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

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Final Report of the

Secretary of Defense

Corporate Fellows Program

2001 - 2002


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2001 - 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 WoltmanUnited Technologies

    Hartford, CT

  • LTC Bob StanleySears, Roebuck & Company

    Hoffman Estates, IL

  • Lt Col Linda Medler Oracle Corporation

    Reston, VA

  • CDR Joe Beadles AMS, Inc.

    Fairfax, VA


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Agenda

  • Background

  • Common Observations/Recommendations

  • Individual Experiences (time permitting)


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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


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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


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SDCFP 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 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 Products

  • Report and Briefingsdirectlyto 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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Agenda

  • Background

  • Common Observations/Recommendations

  • Individual Experiences (time permitting)


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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

Two Different Cultures . . .

. . . With Best Practices to Share


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Areas 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 AgilityTransformational 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 processchanges


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Organizational AgilityTransformational 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 AgilityCollaborative 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 AgilityChange 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)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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Information Technology (IT)Exploiting the Web (Cont)

SECDEF Corporate Fellows Program

  • 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)ITRole 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 Outsourcing

  • 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 Leveraging 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 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 Supply 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 Organizing 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 Talent & 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 Efficient 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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Agenda

  • Background

  • Common Observations/Recommendations

  • Individual Experiences (time permitting)


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Cisco Observations

SECDEF Corporate Fellows Program

  • 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

SECDEF Corporate Fellows Program

  • 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

SECDEF Corporate Fellows Program

  • 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 & Whitney

Observations

SECDEF Corporate Fellows Program

  • 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 & Whitney

Observations

SECDEF Corporate Fellows Program

  • 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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Sears Logistics Services Observations

Caterpillar Inc.

Observations

SECDEF Corporate Fellows Program

  • 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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Sears Logistics Services Observations

Caterpillar Inc.

Observations

SECDEF Corporate Fellows Program

  • 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

SECDEF Corporate Fellows Program

  • 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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AMSObservations

  • 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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AMSObservations

  • 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


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