Final Report of the 199596 SECDEF Fellows Program

1
FINAL REPORT of the Secretary of Defense Fellows
Program 1998 - 1999
2
Agenda

• Background
• Objective
• Organization
• Sponsors
• Results
• Common Observations Recommendations
• Individual Presentations

3
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

4
Background

• Infrastructure is 2/3 of Defense Budget
• Business practice reforms generate savings
• Savings applicable to modernization shortfalls
• DoD needs effective access to best executive
  level business practices
• Strategic Planning
• Organization
• Change Management
• Human Resources
• Information Technology
• Globalization
• Outsourcing

5
Objectives

• 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

6
Organization

• Two officers from each Service (USMC one)
• High flag/general officer potential
• O-6 or O-5
• Senior Service College credit
• Eleven months at Sponsoring Company
• Three weeks orientation
• Report and Briefings directly to SecDef
• Business insights relevant to DoD
  culture/operations
• Recommended process/organization changes

7
Sponsors

• 98 - Prior
• American Management Systems, Andersen Consulting,
  CNN, CITICORP, DirecTV, Hewlett-Packard,
  Loral, Lockheed Martin, McDonnell Douglas,
  Microsoft, Mobil, Oracle, Northrop Grumman,
  Sarnoff Labs, Sears, Southern Co.
• 1998 - 99
• Boeing, Caterpillar, Cisco Systems, Netscape,
  PricewaterhouseCoopers, Raytheon Systems,
• Year of transitions
• 1999 - 00
• CITIGROUP, FEDEX, Lockheed Martin, McKinsey
  Co., Sarnoff Corp., Sun Microsystems

8
Results

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

9
1998-1999 Fellows

• Lt Col Joanne Guretsky The Boeing Company
• Seattle, WA
• COL Steve Holtman Caterpillar, Inc.
• Peoria, IL
• CDR Cathy Thomas Cisco Systems, Inc.
• San Jose, CA
• Lt Col Frank Brooks Netscape Communications M
  ountain View, CA
• LtCol Mike Strain PricewaterhouseCoopers Fair
  fax, VA
• Lt Col Phil McDaniel Raytheon Systems
  Co. Garland, TX

10
Common Observations/Recommendations

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

11
Observations Recommendations

• Internal Organization
• Agility the single most important attribute
• Flexible, task organized, not hierarchical
• Decision-making decentralized
• Customer focused, responsive
• Satisfaction a factor in annual evaluations,
  compensation
• Automated shared support services (pay, travel,
  legal, IT, etc.)
• Single point access by user
• Active Top Level Leadership
• No transformation without it
• Role in strategic planning proportional to change
  magnitude

12
Observations Recommendations

• Information Technology
• Full implementation a strategic level leadership
  issue
• Common Operating Environment for
  architecture/protocols
• CIO must have power/ to enforce
• Seamless DoD-wide Intranet access needed
• Professionalize systems admin in DoD - not a
  collateral duty

13
Observations Recommendations

• Information Technology (cont.)
• Fully utilize high tech collaboration potential
  throughout DoD
• Best practices in accessible archives
• Video/chat meetings and decision-making forums
• On-line professional news education, customer
  presentations
• Lease vs buy
• Leading edge or rapidly changing requirements
  lease
• DoD requires Enterprise Resource Planning (ERP)
  systems

14
Observations Recommendations

• Enterprise Resource Planning (ERP) Systems
• All functions (manufacturing, finance, HR, etc.)
  linked
• Integrated software
• Comprehensive data
• Single point inputs
• All processes evaluated and redesigned as
  required
• Cannot overlay on current processes
• Significant time, effort, transformation
  leadership required
• Significant savings in , manpower, time
• Available commercially or custom developed
• Commercial SAP, PeopleSoft, Oracle, J.D.
  Edwards

15
Observations Recommendations

• Human Resources
• New trend within industry/workforce
• Mutually beneficial partnership - not a job for
  life
• Workforce shortage at all levels
• People must be treated like people
• HR programs/incentives a must to recruit/retain
• DoD must re-think paradigms that limit agility to
  fill gaps
• Only growing military personnel bottom up from
  within
• No lateral appointment/enlistment to fill
  emergent needs
• HR is a profession, not a collateral duty
• Major organizational segment or core competency

16
Observations Recommendations

• Recruit/Retain Incentives
• DoD must adapt to compete
• Total package is critical - NOT JUST PAY
• "One size fits one" - unique incentive
  combinations
• Job Enrichment
• State of the art equipment
• User friendly, competitive health plan
• Work _at_ home an alternative
• Flex time working hours
• Significant compensation above basic pay for
  performance

17
Observations Recommendations

• Partnerships/Teaming
• TRUST
• Greater access to information for friends
  (business, allies)
• Long term, not constantly re-competed
• Must be win-win
• Globalization
• Tech transfer approval process inconsistent and
  glacial
• New process needed for deciding what to protect

18
Observations Recommendations

• Strategic Planning
• Horizon 1 - 5 years out
• Rapid pace of change agility makes longer range
  passé
• Broad and general
• Detailed Fiscal Planning
• 12-24 months out max
• 90 days to build/approve next years budget
• Financial reviews throughout year
• moved at business unit level
• No color of money within business unit
• Savings plowed back, not taken away

19
Observations Recommendations

• Outsourcing
• Determining real core competencies is key
• Dont outsource
• Core competencies may change
• Activities not just organizations
• Incentivize performance
• Partnership is an alternative
• Y2K Problem
• High Awareness, but no silver bullets or new
  surprises
• Subcontractor tiers and overseas still a concern
• Configuration freeze dates set some already
  thawing
• Impetus to complete projects, replace systems

20
1998-1999 Fellows

• Lt Col Joanne Guretsky The Boeing Company
• Seattle, WA
• COL Steve Holtman Caterpillar, Inc.
• Peoria, IL
• CDR Cathy Thomas Cisco Systems, Inc.
• San Jose, CA
• Lt Col Frank Brooks Netscape Communications M
  ountain View, CA
• LtCol Mike Strain PricewaterhouseCoopers Fair
  fax, VA
• Lt Col Phil McDaniel Raytheon Systems
  Co. Garland, TX

21
The Boeing Company

• Largest aerospace company in the world
• Nations leading exporter
• Largest NASA contractor
• Merged with McDonnell Douglas in 1997
• Re-organization/downsizing continuing

22
BoeingObservations/Recommendations

• Enhance communication throughout DoD
• Design anywhere
• Increase use of teleconferences/computer chat
  sessions/ computer video
• Establish virtual offices
• Cost consciousness throughout DoD
• Raise awareness through the web, PME,
  periodicals, media
• Not just finance personnel - involve operators

23
BoeingObservations/Recommendations

• Further implement lean/shared services
• Eliminate service-unique forms
• Enhance maintenance and safety
• Electronic technical/safety updates
• Improve accessibility of web documents
• Increase computerized maintenance forecasting
• Push-type maintenance - parts ready on arrival

24
BoeingObservations/Recommendations

• Commonality/enterprise solutions
• Greater commonality and Civil Military
  Integration
• Explore enterprise solutions for contingency ops
• Flexible, tailorable force packages
• Logistics planning
• Cost information
• Spread and implement best practices
• Formalize process to ensure routine
  implementation
• Improve Joint Uniform Lessons Learned System
  (JULLS)

25
BoeingObservations/Recommendations

• People
• Communicate concern and professional values
• The military profession is a service
• NOT a nine-to-five job
• Take care of people
• Continue to work OPTEMPO
• Evaluate specialties
• Lifetime career fields (e.g. career pilots)
• Up-or-out policy

26
Caterpillar

• Heart of Illinois - Peoria
• Worlds largest producer of
• Construction equipment
• Mining equipment
• Natural gas engines
• Industrial gas turbines
• Diesel engines
• 2 million products in service today
• 65,000 employees plus 197 dealers worldwide
• 1998 sales 20.89B profits 1.51B

27
CaterpillarObservations/Recommendations

• The Journey Continues
• Corporate change
• Hierarchical to business units
• Very few general offices
• Communication challenges
• Strategic planning
• At business unit level
• Near term focus
• E-commerce eventually

28
CaterpillarObservations/Recommendations

• Corporate Drivers
• Total customer focus
• Product differentiation
• Life cycle value
• Professional corporate culture
• Trust
• Quality
• Positive work environment
• Compensation
• Community involvement

29
CaterpillarObservations/Recommendations

• Family Jewels
• Caterpillar parts distribution system
• Integrated dealer network
• Diagnostics and prognostics
• Single parts data base
• 99.72 same day shipment
• KEEP EM RUNNING

30
Cisco Systems

• 85 of total Internet hardware/software
• 200 offices, 55 countries, 17,400 personnel
• 1998 revenues 8.5B, growth 30-35 per year
• Networked company
• Net a conduit to employees, partners, customers
• Employer/employees interdependent
• Virtual workplaces (office, home, on the road)
• Speed, agility in decision-making, execution
  enabled
• Costs avoided

31
Cisco SystemsObservations/Recommendations

• Hiring and retaining top people
• Aggressive, multi-faceted recruiting
• Varied, responsive programs, services, virtual
  workplace
• Compensation, recognition, rewards by line
  managers
• Leading edge technology, training
• No one retires from Cisco
• DoD must adapt to compete
• Flexible incentives packaging (one size fits
  one not all)
• Line manager tools for on the spot
  recognition/reward
• Options for tapping expertise without owning it
• Worry less about retention, more how to
  accommodate turnover

32
Cisco SystemsObservations/Recommendations

• Information Technology
• 6 of personnel spend 3.5 of revenue
• 80 client funded growth 1.5 times the business
• Hardware/software standardization
• Based on industry open solutions
• Reduced training costs, costs of ownership
• More time for development of new capabilities
• Faster reaction to business change
• Allows Cisco to carry a bigger stick DoD could
  too

33
Cisco SystemsObservations/Recommendations

• Outsourcing/partnering
• Everything thats not a core competency
• Allocate headcount to core competencies
• Base on trust, long term commitment, Win-Win
• Partner in one venture, compete in another
• Implications for DoD
• Narrower, more adaptive core competency
  definition
• Outsource more aggressively
• Explore partnering alternative opportunities

34
Netscape Communications Corp

• Fastest growing software company in history
• Apr 94 Founded as Mosaic Communications
• Aug 95 IPO announced
• Oct 96 First 100M Qtr
• Product evolution
• Apr 94 Navigator internet browser and servers
• Apr 96 E-commerce software
• Dec 96 Bundled internet tools (Communicator)
• Sept 97 Netcenter portal (website search engine)
• Jan 98 Browser computer code made FREE
• Mar 99 Netscape bought by AOL
• Future market
• Online sales projection 327 billion by 2002

35
NetscapeObservations

• Flexible management style in Internet Time
• Decisions pushed down to lowest levels
• Reports/red tape minimized
• New ideas are test bedded - failure does not end
  a career
• Outsourcing
• Internal processes
• Increase operating efficiencies decrease
  operating costs
• External processes
• Increase revenue opportunities
• Partnering Meet time to market constraints
• Globalization Open overseas markets

36
NetscapeObservations

• Human Resources
• Large number and variety of programs for a small
  firm
• Centrally managed, cohesively focused on
  corporate strategy, maintains company culture
• One size fits one multiple incentives
  philosophy
• Broad range of management tools
• Tailored rewards
• Revenue based bonuses
• Hi-tech collaboration
• Corporate culture - information sharing is vital
• Online interactive presentations
• Company forums and newsgroups

37
Netscape Recommendations

• Human Resources
• Reorganize HR programs under one chain of command
  
• Differentiate pay scale based on skill code
• Tie bonus to individual performance
• Improve technical currency of DoD support corps
• Introduce specialty tracks at each level of PME
• Provide more information exchange with industry
• Create Reverse Reservists
• Co-sponsor vocational training for companies
• Selectively contract middle management to fill
  gaps

38
PricewaterhouseCoopers
Secretary of Defense Fellows Program

• Global professional services firm
• Merger of Price Waterhouse Coopers Lybrand
• 152 countries over 145K employees
• 61st largest employer in the world
• 1998 growth 20 revenue 15.3B
• Organization
• Matrix organization
• Geography - 4 regions
• Industry - 5 sectors
• Lines of Service (LOS) - 6 lines
• Goes to market by industry, draws expertise from
  LOS

39
PricewaterhouseCoopers Observations/Recommendation
s
Secretary of Defense Fellows Program

• Knowledge Management
• Intellectual capital the currency of a knowledge
  economy
• Ability to create/maintain/find information
  quickly
• Use of Intranet/Extranet facilitates information
  flow
• Common Operating Environment (COE)
• People are KEY -- IT structure supports people
• Enterprise Resource Planning (ERP) Systems
• Leverages IT structure
• Maximizes information utility minimizes info
  cost
• Industry experiences 30-100 ROI
• DoD can benefit from ERPs
• CINCPACFLT Solution Provider Initiative

40
PricewaterhouseCoopers Observations/Recommendation
s
Secretary of Defense Fellows Program

• Agility
• Ability to reinvent organization to meet market
  demands
• Ability to move funds as required
• Maximizes IT structure/knowledge base
• Decentralized decision-making/budget
  responsibilities
• DoD is NOT agile
• Simulation
• Industry uses more often than pilot programs DoD
  favors
• Cheaper, risk free, doesnt disrupt current
  operations
• Greater ability to generate data for
  decision-making
• What if scenario capability
• Applicable at all levels, machine to network

41
PricewaterhouseCoopers Observations/Recommendation
s

• DoD expects support for pre-determined positions
• Consulting firms supposedly hired to research
  problems/recommend solutions
• Not looking for best practices/solutions
• Waste of DoD time and money
• Human Resources
• One size fits all approach doesnt work
• Industry utilizing one size fits one approach
• Review policies for up-or-out, entry level only
  accessions, etc.
• Single point access by user to all support
  services

42
Raytheon Systems

• Raytheon Company
• One of the Big 3 defense contractors
• 20B in yearly revenue
• Global company, expanding internationally
• Company in transition
• Unique merger scenario
• Building an entirely new company
• Period of great turmoil which is not over

43
Raytheon Systems Observations/Recommendations

• Internal organization
• Shared services for pay, travel, legal, HR, etc.
• Matrixed at each level
• Decentralization
• Goal Act with the agility of a small company
• Push down authority and responsibility
• DoD does this somewhat, but still needs
• More sharing for support functions
• Less Service-specific functions
• Greater use of IT

44
Raytheon Systems Observations/Recommendations

• Information Technology
• Internet for general info and contacts
• Extensive Intranet
• Virtual company in the making
• Sharing information, employee communication
• Business is executed over the web
• Personnel functions
• Engineering
• Enterprise Resource Planning
• Determining total costs
• Necessary to determine how to cut costs

45
Raytheon Systems Recommendations

• Information Technology
• DoD needs to
• Expand Internet/Intranet use - not restrict
• Especially Intranet
• Implement Enterprise Resource Planning programs
• Cant fix practices if you dont know whats
  broken
• Greater visibility into spending what things
  really cost
• Greater management oversight of programs
• Closer integration with contractors possible
• Mandate and enforce common operating systems
• Greater interoperability
• Reduced costs through large buys

46
Raytheon SystemsObservations/Recommendations

• Technology transfer
• Globalization has increased transfer issues
• Multi-national companies have added new issues
• Foreign ownership of US companies
• US firms integrating foreign components
• Current system is slow and inconsistent
• DoD must define technologies to protect release
  the rest
• Streamline request system
• Paperless