Secretary of Defense Executive Fellows End of Year

Secretary of Defense Executive Fellows End of Year Briefing Academic Year 2016 -2017

Agenda Secretary of Defense Executive Fellows Program Overview Driving Change Innovation Big Data Human Capital Summary / Q&A 2

SDEF – The Why Secretary of Defense Executive Fellows • Established by SECDEF as a long-term investment in transforming Do. D forces and capabilities • Opportunity for Do. D to gain access to executive level business practices inside highly successful corporations Strategic Planning Change Management Information Technology Organizational Structures Human Resources Supply Chain • Businesses outside Do. D successful in: ‒ ‒ Adapting to changing global environment Exploiting information revolution Structural reshaping/reorganizing Developing innovative processes • Reforms can generate Defense Budget Savings 3

SDEF – The How Secretary of Defense Executive Fellows • Four or more military officers & civilian employees from each Service - O-5 or O-6, or GS-14 or GS-15 - Flag/general officer or Senior Executive Service potential - Senior Service College credit for Army/Air Force/USMC - Do. D Civilian GS 14/15 Employees beginning AY 17 -18 • Initial group education month - Current political/military issues; leading edge technologies - Meetings with senior Do. D officials, business executives, press, alumni - Tailored Graduate Business school Executive Education • Eleven months at Corporate Sponsors - Each Fellow also visits ~5 other sponsor corporations to learn executive’s strategies, challenges, and best practices across multiple industries • Administrative - USD(P&R) for oversight & supervision 4

SDEF – The Who Secretary of Defense Executive Fellows Lt Col Kevin Mantovani USAF Lt. Col Rory Feely USMC Lt. Col Kirk Spangenberg USMC CDR Steven Thomas USN LTC Zach Miller USA Lt Col Scott Gilloon USANG CAPT Ben Mc. Neal USN Lt Col Lara Morrison USAFR CAPT Hui Pak USN CDR Jason Grabelle USN Col Lance French USAF LTC Kerry George USA Lt. Col Jason Julian USMC CDR Bill Coleman USN COL Ralph Perkins USA 5

SDEF – The Results Secretary of Defense Executive Fellows • Continued demand from Corporate Sponsors - Changing mix of repeat and new sponsors (7 for AY 17 -18) each year - Education 3 • Do. D, Individual officers, Corporate Sponsors - Intra-group experience sharing; fresh perspectives for all parties involved • A cadre of military leaders who: - Understand more than the Profession of Arms - Understand business culture & varied corporate decision making processes - Recognize organizational and operational opportunities - Understand skills required to implement change - Will motivate innovative changes throughout career • Briefings to Senior Do. D civilian / military leaders - DEPSECDEF, VCJCS, Service Secretaries/Chiefs - Deputies for Programs, Budgets, Acquisitions, T&E, Personnel, IT, etc. - Group corporate experience observations and recommendations for Do. D 6

Corporate Sponsors Secretary of Defense Executive Fellows • Prior Years 3 M, ABB Group, Accenture, Agilent Technologies, Alaska Airlines, Amazon, American Management Systems, Amgen, Apple, Autodesk, Boeing, Booz Allen, CACI, Caterpillar, Cisco, Citigroup, CNN, Deutsche Bank, Direc. TV, Du. Pont, Dynamic Aviation, EADS, EMC, Enron, Exxon. Mobil, Fed. Ex, General Dynamics, Georgia Power, Google, Hewlett-Packard, Honeywell, Human Genome Sciences, IBM, Insitu, i. Robot, Intel, JPMorgan Chase, Johnson & Johnson, Lockheed Martin, Loral, Mc. Afee, Mc. Kinsey, Mc. Donnell Douglas, Merck, Microsoft, Mobil, Morgan Stanley, Netscape, NCR, Norfolk Southern, Northrop Grumman, Oracle, Pfizer, Pratt & Whitney, Pricewaterhouse. Coopers, Raytheon, Salesforce. com, SAP, SRI/Sarnoff Labs, Sears, Shell Oil, Sikorsky, Space. X, SRA International, Sun Microsystems, Symbol Technologies, Textron, Union Pacific, United Technologies, Vertex Aerospace • Next AY (2017 -2018) Alaska Airlines, Apple, Arizona Public Services, AT&T, Biogen, Black. Rock, Bloomberg, Booz Allen, CVS Health, Dell, Deloitte, Fed. Ex, General Dynamics, Georgia Power, Lockheed Martin, Norfolk Southern, Oracle, Shell Oil, SRI International 7

New Website for Fellows Secretary of Defense Executive Fellows • Powerful new website created by AY 16 -17 Fellows - Collaborate and communicate throughout Fellowship year - Share lessons, observations, insights - http: //www. defensefellows. org/ 8

Agenda Secretary of Defense Executive Fellows Program Overview Driving Change Innovation Big Data Human Capital Summary / Q&A 9

Driving Change Observations Secretary of Defense Executive Fellows • Every corporate sponsor had a history of successfully driving change - Incremental evolutions or transformative reinvention • Industry and Do. D take on change for the same reasons - GAIN AND MAINTAIN A COMPETITIVE ADVANTAGE TO SURVIVE • Industry and Do. D share forces which drive change and transformation - Regulatory pressure - Changing operating environments - Exploiting or countering new technology - Investor/financial imperatives Your success in life isn’t based on your ability to simply change. It is based on your ability to change faster than your competition, customers and business. - Mark Sanborn Entrepreneur & author 10

Driving Change Take-Aways Secretary of Defense Executive Fellows • Strong Corporate Leadership - Realized the need for change and a champion who is passionate - Developed a vision/plan - Relentlessly pursued it with a “maniacal focus” • Leadership remained disciplined and focused on the task - Prioritized and stuck to priorities - Avoided/offloaded distractions of non-value added tasks, issues, people - Used a dedicated Change Manager - Made intentional, irreversible decisions (burned the ships) • Enablers to driving successful change - Innovation embraced - Big Data leveraged - The War for Human Capital waged The challenge is strategic execution—turning the vision into tangible actions in the midst of the tactical routine. - Henry Chang 3 M VP, Business Development 11

Driving Change Examples Secretary of Defense Executive Fellows Autodesk’s move to the cloud and subscription based software licenses “Our company is operating well today, but we think we can make it cleaner and more accountable. So we are creating a new company, called Alphabet. I am really excited to be running Alphabet as CEO with help from my capable partner, Sergey, as President. ” - Larry Page 3 M: Business Transformation that will take 10 years with a new Enterprise Resource Planning System: - 1/2 Bn $ in Working Capital Savings - 1/2 Bn $ in Investment on P&L - Multiple legacy systems to single instance of SAP globally - ”Burn the Ships!” Leveraging Data / Analytics, Machine Learning & Artificial Intelligence to improve decision making and scale highly customizable financial advice 12

Agenda Secretary of Defense Executive Fellows Program Overview Driving Change Innovation Big Data Human Capital Summary / Q&A 13

Innovation Observations Secretary of Defense Executive Fellows • Big “I” vs. little “i” - Most companies had programs to drive incremental/evolutionary “i”nnovation • Included operating efficiencies, such as Lean and 6 -Sigma - More difficult to develop breakthrough…revolutionary…radical “I”nnovations • PC, i. Phone, Amazon marketplace, Uber - Innovation occurs most often when… • Survival is at stake • Culture encourages risk • Culture of the organization determines likelihood of innovation - Not a department or POC • A by-product of culture/environment - Bureaucracy yields a “Frozen middle” • Both are antibodies to innovation - Company culture/leadership must celebrate failure and accept risk • “Diversity of Thought” a secret ingredient for innovative teams - Results are divergent ideas to solve any problem - Team leaders must seek members with radically different thoughts (not like us) 14

Innovation Take-Aways Secretary of Defense Executive Fellows • Timing and implementation matters - Don’t need to be the first - New technology requires rapid and agile implementation • Innovative companies set innovative conditions - Success and failure celebrated - Employees encouraged to innovate on their own • Time away from current projects to work on new ideas permitted • Company resources allocated • Leadership is expertly managing simultaneous transitions - Business model - from licenses to Software as a Service - Applications - from desktop software to cloud services - Product development - from annual releases to frequent updates We are continually faced with great opportunities which are brilliantly disguised as unsolvable problems. - Margaret Mead Cultural Anthropologist 15

Innovation Examples Secretary of Defense Executive Fellows Amgen’s Full Potential Program drives “Nex. Gen Workplace” innovation Union Pacific’s Innovation Station crowd sources ideas by “campaign” Microsoft Hololens a “mixed reality” device + cloud network Mission Planning Acft Maintenance Training Co. P Autodesk & Pier 9 Studio driving Breakthrough Innovations 16

Agenda Secretary of Defense Executive Fellows Program Overview Driving Change Innovation Big Data Human Capital Summary / Q&A 17

Big Data Observations Secretary of Defense Executive Fellows • Why is Big Data so Important? - “Data is the new Oil” • Like oil years ago, it is untapped and excessive • Needs to be refined and formatted into useful products - Making a significant impact to the bottom line across all industries - Companies not afraid to pay for innovation • Purchase tools required for success - Useful if the company/organization has the ability to analyze/make decisions • Data Analytics and Artificial Intelligence - Makes informed decisions that result in better/measurable outcomes • More accurate • Faster • Less man power intensive - Analytics isn’t an IT problem • A business opportunity • Analytics strategy needs to be an enabler to business strategy - The real question is: What can machines do and what can people do? • Not about man vs. machine • Need to combine the best of both to achieve better outcomes 18

Big Data Take-Aways Secretary of Defense Executive Fellows • Successful use of data starts with the business need/issue - Not “what can this data tell me” - Data Analytics provides fact-based insights - Supports decisions and execution of the overall business strategy • Big Data and Artificial Intelligence are also changing - Requires managing a cultural shift from top down • Driving towards an “Intelligent Organization” - A little bit of data in the hands of many is better than a lot of data in a few - Integrating data from multiple sources maximizes insight potential • Can provide a full spectrum of powerful insight • Ranges from simple metrics to complex predictive analytics Data as a strategic asset needs to be managed different then it is now. - Eric Schmidt Alphabet Executive Chairman 19

Big Data Examples Secretary of Defense Executive Fellows Exxon. Mobil Data Center of Excellence Machine Learning used to enhance Cyber Security of Microsoft products and Networks Morgan Stanley initiative to use AI Amgen’s use of Data Analytics to identify genetic variations associated with human diseases. 20

Agenda Secretary of Defense Executive Fellows Program Overview Driving Change Innovation Big Data Human Capital Summary / Q&A 21

Human Capital Observations Secretary of Defense Executive Fellows • Hiring and career paths - Strategic hiring matters; training alone will not build creative/critical thinkers - Mature firms have equipped themselves to win the recruiting war - People Analytics (Big Data) now drives the recruit/hire process • Requires modern, innovative tools • Leader development and retention - Major investments in development at all echelons of leadership - Home-grown leaders and diverse career paths in/out of industry highly valued - “People First” trend • Talent shortage driving employee engagement initiatives • Spectrum of incentives for recruiting & retention tailored to employee preferences • Modernizing critical for mission success - Companies modernizing hardware/software and policies from the top-down • Human Resources, Diversity, Inclusiveness, etc. - Engagement levels tracked in real time using innovative tools and techniques • Leaders use innovation to broadly communicate the mission • Used to keep one-on-one tone with subordinates while geo-separated 22

Human Capital Take-Aways Secretary of Defense Executive Fellows • Hiring and career paths - Investment required in order to become front runner in the War for Talent - Apply People Analytics to recruiting to raise quality and diversity of accessions - Increase permeability of Do. D civ/mil ranks; allow for experience outside Do. D • Leader development and retention - Tailor development opportunities and incentives to reward performance - Move away from “loyalty-over-competence” people decisions - Accelerate development of high-performing leaders • Force modernization - Update (data analytics) suite of tools for tracking and assessing the total force - Employee experience matters; give employees a voice • Help to shape and increase their contributions We must be strategically agile in how we conceptualize future capability needs, how we leverage game-changing technologies, prototyping, and experimentation, and how we recruit and develop our people. - General Dave Goldfein Chief of Staff, United States Air Force 23

Human Capital Examples Secretary of Defense Executive Fellows The War for Talent is Real! 24

Agenda Secretary of Defense Executive Fellows Program Overview Driving Change Innovation Big Data Human Capital Summary / Q&A 25

Summary of Take-Aways Secretary of Defense Executive Fellows • Driving Change - Strong leadership - Remaining disciplined and focused on the task - Accepting unsuccessful attempts as lessons learned; not as failure • An opportunity to learn and improve • Innovation - Big “I” vs. Little “i” – breakthrough vs. incremental - Culture of an organization determines likelihood of innovation - “Diversity of Thought” is the secret ingredient of innovative teams • Big Data - Data Analytics being used in support of an overall business strategy - Embracing Data Analytics and Artificial Intelligence requires a cultural shift - Drive towards an “Intelligent Organization” • Human Capital - Use People Analytics to improve accessions; allow career path permeability - Reward performance and accelerate leader development and retention - Use Data Analytics to asses and shape force modernization 26