Secretary of Defense Corporate Fellows Final Outbrief Academic
Secretary of Defense Corporate Fellows Final Outbrief Academic Year 2009 -2010
Agenda Secretary of Defense Corporate Fellows • Program Overview • Industry Trends • Recommendations for DOD • Further Discussion / Q&A • Individual Corporate Experiences (FYI) 2
Fellows and Assignments Secretary of Defense Corporate Fellows COL Brian Bedell, USA i. Robot Bedford, MA Col David Hicks, USAF General Dynamics Scottsdale, AZ Col Linda Hurry, USAF Caterpillar Peoria, IL Col James Rector, USMC Deutsche Bank London, UK Col (Sel) Bradley Hall, USMC Du. Pont Wilmington, DE Col (Sel) William Spangenthal, USAF Apple Cupertino, CA LTC Ricardo Cristobal, USA Accenture Reston, VA CDR Demetries Grimes, USN NCR New York, NY CDR Scott Josselyn, USN EADS Arlington, VA 3
SDCFP Background Secretary of Defense Corporate Fellows • 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 Do. D in future • Businesses outside Do. D successful in: – – Adapting to changing global environment Exploiting information revolution Structural reshaping/reorganizing Developing innovative processes 4
SDCFP Background Secretary of Defense Corporate Fellows • Do. D needs effective access to best executive level business practices applicable to operations & support – – – – Strategic Planning Organization Change Management Human Resources Information Technology Supply Chain Outsourcing • Non-deployable approximately 2/3 of Defense Budget – – Reforms generate savings Savings applicable to operational shortfalls 5
SDCFP Organization Secretary of Defense Corporate Fellows • Two or more officers from each Service – – O- 6 or O- 5 w/High flag/general officer potential Senior Service College credit • Group Education – – – Current political/military issues; leading edge technologies Meetings with senior Do. D 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, Administrative Assistant Deputy Chief Management Officer (DCMO) for oversight NDU for Admin support: www. ndu. edu/sdcfp/sdcfhom. html 6
SDCFP Sponsors Secretary of Defense Corporate Fellows • 09 - Prior – 3 M, ABB, Accenture, Agilent Technologies, American Management Systems, Amgen, Boeing, Booz Allen, CACI, Caterpillar, Cisco, CNN, Deutsche Bank, Direc. TV, Du. Pont, Enron, Fed. Ex, General Dynamics, Hewlett-Packard, Honeywell, Human Genome Sciences, IBM, Insitu Group, Johnson & Johnson, Lockheed Martin, Loral, Mc. Kinsey & Co. , Mc. Donnell Douglas, Merck, Microsoft, Mobil, Netscape, Oracle, Northrop Grumman, Pfizer, Pratt & Whitney, Pricewaterhouse. Coopers, Raytheon, Sarnoff, Sears, Sikorsky, Southern Company, SRA International, Sun Microsystems, Symbol Technologies, Vertex Aerospace • 09 -10 – Accenture, Apple, Caterpillar, Deutsche Bank, EADS, Du. Pont, General Dynamics, i. Robot, NCR • 10 -11 – Amgen, Exxon. Mobil, Google, IBM, Insitu, Lockheed Martin, Mc. Kinsey, Merck, Microsoft, Pratt & Whitney, Space. X, SRA International 7
SDCFP Results Secretary of Defense Corporate Fellows • Program objectives fulfilled – Education l – – Do. D, Individual officers, Sponsors More Sponsors than Fellows available Intra-group experience sharing l Group visits with sponsor CEO’s and senior leadership • Unique corporate experience – – – Strong corporate support Executive/operational level duty mix Mergers/restructuring l Unexpected challenges, valuable insights 8
SDCFP Products Secretary of Defense Corporate Fellows • 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 – – – Sec. Def/Dep. Sec, VCJCS, Service Secretaries & Chiefs, 20+ other senior uniformed and civilian officials Business insights relevant to Do. D culture/operations Recommend process/organization changes 9
Agenda Secretary of Defense Corporate Fellows • Program Overview • Industry Trends • Recommendations for Do. D • Further Discussion / Q&A • Individual Corporate Experiences (FYI) 10
Industry Trends Secretary of Defense Corporate Fellows • Economic downturn and evolving economic recovery imperatives – – – Greater organizational efficiency Lower production costs Accelerated speed to market • New technology landscape – – – Increased mobility Communications, content, and communities convergence Data integration Internet computing Development of autonomy • Human talent – Increasingly a low density, high demand resource • A common passion and prioritization for innovation – – Flatter organizations The best minds Discipline to say “No” Focused and Funded R&D 11
What Fuels Innovation? Secretary of Defense Corporate Fellows • The Industry’s best personnel – – Functional experts Blend of artistic & technological talent l Both left & right brain • A flat organization – – Extremely limited or no staffs Very few levels between CEO & line employee • Solving a particular problem – Laser focused, market driven approach • Restraint – – Saying “No” is more important than saying “Yes” What to do, not how to do it 12
What Fuels Innovation? Secretary of Defense Corporate Fellows • Rigorous procedures – Measurable, scalable, tailorable, repeatable • Perfectionism – – Good is truly the enemy of Great How to do it, after deciding what to do • Risk taking – – Not every idea works Even great ideas may end up in the trash • Resources – R&D is a must pay bill • Leadership & Management – Knowledgeable at least three levels down 13
Agenda Secretary of Defense Corporate Fellows • Program Overview • Industry Trends • Recommendations for Do. D • Discussion / Q&A • Individual Corporate Experiences (FYI) 14
Reinvigorating Innovation Secretary of Defense Corporate Fellows • Flatten Do. D – Re-evaluate organizational design l Eliminate duplication of operational and support staffs – Replace with high performing teams (CONUS & in-theater) l – Task organized Leverage technology/information transmission speed • Limit “product” offerings – – Every problem does not need to be solved Every solution does not need to be material Limited funds beget elegant solutions Reduce investment overlap amongst the services 15
Reinvigorating Innovation Secretary of Defense Corporate Fellows • Adopt a “Market Driven” R&D investment strategy – Fully fund fewer projects with greater resources for each l l – Eliminate dead-end research “hobby shops” Develop only systems that can REALISTICALLY be procured Develop a CONOPS “business model” for each requirement l Absolutely need a business case for the $$ we spend 16
New Technologies & Organizational Efficiencies Secretary of Defense Corporate Fellows • Enhance/Increase productivity and connectivity – Take it beyond the office environment • Utilize new technologies for collaboration – – Multi-channel, cross-agency, cross-service Security protocols should serve to mitigate risk l – Not interfere with collaboration Modify organizational structures to capitalize on capabilities • Adapt to, and take advantage of, greater decentralization – – The result of an information technology revolution Unity of effort enhances unity of command 17
New Technologies & Organizational Efficiencies Secretary of Defense Corporate Fellows • Lower costs through greater efficiencies – – – Employ matrix organizational design whenever appropriate Semantic integration of data Seek operating commonalities l l Universal CAC Cards Common e-mail addresses for server consolidation Electronic medical records Electronic service records 18
Risk Management Secretary of Defense Corporate Fellows • Integrated Management Approach (IMA) – – Critical to understanding large organization interconnections Enables “Organizational Resilience” • – Quick & effective response to challenges & stress conditions Build structures/processes to ensure open, regular dialogue l l “Silo’d & Fragmented” vs. “Collaborative & Holistic” Ensures capturing the full range and picture of risks • Strategic Risk Framework – – – Know your organization & the interconnections Sustainable business strategy…then consistent risk strategy Identify / Understand the “risk exposure” l l l Investment Bank Risks - Market, Credit, Liquidity, Operational Do. D Acquisition Risks - Cost, Schedule, Performance Operational Risk - exists in all organizations 19
Risk Management Secretary of Defense Corporate Fellows • Do. D Acquisition should include “Operational Risk” – Rapid Action Procurements & Warfighter Requirements l ~1000 robotic vehicles in FY 09 with no Program of Record (POR) – l Warfighter value chain (who, what, when, where) – l COTS, proprietary software disposed of with remaining service life Early Memorandum of Agreement at Defense Acquisition Boards (DAB) Require structure & processes that ensure “due diligence” – Regardless of threshold/oversight level • Strategic Communication – – Integral to an Integrated Management Approach Public Private Partnerships w/ Combatant Commands (COCOM) l Long-term stabilization requirements – – l Execution of “political, economic and social” strategies Simultaneous military stabilization Strategic value and insight through “Financially” focused PPP’s – – – Sovereign Instability Economic Indicators Illicit Economies 20
Leading Human Talent Secretary of Defense Corporate Fellows • Make the workplace a better business proposition – – – Especially for Civil Service More productive More developmental and educational Aligned with a career path Increased emphasis on recruiting at universities Balanced hires between from within and new accessions • Increase cross agency assignments – Drives unity of effort and collaboration Promote Networking – Provide current/critical skills required for knowledge creation – • Cultural transformation required – Recruit, develop, retain the best l l Target digital natives and specific skill sets Greater diversity in all aspects 21
Leading Human Talent Secretary of Defense Corporate Fellows • Develop more “functional experts”; fewer “generalists” – – Cannot outsource our brains to contractors Focus on core competencies • Increase organizational effectiveness education – – – Relationship Building Change Management Strategic Communication • Implement 360 o Peer reviews – Facilitates increased leadership effectiveness 22
Agenda Secretary of Defense Corporate Fellows • Program Overview • Industry Trends • Recommendations for Do. D • Further Discussion / Q&A • Individual Corporate Experiences (FYI) 23
Agenda Secretary of Defense Corporate Fellows • Program Overview • Industry Trends • Recommendations for Do. D • Further Discussion / Q&A • Individual Corporate Experiences (FYI) 24
i. Robot Secretary of Defense Corporate Fellows • Pioneering Robot Developer and Manufacturer – – – Revenues: $308 M in 2008 ( 45% Govt, 55% Commercial) Net Income: $75 K Employees: 400 • Strategy – Build cool stuff, deliver great products, make money, have fun, change the world • Key advantages – – Innovative design/Intellectual Property Software based autonomy • Assignment – Simulation Integration 25
i. Robot Observations Secretary of Defense Corporate Fellows • Government acquisition strategy’s impact on cost – Commercial off the Shelf (COTS) l – – Protracted purchase strategies increases costs up to 40% COTS item purchases through LSI increases costs about 12% Future Combat System (FCS) Legacy • Cost of doing business with the Government – – Compliance costs: $30 M Lead System Integrator (LSI) Model • Defense industry is starving for user feedback – – General Dynamics’s EDGE Centers Development of routine feedback systems 26
Do. D Recommendations Secretary of Defense Corporate Fellows • Government procurement strategy’s impact on cost – Purchase COTS items direct from the manufacturer Reduce procurement timelines as much as possible – Establish a Program Manager (PM) for Robotics – • Cost of doing business with the Government – Lead System Integration Model-what is the future? l Focus on reduced overhead l Large government civilian backbone – Stratified requirements – Small Business Assistance • Defense industry needs feedback – – More efficient transition from established need to requirement Provide a direct link to equipment After Action Reports (AAR) and lessons learned 27
Accenture Secretary of Defense Corporate Fellows • Global Business Consulting – – Management Consulting Systems integration services Business process outsourcing Revenues: $21. 6 B in 2008 l – – 9% Growth Net Income: $1. 6 B Employees: 177, 000 world-wide • Strategy – Helping clients achieve high performance through world-class consulting, outsourcing, and technology • Key advantage – People and one global network • Assignment – National Security Services – State Department, Health Care, Diversity & Integration 28
Accenture Observations Secretary of Defense Corporate Fellows • Technology causing greater decentralization • m(obile) is the new “e” for business – – Hand held is the interface to everything…platform consolidation Penetration far exceeds that of computers • Data and decisions – – Need for normalization, transparency, and integration of data Semantic integration key to decision support tools • Convergence – – – Communication, collaboration, communities, content Distributed knowledge…creation through collaboration From need to know to good to know…increased awareness 29
Do. D Recommendations Secretary of Defense Corporate Fellows • Find the “sweet spot” along organizational continuum – Maginot Line not the answer • “m” is the new “e” – Provide intelligence anytime, anywhere • Data and decisions – Joint Inter-agency Task Force (JIATF) a step on the right direction l – Still short of a US Intelligence Community (USIC) solution Silos perpetuate intelligence failures • Comms, collaboration, communities, content convergence – – Cultural transformation required Recruit, develop, retain the best people 30
NCR Secretary of Defense Corporate Fellows • Global Point of Sale Equipment Developer/Manufacturer – – – ATMs, Self-service check-out scanners, check-in kiosks Document Imaging Revenues: $5. 32 B in 2008 (33. 6% US, 66. 4% ROW) l – – 6. 94% Growth Net Income: $228 M in 2008 Employees: 22, 400 (40% US, 60 % ROW) • Strategy – Lead how the world connects, interacts, transacts with business. • Key advantage – Technology leader w/ established “local level” global footprint/network • Assignment – Industry Solutions and Global Government Operations 31
NCR Observations Secretary of Defense Corporate Fellows • Disruptive innovation in mobile technologies – – Modifying human behavior and demands Social networking and mobile devices l – – Pervasive market penetration changing business models Customer to Business (C to B) is new way of doing business Driven by consumer presence and preferences • Converging multi-channel options – – – Any time, anywhere, any way Force multipliers for business Empowering consumers • Augmented reality – Mobile device and connectivity enables instant feedback 32
Do. D Recommendations Secretary of Defense Corporate Fellows • Innovation – Customer oriented vs. process oriented R&D and Design • Streamline services – – – Continuous Improvement culture Automate basic Administration and (Electronic) health records, Universal ID methodologies and standards • Connectivity – – Joint Network transformation through universal Common Access Cards Universal billet-coded Do. D directory • Human capital – Deploy effectively and more efficiently, based on talent and timing 33
Du. Pont Secretary of Defense Corporate Fellows • Seven sectors – – Chemicals, materials, energy, electronics, coatings & color, safety & protection, agriculture Revenues: $30 B in 2008 (36% US, 64% ROW) Net Income: $2 B Employees: 57 K world-wide • Vision – – Be the world’s most dynamic science company Create sustainable solutions l Essential to a better, safer, healthier life for people everywhere. • Key advantages – Strong belief in core values and innovative capability • Assignment - Performance Coatings – Professional Development Lead 34
Du. Pont Observations Secretary of Defense Corporate Fellows • Broad portfolio of businesses in unrelated industries – – Global support required Hard to determine core strategy given dispirit businesses • Direct Government acquisition programs not worth the effort – – Overhead too costly and complicated Still interested in work within Government projects l Corian counters in Government office buildings l Private Property Venture (PPV) housing • Limited interface with Do. D – – S&T capabilities not leveraged well against Do. D requirements Need customer feedback from end-users l Better focus for next generation materials • Organizational design – Matrix design model that relies on influence management 35
DOD Recommendations Secretary of Defense Corporate Fellows • Utilize matrix organization for joint interagency ops – – Reduce staff footprints to gain synergies Combine units l l l Multi-national Force Iraq (MNFI) Multi-national Corps Iraq (MNCI) Embassy Team • More leadership training in professional development • Improve industry and government communication – Need for feedback: l l – Provide a direct link to equipment After Action Reports (AAR) Lessons learned Reach out more to industry/academia to solve tech issues l More than just utilizing defense and government labs 36
General Dynamics Secretary of Defense Corporate Fellows • Major US Defense Contractor and services provider – Revenues: $29. 3 B in 2008 l l l – – Land/amphibious Combat Systems Shipbuilding and Marine Systems Business-jet Aircraft and Services Information Systems 7. 56% Growth Net Income: $2. 46 B in 2008 Employees: approx. 92, 300 • Strategy – – Lead developer of sophisticated defense systems for US and allies Set the world standard in business jets. • Key advantage – Diverse product/technology portfolio • Assignment – C 4 Systems – Strategy and Business Development in three different business units 37
General Dynamics Observations Secretary of Defense Corporate Fellows • Flat organizational structure – – Communication across business units critical for “jointness” Business units own IR&D $ and business pursuit decisions • Incredible technical/engineering expertise – – Concerned about acquiring/keeping technical talent Well-articulated, precise requirements critical l Engineers build what they think is best without guidance • Acquisition process is a maze – – – Industry desperate for operator input Do. D timelines/budgets in constant flux Technology cycle is much faster than procurement cycle 38
Do. D Recommendations Secretary of Defense Corporate Fellows • Acquisition – Rethink acquisition career field l l l – – Who should be an Acquisition Professional (AP)? Necessary Acquisition and Program Manager (PM) training What are the right roles for military and civilian personnel? Operator inputs early, interface with engineers critical Review all Do. D Labs for effectiveness, charter, operator input • Unmanned Aerial Systems (UAS) development – Develop joint/common platforms and payloads l NOW, before it’s too late 39
Caterpillar Secretary of Defense Corporate Fellows • World's largest heavy equipment manufacturer – – – – Construction and mining equipment Diesel and natural gas engines Industrial gas turbines. Revenues: $51 B in 2008 (34% US; 66% ROW) Net Income: $3. 52 B Employees: 97 K 500 locations in 50 countries • Key to Success – – Vision 2020: Be the global leader in customer value Worldwide Code of Conduct: Values based culture • Assignments – – Motor Grader Product Group Caterpillar Logistics Services 40
Caterpillar Observations Secretary of Defense Corporate Fellows • Organizational design – – – Small Executive Group Matrixed model that relies on influence management Autonomous Business Units – VPs serve as CEOs • Human Capital – – Culture steeped in Midwestern values; grows own leaders Positive work environment • Fosters trust, innovation, teamwork • Rewards individual performance Focus on continuous learning and improvement – CAT U Need more emphasis in leadership & non-engineering topics • Key to success in 2009: Parts & Distribution • Government contracts less than 1% of business 41
Do. D Recommendations Secretary of Defense Corporate Fellows • Leverage industry science and technology capabilities – – CAT’s unmanned mining capabilities UAV convoy ops Include non-traditional defense partners & labs • Benchmark Industry Supply Chain Management / Logistics • Increase use of matrixed organization – Support, joint, interagency operations • Improve Professional development programs – Increase culture and change management education • “Top to Bottom” force structure/assignment review – Ensure getting right people with right skills in the right places 42
European Aeronautic Defense & Space (EADS) Secretary of Defense Corporate Fellows • Global aerospace and defense products and services – Revenues: $62. 7 B in 2008 (75% Civil Sector, 25% Defense) Net Income: $1. 6 B in 2008 Employees: 116, 000 (2, 000+ US) – Major Units: Airbus, CASA, Eurocopter, Astrium – – • Strategy “Leverage financial, technical, programmatic and managerial strengths to bring commitment, capability and value to U. S. customers” l l l Win more programs by integrating U. S. activities, establishing U. S. industrial sites, and acquiring U. S. firms Leverage EADS strength as a foremost producer of commercial aircraft and platforms to expand into U. S. market Perform on U. S. programs with excellence • Key advantage - Global Industry leader – – Commercial Aircraft, Helicopter, Commercial Launch Vehicle Sales Multinational engineering and supply base • Assignment – EADS North America – Armed Aerial Scout Capture Team, Homeland Security Programs 43
EADS Observations Secretary of Defense Corporate Fellows • Competition in Aerospace Industry – – – Mergers have limited the number of aerospace companies More challenging for allied defense and domestic commercial companies to compete in military acquisition process Insufficient competition ultimately hurts the warfighter l Higher cost, limited trade space, lack of innovation • International Traffic in Arms Regulations (ITAR) Impact – Strict ITAR compliance disadvantages programs with foreign content l – Increases development cost and lengthens schedule Limits parts availability l Negative impact on warfighter readiness • Impact of Protests on Acquisition Environment – – Fewer, larger major acquisition programs increases industry pressure Capability gaps and increased cost of final product to warfighter 44
Do. D Recommendations Secretary of Defense Corporate Fellows • Increase Competition – Acquisition reform focus on increased competition l – Reduce barriers to entry Embrace allied industrial base • International Traffic in Arms Regulations (ITAR) – Work with Legislature and Department of State l l More carefully defined “military-related technologies” Criteria for which export licenses are required • Impact of Protests on Acquisition Environment – Work with GAO to refine protest procedures while retaining fairness • Increase Communication with Industry – Hold open forums at beginning of a program’s early phases 45
Deutsche Bank Secretary of Defense Corporate Fellows • Leading Global Investment Bank – – – Corporate and Investment Bank (CIB) Private Clients and Asset Management (PCAM) Corporate Investments (CI) Revenues: € 13, 490 in 2008 Net Income: € 3, 896 in 2008 Employees: 78, 530 in 72 countries • Strategy 2009 - 2011 – – – Be a leading global corporate and investment bank Private client franchise with undisputed leadership in its home market Strong Asian growth engine • Key advantages – – Strong global leadership, good governance, brand strong Adaptive strategy, resilient business model, performance culture • Assignment Corporate Security & Business Continuity 46
Deutsche Bank Observations Secretary of Defense Corporate Fellows • Quick Return to Profitability – – – Growth & Global Market presence Weakness or complete failure of competitors Core strength in Investment Banking • Strong Performance Based Culture – – Bank’s corporate culture is highly competition-oriented Bankers are ambitious, creative l Always searching for innovative solutions…even in financial crisis • Integrated Approach to Capital & Risk Management – Good capital position to meet future demands (Tier 1 = 11. 7%) l – Retained Earnings, Level 3 Asset Reduction, Risk Weighted Assets (RWA) optimization, Central Counterparty Clearing Integrated Management / Risk Approach (One Bank Ethos) l Good communication & processes across Bank Global Executive Committee (GEC), Capital & Risk Committee, Cross-Risk Review Committee ensure capture of full range of risks l Learning & Development “cross disciple” approach for training Global Risk Managers l 47
Do. D Recommendations Secretary of Defense Corporate Fellows • Acquisition Reform Follow-through with Governance/Organizational Reform – Acquisition/Procurement “Value Chain” Analysis l l – Systems Commands, Program Executive Offices, Program Managers, Product Group Directors and warfighter Across resources such as Do. D labs Leverage Resources Across Program Management Authority/Product Groups l Current organizations structured to execute as individual business units (silo’s) • More Industry / Government / Academia Partnerships – Labs and Centers of Excellence – Closer links to warfighter and Program Managers/Product Group Directors • Leadership / Human Capital Investments in Acquisition Workforce – – Corporate Learning and Development Model (performance based) Corporate Talent Management, Succession Planning (performance based) 48
Apple Secretary of Defense Corporate Fellows • Innovative developer and manufacturer – – – Personal computers, operating systems, applications Portable music/video players, cell phones Revenues: $36. 5 B in 2009 l – – 12% Growth Net Income: $5. 7 B Employees: 34, 300 • Strategy – Provide the best user experience through innovative offerings • Key advantage – they design and develop their own products l Operating systems, hardware, application software, services • Assignment – Global Security Operating systems 49
Apple Observations Secretary of Defense Corporate Fellows • Innovation – – Saying “No” is far more critical than saying “Yes” Obsessed with solving the key problem…not boiling the ocean • Singular focus on the customer – – Make life easy for the end-user & they will be loyal customers Give them everything they want plus more • Engineers are their most treasured asset – They are vital to innovative products & design • Rapid growth created many challenges – – How to retain a “startup” mentality Every day/product could be your last 50
Do. D Recommendations Secretary of Defense Corporate Fellows • Re-think innovation – – It is not just technology…it is a thought process Must have a “laser” focus on strategy & vision • Put the customer first – – Satisfy the end user, NOT the administrators Provide the best service…and competition will disappear • Know who & what we value most – – Are resources (time, talent, treasure) going to these areas? Are Labs/Industry/Academia meeting the customer’s needs? • Keep a startup mentality – – Succeed today…or there may not be a tomorrow Eliminate our most critical weak areas 51
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