SECDEF Corporate Fellows Program Final Report of the Secretary of Defense Corporate Fellows Program 2001 - 2002

SECDEF Corporate Fellows Program

Final Report of the

Secretary of DefenseCorporate Fellows

Program2001 - 2002

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2001 - 2002 Fellows2001 - 2002 Fellows

CAPT Natalie Young-Aranita Cisco Systems, Inc. San Jose, CA

Col David Ziegler 3M Company St. Paul, MN

LTC June Sellers Merck & Company, Inc. Whitehouse Station, NJ

LtCol Clyde Woltman United Technologies Hartford, CT

LTC Bob Stanley Sears, Roebuck & Company Hoffman Estates, IL

Lt Col Linda Medler Oracle Corporation Reston, VA

CDR Joe Beadles AMS, Inc. Fairfax, VA

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AgendaAgenda

Background

Common Observations/Recommendations

Individual Experiences (time permitting)

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SDCFP BackgroundSDCFP 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

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SDCFP OrganizationSDCFP 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

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SDCFP SponsorsSDCFP Sponsors

01 - Prior– ABB, Accenture, Agilent Technologies, AMS, Cisco,

DirecTV, Enron, FedEx, Hewlett-Packard, Human Genome Sciences, Lockheed Martin, Loral, McKinsey & Co., McDonnell Douglas, Microsoft, Mobil, Netscape, Oracle, Northrop Grumman, PricewaterhouseCoopers, Raytheon, Sarnoff, Sears, Southern Company, Sun Microsystems

01- 02 – AMS, Cisco, Merck, Oracle, United Technologies, 3M,

Sears

02 – 03– Boeing, FedEx, Pfizer, PricewaterhouseCoopers, Raytheon

Aerospace, Southern Company, Sun Microsystems

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SDCFP ResultsSDCFP 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

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SDCFP ProductsSDCFP 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

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AgendaAgenda

Background



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Two Different Cultures . . .Two Different Cultures . . .

Corporate America

Market-centric “war” footing

“Bottom Line” urgency drives

change across corporation

Ruthless advocates for business efficiency & the customer

Spontaneous, continuously evolving technology base

Peacetime DOD

Service-centric OT&E footing

“Ambiguous Future” restrains rapid change across Services

Moral advocates for mission effectiveness & the warrior

Structured technology development, change by blocks

. . . With Best Practices to Share

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Areas of InterestAreas of Interest

Organizational Agility– Transformational Culture– Collaborative Teaming– The Power of Change Management

Information Technology– Exploiting the Web– IT Role in Organizational Success

Business Processes– Leveraging Size for Spend– Outsourcing– Supply Chain Management– Organizing for e-Business Transformation

Human Capital– Talent and Performance Management– Efficient Employee/Customer Support

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Organizational AgilityOrganizational AgilityTransformational CultureTransformational Culture

Corporate America uses culture to align the work force– “Change” and “continuous improvement” articulated as the norm– Individual performance plans linked to efficiency initiatives– Internal and external communications foster “buy-in”

DoD should:– Develop & communicate unified vision, mission, and goals

Develop in coordination with Service & Agency Heads Widely disseminate through all command levels Reinforce at every leadership contact with military/civilian workers

– Identify and leverage ops/business best practices across DoD Form ad hoc teams to identify and benchmark Develop and submit process changes

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Organizational AgilityOrganizational AgilityTransformational Culture (Cont)Transformational Culture (Cont)

DoD should:– Reward performance that leads to efficiency

Tie pay/promotions/awards to specific accomplishments TSP matching Funds and/or U.S. Savings Bonds

Permit organizations to recoup dollars saved for future use

– “Brand” DoD as an attractive industry partner Allow fair (market) profit that exceeds “hurdle rate” Share Risk--especially R&D Streamline bid/contract processes Adopt industry standards more aggressively

Financial Management Auditing Contracting

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Organizational AgilityOrganizational AgilityCollaborative TeamingCollaborative Teaming

Corporations balance power of teams with unity of effort– Ad hoc teams spontaneously collaborate at all levels– Teams increasingly extend outside of corporation

DoD should:– Encourage cross-Service/Agency relationships to tackle issues

Planning, Operations, Procurement Foster greater tolerance for “out of chain” communications Reward success

– Communicate clear “guide stars” to align teams with vision– Develop network infrastructure to link teams and data sources– Introduce shared change management disciplines

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Organizational AgilityOrganizational AgilityChange ManagementChange Management

Corporate America driving agility/adaptability through formal change disciplines– Not just old initiatives with new face (i.e. TQM)– Common language and standardized tools

DoD should:– Introduce a shared, formal change management discipline

Six Sigma or equivalent Dedicated, fully resourced effort required Build momentum with low level demonstration effort

Prospective Project - Travel Voucher Program– Include change management in Mil/Civ Professional Education – Champion and incentivize change--measure results

Set organizational level objectives for change Tie individual performance plans/evals to change objectives

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Information Technology (IT)Information Technology (IT)Exploiting the Web

Leading companies run their businesses over the Web– Transformational cost efficiency and mission effectiveness

DoD should:– Use Web for mission transactions, not just information

On-line manuals for “plug & play” weapon systems check out On-line HR for self-help administrative processing Internet auctions for purchase of common supplies and equipment

– Revamp the Virtual Pentagon architecture pilot program Single Pentagon IT infrastructure architecture Begin with e-mail networks, eliminate Service-unique systems Consolidate Pentagon IT under single joint system

– Focus on new “end game” processes enabled by new IT Then buy IT to support

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SECDEF Corporate Fellows ProgramSECDEF Corporate Fellows Program

Information Technology (IT)Information Technology (IT)Exploiting the Web (Cont)

DoD should: – Migrate from client-server architecture

Begin with common e-mail system—easiest to do Re-host interactive software applications

Demand compliance with NSTISSP No. 11 security requirements Develop more reliable, redundant system architecture

Revisit “best of breed” mindset to minimize integration costs Phase out legacy systems as appropriate Incrementally adopt a web-based e-business software suite Pick the “low-hanging fruit”

i-Procurement, e-Travel, web-enabled training/education

– Partner with IT industry to transform into an e-business Institute biometrics, consolidate databases, web-enable apps

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Information Technology (IT)Information Technology (IT) ITIT Role in Organizational SuccessRole in Organizational Success

Corporate America considers IT a “strategic spear”– A business enabler, not just automation support – Commits a significant portion of capital spending

Transforming processes and leveraging technology

DoD should:– Embrace spiral development for IT– Allocate share of “transformation” funding to IT– Make “operations” and “technology” equal requirement drivers

IT a full partner in operations planning - not an afterthought Ensure better processes requiring IT to compete equally for dollars Give CIO a vote on formal requirements panels at all levels

– Articulate IT vision and the road map to enable it Consider impact to IT road map when evaluating new weapons

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Business Processes Business Processes OutsourcingOutsourcing

Corporate America divesting “non core” competencies– Strategic Business Process Outsourcing (BPO) alliances– Redirecting Capital & Resources to Core Businesses

DoD should:– Continue to identify core competencies at all levels– Team with industry to provide non-core services

Personnel administration Travel management Finance and accounting Education program administration Medical services (non-combat) Information Technology

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Business Processes Business Processes Leveraging Size for SpendLeveraging Size for Spend

Corporate America tackling procurement inefficiencies– Only 57% of purchasing optimized (Fortune 100 survey)– Pooling purchases – Partnering with small number of high-performing suppliers

Better support and best price/value

DoD should:– Fully exploit size to leverage spending for goods and services

Establish more DoD-wide contracts Office supplies, CONUS ground transportation, strategic carriers, etc.

Expand/better utilize Defense Logistics Agency’s e-Mall portal

– Transform DLA From manager of supplies to manager of suppliers

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Business Processes Business Processes Leveraging Size for Spend (Cont)Leveraging Size for Spend (Cont)

DoD should:– Centralize purchasing authority

Defense Logistics Agency or Defense Contract Management Agency Non-standard (i.e., Service unique) purchases if fiscally justifiable

– Stand up DoD-wide cost-reduction and procurement teams– Move to a common, DoD-wide electronic procurement engine

Greatly expand on-line auctions DLA (or DCMA)

Operates and maintains Trains Services and Agencies

Services and Agencies use

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Business Processes Business Processes Supply Chain ManagementSupply Chain Management

Corporate America cannot “beat” the competition alone– Strategic Alliances with their best Supply Chain organizations– Supply Chain Management brings better service at lower costs

DoD should:– Adjust mindset from Logistics to Supply Chain Management

Single Point of Contact, e.g., Defense Logistics Agency Exercise aggressive inventory control, reduce redundant inventory Reduce cycle times Partner with key suppliers

– Adopt a Vendor Compliance Program Standards, certification, and training Enforcement mechanism Cost recovery

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Business Processes Business Processes Organizing e-Business TransformationOrganizing e-Business Transformation

Corporations view IT as a strategic advantage– No longer just a service provider– CIO a full business leadership participant– IT identifies opportunities

DoD should:– Designate office responsible for e-Business transformation – Give DoD CIO full authority to:

Set and enforce DoD-wide standards and protocols Approve Service IT programs (including funding) Develop and implement shared services e-business model

– Give Service CIO’s funding authority for all IT program aspects– Strengthen Business Initiatives Council – SDCFP link

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Human Capital Human Capital Talent & Performance ManagementTalent & Performance Management

Corporations raising personnel performance at all levels– Performance management, training and education

DoD should:– Target “satisfactory” low performers for coaching and mentoring– Permit dual tracks for leaders/managers & technical specialists– Craft e-Learning partnerships with civilian education institutions

DoD-wide programs… not service specific Include “Trades” and certification programs

– Address “Life after the military…” to enhance retention/recruiting Web-based DoD-wide placement assistance program

marineforlife.com as model DoD-wide program for non-job related training and certification

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Human Capital Human Capital Efficient Employee/Customer SupportEfficient Employee/Customer Support

Corporations embracing Shared Service Model – Reduce redundancy, gain productivity, improve service

DoD should:– Identify DoD-wide common processes fitting Shared Service Model

Human resources, legal, health care, supply chain, IT, Finance Aggressively web-enable

– Minimize customization of COTS solutions – Develop IT solutions that enable process changes

Gain full benefit, not just smarter typewriters

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AgendaAgenda

Background



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Cisco Observations

Intense organizational culture – CEO/executive leadership/managers proactively build & reinforce– Core values driven into all levels; provides focus for company

Customer focus and corporate citizenship Change Management

– Constant, timely internal communications are key – Climate built for flexibility, acceptance of frequent changes

Leveraging Technology – “Cisco Employee Connection”: Intranet an invaluable resource/tool– Internet business solutions enable huge productivity gains/efficiencies

Employee Performance Management – Frequent, scheduled, individual feedback “1:1s” ingrained in calendars– Aggressive management of bottom 10% performers– Rewards tied to productivity

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3M Observations

Strong “outsider” CEO successfully leading change– Crystal clear goals from former GE executive– Razor-sharp accountability

“Headlong” implementation of Six Sigma driving results– Common language, established channels, measured performance

Ad hoc work groups and teams powered by electronic networking– Seamless data sharing and resource scheduling– Well-developed intranet for business admin and training

Relentless corporate pressure to cut costs of business– “Hold” business & ”Win” cost savings ”Grow” business with savings– DoD: “Hold” budget & “Optimize” mission results within given dollars

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3M Observations

Aggressive initiatives to optimize spend for goods & services– Improved discipline, pool purchases, dual sources, competition– Saved $166M in first year; on target for $500M by 2003

Centrally managed “Corporate Identity Strategy and Standards”– Careful orchestration of vision, key messages, values and alliances– 3M highly respected for its quality, trust and innovation

R&D reticent to cater to Govt consumer without commercial payback – Why TBD:

3M’s commercial culture? Fall out from past work with Government?

Heartwarming response & support for military after 9/11– But generally ill-informed on the most basic military concepts

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Pratt & WhitneyObservations

Corporate Strategy– Clear & simply stated; end state and “bridge” articulated– Competitive advantages understood – Focus on core competencies & outsourcing non-core– Growth aspirations linked to extensions of core competencies– Leverages operational capability to “change the game”

Culture– “Lean Thinking” & “ACE” permeate all facets of company– “Constant change is a way of life”– Willingness to stretch the limit– Merged companies drawn into parent philosophy

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Pratt & WhitneyObservations

Architecture & Processes– Empowerment/accountability at lowest levels– Supply base consolidation– Integrated Program Deployment implementation

Execution– Education– Scorecards– UTC coordinated Leadership Councils– Corporate Analysis

McKinsey & Co. and Dupont– Electronic Work Instructions

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Caterpillar Inc.Observations

Sears Logistics Services Sears Logistics Services Observations

Sears & SLS undergoing significant change– Moving from silos to enterprise-wide approach– Robust change management/leadership program

Business strategy with quantifiable objectives– Customer centric– Improve productivity and returns– Drive profitable growth– Develop diverse high performance team

Global Net Exchange System (GNX) - using the internet for auctions – Purchase retail items for manufacture and resale

Sales Volume in Excess of $240M; more than $40M saved to date– Liquidate liability inventory (increased cost recovery)– Purchase supplies for home office use and remodeling– Partner with Michelin to test collaborative planning and forecasting

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Caterpillar Inc.Observations

Sears Logistics Services Observations

Vendor relations– Adopted industry standards– Electronic Data Interchange (EDI)– Compliance program with standards and charge-backs

Cost recoveries in excess of $40 million Information Technologies

– Wide range of legacy systems Building bridges vice developing new systems

Training– Continuous process– Moving to increased web-based format– Cross training associates - improves company wide perspective

Supply Chain management– Improved efficiencies (especially transportation)– Lower/controlled inventories– Improved cycle times

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ABB GROUP


Oracle Observations

The $1B Savings Story confirmed by Booz-Allen– Eye-watering technology reduced tooth to tail– Efficiency up workforce down operating margins up

Focused to become an e-business – Servers and processes consolidation (not just e-mail)– Business practices and processes standardization

Using proprietary software– Reliance on self-service mentality

Shared services paradigm enhances productivity– e-Travel, HR, education/training, procurement– Self-service is “liberating”

Transformations successful because of leadership– Benevolent Dictator

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AMSAMSObservationsObservations

A company in the midst of transformation– Present business model under review

Loose conglomerate of autonomous business units less successful now

Greater Corporate involvement– New CEO appointed

An “outsider” Focus now more on growth through acquisition

Branding Problem– Corporate image tarnished by high profile law suits

Maintaining a technically competent workforce– Forming strategic partnerships to augment

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AMSAMSObservationsObservations

Increased core markets competition – DoD, Federal, and State business space more attractive – Leveraging experience, customer familiarity to maintain

advantage

“Business Joint”– Company’s strengths & weaknesses recognized

Developing permanent and/or interim partnership to address

Leveraging technology ensures company-wide info access– Common tools for Project Management – Robust “Best Practices” data base – no PM needs to go it alone

Consolidation of Common Services– Business Unit-specific IT/HR/Admin Support removed

Documents

SECDEF Corporate Fellows Program Final Report of the Secretary of Defense Corporate Fellows Program 2001 - 2002