Final Report of the 199596 SECDEF Fellows Program

1
FINAL REPORT of the Secretary of
Defense Corporate Fellows Program 1999-2000
2
SDCFP 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

3
SDCFP Origin

• RMA Senior Steering Group recommended- SECDEF
  Fellows Program- SECDEF Strategic Studies
  Group- Other (Concept Development Center,
  etc..)
• Established by SECDEF memo- October 6, 1994
• DoD Directive 1322.23- September 2, 1995

4
SDCFP Organization

• Two officers from each Service (USMC one)
• - High flag/general officer potential- O-6 or
  O-5- Senior Service College credit (except
  Army)
• Eleven months at Sponsoring Company
• Group Education
• Permanent Staff- SDCFP Director, Admin Asst.
• - USD(P), USD(AT), Net Assessment for
  oversight- National Defense University for Admin
  support

5
SDCFP Objectives

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

6
SDCFP Results

• Program objectives fulfilled- Education,
  education, education
• - More Sponsors than Fellows available
• - Inter/intra-group experience sharing
• Unique corporate experiences- Strong corporate
  support - Executive/operational level mix-
  Mergers/restructuring

7
SDCFP Sponsors

• 99 - Prior
• American Management Systems, Andersen Consulting,
  Boeing, CNN, Caterpillar, Citibank, Cisco
  Systems, DirecTV, FedEx, Hewlett-Packard,
  Lockheed Martin, Loral, McDonnell Douglas,
  McKinsey Co., Microsoft, Mobil, Netscape,
  Oracle, Northrop Grumman, PricewaterhouseCoopers,
  Raytheon Systems, Sarnoff Corp, Sears, Southern
  Company, Sun Microsystems
• 00 - 01
• ABB, Agilent Technologies, Andersen Consulting,
  Caterpillar, Enron, Human Genome Sciences,
  Northrop Grumman

8
1999-2000 Fellows

• LTC Keith Armstrong McKinsey Co.
• Houston, TX
• RADM(S) Steven Enewold Lockheed Martin
• Gaithersburg, MD
• Lt Col Brenda Johnson Sarnoff Corporation
• Princeton, NJ
• Col Darren McDew Sun Microsystems
• Palo Alto, CA
• CDR Burt Palmer Citigroup
• New York, NY
• Col Art Sass Federal Express
• Memphis, TN

9
McKinsey Company
SECDEF Corporate Fellows Program

• World-wide management consulting firm
• 40 countries 86 offices 6500 employees
• 2.0B annual revenue sustained growth 15
  since creation
• Cradle for future CEOs (IBM, AMEX, Delta
  Airlines, Starbucks...)
• Mission
• Create value help clients make lasting
  performance improvements.
• Build a firm able to attract and retain
  exceptional people.
• 1003 (Firm, Time, World)
• Corporate culture vs. Military culture
• Similar Up or out, Very high attrition, Firm
  success at the expense of Quality of Life
• Different Non-hierarchical, flat organization
  Personal value creation based motivation

10
McKinsey Company Observations
SECDEF Corporate Fellows Program

• War for Talent
• Universal goal find, recruit, develop, and
  retain the best
• Demand for top talent is explodingsupply is not
• Talent becoming migratory / reduced loyalty to
  the institution
• Over 70 passively seeking new employment
• Small, start-up companies gaining share of the
  market
• Economic boom used as a crutch to explain away
  talent problems
• Money is a player, but not the key lever in a
  decision to leave or stay
• Corporate culture is a major lever
• Contact w/ leaders Flexible work schedules
• Autonomy responsibility Recognition
  rewards
• Dual income family accommodations
• Aggressive / innovative HR methodologies
  mandatory

11
Recommendations
SECDEF Corporate Fellows Program

• Recognize we have a Talent/Human Resources
  problem
• Apply resources to solve the problem...or be
  prepared to pay a higher price
• Improve quality of life (food stamps, medical,
  housing, dual income families, stabilized
  assignments, selective telecommuting)
• Incentive programs for high priority skill sets
• Revise the personnel selection and assignment
  process
• Longer tour length
• Create new recruiting and retention strategy
• Recruit early - take DoD into the middle-school
  classroom
• Partner with industry to recruit like skill sets
• Vesting Options
• Bring full financial service to DoD outsource
  DFAS
• One-stop shopping (Financial, Insurance,
  Investments)

12
1999-2000 Fellows

• LTC Keith Armstrong McKinsey Co.
• Houston, TX
• RADM(S) Steven Enewold Lockheed Martin
• Gaithersburg, MD
• Lt Col Brenda Johnson Sarnoff Corporation
• Princeton, NJ
• Col Darren McDew Sun Microsystems
• Palo Alto, CA
• CDR Burt Palmer Citigroup
• New York, NY
• Col Art Sass Federal Express
• Memphis, TN

13
Lockheed Martin Mission Systems
SECDEF Corporate Fellows Program

• 4 of Lockheed Martin Corporation sales (900M)
• IT Company in an Aerospace Corporation
• Three business lines (Commercial, Defense, Space)
• Large Complex System integration and support
• (US Census , GCCS, Space Ranges- West)
• Environment- Dealing with Adversity
• DoD Mirror Image
• Direct Applicability to DoD

14
Observations/Recommendations
SECDEF Corporate Fellows Program

• Commercial v. government procurements
• Simplicity v. Complexity
• Trust v. Checks Balances
• Continuous v. Staged Communication
• Speed v. Fairness
• Market Value Pricing v. Cost Breakdown
• Reputation v. Fee Structure
• Procurement Recommendations
• Establish commercial business model vision
• Determine set of changes to reduce complexity,
  open communications, and generate trust

15
Observations/Recommendations
SECDEF Corporate Fellows Program

• Process excellence
• Carnegie-Mellon Capability Maturity Models (CMM)
  - Industry Std
• Unique online Process Asset Library
• Recommendation Endorse process excellence and
  web-based access to current DoD documents.
• People Programs
• Effective Processes
• Mentors role
• Challenge and responsibility
• Recommendations
• Develop individualized retention packages using
  non-pay related benefits.
• Conduct a "self evaluation" of the DoD Personnel
  Management
• System using CMM for People.

16
1999-2000 Fellows

• LTC Keith Armstrong McKinsey Co.
• Houston, TX
• RADM(S) Steven Enewold Lockheed Martin
• Gaithersburg, MD
• Lt Col Brenda Johnson Sarnoff Corporation
• Princeton, NJ
• Col Darren McDew Sun Microsystems
• Palo Alto, CA
• CDR Burt Palmer Citigroup
• New York, NY
• Col Art Sass Federal Express
• Memphis, TN

17
Sarnoff Corporation

• The Company
• Founded in 1942 as the RCA research lab
• For-profit subsidiary of SRI International since
  1987
• Innovative electronics-based research
  organization
• 750 employees, 130M revenue, two new patents
  every week
• 19 successful spin-offs, first IPO in May 00,
  more soon
• Contract RD, manufacturing, and recently an
  Internet Incubator
• Balance in tech creativity and business
  discipline
• Scientists engineers into entrepreneurs, PMs,
  and leaders
• Assignment Life Sciences and Systems Business
  Unit
• All phases of technology venture development and
  execution
• Strategic planning, change leadership, process
  improvement
• Biotechnology (two ventures, brainstorming, DSB
  Task Force)
• DoD-Sarnoff RD Strategic Supplier Alliance
• Breakthrough Rapid Improvement Team (RIT)

18
Observations/Recommendations

• Technology survival of the smartest
• DoD not aggressive in tracking/contacting the
  marketplace
• DoD access to technology is decreasing
• Intellectual Property is key - more security
  means less talk pubs
• DoD seen as a slow, unprofitable fragmented
  market
• Intellectual property is only useful if it
  creates value sooner than later
• Cant find the right DoD customer, RD rarely
  transitions to warfighter
• Marketplace going at hyperspeed DoD takes too
  long, too many stakeholders, untimely payments,
  full open competition, low fees
• Cost sharing favors large, established companies-
  NOT new ventures
• Expand use of strategic alliances (RD, National
  Technology Alliance), spin-offs (CIAs In-Q-Tel),
  govt teaming, commercial-like contracts
• People are like PCs bio-hacking, bugs,
  reprogramming, enhancers
• Concerns Ethical use of technology, David
  Goliath issues

19
Observations/Recommendations

• No integrated approach to biotech
• No real defense for bio attack
• Five key breakthroughs needed
• Biosensors Diagnostics
• Sequence unknown pathogen DNA
• Map protein molecular structure
• find binding sites for drug molecules
• Design and test antigens rapidly
• with confidence safety
• Go from experimental drugs to high
• volume production delivery
• Need National Strategy with cross-
• government and industry cooperation
• One proposal (many out there)

Pathogen Genome Detection and Countermeasure
Process - Current Bug to Drug
cycle is 5-10 years - Need to
get down to months or weeks

• The Engineered Pathogen Identification and
  Countermeasures (EPIC) Program
• Sarnoff working with Congress and briefing 2
  DSB Task Forces

20
1999-2000 Fellows

• LTC Keith Armstrong McKinsey Co.
• Houston, TX
• RADM(S) Steven Enewold Lockheed Martin
• Gaithersburg, MD
• Lt Col Brenda Johnson Sarnoff Corporation
• Princeton, NJ
• Col Darren McDew Sun Microsystems
• Palo Alto, CA
• CDR Burt Palmer Citigroup
• New York, NY
• Col Art Sass Federal Express
• Memphis, TN

21
Sun Microsystems

• The company
• A teenager in the Silicon Valleyfounded in 1982
• 35K employees 15B revenue 150 in fortune
  500 163B market cap
• Undergone continuous innovation and reinvention
  since 1982
• "The network is the computer"... and still is
• Refocused workstations to enterprise servers
  and software to services
• Today Were the dot in .Com and the O in
  the Old Economy
• Vision 1 provider of products, technologies
  and services for enabling the net economy
• Assignment Assistant to VP, Chief Information
  Officer (CIO)
• Contributions to Sun
• Active member of Suns staffInformation
  Management Group, Leadership Council, Public
  Policy Forum
• DoD ambassador leadership consultant
  disciplined perspective

22
Sun Microsystems Observations

• Technology big bets
• Service driven network applications delivered
  to the browser
• Massive scale bandwidth costs declining 30-50
  usage up 3-4X
• Continuous, real-time availability mandatory
• Business strategy
• Focus on core competencies 1st
• Acquire to build business position partner to
  fill gap
• e- everything or mothball it!
• Strategic planning horizon 20 months v. 20
  years _at_ DoD
• Innovation and speed to market valued and highly
  rewarded
• Challenging work, compensation packages keep the
  best
• Greatest strength (agility) is also greatest
  weakness
• Leadership gaps negatively impacts retention and
  execution
• Being the UNIX employer of choice aids
  recruiting!

23
Recommendations

• Accelerate transition to electronic environment
• Use DoD expertise to get security procedures
  right
• Partner to develop MyMilitary.mil portal
• Personalized, content-rich serviceanywhere,
  anytime
• Web enable ALL tools and processes
• Great way to advertise to present and future
  workforce
• Grant universal internet access to troops
• Leverage economic position FREE internet
  service and PCs
• Remove barriers MILCON, financial, hardware,
  policy
• Invest in thin client architecture
• Perfect for the Pentagonbillions in savings
• Totally Wireless for workers authorized cell
  phones
• Cell phone laptop OR desktop PC w/ desk
  phonenot both
• Smart card must include additional applications
• Purchase card, Credit card, Club card, building
  access
• Outsource non core IT function insist on
  interoperability

24
1999-2000 Fellows

• LTC Keith Armstrong McKinsey Co.
• Houston, TX
• RADM(S) Steven Enewold Lockheed Martin
• Gaithersburg, MD
• Lt Col Brenda Johnson Sarnoff Corporation
• Princeton, NJ
• Col Darren McDew Sun Microsystems
• Palo Alto, CA
• CDR Burt Palmer Citigroup
• New York, NY
• Col Art Sass Federal Express
• Memphis, TN

25
Citigroup
SECDEF Corporate Fellows Program

• Worlds 2nd largest full service financial firm
• 100 countries, 200K employees, 100M customers
• 1 trillion dollars in financial transactions
  daily
• Two Products Money and Customer Trust
• Customer Trust
• Citicorp hacked in 1994
• Cant let it happen again
• Built financial industrys best Info Security
  framework
• Elevated level of responsibility to top
  management
• Assignment Corporate Information Security Office
  (CISO)
• Global corporate business oversight

26
Citigroup CISO Observations
SECDEF Corporate Fellows Program

• Info security program based on informed risk,
• information ownership, top management
  responsibility
• Information is an asset, not a resource
• A leadership, not just technical, issue
• Industry facing same challenges as DoD
• Inherently insecure architecture
• Challenges harder as technology change quickens
• Globalization, e-commerce, COTS, outsourcing,
• open architectures, wireless, miniaturization
• Rush to market often more urgent than system
  security

27
Recommendations
SECDEF Corporate Fellows Program

• Cant assume a system is secure until you test
  it.
• Citigroup tests every system prior to fielding
• Info Security is an operational requirement
• DoD needs to play a leadership role in driving
  national information infrastructure security
• Partnering Opportunity
• Hire, train and retain the best
• Info Security personnel shortage demand high
• Join because organization seen as the best
• Stay because leadership, challenging work, QOL,
  pay

28
1999-2000 Fellows

• LTC Keith Armstrong McKinsey Co.
• Houston, TX
• RADM(S) Steven Enewold Lockheed Martin
• Gaithersburg, MD
• Lt Col Brenda Johnson Sarnoff Corporation
• Princeton, NJ
• Col Darren McDew Sun Microsystems
• Palo Alto, CA
• CDR Burt Palmer Citigroup
• New York, NY
• Col Art Sass Federal Express
• Memphis, TN

29
Federal Express

• Worlds largest express-transportation company
• Serving 210 countries worldwide
• Employees 156,000
• Revenues 1999 17 Billion
• Ground Transport Vehicles 44,500
• Aircraft Fleet 650 (air cargo fleet second only
  to USAF)
• Assignment FedEx Strategy Core Team
• Embed strategic thinking throughout the company
• Identify potential future market spaces
• Validate market spaces against plausible
  realities (scenarios)

30
Federal ExpressObservations

• Strategic Planning (6-18 Months)
• Short-term, narrow scope
• Flexible budget process accommodates changes in
  strategic plan
• Recruiting/Retention Issues
• Approximately 22 annual turnover (mostly lower
  levels)
• Morale among tenured employees (12 years)
• Operate Independently- Compete Collectively
• FedEx Express, Ground, Custom-Critical,
  Logistics
• Transportation/Distribution/Information Network
• Best in the world?

31
Recommendations

• Invest in an all out effort to integrate military
  logistics throughout DoD -- REINVENT where
  necessary
• Emphasize distribution over transportation
• Integrated information network
• Continue to explore and invest in Web-based
  technology
• Dont let best get in the way of better
• DoD must posture itself for highly skilled
  personnel
• Better to partner than compete with Corporate
  America

32
Common Observations/Recommendations

• Operational Change
• Organizational Change
• Transformation
• Service and DoD Implications

33
Common Findings

• Human Resources
• Dealing with DoD
• Information Technology
• Information Security
• Technology Use/Access
• Strategic Planning/Resource Allocation
• Business Best Practices
• Partnerships/Alliances/Teaming
• Internal Organization

34
Human Resources Common Findings
Andersen Consulting Observations/Recommendations
SECDEF Corporate Fellows Program

• Renew focus on DoD strengths for recruiting
• Institutional values duty, honor, country
• Leadership development, education and training
• Challenging work, significant responsibility at
  early age
• Gender race-blind mentoring - diversity as a
  strength
• Ensure leaders understand impact assigned HR
  accountability
• Performance report comment
• Help DoD close cultural divide with civilian
  community
• Carefully manage the top 10 and the bottom 10
• Benchmark Fortune 100 - become equivalent
• War for Talent EXISTS - no easy fix apply all
  available resources now or experience greater
  costs later
• Intellectual property, intangible assets more
  valuable than fixed assets
• Talent migratory long-term dedication, loyalty
  waning

35
Human Resources Common Findings
Andersen Consulting Observations/Recommendations
SECDEF Corporate Fellows Program

• Money NOT only key lever to attracting
  retaining top talent
• Increase total compensation and benefits package
• Tax exemption options
• Launch Mileage Plus frequent flyer program
• Match market value
• Reduce gap between officer and enlisted salaries
• Build Perks_at_work web site leverage DoD buying
  power
• Provides one-stop shopping for employees
• Raise QOL attention to detail use new methods
  and techniques
• Gen-X is different, not better or worse
• Recruit individuals retain families
• Vet new ideas outside the Pentagon
• Pick low hanging fruit do easy fixes quickly
• Robust health and dental plans, dual worker
  family plans, adult day care, telecommuting,
  on-site child care, hospice services, major
  signing bonuses, incentive pay, investment
  packages (TSP or 401K for active duty)
• Develop military to civil service transfer plan

36
Dealing with DoD Common Findings

• Dealing with DoD
• Companies dont care, cant get in, frustrated
• Dont care - commercial business booming
• Cant get in - funded sponsor identification
• Frustrated - complex burdensome system
• Multiple customers and checkers
• Cost accounting standards with audits
• Funding instability
• Low fee structures
• Recent DSB findings similar
• Reach out to industry (on their turf)
• Barriers to entry, fee structures, partnering
  enticements
• Determine set of changes to reduce complexity,
  open communications, and generate trust

37
Information Technology Common Findings

• Accelerate INFOTECH transformation to electronic
  environment
• Use DoD expertise to get security procedures
  right
• Partner to develop MyMilitary.mil portal
• Personalized, content-rich serviceanywhere,
  anytime
• Web enable ALL tools and processes
• Great way to advertise to present and future
  workforce
• Grant universal internet access to troops
• Remove barriers MILCON, financial, hardware,
  policy
• Leverage economic position FREE internet
  service and PCs
• Invest in thin client architecture
• Perfect for the Pentagon!billions in savings
• Totally Wireless for workers authorized cell
  phones
• Cell phone laptop OR desktop PC w/ desk
  phonenot both
• Outsource non core IT function insist on
  interoperability

38
Information SecurityCommon Findings

• Information Security
• Cyber attacks increasing
• DoD and commercial systems similar
• Firewalls ONLY PARTIALLY effective
• Off-the-shelf hacking tools available
• Information protection requires training and
  tools
• Commercial systems (banking) are the edge leading
• Centralized IT management
• Network monitoring
• Intrusion detection and tracking
• Ethical hacking required before fielding systems
• Recommendation Partner with industry for
  process,
• training and tools

39
Technology Use/Access Common Findings

• DoD use of Technology (Infotech, Biotech,
  Nanotech)
• Need Board/Council for the Ethical Use of
  Technology
• Personnel privacy/security concerns w/ DNA
  collection and use
• Partner with industry on potential use of DoD DNA
  database
• Train personnel on biotech nanotech just like
  for infotech
• Need new doctrine, strategy, tactics,
  international agreements
• Integrate approach for biotech nanotech
  acquisition and use
• David Goliath studies to look at
  vulnerabilities asymmetrical attacks
• Outsource everything not core to DoD
• DoD needs Commercial Mindset to access Technology
  
• Consider RD as a commercial service max use of
  commercial-like contracting
• Conduct Entrepreneurial training for all
  personnel
• Provide all DoD personnel online access to best
  business literature tools
• Use Commercial front door
• Databases connecting DoD with enterprises and
  vice versa
• Organization/infrastructure to support commercial
  interface
• Send 50 of Defense Leadership and Management
  Program (DLAMP) to industry
• Integrate DoD personnel working in industry using
  common web umbrella
• Enhances interaction across programs and
  participating sponsors

40
Strategic Planning/Resource Allocation Common
Findings

• Strategic Planning
• Everybody talks it, few actually do it
• Strategic window shorter than DoD
• 6 to 20 months v. 20 years
• Short-term window drivers
• Competition
• Technology
• Business Environment
• Resource allocation
• Flexible processes support strategic plans
• DoDs resource allocation plan must be more
  flexible

41
Business Best Practices Common Findings

• Executives must understand more than profession
  of arms
• Military and civilian officer and enlisted
• Initiate business training at commissioning
  source PME
• No price is low enough for a bad buy avoid deal
  fever
• As important to kill a bad acquisition as to
  close a good deal!
• Treat change acceleration as a process have a
  champion
• Create shared need reason must be instilled In
  organization
• Shape vision desired outcome must be clear,
  widely understood
• Fully Commit key people must invest, demand
  attention
• Make change last learning transferred throughout
  organization
• Monitor progress set benchmarks, establish
  accountability
• Install trained CIO at wing/brigade level
• Smart card must include additional applications
• Purchase card, credit card, club card, building
  access
• Leadership conferences reinforce values and vision

42
Partnerships/Alliances/Teaming Common Findings

• Determine core competencies first
• Build on TRUST must be win-win
• Look for long term commitments for non-core
  competencies
• Re-compete only if necessary
• Complicates planning and execution for all
  parties
• Develop web-based business partnering database
• Accessible to government and Industry
• Facilitates inter-service/agency teaming and
  benchmarking
• Outsourcing is a partnershipnot just a hand off

43
Internal Organization Common Findings

• Agile fast are the most important attributes
• Flexible, task organized, not hierarchical
• Decision-making and execution mostly
  decentralized
• Business models keep pace with the marketplace
• Org structure keeps pace w/ new business
  strategies
• Dedicated change agents, top-line outside
  consultants
• Very customer oriented (internal and external)
• Want repeat and new business
• Resolving issues quickly is key
• Quality check with customer surveys
• Automated support (pay, travel, legal, IT,
  financial, etc.)
• Dynamic very proactive top leadership
• No transformation without it

44
Backup Slides
45
DoD-Sarnoff Strategic Supplier Alliance
RIT(Research and Development Partnerships)
(Backup) SARNOFF CORPORATION OBSERVATIONS AND
RECOMMENDATIONS

• Purpose Make contracting with government more
  "commercial like" to encourage emerging
• firms and companies developing technology to
  provide government access to the new technology
• Why Sarnoff?
• A dual use business model
• A leading RD company in both commercial and
  government markets
• 18 Sarnoff Technology Ventures
• Strong connections to the Venture Capital
  community
• RIT Proposed Solution
• Operationalize a could be process for working
  with both Sarnoff and its commercial
• spin-off/start-up technology ventures
• Implementation Action Plans
• Create training to apply O.T. and Commercial
  Contracting practice to RD partnership
• Develop contract template for O.T. and
  Commercial Contracting practice for Sarnoff
• Establish basis for a commercial pricing model
  for RD across DoD
• Target projects to test Could Be process and
  contract templates
• Clarify requirements for making RD a commercial
  item designation