CNBC Interview with Guy Diedrich, VP & Global Innovation Officer, Cisco

Below is the transcript of a CNBC interview with Guy Diedrich, VP & Global Innovation Officer, Cisco and CNBC's Akiko Fujita. The interview took place at CNBC's inaugural tech conference, East Tech West, in Nansha, Guangzhou.

AF: Thanks for the introduction, Mandy, and Guy, it's great to have you here today. I do want to get to the CDA program, obviously, which is what you're tasked with, but I have to start with the big overhang, and the discussion that has been happening a lot here at the conference, which is the question about where US and China trade relations are headed, because your CEO and Chairman, Chuck Robbins, has been quite vocal about the price pressures that this has created on the business. As you look to where the White House is headed, uncertainty around the policy, and the price pressures that continue to build up, as a result of the tariffs, how has that forced a rethink in the company, in terms of the strategy?

GD: Well, Cisco, being a very dynamic global company, is very surgical, very focused on whatever cost increases we have to pass along to our customers, but, simultaneously, we optimize our supply chain. For instance, we're constantly reconciling with the volatility of memory prices. And so, we have not seen a dramatic fall-off at all, in fact, we've seen quite good growth in our enterprise business, so we're not seeing any real impact right now, and continue to watch, but no major change or fluctuation in strategy.

AF: As you look to the CDA program, which we'll get in to, is there concern that a lot of countries, as they see the global macro environment maybe cooling down a bit, will hold back on some investments as it relates to technology?

GD: We're actually seeing the opposite. What we're seeing is, is that they are seizing this opportunity, to leapfrog, and to accelerate, which is what this program is all about. They see it as an opportunity, where maybe others may be a little less aggressive, our customers, our countries, are being very aggressive in their growth opportunities for digitization in the digital age.

AF: So, let's talk about the program-,

GD: Yeah.

AF: We're about three years in now?

GD: That's right.

AF: Country Digital Acceleration, CDA for short, this is a very ambitious project which you were brought in, tasked with immediately, to digitize, not just countries like China, but those like Azerbaijan, as you point out-,

GD: Yes.

AF: Where are you, in the process? You know where you started, you know where your ambitions were. Are you moving along a lot quicker than you expected? Give me a sense of where you think your success marker is right now.

GD: To be honest, yes, we never would have imagined that so many countries would have stepped up to this challenge. What CDA is, or Country Digital Acceleration is, more than anything, is a process, and it allows us to go in to these countries, we're starting to see many of them coming out with their Country Digital Agendas, right, typically they'll work with a McKinsey, or a Deloitte, or one of the large consultancies, to develop this digital agenda, and many of them are very ambitious, very targeted, to the particular needs of that country, but they had no execution plan. And so that's what our process does, we come in with a process that allows you to build an architecture for the entire country, against four key pillars: research and education; business and innovation; digital platforms for economic development; and infrastructure. We then, with the agreement of the government, and our partners, will build an execution plan down to the task level, including budgets, and then when the government signs off on it, on what they believe to be the key things that are really going to move the needle for that country in the short-term, we start executing, and they know exactly how much it's going to cost, we have all of the partners built in, sure, we bring Cisco products and services to bear, but we also bring in the local partners, the local companies, that can help us. And then we go to our larger, global network, of 60,000 partners around the world, that Cisco works with directly, to fill in the remaining gaps.

AF: You've worked with dozens of countries so far-,

GD: Yes.

AF: As you decide what your next market is, is there a checklist? What is that selection process like?

GD: The first criteria is a very strong, engaged, visionary leader, and I mean the President or Prime Minister. Without that visionary leader, we really can't move as quickly as we need to. We then look to the next tier of government leadership, to make sure that we have the right track partners, so it could be education, transportation, healthcare, IoT, cybersecurity. Whatever those key areas are, we have to have the right functional partners, at the government level. And then we look to the actual industry infrastructure, what vendors and other partners we can bring to the table. If it passes all of those criteria, then we know we have a country we can really accelerate with.

AF: There's a lot of people who will listen to this, and say, 'This sounds like a great vision-,'

GD: Mm-hm.

AF: 'But Cisco's not just doing this out of the goodness of their heart. You've got to have a business case for it.' So what is that case?

GD: Well, it-, it-, so we have a tremendous amount of money that we do invest in these countries, but the way that we invest is we-, we invest in proofs of concept. So, let's say, for instance, in India. India, right now, we are in our-, starting our third year in India, we have 55 active or completed digitization projects, that we've funded around the country, and one of them was what's called a 'smart mile'. It was one mile, in a very busy city center, that-, loaded up with all things Smart City, all things IoT, just about everything we and our partners could bring to the table. And then we tested it, as a proof of concept, we found out what was relevant, what wasn't, what actually provided a return on investment, and then we optimized that solution, and then started replicating it around the country. Prime Minister Modi is prepared to undertake 100 Smart Cities, and we're on number 17 now. So, it really is around making sure that the country gets off on the right foot. It's-, sure, it's a business proposition for Cisco, and for IT, as a whole, but it's really about making sure that the right decisions are made upfront, so that money isn't being thrown down a black hole. Technology is only the enabler, right? We want to make sure that the focus is on the outcomes: GDP growth, jobs creation, and building up a sustainable innovation ecosystem.

AF: And of course, for Cisco, when you talk about really making sure that a country is digitized, you want to be right there, so that when they do make that transformation, they do have that partnership with Cisco in place, for that business opportunity. Is there a number that you can-, that the company can point to, to say, 'This is how much growth we see for the company, in initiating the CDA program'?

GD: It's not directly linked to the CDA program, that's what's important. This is very much a long-term growth strategy for Cisco, but also for our industry, and for that country. So, there isn't a particular dollar figure tied to it, no.

AF: You point to India, this was a really interesting example for me, because I've certainly seen the transformation there, being on the ground, on a few trips, and Narendra Modi, as you point out, has been a huge advocate about this digital nation-,

GD: Mm-hm.

AF: And yet, what you have seen is a lot of fragmentation. You talk about, you know, access to internet, and yet women, oftentimes, are being marginalized in that way-,

GD: Yes.

AF: Each home may have a smartphone, but women don't necessarily have access to it, there are cultural pushbacks. How do you deal with something like that?

GD: Well, like many in this room, we acknowledge that, you know, technology is agnostic. Technology is an enabler. It doesn't know borders. What we do, as a company, is establish the greatest opportunity for success, and, potentially, for change and evolution. I'll give you a quick example of a little town called Palghar, about 2.5 hours outside of Mumbai. It is your typical, very poor, you know, dirt road village, in India. And I was just there, and we connected them to the internet for the very first time, they'd never had access. And I watched as a group of little girls got out of school, and you - maybe some of you have seen this - where they are dressed impeccably, right, beautiful uniforms, flowers in their hair, hair pulled back, and no shoes, and walking down the dirt road. And what you realize is that, in connecting this village, like so many other villages, or so many other parts of the world, these young ladies are now going to have the opportunity to be doctors, and lawyers, and engineers, and scientists, and journalists, and things that they never would have had the opportunity to do before. So, it is incremental change, but it's change, and it's change for the better.

AF: That leads me to the question of inclusion, because what we often see are, tech companies offer these grand solutions, and yet there are only certain parts of the society that can afford to tap in to that solution.

GD: Mm-hm.

AF: How do you address that issue? Because, you bring up this example of the village in India, you know, how do you make sure that the technology, and the solutions you are providing, is accessible to all parts of a country?

GD: Well, see, that's the thing about the digital age, and what's fundamentally different. So, as you all know, Cisco, you know, connected the world, in the information age, still 70% of the world's traffic crosses through Cisco equipment. Yet we were limited in our ability to deliver for the world, for all the reasons you've just said, economic circumstances, cultural circumstances, etc. In the digital age, there are no more excuses. Everyone should be connected. At this point, it should be a human right, to be able to be connected and included in the rest of the world. And we can do that this time. We're going to go from 20 billion connected things, today, to 500 billion connected things, and people, uh, by 2030. Maybe you've seen-, I think we have all seen that-, that satellite picture, that goes around the world at night, and it shows Europe lit up, it shows China lit up, it shows the United States lit up, and you get to Africa, and it's a giant dark spot, with just the tiniest little glimpse of light down in South Africa. We have no excuse for that to be the case in ten years anymore. We should light up Africa. We should light up the rest of the world. And we have the capability to do it. With healthcare, there's no reason why a person in far, southern reaches of a country, the most rural region of a country, couldn't have access to oncologists at MD Anderson Cancer Center, in Houston, through technology. It's all there.

AF: Let me ask you about another question that has popped up a lot in the tech sector, which is the question of responsibility, whether responsibility lies for these tech companies in the changes that they are creating globally.

GD: Yes.

AF: In the case of Cisco, as you digitize these countries, naturally that leads to more automation, there will be more people, the thinking goes, that will be replaced by machines.

GD: Mm-hm.

AF: And so, what is the responsibility, for a tech company like Cisco, to make sure that those who are displaced, in those jobs, have the skills that are necessary? Is that contingent on you, to make sure, or Cisco, to make sure that you do retrain these workers, so the jobs, when they become available, they are ready for that?

GD: See, that is one of the key tenets of the Country Digital Acceleration program. We don't just do tech. We also do training, and education. So, for instance, right here in China, we signed an agreement with the Ministry of Education, to train 400,000 students in three years, and I'm happy to say we've just trained our 286,000th member, and we're just a year and a half in to the program, we're just under two years in the program, so we'll reach that goal. You have to do that. Because when you digitize, you do create an obsolescence for certain jobs, it is just a part of the process. Certain jobs aren't going to be necessary anymore, or certain jobs are going to be done by mechanical, or other, or robotic means. AI is going to change the landscape completely, 5G is going to change the landscape. What's happening, though, is that those jobs-, it's-, it's not that they disappear. It's a churn, an economic churn, where the old jobs are swept away, but the new jobs emerge. If you had told me, back when-, when-, I used to have a software company, many years ago. If you'd told me, back in the early 90s, that the job that I really need to get is in cybersecurity, I would've said, 'What is that?' because it didn't exist. So many of the jobs that our kids will be doing don't exist today, and it's because of the transformation that's taking place. So, yes, there will be some jobs that go away, out of necessity, and they should, but they are replaced with much better jobs, long-term jobs, better paying jobs, jobs more associated with an innovation economy, rather than an agrarian economy, for instance, and it is incumbent upon governments, and industry, to work together to retrain those people, because the government isn't going to be able to predict the future. Industry is a little bit better at it, because we're in the middle of it, and we do have people that think about five and ten years out. Combined, we can create those next-generation jobs, and have them well-trained, leading up to it.

AF: I know we're out of time here, but we didn't-,

GD: Okay-,

AF: Get in to any audience questions, so I wonder if there's anybody that would like to ask a question, before we go.

ENDS

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