Secretary of Defense Corporate Fellows Final Report of the Secretary of Defense Corporate Fellows Program 2003 - 2004

Secretary of Defense Corporate Fellows Secretary of Defense Corporate Fellows

Final Report of the

Secretary of DefenseCorporate Fellows

Program2003 - 2004

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AgendaAgenda

Background

Common Findings/Recommendations

Individual Experiences (time permitting)

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SDCFP BackgroundSDCFP Background

SECDEF concerns for future Service leaders– Open to organizational and operational change– Recognize opportunities made possible by info tech– Appreciate resulting revolutionary changes underway

Affecting society and business now Affecting culture and operations of DoD in future

Businesses outside DoD successful in:– Adapting to changing global environment– Exploiting information revolution– Structural reshaping/reorganizing– Developing innovative processes

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SDCFP OrganizationSDCFP Organization Two officers from each Service

– High flag/general officer potential– O-6 or O-5– Senior Service College credit

Group Education– Current political/military issues;leading edge technologies – Meetings with senior DoD officials, business executives,

Members of Congress, the press, former sponsors, alumni– Graduate business school executive education

Eleven months at Sponsoring Company Permanent Staff

– SDCFP Director, Admin Assistant– Net Assessment for oversight– National Defense University for Admin support

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SDCFP SponsorsSDCFP Sponsors 03 - Prior

– ABB, Accenture, Agilent Technologies, American Management Systems, Boeing, Cisco, DirecTV, Enron, FedEx, Hewlett-Packard, Human Genome Sciences, IBM, Lockheed Martin, Loral, McKinsey & Co., McDonnell Douglas, Merck, Microsoft, Mobil, Netscape, Oracle, Northrop Grumman, Pfizer, PricewaterhouseCoopers, Raytheon, Sarnoff, Sears, Southern Company, Sun Microsystems, 3M, United Technologies

03 - 04– Amgen, DuPont, General Dynamics, McKinsey,

Microsoft, Northrop Grumman, Oracle, Sarnoff 04 – 05

– 3M, Caterpillar, Cisco, Hewlett-Packard, Honeywell, Merck, Lockheed Martin, SRA International

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SDCFP ResultsSDCFP Results

Program objectives fulfilled– Education3

DoD, Individual officers, Sponsors– More Sponsors than Fellows available– Intra-group experience sharing

Unique corporate experience– Strong corporate support – Executive/operational level mix– Mergers/restructuring

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SDCFP ProductsSDCFP Products

Build a cadre of future leaders who:– Understand more than the profession of arms – Understand adaptive and innovative business culture– Recognize organizational and operational opportunities– Understand skills required to implement change– Will motivate innovative changes throughout career

Report and Briefings directly to SecDef, others– Business insights relevant to DoD culture/operations– Recommended process/organization changes


“And we must transform not only our own forces, but also the department that serves them by encouraging a culture of creativity and intelligent risk taking. We need to promote a more entrepreneurial approach to developing military capabilities, one that encourages people--all people--to be more proactive and not reactive, to behave somewhat less like bureaucrats and more like venture capitalists… “

Secretary of Defense Donald RumsfeldRemarks to The National Defense

University31 January 2002

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2003 - 2004 Fellows2003 - 2004 Fellows COL Pete Blaber Amgen, Inc.

Thousand Oaks, CA CAPT Nancy Deitch Sarnoff Corporation

Princeton, NJ COL Tony Glenn Northrop Grumman Electronic Systems

Linthicum, MD LTC/P Tom Hopkins Oracle Corporation

Reston, VA LtCol Chet Jolley McKinsey & Company

Cleveland, OH Col (sel) Jerry Martinez E. I. DuPont de Nemours & Co.

Wilmington, DE CDR Doug Swanson Microsoft Corporation

Redmond, WA Col Tom Tinsley General Dynamics

Scottsdale, AZ

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AgendaAgenda

Background



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Framework

People

TechnologyTechnologyProcess

Enterprise

Architecture

Improving DoD in 2004 and Beyond

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TopicsTopics

Performance Management DoD Acquisition

ApplicationsInfrastructureTechnology

Process

Leadership Workplace Trends Safety

People

Enterprise Architecture

EA

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LeadershipLeadership Processes to grow leaders unique by company….

– Leadership development considered important by all companies Development programs varied greatly by organization Corporate path to success not always defined Management verses leadership not always understood

– DoD viewed as benchmark of leader development

Transformation is tough

– People do not like change– Job loss creates panic, with corresponding impact on results– Vision not always understood– Communication is critical to the process– Essential to long-term survival

People

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Relevance to DoDRelevance to DoD Continue leader development at every level

– Strategic thinking, core values, risk management– Leadership development for DoD civilian personnel

Make transformation every leader’s job– Communicate the strategic vision throughout the

organization– Enforce accountability and responsibility

People

Maintain DoD as the leadership Center of Excellence

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Workplace Trends – HR ImplicationsWorkplace Trends – HR Implications Increased competition for technical talent

– Recruiting – hiring – diversity – retention

Aging workforce – retirement “bubble”– Knowledge retention & transfer – hiring

Generational perspective (Boomers v. Gen-X’ers v. Millenials)– Organization structure – work expectations – leadership

Acceleration of information & technology exposure– Training & development – knowledge management

Increased need for talent mobility– Compensation & benefits – relocation – flexibility

Transformational change in the workplace

People

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Remove barriers to government service – Create programs to attract/keep the right talent – Predictability in assignments, promotions, terminations– Link pay, rewards and incentives to performance

Pay attention to generational perspectives– Organization structure, work expectations, leadership– Value people, ensure early training & development– Top down focus on work life balance

Structure HR system to support changing workforce– Create anytime-anywhere workspace networks– Telecommuting, flex-place work, self managed teams – Rotational assignments, succession planning, mentoring

Relevance to DoDRelevance to DoD People

Transformational change in the workplace

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SafetySafety Safety essential to all businesses

– Most incidents are preventable– Lost employee time produces significant financial impact

At DuPont – Working safely a condition of employment– Immediate attention to and resolution of deficiencies

Management audits a must– Extends off the job and into the home

People

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Relevance to DoDRelevance to DoD

Consider outside review of safety programs

Safety continues to be a leadership responsibility– Set expectations – Demonstrate business value – Reward and recognize – Maintain accountability

People

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Performance ManagementPerformance Management Transformational process improvement

philosophies for UK Ministry of Defense and leading private sector companies – Lean - Designed to eliminate waste in a system– Six Sigma - Statistically based, improves quality by minimizing

process variability

Each philosophy at its core strives to improve– Operating system– Management Infrastructure– Mindsets and behavior

Dramatic results from Lean & Six Sigma observed– Increased productivity 20-40% – Quality improvements 50-75%– Lead-time reductions 60-95%

Process

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Relevance to DoDRelevance to DoD Initiate an end-to-end performance management study across

DoD logistics processes– Review results of UK MoD end to end study; apply best practice – Include supplier and supply chain practices – Apply appropriate resources and training – Develop requirements, key performance indicators and

incentives

Partner with leading change management professionals to ensure success

Export to other functional areas across DoD

Process

Decision by Fact

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DoD AcquisitionDoD Acquisition Processes and structure do not support warfighter requirements

– Gaps between industry, acquisition community, warfighter– Technical/financial/procedural gaps between research and

productization– Innovation responsibility shift from DoD to commercial sector– Self imposed constraints hinder best product

Emphasis on COTS comes at a price– Exacerbates configuration control challenges– Introduces potential security risks

Out-sourcing/Off-shoring – Industry trying to simultaneously reduce cost, return value to the

shareholder– International Traffic in Arms Regulations (ITAR)

Challenges in industry drives cost

Process

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Relevance to DoDRelevance to DoD Align, plan and resource to achieve jointness

Identify and fund basic research areas where DoD lead is critical– Fix the DoD laboratories (workforce, infrastructure, mission)– Reevaluate ITAR language– Address Intellectual Property ownership and classification– Facilitate multi year funding

Facilitate agility through innovative industry/govt partnerships– Federally Funded Venture Capital

Process

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ApplicationsApplications

Significant efficiencies gained through Self Service Applications– Oracle SSA reduced HR staff by 50%, increased employee satisfaction– Online access to pay, benefits, healthcare, expense reports, business metrics

Suite of Applications saves integration spending

– Adapt business process to Enterprise Resource Plan (ERP) What you need… not what you want

– Best of breed drives multiple instances of data, reducing accuracy – Strong corporate leadership enabled transformation to e-business

Welch at GE, Ellison at Oracle

Technology

Technology won’t change culture or fix a broken process

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InfrastructureInfrastructure Consolidation & Simplification of infrastructure yields significant

savings– Oracle Worldwide Network consolidation:

e-mail servers: 97 2 e-mail databases: 120 4 ERP databases: 70 5

– Overhead converted into revenue generators >70% reduction in IT Staff >80% reduction in number of applications >55% reduction in IT spending

– “Single Global Instance” Increases accuracy, availability and efficiency

Technology

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Relevance to DoDRelevance to DoD Accelerate & broaden use of DIMHRS-like Self Service Apps:

– Global customer service centers with expert staff

Authority to solve problems

– Broaden functionality to include finance, healthcare, travel etc.

Reduce integration spending through common applications– Curtail proliferation of apps, establish migration plan within functional areas– Network Centric/Sense and Respond Ops highlight need for commonality

Navy/USMC logistics integration could be a model for DoD

Accelerate consolidation of DoD’s IT infrastructure– Increase accuracy and integrity of data– Outsourcing allows for reduced reliance on hard to retain MOS’s

SSA and Consolidation key to improving tooth-to-tail Ratios

Technology

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Enterprise Architecture EA is…

– Required by Clinger-Cohen Act – A holistic view of the business enterprise– Strategic plan, organization, people, process, technology integrator

Business architecture determines success. – Reflects strategy and core competencies – Centralize and matrix common support services

Application & Data Architecture – Provide information to support the mission and business

Infrastructure Architecture provides access to information

Security architecture must be part of all

EA

EA not a common finding in industry

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Relevance to DoDRelevance to DoD

Architecture development within DoD more deliberate, slower than industry

– Business Enterprise Architecture (BEA)– Business Management Modernization Program (BMMP)

Development and implementation of transformation initiatives– Leadership role decisive– Authority and accountability for success– Incentives and rewards

Have an architecture, but …– Don’t get lost in the analysis– Do build security in from the ground up– Do make sure the IT architecture supports the mission

EA

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People

Transformation requires relentless leadership

Process

DoD not unique, must be viewed as an enterprise

Adopt industry best practices

Technology

Do more … spend less … consolidate…

Patriotism for troops runs high

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AgendaAgenda

Background



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Amgen, Inc.

World's largest biotechnology company

Goal: Unleash body's own powerful therapeutic responses

Methodology: – Utilize cellular/molecular biology and medicinal chemistry – Discover, develop, commercialize naturally occurring agents

Proteins, antibodies, small molecules

Assignment: Office of Program Change Management

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Amgen Observations

OPCM – Empower Amgen to achieve enhanced performance

– Deploy a proactive change capability

– Utilize a common set of tools Facilitation, problem-solving, change management

Internal capability for continuous improvement essential – Sustains Amgen competitive advantage

– Ongoing Change Program provides Consistent and effective approach

Issue identification, problem-solving, change management

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Recommendations

Pursue an ongoing Change Program – Common language and methodologies for problem solving– Institutionalize focus on continuous organizational

improvement– Focus on increasing efficiency and effectiveness in everything– Sustain U.S. Military competitive advantage

Stay ahead of global threat environment

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A science company for more than 200 years– Employees: 79 K in 75 countries– Revenue: $23 B for 2003 – Five company Platforms

– Agriculture & Nutrition– Coatings & Colors,– Electronic and Communication Tech– Performance Material– Safety and Protection

– Solving problems to make people’s lives better, safer, and easier. Corporate Strategy

– Launch “The New DuPont” - Transformation to a sustainable growth company– Reinforce Core Values

– Safety, Environmental Stewardship, Respect for People, Ethical Values– Grow revenue at more than $1 Billion annually

Assignment: Safety and Protection Group; all business aspects

E. I. Dupont de Nemours & Co. E. I. Dupont de Nemours & Co.

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Dupont Observations Employees dedicated, hard working, honest, and loyal

Incredibly bold transformation to ensure aggressive sustainable growth– Selling textile business (Invista); approx 1/4 of company worth $7B– Aligning innovation pipeline with market and customer requirements – Rebalancing resources toward high growth markets and regions– Standardizing systems and processes, leveraging scope of “One DuPont”

Safety program unlike any; almost “extreme” or “cult like”– Benchmark for Industry; consultants for numerous fellow corporations– 18,000 injuries and 50 deaths avoided over last three years– 10-point safety philosophy understood by all; employees “fear” getting injured– “Goal is Zero” placards everywhere!

Building relationships critical to winning in business– Money extremely important….but willing to invest it in relationships

Business world craves leadership– Large investment in training and education; roadmap to success not clear

Communication from top part of norm

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Recommendations

Invest in larger “outside” perspective on safety– Invest in safety overhaul through consultant expertise– Develop a leadership track for safety professionals– Hold leaders to greater accountability

Provide greater top down communication directly to troops– Goals, objectives, updates, expected outcomes, actual outcomes– Safety incidents, DUI accountability, integrity violations, UCMJ– Holiday messages and “pats on the back”

Emphasize Partnering within DoD– Build culture highlighting importance of counterpart relationships– Weigh financial cost verses mission effectiveness– Encourage face to face discussion when applicable or needed

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Fifth largest U.S. defense contractor – Employees: 67 K worldwide– Sales: $23 B for 2003 ( 20 % increase over 02)– Main business segments

– Aerospace - Leading builder of large-cabin and mid-size business jets– Combat Systems– Information Systems and Technology– Marine Systems

Corporate Strategy– “Strength on your side”– Increase market share for sophisticated defense systems to US/Allies

Assignment: C4 Systems (formally Decision Systems) – 3.5 K employees; 2003 revenues of $1 B +– Battle management, C4ISR, INFOSEC, space and homeland security – Working in all three divisions at all levels

General Dynamics General Dynamics

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General Dynamics C4SGeneral Dynamics C4SObservationsObservations

Corporate employees are dedicated members in our nations defense

Merging two Information Systems & Technology segment companies into one– Previously competing GD business units – Organization size doubled (3.5K to 7K); $2.2 B in ‘04– Challenges merging organizations with different financial and business models

Highly integrated IT support and targeted software to streamline processes– Specialized and integrated software to automate end-to-end travel functions– Leasing/outsourcing IT services to ensure cost efficiency and continued modernization

Building competitive teams that benefit business and DoD– Joint Tactical Radio System (JTRS) Cluster 5 teaming approach and strategy

Ensures best technology while enabling competition in manufacturing final product

Frustration with DoD Acquisition Process– Overall Services road map and vision lacking– Doesn’t allow businesses to plan for investment and opportunities– Program instability forces tailoring of both R&D and future program investment – Warfighter’s needs and expectations lost in the overall process

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Recommendations

Invest in Joint integrated IT support and applications– Develop DOD-wide standardized IT solutions/modernization

plan – Invest in common travel and pay support technology – Outsource IT support for common administrative functions

Change cultural mindset for future acquisitions– Develop Joint and Service specific road maps

Detailed and realistic expectations; follow budgeted plan– Better educate contractors on roles and missions

Before RFPs are written on specific systems– Contractor access (with acquisition oversight) to “end user”

Provide contractor with Concept of Operations, test plans Ensure warfighters get what they need

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McKinsey & CompanyMcKinsey & Company World’s leading management consulting firm

– Over seventy five years old– 1,000-plus clients; 100 of the top 150 global companies – Serving, touching every major industry.– Partners/employees from more than 100 nationalities– Alumni constitute a dynamic professional network

Strategy: Improve client strategies, organizations and operations. – Help leading/potential leading companies– Provide counsel to senior management– Help achieve substantial, lasting improvements in performance

Values based consultancy – High professional standards, outstanding character, sharp

analytical minds – Ability to work effectively with people at all levels in an

organization

ASSIGNMENT: Operations, Strategy & Effectiveness Practice (OS&E)

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McKinsey ObservationsMcKinsey Observations Professional service firms bring expertise, analysis, problem solving

– External change agents critical in the transformational process

– ‘One Firm’ concept ensures client receives benefit of all firm’s resources Regardless of geography or industry Extensive networking tools and knowledge management

– Companies attempting to remain or become competitive

Manufacturing practice is fastest growing area– Applying Lean Manufacturing principles to industry transformation– Lean Manufacturing, Six Sigma dominant transformational philosophies

Lean as an ‘End To End’ transformation process Six Sigma a lever complementing the Lean process

– Some firms, companies center transformations on Six Sigma alone

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RecommendationsRecommendations Closely review Lean Transformation efforts of the UK Ministry of Defense

– Apply best practices to DoD

Begin diagnostic for an End-to-End review of DoD logistics & maintenance– Determine potential savings and possible increased performance

Consider applying Six Sigma to aviation/ground safety programs – Eliminate mishap causal factors variability

Maintenance, human error, etc.

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Microsoft CorporationMicrosoft Corporation The corporation – “Your potential, our passion”

– 53 K employees world-wide; 26 K in Puget Sound area– $9.993 B net Income in 2003– Subsidiaries in over 75 countries; 27% of revenue international– Matrixed organization evolving - Seven supported Profit & Loss centers

Assignment: Chief Information Officer

– IT operations processes, Six Sigma, Globalization

Microsoft IT – 7 K servers, 150K PC’s, 400 applications. 4.5 M internal e-mails daily– Strategic Focus

“First and Best Customer” Model Enterprise/IT Showcase Embody Trustworthy Computing Enterprise Computing Scenarios ??? Build Agility

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Culture– Entrepreneurial spirit; accepting change– Heroes, Darwinistic, does not promote organizational learning

People – selection, development, retention– Recruit the best and retain them.

– Better no one than anyone– Getting rid off non-performers hard– Employee orientation spans several months

– Continue to instill values, identify and develop future leaders.– Diverse experience is a strength; frequent job changes a plus– People can work in a matrixed organization

Microsoft ObservationsMicrosoft Observations

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Leadership– Change begins at the top– Clear, consistent, message gets through, random messages don’t– “Thought Leadership” – elevate good ideas– Business case < 3yr payback– Outsourcing non-core is a viable way to reduce cost

Process– Repeatable processes are important (lacking at MS)– Fledgling Six Sigma program– Change is hard, sometimes need change by decree– Culture can impede or enable change

Microsoft ObservationsMicrosoft Observations

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Continue clear, consistent message on transformation

Continue to support, embrace, institutionalize process change tools methods– Six Sigma, Lean, etc.– Hire outside experts to develop core competency– Leads to “decision by fact” and efficient, effective organizations

Leadership Development is key

Continue to evolve culture towards one that embraces change,

– Change by decree is still valid

Do look to outsourcing more as a means to transform

Don’t always assume industry knows best!

RecommendationsRecommendations

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Leading supplier of warships, bombers, and military electronics – Employees: 120,000 in all 50 states & 25 countries– Revenue: $25-26 B (est.) for 2003 – Customers: DoD 86%, International 8%, Commercial 6% – Premier aircraft, space and missile defense company– Premier airborne radar & electronic warfare systems provider– Largest federal IT provider

Corporate Strategy– Build portfolio of technologies essential to system-of-systems

– Across all platforms and services– Aggressively pursue emerging opportunities– Apply advanced technologies and human capital across the company– Constantly improve program and financial performance

Assignment: VP, Strategic Plans and Analysis, NG Electronic Systems

Northrop Grumman Northrop Grumman

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Northrop Grumman Northrop Grumman Observations

Highly successful transformation to first-tier global defense company– Systems integrator, principal subcontractor, teammate, preferred supplier– Leveraging transformation to provide discriminating technology– Sound management practices in place

Corporate/sector integration key to customer focus and future growth – Strong management team mitigates some acquisition risk– Acquisitions bring large-scale system integrator capability under one roof– Internal organizational alignment a major challenge

Effective process improvement programs– Enterprise Resource Planning (ERP), e.g., SAP, Lean, Six Sigma– Improving cash flow, inventory management, cycle times– Moving people to work, consolidating functions, closing facilities– Leveraging tools to reduce costs, eliminate waste, improve efficiency

Focused on recruitment, retention, leader development, incentives

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Recommendations

Improve DoD human resource strategy– Build a leader development strategy for civilian employees– Tailor follow-on assignments to individual needs– Incentivized pay and rewards for high performance

Ensure metrics and measures at OSD and Service level– Focus strategic planning on desired outcomes– Greater emphasis needed on execution and accountability– Goals, objectives, action plans at all echelons

Implement Lean & Six Sigma principles to improve efficiency– Eliminate duplicative organizational structures– Ensure commonality across the Department– Partner with industry on best practices

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World’s largest enterprise software company – Employees: 42K + in 147 Countries– Revenue: ~$10B – Customers: DoD largest single customer, ~$150M

Americas 59%, Asia/Pac 13%, Europe/Middle East/Africa 28%

– Leading provider of Database Technology, e-Business Suite, Application Server, Outsourcing, and Consulting Services

Tailored solutions for DoD in HR, Financials, Net Centric Warfare

Corporate Strategy– Gain business applications market share– “Do more, pay less” through enterprise grid computing– Offer efficiencies to government and private sector through outsourcing– Grow DoD relationship from “vender of choice” to “trusted strategic partner”

Assignment: Senior Vice President, Oracle Federal Sales

Oracle CorporationOracle Corporation

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Significant efficiencies/personnel reductions via World-wide Support– Web based Self Service applications handle majority of HR and payroll issues– Turned support staff into revenue generators (tooth to tail)

Applications Suite saves integration spending– Optimizes vertical performance at expense of enterprise wide BI and

integration– Drives multiple instances of data, reducing accuracy of information– Strong corporate leadership enabled transformation to e-business

Changing technology was the easy part, convincing people to change was hard Directed change to business processes vice customized software

– Tens of thousands of systems in DoD No clear migration plan within functional areas (Logistics, med, personnel etc..)

Global IT initiative resulted in significant savings– 97 e-mail systems down to 1 - savings in hardware, software and personnel– $30M annual savings on infrastructure that supports 40K employees

Oracle ObservationsOracle Observations

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Centralize HR functions– Consolidated global “customer service” center

Manned by experts with authority to solve problems– Improve “tooth to tail” by reducing HR staff in troop units

Accelerate outsourcing of IT infrastructure– Reduced reliance on hard skill, hard to retain MOSs – Improved tooth to tail– Increased reliability from industry’s experts

Centralize financial operations– Consolidated global “customer service” center

Manned with experts with authority to solve problems– Natural evolution: Class A Officer, Direct Deposit, Global Support – Reduced financial staff in troop units

Consolidate e-mail infrastructure– Regional versus organizational

RecommendationsRecommendations

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Sarnoff CorporationSarnoff Corporation Founded in 1942 as the RCA research lab For-profit subsidiary of SRI International since 1987 Innovative electronics-based research organization

– 500+ employees – $100M revenue – 19 spin-offs; first IPO in May 00 – Expansion into life sciences

New CEO – mid CY 02– Reinventing the company

Producing value for the client Transitioning the Valley of Death between investment and profit

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Sarnoff AssignmentSarnoff Assignment Office of the Chief Technology Officer

– Globalization and the establishment of Sarnoff India Right sourcing, right sizing Overseas incorporation Security/export compliance Extended program management Communication, internal and external

– Venture development and execution Vital Signs Monitoring

– Programmatic support Combat Zones That See Generalized Emulation of Microcircuits

Documents

Secretary of Defense Corporate Fellows Final Report of the Secretary of Defense Corporate Fellows Program 2003 - 2004