to make sure that we edit the, um, the code that's gonna ship." Right? And the moment that happened, there was an unlock in the team, and everyone started thinking differently because then it became a safe space. And we were just, you know, kind of critiquing each other's ideas. They were telling me I was wrong. I was telling them they were wrong. We were just debating back and forth, and the titles were left outside the room, and that created this magical, you know, kind of purely the best idea wins. And I think in a large company, best idea wins happens very seldom. You know, so you have to make sure you fight that, that urge to say rank wins. It's like the best idea

  18. 32:26 – 34:14

    From Sales-Led to Product-Led

    1. JP

      has to win.

    2. MC

      I mean, it's just occurred to me, I don't know why it didn't occur to me before, that both of you are product people. [laughs]

    3. JP

      Yeah.

    4. RR

      Yeah, of course.

    5. MC

      Right? Uh-

    6. RR

      I don't think it's a pi- I don't... I mean, nothing against people with other specialties, and they're all, uh, phenomenally difficult to acquire expertise in many of these corporate domains. But you cannot navigate this AI- AI transformation or for that matter, any other transformation if it doesn't start from the product.

    7. MC

      Yeah, I think so. That's very interesting. Do you, do you manage, like, from product on out?

    8. JP

      Absolutely. I think, I think of... And I'm very public about this. I usually think the product is the soul of the company. And what we do is we will, uh, when we start thinking about the, the product side, Cisco used to be a very sales-led company.

    9. MC

      Well, I mean, John Chambers is the consummate sales guy.

    10. JP

      Right? Yeah, yeah.

    11. MC

      I mean, like-

    12. JP

      Um, and w- what I give Chuck a lot of credit for is he said we have to become a product-centric company.

    13. MC

      Really?

    14. JP

      Yeah.

    15. MC

      I wasn't aware of that.

    16. JP

      And then Chuck's a sales guy, right?

    17. MC

      Yeah, of course.

    18. JP

      By, by trade.

    19. MC

      Yeah, yeah. Exactly.

    20. RR

      Yeah.

    21. JP

      And, and he said, "Jeetu, we have to make Cisco a product-led company, and you have to start from the product."

    22. MC

      Yeah.

    23. JP

      And every single time a product guy started bitching about why the salesperson wasn't selling well-

    24. MC

      Yeah

    25. JP

      ... he said, "Well, you know, if you, if you build a good enough product that has market pull-

    26. MC

      Yeah

    27. JP

      ... you're never gonna complain about enablement." Like, you know, like, if, if you, if you build a product that cures cancer... One of my mentors used to tell me this. Like, if you build a p- product that cures cancer, you sell it in the Himalayas from two thirty to three-

    28. MC

      [laughs]

    29. JP

      ... three thirty PM on Tuesday afternoon-

    30. MC

      People will buy it, yeah

  19. 34:14 – 35:42

    You Can’t Cash-Cow Innovation

    1. MC

      Yeah. I, I, I feel like companies go through three stages. They go through the product stage, the sales stage, and the operations.

    2. JP

      Yeah.

    3. MC

      And there's actually leaders for each one of these stages. Like, the same person can do all of them, but they have very different requirements. The danger zone seems to be that you've got the operations CEO, you know, during a transformation because it's such a product and they've got to go ahead and reset.

    4. JP

      Yeah.

    5. MC

      And so I, I, I do think that having... Founders tend to always be product because, like, you have to go through that stage.

    6. RR

      Yeah, that's where it starts. Yeah. And I mean, if you look across any large Silicon Valley company or for that matter, outside Silicon Valley, where the leaders or the companies have successfully navigated the transition, I don't think you can think of an example. Maybe not. Well, I'm guessing an exception-

    7. MC

      Except, except... I would... There's a few people maybe touched by divinity, like John Chambers-

    8. RR

      Yeah

    9. MC

      ... but, like, there's very few of them.

    10. JP

      Yeah.

    11. RR

      Yeah.

    12. JP

      But I... The one thing that I've never understood in large companies is, um, the one thing that definitively does not work as a formula is saying, "I'm in a tech space, and I'm gonna cash cow this business and not innovate, and I think I'm gonna do great." Like, that, that never plays out in the long term, right?

    13. MC

      Yeah, yeah.

    14. JP

      And so-

    15. RR

      But it, but it is so common

    16. JP

      ... but it's so common, and I've never understood that. I'm like, "What?"

    17. RR

      Becomes a self-fulfilling prophecy pretty soon.

    18. MC

      Yeah, 100%. [laughs]

    19. JP

      It does. It's like just keep innovating, and it's a very simple formula. Just, just keep outdoing yourself and doing better every day. And I... We have this line internally we use, "Just get one point two seven percent better every day-

    20. MC

      Yeah

    21. JP

      ... from what you were yesterday, and in a year you'll be 100X better."

    22. MC

      Yeah, yeah.

    23. JP

      You know, just there's a power of compounding.

    24. MC

      Would

  20. 35:42 – 40:09

    AI Is Rebuilding the Stack

    1. MC

      love, Raghu, your thoughts on the AI stuff. I know it's pretty early, and I'd love to hear your thoughts, Jeetu. So do you think this changes infrastructure? Do you think it's largely independent of infrastructure? You know, do you think this increases TAM? Like, how do you think about this on a macro scale?

    2. RR

      Oh, I think it changes infrastructure in an enormous way, right?

    3. MC

      Yeah.

    4. RR

      I mean, infrastructure always is a follower of the-

    5. MC

      Of the workload

    6. RR

      ... change, right?

    7. MC

      Yeah, yeah, yeah. Of course. Yeah.

    8. RR

      Right?

    9. MC

      Yeah.

    10. RR

      I mean, go back to Netscape, right? When the browser came out, we were running on what, four point eight kilo, barred modems or whatever it was, right? [laughs]

    11. MC

      [laughs] Yeah.

    12. RR

      And then look at the internet infrastructure today.

    13. MC

      Yeah, yeah.

    14. RR

      Right? And-

    15. MC

      I remember the transition from the wiring closet to the data center, remember?

    16. RR

      Yeah, exactly.

    17. MC

      Like it used to be-

    18. RR

      Exactly

    19. MC

      ... these mega data centers actually drove switching.

    20. RR

      Yeah, and-

    21. MC

      Yeah

    22. RR

      ... yeah, I mean, the dual net wasCreated on a gaming chip-

    23. JP

      Yeah, yeah

    24. RR

      ... right?

    25. JP

      That's right, yeah.

    26. RR

      And today now you've got AI factories and, and like you said earlier in the talk, uh, the bottlenecks are progressively moving every way. So I think fundamentally, every layer changes. It's not just compute. Um, we got high bandwidth memory changes, right? Uh, obviously the networking changes, the storage access patterns are changing. So every part of what we think of conventional infrastructure is changing, but the layer below that is changing as well, right?

    27. JP

      Yeah, yeah, sure.

    28. RR

      I mean, this whole business at the end of the day is power to tokens.

    29. JP

      Yep, yep, yep, yep.

    30. RR

      And so everything that's in between the power to tokens, starting from power generation to the token output, is dramatically changing.

  21. 40:09 – 43:14

    Vertical Integration, Horizontal Openness

    1. MC

      Totally. Totally.

    2. RR

      Yeah.

    3. MC

      I, I do think that there are signs of horizontalization also, by the way, in-

    4. JP

      Oh, for sure

    5. MC

      ... in this, in this AI wave. So for example, um, the open source AI models are actually pretty successful.

    6. RR

      Yeah.

    7. MC

      And, like, there are separate inference platforms, and so I don't, I don't think the vertical versus horizontal is played out yet. It's just so fast-

    8. RR

      That is exactly my point

    9. MC

      ... and so furious. Yeah, so-

    10. RR

      Yeah.

    11. JP

      But that's why you have to make sure that you, if you do the vertical, you have to be very horizontally friendly.

    12. MC

      No, that was a great-- I, I mean, actually I love that. That was a great point.

    13. RR

      Yeah.

    14. MC

      So, okay. So listen, we're coming to the end of the time. Listen, we've got two of the most storied execs, elite execs in, in infrastructure. A lot of the people listening to this are in companies navigating this transition. Maybe they're not as big as VMware or Cisco, but, like, maybe just a few words of how do you think about navigating these and the opportunity as a bit of guidance.

    15. JP

      I'll... Maybe I'll, I'll give the founders, which I think is kind of the heart and soul of America, um, and the world actually, is, um, the startup ecosystem, and I think it's really important that we keep it vibrant. I would say that's a six-part formula that I use on what's really important in descending order on how you should think about building a great company. Number one, and the most important thing is timing.

    16. MC

      Yeah.

    17. JP

      Get the timing right. Right now, like, y- don't fight the mega trend. Make sure that everything that you do actually has AI as a tailwind, otherwise you're not gonna win, right? So timing's number one. Nu- number two, make sure you go after a very large market that you can attack a step at a time.

    18. MC

      Yep.

    19. JP

      Like, if you try to go out and control the entire market, it's gonna be really hard, so you have to make sure you go after a large TAM, but address it a step at a time. And ideally, create the TAM. Don't go after an existing TAM. It's even better. Number three is team, and oftentimes people will say, "Well, does team, uh, trump market?" I actually think market always trumps team, and this is not-

    20. MC

      Same. Same. I agree

    21. JP

      ... my idea. This is Marc Andreessen. I've learned it from him.

    22. MC

      I, I agree. Yeah, yeah. [laughs]

    23. JP

      It was-

    24. MC

      I think, I think that's valley consensus, by the way, yeah

    25. JP

      ... it's consensus right now. Market always trumps team.

    26. MC

      Market always wins.

    27. JP

      Um, number four is product. I think you have to build a great product. In my mind, there's three parts to a product. Build a product that people love, that they talk to their friends and family about, because that's the only way you get to hundreds of millions of users. Um, number two, get adoption and really understand retention and why it happens. And number three, uh, get to commercial relevance, otherwise it's a science experiment.

    28. MC

      Yeah.

    29. JP

      Um, so timing, market, team, product. Number five is brand.

    30. MC

      Yeah.

  22. 43:14 – 44:25

    Advice for Founders

    1. MC

      in my experience, there's a lot more opportunity than not, and so like-

    2. RR

      100%

    3. MC

      ... in a way, like run towards the fire in this case.

    4. JP

      I do actually think it's interesting when people say, "Well, you know, the AI thing is gonna like, you know, humans are gonna be deemed irrelevant." It's like-

    5. MC

      [laughs]

    6. JP

      ... I think we're so far from a fa- point where humans are not gonna be able to add value to society. And-

    7. MC

      I mean, come on, like, like, like, like, like once cancer is solved and like whatever, once I can like simply pay my taxes, then we can have a conversation. [laughs]

    8. JP

      Kind of a, like an argument I have, I have to pinch myself saying, "Are we actually having this argument?" Because right now, I can't write a full board presentation with AI just yet.

    9. MC

      I mean, until I can go to the DMV easily-

    10. JP

      Yeah

    11. MC

      ... I mean, come on, man. [laughs] Like-

    12. RR

      Forget a board presentation, just even a careful email.

    13. MC

      [laughs]

    14. JP

      [laughs]

    15. RR

      Right?

    16. MC

      Sure.

    17. RR

      A very careful email that you would send to a customer-

    18. MC

      Yeah

    19. RR

      ... to close a deal or whatever it is, right?

    20. MC

      There's a lot of, there's a lot of upside going on. Well, listen, thank you so much for joining us. This was-

    21. RR

      Yeah

    22. MC

      ... a lot of fun.

    23. RR

      Absolutely.

    24. JP

      Thank you for having us.

    25. RR

      Thanks. [upbeat music]

Episode duration: 44:32

Install uListen for AI-powered chat & search across the full episode — Get Full Transcript

Transcript of episode 8Je9HzxYfm8

Get more out of YouTube videos.

High quality summaries for YouTube videos. Accurate transcripts to search & find moments. Powered by ChatGPT & Claude AI.

Add to Chrome