Secretary of Defense Corporate Fellows Final Outbrief Academic Year 2009-2010.

Secretary of Defense Corporate Fellows

Final OutbriefFinal Outbrief

Academic Year 2009-2010


AgendaAgenda

• Program Overview

• Industry Trends

• Recommendations for DOD

• Further Discussion / Q&A

• Individual Corporate Experiences (FYI)

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Fellows and AssignmentsFellows and Assignments

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COL Brian Bedell, USA iRobotBedford, MA

Col David Hicks, USAF General DynamicsScottsdale, AZ

Col Linda Hurry, USAF CaterpillarPeoria, IL

Col James Rector, USMC Deutsche BankLondon, UK

Col (Sel) Bradley Hall, USMC DuPontWilmington, DE

Col (Sel) William Spangenthal, USAF Apple

Cupertino, CA

LTC Ricardo Cristobal, USA AccentureReston, VA

CDR Demetries Grimes, USN NCRNew York, NY

CDR Scott Josselyn, USN EADSArlington, VA


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 BackgroundSDCFP Background

• DoD 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

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SDCFP OrganizationSDCFP Organization

• 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 DoD 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

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SDCFP SponsorsSDCFP Sponsors

• 09 - Prior– 3M, ABB, Accenture, Agilent Technologies, American Management Systems,

Amgen, Boeing, Booz Allen, CACI, Caterpillar, Cisco, CNN, Deutsche Bank, DirecTV, DuPont, Enron, FedEx, General Dynamics, Hewlett-Packard, Honeywell, Human Genome Sciences, IBM, Insitu Group, Johnson & Johnson, Lockheed Martin, Loral, McKinsey & Co., McDonnell Douglas, Merck, Microsoft, Mobil, Netscape, Oracle, Northrop Grumman, Pfizer, Pratt & Whitney, PricewaterhouseCoopers, Raytheon, Sarnoff, Sears, Sikorsky, Southern Company, SRA International, Sun Microsystems, Symbol Technologies, Vertex Aerospace

• 09-10– Accenture, Apple, Caterpillar, Deutsche Bank, EADS, DuPont, General

Dynamics, iRobot, NCR

• 10-11– Amgen, ExxonMobil, Google, IBM, Insitu, Lockheed Martin, McKinsey, Merck,

Microsoft, Pratt & Whitney, SpaceX, SRA International

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SDCFP ResultsSDCFP Results

• Program objectives fulfilled– Education

DoD, Individual officers, Sponsors– More Sponsors than Fellows available– Intra-group experience sharing

Group visits with sponsor CEO’s and senior leadership

• Unique corporate experience– Strong corporate support – Executive/operational level duty mix– Mergers/restructuring

Unexpected challenges, valuable insights

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SDCFP ProductsSDCFP Products

• 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– SecDef/DepSec, VCJCS, Service Secretaries & Chiefs,

20+ other senior uniformed and civilian officials– Business insights relevant to DoD culture/operations– Recommend process/organization changes

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AgendaAgenda


• Industry Trends

• Recommendations for DoD



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Industry TrendsIndustry Trends

• 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

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What Fuels Innovation?What Fuels Innovation?

• The Industry’s best personnel– Functional experts– Blend of artistic & technological talent

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

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What Fuels Innovation?What Fuels Innovation?

• 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

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AgendaAgenda


• Industry Trends


• Discussion / Q&A


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Reinvigorating InnovationReinvigorating Innovation

• Flatten DoD– Re-evaluate organizational design

Eliminate duplication of operational and support staffs – Replace with high performing teams (CONUS & in-theater)

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

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Reinvigorating InnovationReinvigorating Innovation

• Adopt a “Market Driven” R&D investment strategy– Fully fund fewer projects with greater resources for each

Eliminate dead-end research “hobby shops” Develop only systems that can REALISTICALLY be procured

– Develop a CONOPS “business model” for each requirement Absolutely need a business case for the $$ we spend

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New Technologies & Organizational EfficienciesNew Technologies & Organizational Efficiencies

• 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

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

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New Technologies & Organizational EfficienciesNew Technologies & Organizational Efficiencies

• Lower costs through greater efficiencies– Employ matrix organizational design whenever appropriate– Semantic integration of data– Seek operating commonalities

Universal CAC Cards Common e-mail addresses for server consolidation Electronic medical records Electronic service records

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Risk ManagementRisk Management

• 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

“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”

Investment Bank Risks - Market, Credit, Liquidity, Operational DoD Acquisition Risks - Cost, Schedule, Performance Operational Risk - exists in all organizations

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Risk ManagementRisk Management

• DoD Acquisition should include “Operational Risk”– Rapid Action Procurements & Warfighter Requirements

~1000 robotic vehicles in FY09 with no Program of Record (POR)– COTS, proprietary software disposed of with remaining service life

Warfighter value chain (who, what, when, where)– 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)

Long-term stabilization requirements – 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

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Leading Human TalentLeading Human Talent

• 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

Target digital natives and specific skill sets Greater diversity in all aspects

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Leading Human TalentLeading Human Talent

• 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 360o Peer reviews– Facilitates increased leadership effectiveness

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AgendaAgenda


• Industry Trends




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AgendaAgenda


• Industry Trends




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iRobotiRobot

• Pioneering Robot Developer and Manufacturer – Revenues: $308M in 2008 ( 45% Govt, 55% Commercial)– Net Income: $75K– 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

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iRobot ObservationsiRobot Observations

• Government acquisition strategy’s impact on cost– Commercial off the Shelf (COTS)

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: $30M – Lead System Integrator (LSI) Model

• Defense industry is starving for user feedback– General Dynamics’s EDGE Centers– Development of routine feedback systems

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DoD RecommendationsDoD Recommendations

• 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?

Focus on reduced overhead

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 learned27


AccentureAccenture

• Global Business Consulting– Management Consulting– Systems integration services– Business process outsourcing– Revenues: $21.6B in 2008

9% Growth– Net Income: $1.6B– 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

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Accenture ObservationsAccenture Observations

• 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

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• 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

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

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NCRNCR

• Global Point of Sale Equipment Developer/Manufacturer– ATMs, Self-service check-out scanners, check-in kiosks– Document Imaging– Revenues: $5.32B in 2008 (33.6% US, 66.4% ROW)

6.94% Growth

– Net Income: $228M 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

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NCR ObservationsNCR Observations

• Disruptive innovation in mobile technologies– Modifying human behavior and demands– Social networking and mobile devices

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

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• 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 DoD directory

• Human capital– Deploy effectively and more efficiently, based on talent and timing

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DuPontDuPont

• Seven sectors– Chemicals, materials, energy, electronics, coatings & color,

safety & protection, agriculture– Revenues: $30B in 2008 (36% US, 64% ROW)– Net Income: $2B– Employees: 57K world-wide

• Vision– Be the world’s most dynamic science company – Create sustainable solutions

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

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DuPont ObservationsDuPont Observations

• 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

Corian counters in Government office buildings

Private Property Venture (PPV) housing

• Limited interface with DoD – S&T capabilities not leveraged well against DoD requirements– Need customer feedback from end-users

Better focus for next generation materials

• Organizational design– Matrix design model that relies on influence management

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DOD RecommendationsDOD Recommendations

• Utilize matrix organization for joint interagency ops – Reduce staff footprints to gain synergies – Combine units

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: Provide a direct link to equipment After Action Reports (AAR) Lessons learned

– Reach out more to industry/academia to solve tech issues More than just utilizing defense and government labs

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General DynamicsGeneral Dynamics

• Major US Defense Contractor and services provider– Revenues: $29.3B in 2008

Land/amphibious Combat Systems Shipbuilding and Marine Systems Business-jet Aircraft and Services Information Systems 7.56% Growth

– Net Income: $2.46B 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 – C4 Systems– Strategy and Business Development in three different business units

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General Dynamics ObservationsGeneral Dynamics Observations

• 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

Engineers build what they think is best without guidance

• Acquisition process is a maze– Industry desperate for operator input – DoD timelines/budgets in constant flux– Technology cycle is much faster than procurement cycle

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• Acquisition– Rethink acquisition career field

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 DoD Labs for effectiveness, charter, operator input

• Unmanned Aerial Systems (UAS) development– Develop joint/common platforms and payloads

NOW, before it’s too late

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CaterpillarCaterpillar

• World's largest heavy equipment manufacturer– Construction and mining equipment– Diesel and natural gas engines– Industrial gas turbines. – Revenues: $51B in 2008 (34% US; 66% ROW)– Net Income: $3.52B– Employees: 97K– 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 4040


Caterpillar ObservationsCaterpillar Observations

• 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

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• 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

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European Aeronautic Defense & Space (EADS)European Aeronautic Defense & Space (EADS)

• Global aerospace and defense products and services– Revenues: $62.7 B in 2008 (75% Civil Sector, 25% Defense) – Net Income: $1.6B 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” 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

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EADS ObservationsEADS Observations

• 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

Higher cost, limited trade space, lack of innovation

• International Traffic in Arms Regulations (ITAR) Impact– Strict ITAR compliance disadvantages programs with foreign content

Increases development cost and lengthens schedule– Limits parts availability

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

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• Increase Competition– Acquisition reform focus on increased competition

Reduce barriers to entry

– Embrace allied industrial base • International Traffic in Arms Regulations (ITAR)

– Work with Legislature and Department of State 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

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Deutsche BankDeutsche Bank

• 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

• AssignmentCorporate Security & Business Continuity

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Deutsche Bank ObservationsDeutsche Bank Observations

• 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

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%)

Retained Earnings, Level 3 Asset Reduction, Risk Weighted Assets (RWA) optimization, Central Counterparty Clearing

– Integrated Management / Risk Approach (One Bank Ethos) Good communication & processes across Bank

Global Executive Committee (GEC), Capital & Risk Committee, Cross-Risk Review Committee ensure capture of full range of risks Learning & Development “cross disciple” approach for training Global Risk Managers

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• Acquisition Reform Follow-through with Governance/Organizational Reform– Acquisition/Procurement “Value Chain” Analysis

Systems Commands, Program Executive Offices, Program Managers, Product Group Directors and warfighter

Across resources such as DoD labs

– Leverage Resources Across Program Management Authority/Product Groups

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)

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AppleApple

• Innovative developer and manufacturer– Personal computers, operating systems, applications– Portable music/video players, cell phones– Revenues: $36.5B in 2009

12% Growth– Net Income: $5.7B– Employees: 34,300

• Strategy– Provide the best user experience through innovative offerings

• Key advantage – they design and develop their own products Operating systems, hardware, application software, services

• Assignment– Global Security Operating systems

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Apple ObservationsApple Observations

• 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

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• 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

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Secretary of Defense Corporate Fellows Final Outbrief Academic Year 2009-2010.

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