Final Report of the 199596 SECDEF Fellows Program

1
Final Report of the Secretary of
Defense Corporate Fellows Program 2000 - 2001
2
Agenda

• Background
• Common Observations/Recommendations
• Individual Experiences (time permitting)

3
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

4
SDCFP Organization

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

5
SDCFP Sponsors

• 99 - Prior
• American Management Systems, Andersen Consulting,
  Boeing, CNN, Caterpillar, Citibank, Cisco
  Systems, DirecTV, FedEx, Hewlett-Packard,
  Lockheed Martin, Loral, McKinsey Co., McDonnell
  Douglas, Microsoft, Mobil, Netscape, Oracle,
  Northrop Grumman, PricewaterhouseCoopers,
  Raytheon Systems, Sarnoff, Sears, Southern
  Company, Sun Microsystems
• 00 - 01
• ABB, Accenture, Agilent Technologies,
  Caterpillar, Enron, Human Genome Sciences,
  Northrop Grumman
• 01- 02
• American Management Systems, Cisco, Merck,
  Oracle, United Technologies, 3M, Sears

6
SDCFP Results

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

7
SDCFP Products

• 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

8
2000 - 01 Fellows

• Col Dan Brush Caterpillar, Inc.
• Peoria, IL
• LTC Dallas Edwards ABB Group
• Raleigh, NC
• Col Terry Feehan Accenture
• Northbrook, IL
• CAPT Linda Lewandowski Human Genome Sciences,
  Inc
• Rockville, MD
• LTC(P) Jane Maliszewski Agilent Technologies
• Santa Clara, CA
• CAPT(S) Mike Moran Enron Corporation
• Houston, TX
• Col (sel) Larry Thompson Northrop Grumman ES3
• Linthicum, MD

9
Agenda

• Background
• Common Observations/Recommendations
• Individual Experiences (time permitting)

10
DoD Transformation

• Integrated systems approach
• Continuous assessment and real-time adjustments
• Seamless integration between all components of
  enterprise from business to warfighter
• Decision-making frameworks
• Information/Knowledge Management backbone
• Adjustment to organizations and management
  methods
• Core Underpinnings
• Knowledge Management
• E-enable all aspects of enterprise
• Competitive edge knowledge to value
• Human Capital
• Personal management
• Culture of Innovation

11
Recommendations for DoD Transformation

• Adaptive Organization
• Leveraging Information Technology
• Process Improvements
• People

12
Adaptive Organizations

• Transformation is the journey, not the
  destination
• Essential characteristics
• Relentless pressure from senior leadership most
  important
• Accountability, systems approach, disciplined
  focus/persistence, clear vision/values,
  communication, high technology, key controls,
  culture
• DoD must
• Champion and incentivize change measure results
• Streamline processes more flexible, adaptable
• Incorporate Change Management, RBA studies in
  leadership training
• Increase outside exposure through mid/senior
  level internships
• Make personnel management more flexible, aligned
  with objectives

13
Recommendations for DoD Transformation

• Adaptive Organization
• Leveraging Information Technology
• Process Improvements
• People

14
Leveraging Information Technology

• Information Technology (IT) as a strategic
  advantage
• Security implications in a computer enabled world
• Knowledge Management (KM) improves support
• Enterprise Resource Planning (ERP)

15
Information Technology

• Information Technology (IT) is a strategic
  advantage
• No longer just a service provider
• CIO a full business partner becoming e-knowledge
  advisor
• Disciplined architecture optimizes effectiveness
  efficiency
• IT identifies exploitation opportunities
• DoD must
• Elevate CIO responsibility, authority, and
  accountability
• Impose architecture discipline and governance
  adaptability
• Force equal partnership between operations and
  technology
• Incorporate IT exploitation in all professional
  training

16
Information Security

• Security implications in a computer enabled world
• Increased reliance on vulnerable, web-based
  systems
• Dangers in outsourcing and insufficient security
  skills
• DoD must
• Establish priorities
• Insufficient attention to security in current
  programs
• Jointly develop international/industrial
  solutions
• Lack of international laws to track and punish
  hackers
• Lack of security skills in todays computer
  programmers

17
Knowledge Management (KM)

• Knowledge Management (KM) improves support
• Increased importance in global operations
• DoD should
• Develop an integrated KM approach
• Establish an empowered joint KM program office
• Field DoD-wide system
• Manage strategy, processes, personnel, technology

18
Enterprise Resource Planning (ERP)
Andersen Consulting Observations/Recommendations
SECDEF Corporate Fellows Program

• Enterprise Resource Planning (ERP)
• IT used to standardize management processes
• Opportunities for efficiencies and cost reduction
• DoD implementation
• DLA just starting - Accenture providing
  consulting services
• Other possible candidates Depots, Defense
  Agencies
• DoD Challenges
• Enormous commitment of time, resources,
  training
• Technically complex - major changes culture
  organization
• Time money to replace functional stovepipe
  systems

19
Recommendations for DoD Transformation

• Adaptive Organization
• Leveraging Information Technology
• Process Improvements
• People

20
Process Improvements

• Development and transition of technology in DoD
• Globalized sourcing of equipment services
• Outsourcing
• Six Sigma

21
Transitioning New Technology
Andersen Consulting Observations/Recommendations
SECDEF Corporate Fellows Program

• Improvements possible through greater user
  involvement
• DoD should
• Publish a long range capabilities strategy
• Attain user pull and stable funding commitment
• Partner with industry where it makes sense
• Develop independently if necessary
• Secure Congressional trust to execute
• Two-year budget

22
Globalized Sourcing
Andersen Consulting Observations/Recommendations
SECDEF Corporate Fellows Program

• Efficiencies through Global purchases, rentals,
  and maintenance
• DoD should
• Utilize worldwide COTS rental vice buy one for
  one
• Cheaper initial cost, reduced OM for a smaller
  force structure
• Less transportation demand when acquired on site
• Maintains technology edge
• Use contract services
• DLA overhead reduced
• Support local allies

23
Outsourcing

• Corporate America insights
• Difficulty is identifying core from non-core
  functions
• Should be capability not resource driven
• Current focus on more integrative solutions
• DoD must
• Clearly articulate requirements, metrics, scope
  of service
• Accurately benchmark actual cost of service
• Define penalties for non-compliance
• Be flexible to allow for advances in technology

24
Utility Outsourcing (DRID No. 49)

• DoD utilities privatization in trouble
• Services drove away most efficient solution
  providers
• Difficulties/frustration of non-traditional
  defense contractors
• Contract award timeliness, restrictive guidance,
  no best business practices
• Beneficial - but DoD could do much better
• Total value proposition vs utility only
• Greater potential for additional In the box
  savings

25
Six Sigma

• Six Sigma
• More than just the latest Quality fad
• Applicability across all aspects of organization
• Previously implemented world class quality
  programs
• Partial Six Sigma in some processes
• Readiness business, Velocity Management, Quality
  of Life, etc.
• DoD must
• Dedicate required resources to transform quality
  to the next level
• Increase Six Sigma use top down
  emphasis/attention required
• Partner with industry to establish benchmarks
• Provide Six Sigma training in schools

26
Recommendations for DoD Transformation

• Adaptive Organization
• Leveraging Information Technology
• Process Improvements
• People

27
People - The Strategic Resource

• War for Talent
• Change in landscape/expectations
• Asymmetric fight is a necessity
• Focus Manage develop talent to optimize value
  creation
• Common themes
• Great place to work
• Opportunities to add value
• Value of the individual
• Value of the culture environment
• Leadership-commitment, visibility, accountability
• Common values
• Trust
• Communication

28
People - The Strategic ResourceRecommendations

• Recruiting
• Everyone a recruiter
• Shared vested interest, use incentives
• Community mentoring tutoring, sports, community
  service
• Retention
• Great place to work culture and emphasis
• Roots in strong mentoring program
• Commonly misunderstood
• Great knowledge transfer
• Fix small problems before they grow
• Create cross-organizational mentoring programs
• 360-Degree evals

29
People - The Strategic ResourceRecommendations

• Retention (cont.)
• Visibility into personnel systems assignments,
  promotions
• Unknowns breed contempt
• Distributed networks design anywhere, build
  anywhere
• Centralize support, reduce tooth to tail
• Build personal worth
• Avoid professional atrophy
• Education / training should not create
  indentured servants
• Dual tracks for professionals
• Personal not Personnel management

30
The Bottom LineIts the Culture

• Importance of innovation in the knowledge based
  economy
• Intellectual assets have surpassed physical
  knowledge is the most important competitive
  advantage
• Key innovation elements
• Empowerment, communication, risk tolerance,
  cross business learning
• DoD must
• Reevaluate how talent is managed
• Improve the way information is managed
• Develop new communication channels (both
  vertically horizontally)
• Support key innovation elements from the top
  (recognition reward)

31
Agenda

• Background
• Common Observations/Recommendations
• Individual Experiences

32
2000 - 01 Corporations

• Col Dan Brush
• LTC Dallas Edwards
• Col Terry Feehan
• CAPT Linda Lewandowski
• LTC(P) Jane Maliszewski
• CAPT(S) Mike Moran
• Col (sel) Larry Thompson

• Caterpillar, Inc.
• ABB Group
• Accenture
• Human Genome Sciences
• Agilent Technologies
• Enron Corporation
• Northrop Grumman ES3

33
Caterpillar
SECDEF Corporate Fellows Program

• World leading manufacturer of construction and
  mining equipment, on highway/marine engines,
  natural gas/diesel power generation sets
• Employees 68,500 (45 US)
• Revenues 20.2B (50 US)
• Manufacturing gt93 Plants (44 US)
• Dealers gt207 worldwide (gt1800 service
  locations)
• Patents gt2500 last 5 years
• Fortunes Most Admired Industrial/Farm Equip
  Manufacturer
• Assignment Machine Systems RD, Technical
  Services
• 6 Sigma deployment
• 20 year vision of commercial construction
  equipment
• Prognostics

34
Caterpillar Observations
Caterpillar Inc. Observations
SECDEF Corporate Fellows Program

• Well positioned (market share) in traditional
  industries
• Mining, earthmoving, truck/marine engines,
  Ag/forestry, logistics, financial, power
  generation equipment
• And non-traditional industries
• CAT World Trading Corp., CAT Redistribution
  Services
• Rental Market 643 stores worldwide
• e-Commerce - contract with i2 Technologies Inc
• Strategic vision- two generations (5 years) out
• Business strategy
• Focus on customer
• Grow 50 by 2006, Reduce costs 10 by 2003
• 6 Sigma deployment
• Continue to be a global leader
• Continue product diversity through acquisition/
  joint ventures

35
Recommendations
Caterpillar Inc. Recommendations
SECDEF Corporate Fellows Program

• Leverage industry rental and service markets
• Reduce re-capitalization costs
• Stay on top of the evolutionary technology wave
• Gain strategic advantage from Service for
  Profit
• Enhance technology development
• Provide 10-20 year vision
• Drive revolutionary change
• Teaming/Strategic Alliances/Partnerships
• Promote autonomous equipment requirements
• Prognostics (Machine Heal Thy Self)
• Operations (Horizontal Construction, Mine Counter
  Measures, Material Movement)

36
ABB
SECDEF Corporate Fellows Program

• Global Technology Group
• 100 countries 1000 Companies 160,000
  employees
• 23.0B 2000 annual revenue Down from 1999 - 25B
  
• Initial Public Offering on NYSE 6 Apr 01
• Mission (ABB The Value Creator)
• Making customers more competitive in a networked
  world
• Achieving returns that meet/exceed expectations
  of shareholders
• Living our commitment to sustainability
• Corporate culture vs. Military culture
• Similar Interesting work, ability to learn new
  things, global opportunities, personal growth,
  respect for employees
• Different Non-hierarchical, flat organization
  personal value creation based motivation
  (competitive with market)

37
Observations/Recommendations
SECDEF Corporate Fellows Program

• ABB Corporate Transformation
• Changing world situation makes change necessary
• End result a new capability to tackle a new
  environment
• A more responsive, agile, versatile and
  sustainable organization
• Organized around customer relationships
  (partnerships/alliances)
• Speed of change important due to cost
• People are a key ingredient open communications
  and buy in
• Transformation transparent to customers
• Develop IT to support new structure (Over 300
  ERPs, 40 SAP)
• Recommendations for DoD
• Develop a corporate integrated business strategy
• Business processes Quadrennial Defense Review
  (QDR)
• Possible new structures
• IT structure that allows seamless real time
  coordination
• Local teams allow operators to maintain current
  operations

38
Observations/Recommendations
SECDEF Corporate Fellows Program

• DoD Utilities Privatization
• Complex, Service unique proposal processes
• Incomplete requirements, cost criteria withheld
• Site visits - inadequate time to assess utility
  systems
• Single installations not commercially appealing
• Bundling installations better
• Continue to require SB goals be met
• Recommendations
• Use the Internet for posting
• RFPs, amendments, list of interested parties
• e-mail for all correspondence
• Equal access for base site visits
• Avoid protracted bidding timeframes
• State performance service reliability goals
• Reasonable, measurable, achievable

39
Accentureformerly Andersen Consulting
SECDEF Corporate Fellows Program

• World leader in management and technology
  consulting
• Employees 70,000
• Revenues 9.75B
• 54 Americas
• 38 Europe, Middle East, Africa, India
• 8 Asia
• Locations Six continents, 46 countries
• Clients Over 4,000 worldwide
• 84 of Fortunes Global 100
• Over half of Fortunes Global 500
• IPO filing in April 2001
• Assignment Center for Strategic Technology and
  Research
• Develop and implement innovation concept to
  product process
• Accentures DLA supply chain contract
• Research knowledge management, enterprise
  architecture, and Internet security

40
AccentureObservations/Recommendations

• Thousands of bright young recruits for high
  travel/stress jobs
• Competitive pay, flexible working conditions, top
  equipment, knowledge exchange
• Desire to be part of a winning team
• Like DoD, Accentures personnel deploy around the
  world
• Enabled by Knowledge Management system and web
  connectivity
• Tremendous delegation of authority and
  accountability
• Operating locations and challenges continuously
  change
• Success through holistic approach to change
  architecture
• Risk security in a web-enabled working
  environment
• Engaging with government, industry and academia
• Identify issues outsourcing, software quality,
  education
• Leverage relationships/expertise for solutions

41
Human Genome Sciences

• A pioneer in the use of genomics (study of all
  human genes)
• Founded in 1992
• 1.9B total cash and asset
• 750 employees
• Worlds leading patented gene sequence database
• Approximately 97 of all medically significant
  genes and proteins
• Five pipeline products in clinical trials
• Leader in moving genomics-based drugs into
  patient-based clinical trials for development of
  new pharmaceutical products
• Goal - become a global biopharmaceutical company
• Discover, develop, manufacture, sell its own
  genomics-based drugs

42
Human Genome Sciences

• Sponsor Assignment Director, Strategic Planning
  
• Reporting to both CEO and Chief Business Officer
• Projects
• Strategy formulation for commercialization phase
  and beyond
• Forging a partnership with DoD
• Contributing to DoD Biotech Strategy development
  and Strategic Review
• Monitoring Regenerative Medicine
• New area of medicine with broad DoD applications
• Exploiting DoD value from biotech sector

43
Human Genome Sciences Observations

• CEOs powerful vision and personal leadership
• The driving forces behind success
• Main leadership challenges
• Rapid company growth
• Integration of science with business
• Development of solid leaders in key positions
• Intellectual property is a core asset
• Human Capital/Knowledge Management are critical
• Strategy on the fly
• Not a continuous, structured process

44
Recommendations

• DoD Biotech applications
• Biomedical countermeasures
• Highly fragmented effort across government/civil
  sector
• National Homeland Defense Czar responsibility
• Cabinet level position
• DoD Anti-Bio Warfare
• Primary focus on sensors, detectors, vaccines
• Focus and pool resources at national level
• Biopharmaceutical industry an untapped resource

45
Agilent Technologies

• Diversified technology company focusing on high
  growth markets in communications, electronics,
  and life sciences
• Split from HP in Nov 1999--the HP Way is
  pervasive
• 11B revenues in FY 2000, Forbes Platinum 400
• 47,000 employees based in 40 countries
• Customer markets in 120 countries
• 46 on Fortunes Top 100 Best Places To Work
• Significant investment in advanced RD (10-12 of
  revenue)
• Vision
• Revolutionize the way people live and work,
  through technology
• Assignment Chief Information Officer/Information
  Technology staff
• IT strategic planning--Balanced Scorecard
• Performance measurement--IT Customer-Facing
  Metrics

46
Agilent TechnologiesObservations

• IT as a full business partner powerful CIO role
• Customer Focus is a new core competency-- Easy To
  Do Business With
• Requires change in the operating model
• IT provides the customer experience--new role
• Transformation--continued commitment in economic
  downturn
• Massive culture change necessary
• Relentless top level support--measuring,
  resourcing, rewarding
• Integration and synchronization of decisions at
  enterprise level
• Discipline, focus, speed, accountability
• Holistic approach to decision implications no
  more stovepipes
• Continuous growth environment
• Emphasizes both organizational growth and
  personal development
• Cultivates an adaptive mindset
• Innovation and improvement benchmark forums

47
Recommendations

• Elevate position of CIO to Undersecretary of
  Defense
• Real authority for interoperability,
  standardization, spending
• Make DoD Easy To Do Business With -- internal
  and external
• Priority on systems that provide responsiveness
  and flexibility
• Transformation and adaptive culture becomes DoD
  priority
• Tie measures, accountability, and incentives to
  it
• Demand integration and visibility between all
  systems/processes
• Seamless, interoperable supply/information chain
  from sustaining base to foxhole, sensor to
  shooter
• Create streamlined business/organizational
  framework
• Flexible outsourcing methodology skills in
  Vendor Management
• Can quickly adopt benchmark techniques
• Empower employees Involve participants

48
Enron

• Worlds largest Energy company
• Top wholesaler of energy - 1 natural gas
  buyer/seller
• Forbes Platinum 400 CY 2000 revenues 100 B
• Fortunes Globally Most Admired Energy Provider
• Americas Most Innovative Company 1996-2001
• Fortunes Globally Most Innovative, Top 25 Best
  Places to Work
• Business Week s Top 25 Management
• Reputation for transforming markets
• Risk management, outsourcing, e-Commerce,
  broadband
• 80 of revenues from businesses new in last five
  years
• Assignments
• Blockbuster Team entertainment on demand
  streaming video
• Federal Solutions DoD energy outsourcing

49
Enron Observations

• Innovation - driving force for success
• Strategic vision - simple straight forward
• Tied to core values
• Corporate culture - Entrepreneurial
• Intellectual Capital
• People are the most important asset
• Fortunes Global Top Two Getting/Keeping Talent
• Extensive use of knowledge management tools
• Education, training, mentoring
• Well versed in handling change
• Organization - flat fast
• First Mover Advantage
• Decentralized decision making

50
Recommendations

• Internet Transformation
• e-Commerce growth requires smart broadband
  networks
• Applications for DoD
• Quality of Life education
• DoD a very difficult utility outsourcing business
  partner
• Enron withdrew from energy outsourcing program
• RFP to contract award time (18-24 months) is too
  long
• Local roadblocks bar efficient, large-scale
  solution providers
• Standardized RFP process needed (consistency
  across Services)
• DoD should rethink approach to utility
  outsourcing
• Total value proposition vs segmenting the energy
  chain
• Missed opportunities for concurrent TELCOM
  infrastructure upgrades
• Beta tests for selected bases (one per Service)

51
Northrop Grumman
SECDEF Corporate Fellows Program

• Number Two in Defense Electronics with 5.1B
  Litton acquisition
• Forbes Platinum 400, Fortune Most Admired
  Aerospace Top 8
• Three sectors (five w/ Litton), 15B revenue
  forecast
• SecDef Fellow in MD at Electronic Sensors
  Systems (ES3)
• ES3 Fastest growing sector 1/3 of corporate
  sales (3B)
• Manufacturing in eight states, Puerto Rico,
  Canada, Europe
• Globally aggressive w/ active acquisitions,
  partnerships, teaming
• 1B UAE F-16 radar EW suite Australian
  Wedgetail AEW
• Focus is on core competencies in military and
  commercial areas
• Radar, sensors, weapons, countermeasures,
  microchips, marine propulsion, communications,
  postal automation

52
Northrop Grumman ES3 Observations /
Recommendations
SECDEF Corporate Fellows Program

• Maintain quality workforce using a culture of
  confidence, security
• Great places to work / use of professional and
  leadership tracks
• Training, education w/ no strings builds
  professional personal worth
• Everyone a recruiter, everyone a mentor
• Personal not Personnel management
• Change Management is deliberate and critical in
  successes today
• Change is unavoidable and sought after
• Change Management requires serious study of
  concepts techniques
• Acquisition and Contracting in the Defense
  Industry
• Unpredictable business fraught with
  misunderstandings
• Defense Science Board Industrial Base Study
  lessons must not be lost
• More Industry knowledge experience needs to be
  infused into DoD
• Cultivate more cooperative relationships,
  programs (SDCFP, EWI)