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Final Report of the 1995-96 SECDEF Fellows Program

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Final Report of the 1995-96 SECDEF Fellows Program

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    2. 2 These are the officers who will be giving the majority of the brief and the sponsoring companies where they spent most to of the last year. These are the officers who will be giving the majority of the brief and the sponsoring companies where they spent most to of the last year.

    3. 3 Agenda Background Common Observations/Recommendations Individual Experiences (time permitting) (Background slides only when required) Some brief background on the program for those who have never received a brief before. Followed by the most important part, the officer’s recommendations. Individual experiences are an up-date of our mid-term brief and we usually don’t have time to get there.(Background slides only when required) Some brief background on the program for those who have never received a brief before. Followed by the most important part, the officer’s recommendations. Individual experiences are an up-date of our mid-term brief and we usually don’t have time to get there.

    4. 4 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 SECDEF was Secretary Perry, although AF Secretary Jim Roche will tell you that he was the godfather of the program that put the bug in everyone’s ear. Perry’s concern was that career officers didn’t know what they didn’t know. Especially officers who had been operational their whole careers and had very little, if any interaction with the commercial world. While certainly not perfect, the business world was better and faster in adopting new technologies, especially IT, and new organizations and processes. And more open to change. This program differs from previously existing Service Training with Industry programs in several respects: Officers are more senior and the focus is on senior level leadership/management. How the generals and admirals of industry get their companies to adopt new processes and organizations. How they get them to change. Officers are from all branches/operational specialties, not just from the support side. Technology is of interest, but secondary to leadership and change management. SECDEF was Secretary Perry, although AF Secretary Jim Roche will tell you that he was the godfather of the program that put the bug in everyone’s ear. Perry’s concern was that career officers didn’t know what they didn’t know. Especially officers who had been operational their whole careers and had very little, if any interaction with the commercial world. While certainly not perfect, the business world was better and faster in adopting new technologies, especially IT, and new organizations and processes. And more open to change. This program differs from previously existing Service Training with Industry programs in several respects: Officers are more senior and the focus is on senior level leadership/management. How the generals and admirals of industry get their companies to adopt new processes and organizations. How they get them to change. Officers are from all branches/operational specialties, not just from the support side. Technology is of interest, but secondary to leadership and change management.

    5. 5 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 A joint program. Officers are selected by the Services through their Senior Service School/Fellowship selection processes. Provides the right quality cut for officers and at the point in their careers where they can take a year off for education without jeopardizing their operational career. Year long program, but only eleven months because we give them a month of group education before throwing them out into the business world. Staff ride. Pol-mil speakers on the big strategic issues facing DoD. Budget, transformation, threats, etc. Get them to start thinking strategic and not in the operational world that most of them just came from. Briefings by members of Congress and the Defense Press to get another perspective on these issues. Meetings with OSD and Service leaders to receive guidance on what to look for out there. New technologies, such as bio-tech, robotics, IT, IT Security, etc. Again to expand horizons, and start thinking about possibilities. Although strategic level leadership/management is the program’s focus, finding new technological opportunities is an interest. One week mini-MBA by professors from UVA’s Darden Business School. A joint program. Officers are selected by the Services through their Senior Service School/Fellowship selection processes. Provides the right quality cut for officers and at the point in their careers where they can take a year off for education without jeopardizing their operational career. Year long program, but only eleven months because we give them a month of group education before throwing them out into the business world. Staff ride. Pol-mil speakers on the big strategic issues facing DoD. Budget, transformation, threats, etc. Get them to start thinking strategic and not in the operational world that most of them just came from. Briefings by members of Congress and the Defense Press to get another perspective on these issues. Meetings with OSD and Service leaders to receive guidance on what to look for out there. New technologies, such as bio-tech, robotics, IT, IT Security, etc. Again to expand horizons, and start thinking about possibilities. Although strategic level leadership/management is the program’s focus, finding new technological opportunities is an interest. One week mini-MBA by professors from UVA’s Darden Business School.

    6. 6 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 Sponsoring companies where we’ve been before, where we are this year and where we’re going next, beginning this summer. A broad range of business areas, each company a leader in its field. Only one defense contractor per year. Sponsoring companies where we’ve been before, where we are this year and where we’re going next, beginning this summer. A broad range of business areas, each company a leader in its field. Only one defense contractor per year.

    7. 7 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 Education for DoD. Bringing back recommendations for improvements, such as contained in this brief. Education for the officers, to make them better officers. More knowledgeable about all the possibilities out there, able to make better decisions, and to act as agents of change throughout the rest of their careers. And, to be honest, for the rest of their lives even after they leave the military. Education for the sponsors. They really do learn from us, and often surprised by just what. More that just leadership, organization, strategic planning one would expect. Also, at a more basic level, what the military is doing and life as an officer in the military. Our officers are often surprised how clueless they are outside the beltway about the military. Companies like this program. Every sponsor has asked to participate again. Companies are now coming to us. Officers don’t just take notes at high level meeting while they are there. They get their hands dirty with OJT and real responsibilities. The length of the program makes sponsors feel that they are able to really get something out of it too. A real two-way street. In the leading edge companies we go to, observing mergers and restructuring occurs every year. Education for DoD. Bringing back recommendations for improvements, such as contained in this brief. Education for the officers, to make them better officers. More knowledgeable about all the possibilities out there, able to make better decisions, and to act as agents of change throughout the rest of their careers. And, to be honest, for the rest of their lives even after they leave the military. Education for the sponsors. They really do learn from us, and often surprised by just what. More that just leadership, organization, strategic planning one would expect. Also, at a more basic level, what the military is doing and life as an officer in the military. Our officers are often surprised how clueless they are outside the beltway about the military. Companies like this program. Every sponsor has asked to participate again. Companies are now coming to us. Officers don’t just take notes at high level meeting while they are there. They get their hands dirty with OJT and real responsibilities. The length of the program makes sponsors feel that they are able to really get something out of it too. A real two-way street. In the leading edge companies we go to, observing mergers and restructuring occurs every year.

    8. 8 SDCFP 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 The short-term product – today’s briefing. Given to the senior officials of OSD and the Services that are in positions to take the ideas and act on them. Starting this year inputs to the Business Initiatives Council also. We found that the feedback during these briefings provides a lot of education to the briefers as well. The realities of DoD. The problems faced by leaders trying to implement these or similar recommendations. The long term product and, in Mr. Marshall’s view the real benefit of the program. Better officers who will make better decisions throughout the remainder of their careers and act as agents of change. The short-term product – today’s briefing. Given to the senior officials of OSD and the Services that are in positions to take the ideas and act on them. Starting this year inputs to the Business Initiatives Council also. We found that the feedback during these briefings provides a lot of education to the briefers as well. The realities of DoD. The problems faced by leaders trying to implement these or similar recommendations. The long term product and, in Mr. Marshall’s view the real benefit of the program. Better officers who will make better decisions throughout the remainder of their careers and act as agents of change.

    9. 9 Agenda Background Common Observations/Recommendations Individual Experiences (time permitting)

    10. 10 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 Before introducing our specific observations and recommendations, we acknowledge up front that Corporate America and the DoD are different. What works in the business world, may not work the same way in defense circles. The DoD may have to tailor corporate “best practices” for their particular environment. Corporations are on “war” footing to gain market share and beat competitors every day. And they get instant and continuous feedback on the bottom line in the way of profits, costs, cash flow and market share. That feedback engenders a sense of urgency in corporate life that, in turn, fosters bold action in the way of cost control & customer service. Technologies are implemented spontaneously to gain productivity resulting in a very fluid technology baseline. In contrast, the peacetime DoD operates in an environment that is less clear and discernable. Without a hot war in progress, the Services organize, train & equip to the core competencies they believe will best serve the nation in a future conflict--a conflict, however, that is ambiguous and calls for a certain amount of worst-case analyses. As the British historian, Michael Howard said, the military’s job isn’t to get the next war exactly right, it’s to not get it too badly wrong. This leads the DoD on a moral quest for more mission capability and prudent force protection at the tip of the spear--often at the expense of cost-efficiency or technology in the tail of the spear. Technology development is conservative and methodical--evolving by block change. So is the rest of this briefing a waste of time? No. Despite its different culture, Corporate America employs best practices that could and should find their way into a DoD that share much in common in the way of organization, processes, people and technology. Before introducing our specific observations and recommendations, we acknowledge up front that Corporate America and the DoD are different. What works in the business world, may not work the same way in defense circles. The DoD may have to tailor corporate “best practices” for their particular environment. Corporations are on “war” footing to gain market share and beat competitors every day. And they get instant and continuous feedback on the bottom line in the way of profits, costs, cash flow and market share. That feedback engenders a sense of urgency in corporate life that, in turn, fosters bold action in the way of cost control & customer service. Technologies are implemented spontaneously to gain productivity resulting in a very fluid technology baseline. In contrast, the peacetime DoD operates in an environment that is less clear and discernable. Without a hot war in progress, the Services organize, train & equip to the core competencies they believe will best serve the nation in a future conflict--a conflict, however, that is ambiguous and calls for a certain amount of worst-case analyses. As the British historian, Michael Howard said, the military’s job isn’t to get the next war exactly right, it’s to not get it too badly wrong. This leads the DoD on a moral quest for more mission capability and prudent force protection at the tip of the spear--often at the expense of cost-efficiency or technology in the tail of the spear. Technology development is conservative and methodical--evolving by block change. So is the rest of this briefing a waste of time? No. Despite its different culture, Corporate America employs best practices that could and should find their way into a DoD that share much in common in the way of organization, processes, people and technology.

    11. 11 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 Our charter was to recommend corporate practices that the DoD could adopt to become more efficient and effective. We did not critique our corporations' shortcomings or consider DoD practices that would improve corporate operations. Our recommendations and observations loosely fall into four areas of interest: First, we’ll talk about organizational agility and how the DoD might capitalize on Corporate America’s approach to fostering and managing organizational-wide change. Second, we’ll tackle the subject of information technology and how the DoD can exploit IT with the successes that continue to improve productivity at corporations. Third, we’ll consider how Corporate America is honing its strategies for business processes that are important to the defense community--processes related to procurement, logistics and information technologies. And, finally, we’ll discuss people, and what the business world offers in the way of performance management and member services. Our charter was to recommend corporate practices that the DoD could adopt to become more efficient and effective. We did not critique our corporations' shortcomings or consider DoD practices that would improve corporate operations. Our recommendations and observations loosely fall into four areas of interest: First, we’ll talk about organizational agility and how the DoD might capitalize on Corporate America’s approach to fostering and managing organizational-wide change. Second, we’ll tackle the subject of information technology and how the DoD can exploit IT with the successes that continue to improve productivity at corporations. Third, we’ll consider how Corporate America is honing its strategies for business processes that are important to the defense community--processes related to procurement, logistics and information technologies. And, finally, we’ll discuss people, and what the business world offers in the way of performance management and member services.

    12. 12 Organizational Agility Transformational 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 As COL Ziegler just said - there are differences between the cultures of Corporate America and DoD, mostly because we face different challenges. We also saw differences in culture between our companies but - in general - the most successful companies have a culture that embraces change. Communication seemed to be the common theme in building a transformational culture among all of our companies - they decided on a direction, and then pushed the decision down through the ranks internally and to key stakeholders, externally. This aggressive communication also seemed to be a precursor to successful change management - helping the employees understand and embrace the proposed change. To date, we have not seen or heard DoD articulate a clear vision, goals and objectives. Though external communications do occur - as with Sec Rumsfeld’s statement on efficiency in the department last September - that type of communication does not travel very deeply internally. Our recommendation is for DoD to really push these communications to the lowest levels of each agency and service - to ensure people understand it, buy into it, and become good advocates for it. Our recommendation on best practices relates to what we believe is a very deeply rooted culture of each Service or Agency for itself - a culture which promotes their efforts to be the best they can be. On the flip side this culture is not one that encourages people at any level to look to what a sister Service or Agency is doing to institute a program or to gain efficiency in an area and leverage that as a best practice. The Business Initiatives Council is beginning to change that attitude by enabling cross-talk on business processes but we’re still missing a lot of opportunities to leverage size and reduce redundancy across the force. On the operational side - each Service captures lessons learned but these databases are not shared enough across the Services - it could be a matter of advertising their availability. [For instance, each Service has or is developing an e-learning capability for its people either internally or through outsourcing. When the e-learning opportunities offered are generic (I.e., not Service-specific but applicable to any mil or civ employee) why don’t we have one program that is used across DoD? Smartforce.com is a good example of this.] So we recommend that DoD form an ad hoc team to expand the scope of leveraging best practices beyond business processes into the operational and quality of life worlds. As COL Ziegler just said - there are differences between the cultures of Corporate America and DoD, mostly because we face different challenges. We also saw differences in culture between our companies but - in general - the most successful companies have a culture that embraces change. Communication seemed to be the common theme in building a transformational culture among all of our companies - they decided on a direction, and then pushed the decision down through the ranks internally and to key stakeholders, externally. This aggressive communication also seemed to be a precursor to successful change management - helping the employees understand and embrace the proposed change. To date, we have not seen or heard DoD articulate a clear vision, goals and objectives. Though external communications do occur - as with Sec Rumsfeld’s statement on efficiency in the department last September - that type of communication does not travel very deeply internally. Our recommendation is for DoD to really push these communications to the lowest levels of each agency and service - to ensure people understand it, buy into it, and become good advocates for it. Our recommendation on best practices relates to what we believe is a very deeply rooted culture of each Service or Agency for itself - a culture which promotes their efforts to be the best they can be. On the flip side this culture is not one that encourages people at any level to look to what a sister Service or Agency is doing to institute a program or to gain efficiency in an area and leverage that as a best practice. The Business Initiatives Council is beginning to change that attitude by enabling cross-talk on business processes but we’re still missing a lot of opportunities to leverage size and reduce redundancy across the force. On the operational side - each Service captures lessons learned but these databases are not shared enough across the Services - it could be a matter of advertising their availability. [For instance, each Service has or is developing an e-learning capability for its people either internally or through outsourcing. When the e-learning opportunities offered are generic (I.e., not Service-specific but applicable to any mil or civ employee) why don’t we have one program that is used across DoD? Smartforce.com is a good example of this.] So we recommend that DoD form an ad hoc team to expand the scope of leveraging best practices beyond business processes into the operational and quality of life worlds.

    13. 13 Organizational Agility 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 Of course, we’re all human - so being a good advocate for change is easier when you are awarded appropriately. We have awards (military and civilian) built into our systems - we need to publicize evidence that people and units who are bringing about change in the department are being awarded for it. The only place that info ever gets published seems to be in very specific (and technical) trade-type publications. Push an ad campaign that the general population can see and appreciate. Giving dollars saved back to the organization that saved them is also critical to demonstrating our resolve to change. “Branding” in the next bullet refers to industry’s view of DoD as a good business partner and not to the branding that each Service uses successfully to put people in uniform. In general, DoD is not seen as an attractive partner for industry, small or large. Some of that is due to intellectual property rights -the perception that all contracts are written in favor of the government - making R&D too risky an investment. Some of it is due to the mounds of paperwork and red tape that companies have to cut through to submit a RFP and navigate through the contract award process - big investment in time, energy and $ just to do the RFP with no guarantee of a contract. Sharing the R&D risk and streamlining processes will help a lot there. Of course, we’re all human - so being a good advocate for change is easier when you are awarded appropriately. We have awards (military and civilian) built into our systems - we need to publicize evidence that people and units who are bringing about change in the department are being awarded for it. The only place that info ever gets published seems to be in very specific (and technical) trade-type publications. Push an ad campaign that the general population can see and appreciate. Giving dollars saved back to the organization that saved them is also critical to demonstrating our resolve to change. “Branding” in the next bullet refers to industry’s view of DoD as a good business partner and not to the branding that each Service uses successfully to put people in uniform. In general, DoD is not seen as an attractive partner for industry, small or large. Some of that is due to intellectual property rights -the perception that all contracts are written in favor of the government - making R&D too risky an investment. Some of it is due to the mounds of paperwork and red tape that companies have to cut through to submit a RFP and navigate through the contract award process - big investment in time, energy and $ just to do the RFP with no guarantee of a contract. Sharing the R&D risk and streamlining processes will help a lot there.

    14. 14 Organizational Agility Collaborative 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 In general, the military pushes issues up parallel chains until such point that the chains intersect at a formal decision maker. Sometimes we try to speed up this process by chartering study groups, commissions and the like. Day-to-day, however, Corporate America tackles issues and problems at levels below traditional decision points. Teams with members from across the corporate (and often outside the corporation) collaborate in what GE’s former CEO termed the “boundary-less corporation.” Having witnessed corporate successes here, we believe the DoD should encourage the same in its planning, operations and procurement. We have to get more comfortable with out-of-chain collaboration. We need to create a climate where DoD members stop shunning hard issues with a simple “that’s above my pay grade.” Collaborative teaming in the DoD at lower levels would engage the issue experts, speed problem resolution, break down stove pipes, and build momentum through successes. As in Corporate America, DoD leaders would have to clearly establish measurable guide stars to ensure unity of effort across the DoD. They would also have to invest in an area key to the success of corporate collaboration--networking infrastructure. The DoD can’t fully unlock the power of teams, until those teams have robust architectures to communicate and share data. Better yet, the DoD could also introduce a common approach to pursuing change anywhere in the DoD--the subject of our next slide. In general, the military pushes issues up parallel chains until such point that the chains intersect at a formal decision maker. Sometimes we try to speed up this process by chartering study groups, commissions and the like. Day-to-day, however, Corporate America tackles issues and problems at levels below traditional decision points. Teams with members from across the corporate (and often outside the corporation) collaborate in what GE’s former CEO termed the “boundary-less corporation.” Having witnessed corporate successes here, we believe the DoD should encourage the same in its planning, operations and procurement. We have to get more comfortable with out-of-chain collaboration. We need to create a climate where DoD members stop shunning hard issues with a simple “that’s above my pay grade.” Collaborative teaming in the DoD at lower levels would engage the issue experts, speed problem resolution, break down stove pipes, and build momentum through successes. As in Corporate America, DoD leaders would have to clearly establish measurable guide stars to ensure unity of effort across the DoD. They would also have to invest in an area key to the success of corporate collaboration--networking infrastructure. The DoD can’t fully unlock the power of teams, until those teams have robust architectures to communicate and share data. Better yet, the DoD could also introduce a common approach to pursuing change anywhere in the DoD--the subject of our next slide.

    15. 15 Organizational Agility Change 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 Corporate America is driving agility & adaptability through formal change disciplines. Formal Change Disciplines (Balance Scorecards, 6-Sigma, Lean Thinking) give: A Common language of Change Management Common tools & metrics (“If you can’t measure it you can’t change it.”) Standardized tools for finding opportunities & measuring effectiveness We recommend that DoD implement a DoD-wide formal change discipline (a tailored 6-Sigma, ACE, et al) That requires a dedicated effort, and widely endorsed at all levels That builds momentum through small successes Build on these; win confidence / “buy in” Starting big is “old think”… starting small is “new think” Sited here as an example is the Travel Voucher program (changing the process allows a more expeditious & efficient method to implement the change). Education is the heart of Change Management Create / leverage our culture to incentivize change Set organizational level objectives… “Road Maps” Tie professional performance to successful implementation Corporate America is driving agility & adaptability through formal change disciplines. Formal Change Disciplines (Balance Scorecards, 6-Sigma, Lean Thinking) give: A Common language of Change Management Common tools & metrics (“If you can’t measure it you can’t change it.”) Standardized tools for finding opportunities & measuring effectiveness We recommend that DoD implement a DoD-wide formal change discipline (a tailored 6-Sigma, ACE, et al) That requires a dedicated effort, and widely endorsed at all levels That builds momentum through small successes Build on these; win confidence / “buy in” Starting big is “old think”… starting small is “new think” Sited here as an example is the Travel Voucher program (changing the process allows a more expeditious & efficient method to implement the change). Education is the heart of Change Management Create / leverage our culture to incentivize change Set organizational level objectives… “Road Maps” Tie professional performance to successful implementation

    16. 16 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 Across the board, we found truly leading edge companies are using the internet for much more than information sharing…they are running their entire organization over the Web and doing it successfully! What impedes this within the DoD isn’t the technology, it’s the culture because web-enabling processes means more than putting it on the web, it means sharing information and losing some autonomy. To truly capitalize on web technology the DoD must move to a to a shared services model for common functions and we’ll discuss this concept later in our briefing. This requires a comprehensive versus stovepiped view of the enterprise. For example, web tools could allow personnel to inprocess and outprocess duty locations is a simple functionality that cross boundaries of all military organizations. Truly adaptive organizations also keep key data on-line, immediately accessible. We think this has great potential for weapon systems maintenance and operations. i-procurement is an idea whose time has come, and will permit DoD to also capitalize on it’s size to get the most bang for our procurement buck All these web-enabled products are immediately available today, with minimum customization. Secondly, we believe it’s time for the Pentagon to walk the talk, when it comes to transformation, by radically changing the way it gets it’s IT support. The Virtual Pentagon initiative doesn’t go nearly far enough, and we recommend eliminating service unique email systems, and moving to a “consolidated Pentagon Email System” off site. Not only will this prove to be more reliable, it’s also more survivable given the current threat to the building. For this initiative to work, it must have sponsorship from the highest levels, and we suggest consolidating all IT under a single joint organization. In the end, it’s not the technology but the culture that is impeding this necessary change. Finally, we recognize that technology is just a piece of the pie. By recognizing the value in shared services and changing processes to support this new model, IT dollars will be more effective once decisions are made to consolidate functions across the enterprise.. Across the board, we found truly leading edge companies are using the internet for much more than information sharing…they are running their entire organization over the Web and doing it successfully! What impedes this within the DoD isn’t the technology, it’s the culture because web-enabling processes means more than putting it on the web, it means sharing information and losing some autonomy. To truly capitalize on web technology the DoD must move to a to a shared services model for common functions and we’ll discuss this concept later in our briefing. This requires a comprehensive versus stovepiped view of the enterprise. For example, web tools could allow personnel to inprocess and outprocess duty locations is a simple functionality that cross boundaries of all military organizations. Truly adaptive organizations also keep key data on-line, immediately accessible. We think this has great potential for weapon systems maintenance and operations. i-procurement is an idea whose time has come, and will permit DoD to also capitalize on it’s size to get the most bang for our procurement buck All these web-enabled products are immediately available today, with minimum customization. Secondly, we believe it’s time for the Pentagon to walk the talk, when it comes to transformation, by radically changing the way it gets it’s IT support. The Virtual Pentagon initiative doesn’t go nearly far enough, and we recommend eliminating service unique email systems, and moving to a “consolidated Pentagon Email System” off site. Not only will this prove to be more reliable, it’s also more survivable given the current threat to the building. For this initiative to work, it must have sponsorship from the highest levels, and we suggest consolidating all IT under a single joint organization. In the end, it’s not the technology but the culture that is impeding this necessary change. Finally, we recognize that technology is just a piece of the pie. By recognizing the value in shared services and changing processes to support this new model, IT dollars will be more effective once decisions are made to consolidate functions across the enterprise..

    17. 17 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 The DoD must also migrate away from the Client Server architecture. We need to web-enable most of our transactional systems. However, we need to stop granting waivers for these systems that don’t meet information assurance guidelines and hold the services accountable for following current security policies. (policy states that “preference shall be given to the acquisition of COTS Info Assurance and IA-enabled IT products which have been evaluated and validated in accordance with the common criteria, NIAP validation or FIPS validation). Another recommendation is to really look at our best of breed mindset. We recognize this is easier said than done, and that regardless of the hype, no suite of software will be all it needs to be for the enterprise. But the goal should be to minimize the touch points to reduce the integration costs and requirements. The shared services model enforces this enterprise approach. As mentioned numerous times, there are certain processes that are easier to implement than others. To really move DoD forward, we suggest picking off a few quick wins with iProcurement, making eMall global in essence, immediately adopting eTravel business, and benchmark pinnacle web-enabled training and education programs. Finally, the DoD needs to recognize that software is developed using government process and procedures that could work for us with minimal changes. Industry has learned a great many lessons that we don’t need to relearn. We suggest partnering with leaders in the IT industry, perhaps even using them as Application Service Providers by outsourcing some of our IT support requirements. The DoD must also migrate away from the Client Server architecture. We need to web-enable most of our transactional systems. However, we need to stop granting waivers for these systems that don’t meet information assurance guidelines and hold the services accountable for following current security policies. (policy states that “preference shall be given to the acquisition of COTS Info Assurance and IA-enabled IT products which have been evaluated and validated in accordance with the common criteria, NIAP validation or FIPS validation). Another recommendation is to really look at our best of breed mindset. We recognize this is easier said than done, and that regardless of the hype, no suite of software will be all it needs to be for the enterprise. But the goal should be to minimize the touch points to reduce the integration costs and requirements. The shared services model enforces this enterprise approach. As mentioned numerous times, there are certain processes that are easier to implement than others. To really move DoD forward, we suggest picking off a few quick wins with iProcurement, making eMall global in essence, immediately adopting eTravel business, and benchmark pinnacle web-enabled training and education programs. Finally, the DoD needs to recognize that software is developed using government process and procedures that could work for us with minimal changes. Industry has learned a great many lessons that we don’t need to relearn. We suggest partnering with leaders in the IT industry, perhaps even using them as Application Service Providers by outsourcing some of our IT support requirements.

    18. 18 Information Technology (IT) IT Role 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 A key difference between Corporate America and DoD is how IT is perceived and used – Corporations ensure that IT is fully leveraged in all aspects of their business operations, while DoD continues to mainly view IT as a mere support function, failing to capitalize on the significant gains that IT can bring when used as a strategic resource. We recommend that the DoD make a solid commitment to leverage IT by increasing capital spending to improve our entire infrastructure, establishing processes for enterprise e-Business operations, and recognizing IT as a strategic partner in all of our military operations. Our DoD and Service CIOs are in key positions to lead this transformation of our military departments towards a more technology-oriented, efficient organization. This effort needs to have visible top-down emphasis to ensure success. By making this commitment, we will be transforming our IT vision into reality, and taking the right steps to assure our future military has the best technology, tools and resources needed for our mission. Now, our next area of discussion will be on Business Processes…. A key difference between Corporate America and DoD is how IT is perceived and used – Corporations ensure that IT is fully leveraged in all aspects of their business operations, while DoD continues to mainly view IT as a mere support function, failing to capitalize on the significant gains that IT can bring when used as a strategic resource. We recommend that the DoD make a solid commitment to leverage IT by increasing capital spending to improve our entire infrastructure, establishing processes for enterprise e-Business operations, and recognizing IT as a strategic partner in all of our military operations. Our DoD and Service CIOs are in key positions to lead this transformation of our military departments towards a more technology-oriented, efficient organization. This effort needs to have visible top-down emphasis to ensure success. By making this commitment, we will be transforming our IT vision into reality, and taking the right steps to assure our future military has the best technology, tools and resources needed for our mission. Now, our next area of discussion will be on Business Processes….

    19. 19 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 Industry looks internally at their processes, attempting to determine what are core or central to their business strategies and to identify processes that might be done better, faster and cheaper by an outside provider. Prior to considering outsourcing as an option, the determination of what constitutes a core competency must be done. We recommend that forums like the Business Initiative Council study this for the DoD and provide additional recommendations on non-core competencies that may be appropriate for outsourcing What should make outsourcing an attractive option for the department is that the most mature BPO offerings (HR, admin, finance) are all in areas of demonstrated need in the DoD. This won’t be easy. There will be challenges, both cultural and operational to this concept. Additionally changes in current governance must be made to optimize results. But if done correctly, outsourcing can provide great fiscal and service benefit to the DoD Industry looks internally at their processes, attempting to determine what are core or central to their business strategies and to identify processes that might be done better, faster and cheaper by an outside provider. Prior to considering outsourcing as an option, the determination of what constitutes a core competency must be done. We recommend that forums like the Business Initiative Council study this for the DoD and provide additional recommendations on non-core competencies that may be appropriate for outsourcing What should make outsourcing an attractive option for the department is that the most mature BPO offerings (HR, admin, finance) are all in areas of demonstrated need in the DoD. This won’t be easy. There will be challenges, both cultural and operational to this concept. Additionally changes in current governance must be made to optimize results. But if done correctly, outsourcing can provide great fiscal and service benefit to the DoD

    20. 20 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 Corporate America is increasingly exploiting their purchasing power by consolidating their procurement systems and leveraging their size to reduce overall spending and improving service. Corporate America is seeing 5-20% savings and improved service levels. Consolidating procurement for non-service specific items should result in significant cost savings. DLA has made a start, just needs to be more aggressive and needs DoD and Service leadership to force improvements in their service levels and processes. Recommend establishing DoD wide contracts leveraging private industry capabilities (I.e. office max/office depot); a portal that provides pass through of a requisition/request straight to the vendor, delivered the same or next day at a lower cost and at a higher level of service (expand and better advertise things like the DLA e-mall portal) Need to transform DLA - provide greater transparency of their cost structure and processes; develop joint service (customer) derived metrics to drive DLA behavior to become the “supplier of choice” Accelerate the move from manager of supplies to manager of suppliers DLA provides supply, technical and logistics combat support to the military Services and to federal civilian agencies. DCMA supervises and administers contracts with the thousands of suppliers who deliver goods and services to the military each year. The new agency also is chartered to streamline and standardize the contracting process. Corporate America is increasingly exploiting their purchasing power by consolidating their procurement systems and leveraging their size to reduce overall spending and improving service. Corporate America is seeing 5-20% savings and improved service levels. Consolidating procurement for non-service specific items should result in significant cost savings. DLA has made a start, just needs to be more aggressive and needs DoD and Service leadership to force improvements in their service levels and processes. Recommend establishing DoD wide contracts leveraging private industry capabilities (I.e. office max/office depot); a portal that provides pass through of a requisition/request straight to the vendor, delivered the same or next day at a lower cost and at a higher level of service (expand and better advertise things like the DLA e-mall portal) Need to transform DLA - provide greater transparency of their cost structure and processes; develop joint service (customer) derived metrics to drive DLA behavior to become the “supplier of choice” Accelerate the move from manager of supplies to manager of suppliers DLA provides supply, technical and logistics combat support to the military Services and to federal civilian agencies. DCMA supervises and administers contracts with the thousands of suppliers who deliver goods and services to the military each year. The new agency also is chartered to streamline and standardize the contracting process.

    21. 21 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 Centralize purchase authority for non-service specific items; services still can go outside the system if justified fiscally or by mission, but provide a feedback loop so that the central purchase authority can capture the lessons learned and further drive lower costs and better service. [Depending on who you ask, there already is a common procurement system – the DoD’s Standard Procurement System. It has been around since 1996 but there has never been anything that has mandated that the services give up there unique systems and adopt this one. Ex. Sears implemented and saved $100 mil in the first year (7 months); expect $300M savings in 02 of total $6 billion in non-merchandise spend] Establish strategic partnerships - may prove a challenge based on small business laws - maintain stocks on the vendor dime and share risk; Look for best value vice lowest cost Establish “tiger teams” to identify areas of opportunity expand/do more on line auctioning (I.e. GNX); industry is averaging 10 - 20% savings; increased competition, reduced procurement timelines - caution have to establish requirements up front and stick to them throughout the duration of the auction and the contract. Auctions can be constructed to award the best value the winner vice the lowest cost. Centralize purchase authority for non-service specific items; services still can go outside the system if justified fiscally or by mission, but provide a feedback loop so that the central purchase authority can capture the lessons learned and further drive lower costs and better service. [Depending on who you ask, there already is a common procurement system – the DoD’s Standard Procurement System. It has been around since 1996 but there has never been anything that has mandated that the services give up there unique systems and adopt this one. Ex. Sears implemented and saved $100 mil in the first year (7 months); expect $300M savings in 02 of total $6 billion in non-merchandise spend] Establish strategic partnerships - may prove a challenge based on small business laws - maintain stocks on the vendor dime and share risk; Look for best value vice lowest cost Establish “tiger teams” to identify areas of opportunity expand/do more on line auctioning (I.e. GNX); industry is averaging 10 - 20% savings; increased competition, reduced procurement timelines - caution have to establish requirements up front and stick to them throughout the duration of the auction and the contract. Auctions can be constructed to award the best value the winner vice the lowest cost.

    22. 22 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 Accelerate the initiatives to move to a point to point view; vendor to foxhole; current system is under control of DLA, TRANSCOM, and the Services there is not a SPOC for supply chain management - their needs to be one; it would facilitate better reach back for the deployed warfighter. Industry experience shows that SCM techniques result in lower cost, reduced cycle times and better service. DoD needs a vendor compliance program with teeth; enforces contract standards, establish vendor report cards visible to the customer, buyer and vendor, recovers costs (price of non-compliance) and results in increased service. This can be done for vendors and transportation providers. Accelerate the initiatives to move to a point to point view; vendor to foxhole; current system is under control of DLA, TRANSCOM, and the Services there is not a SPOC for supply chain management - their needs to be one; it would facilitate better reach back for the deployed warfighter. Industry experience shows that SCM techniques result in lower cost, reduced cycle times and better service. DoD needs a vendor compliance program with teeth; enforces contract standards, establish vendor report cards visible to the customer, buyer and vendor, recovers costs (price of non-compliance) and results in increased service. This can be done for vendors and transportation providers.

    23. 23 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 As we pointed out earlier, a common practice found in the industry leaders that we worked with, which differs from the DoD, is how their IT organizations are embraced as a strategic partner with their entire spectrum of business operations. These corporations realize how IT can be used as significant leverage for having a major impact on their success in the business. DoD can benefit from adopting this practice of elevating IT from a support role to a strategic business partner in all aspects of operations. We fall way behind corporate America in transforming to e-Business operations which would result in significant efficiencies. We propose establishing a DoD office to spearhead this much-needed improvement in the way we do business. Our DoD and Service CIOs should be fully engaged as our IT leaders – setting and enforcing standards and protocols, approving and funding IT programs, and ensuring the way ahead for a DoD-wide shared services e-business model. The SDCFP appears to be an untapped resource for the existing Business Initiatives Council—strengthening clear linkage between the two would allow valuable input from Fellows with actual experience in the corporate world and insight into commercial business processes. Next, we’ll talk about the importance of our most valuable resource: Human Capital….. As we pointed out earlier, a common practice found in the industry leaders that we worked with, which differs from the DoD, is how their IT organizations are embraced as a strategic partner with their entire spectrum of business operations. These corporations realize how IT can be used as significant leverage for having a major impact on their success in the business. DoD can benefit from adopting this practice of elevating IT from a support role to a strategic business partner in all aspects of operations. We fall way behind corporate America in transforming to e-Business operations which would result in significant efficiencies. We propose establishing a DoD office to spearhead this much-needed improvement in the way we do business. Our DoD and Service CIOs should be fully engaged as our IT leaders – setting and enforcing standards and protocols, approving and funding IT programs, and ensuring the way ahead for a DoD-wide shared services e-business model. The SDCFP appears to be an untapped resource for the existing Business Initiatives Council—strengthening clear linkage between the two would allow valuable input from Fellows with actual experience in the corporate world and insight into commercial business processes. Next, we’ll talk about the importance of our most valuable resource: Human Capital…..

    24. 24 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 Corporate America promotes performance; uses a foundation of education & training, sometimes as a reward, always to build capability and strong foundation… focusing on long term. Recommend DoD (civilian/military) look at a broader approach to performance evaluation: Key benefit would be to target satisfactory “low performers”; provides options… finds the best “fit” for the apparent expressed interest/capability. Ties education & training with performance evaluation counseling; Ensures greater visibility for “Reporting Seniors” on where personnel can be best “placed/trained”; permits opportunity for success for “dual tracks”; and Craft associations with civilian education institutions. “Life after the military placement assistance”… DoD-wide carry our commitment to our personnel… beyond their service. Provide greater service than advising how to wear a suit, undergo an interview, or write a resume. Examples: marineforlife.com military.com Corporate America promotes performance; uses a foundation of education & training, sometimes as a reward, always to build capability and strong foundation… focusing on long term. Recommend DoD (civilian/military) look at a broader approach to performance evaluation: Key benefit would be to target satisfactory “low performers”; provides options… finds the best “fit” for the apparent expressed interest/capability. Ties education & training with performance evaluation counseling; Ensures greater visibility for “Reporting Seniors” on where personnel can be best “placed/trained”; permits opportunity for success for “dual tracks”; and Craft associations with civilian education institutions. “Life after the military placement assistance”… DoD-wide carry our commitment to our personnel… beyond their service. Provide greater service than advising how to wear a suit, undergo an interview, or write a resume. Examples: marineforlife.com military.com

    25. 25 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 Shared Service Model – consolidation of like capabilities is a concept used in several of our host companies. AMS consolidated HR, Administrative, and Marketing functions– all previously conducted by individual horizontal business units in a cross cutting company wide horizontal with anticipated cost savings of $30 million/year. . Oracle Shared Business Service – successfully web enabled common processed. Self Service model works Travel office of 5 supports a company of 42000 We recommend the DoD identify common processes throughout the department and determine their applicability to Shared Service Model Concept is scalable High Level – consolidation of Service specific HR/Personnel functions, medical care, finance Low Level – consolidation of safety/admin departments at squadron level – Wing level provides service Technology allows for many of the services to become more self service through the use of portals and websites. If technology is used as an enabler – minimize the use of customization Adds to overall cost, often delays Implementation And lastly, prior to IT integration – ensure that the process has been optimized Having a bad process that works a little fast doesn’t benefit anyone IT shouldn’t be the tail that wags the dog – optimize process that then infuse with IT. Shared Service Model – consolidation of like capabilities is a concept used in several of our host companies. AMS consolidated HR, Administrative, and Marketing functions– all previously conducted by individual horizontal business units in a cross cutting company wide horizontal with anticipated cost savings of $30 million/year. . Oracle Shared Business Service – successfully web enabled common processed. Self Service model works Travel office of 5 supports a company of 42000 We recommend the DoD identify common processes throughout the department and determine their applicability to Shared Service Model Concept is scalable High Level – consolidation of Service specific HR/Personnel functions, medical care, finance Low Level – consolidation of safety/admin departments at squadron level – Wing level provides service Technology allows for many of the services to become more self service through the use of portals and websites. If technology is used as an enabler – minimize the use of customization Adds to overall cost, often delays Implementation And lastly, prior to IT integration – ensure that the process has been optimized Having a bad process that works a little fast doesn’t benefit anyone IT shouldn’t be the tail that wags the dog – optimize process that then infuse with IT.

    26. 26 Agenda Background Common Observations/Recommendations Individual Experiences (time permitting)

    27. 27 World leader in Internet equipment and utilization Annual revenues: FY01 $22.2B Employees: 38,000 worldwide Pioneer using the Internet for all business processes Customer sales and support Production management Financial management Personnel management In-house, online training Tradition of innovation Creating new Internet products and key technologies Advanced routing and switching, voice and video-over IP, optical networking, wireless, storage networking, security, broadband, and content networking

    28. 28 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 Overwhelming aura of organizational culture and commitment. In FY'01, Cisco realized productivity gains of approximately $1.7B through the use of Internet Business Solutions. These productivity gains resulted from efficiencies in our Supply Chain Management, Customer Care, Workforce Optimization and E-Learning solutions. Overwhelming aura of organizational culture and commitment. In FY'01, Cisco realized productivity gains of approximately $1.7B through the use of Internet Business Solutions. These productivity gains resulted from efficiencies in our Supply Chain Management, Customer Care, Workforce Optimization and E-Learning solutions.

    29. 29 Recommendations Aggressively adopt Internet business solutions Build/Invest in robust network foundation Capitalize on power of internet capabilities e-Learning, Supply Chain Management, Customer Care, Employee Services Workforce optimization, productivity gains Build industry partnerships Engage consultants to benefit from leading edge best business practices Implement/Enforce strict performance management processes Critical for ensuring most productive workforce Establish and instill DoD innovation & change core values DoD core values set foundation and climate for continuous improvement Service-specific core values remain

    30. 30 Diversified manufacturing company Annual revenues: $17B Employees: 75,000 (38,000 US; 37,000 International) Major Market Centers spanning 55,000 products and 200 countries : Industrial ? Specialty Material Consumer & Office ? Transportation, Graphics & Safety Health Care ? Electronics & Communications Innovation is both legacy and lifeblood 30% of annual revenues from products less than 4 years old Century Anniversary in 2002 marked enduring success Only 3% of companies survive 100 years 3M on the move: New CEO, GE-proven initiatives, Six Sigma (0:45) 3M is a $17B diversified manufacturing company with superb international penetration. It’s 55,000 products run from band-aids to aerospace materials and from Post-its to pharmaceutical drugs. 3M is widely admired for its record of innovation. Every year, 30% of its revenues stem from products introduced in the last four years. 10% of annual revenues are from products that were introduced that same year. This year, 3M turned 100 years old--a landmark that puts it in the top tier of enduring corporate successes. Even with this success, 3M is exchanging old ways for new. A new CEO is giving the corporation sharper focus and revised priorities.(0:45) 3M is a $17B diversified manufacturing company with superb international penetration. It’s 55,000 products run from band-aids to aerospace materials and from Post-its to pharmaceutical drugs. 3M is widely admired for its record of innovation. Every year, 30% of its revenues stem from products introduced in the last four years. 10% of annual revenues are from products that were introduced that same year. This year, 3M turned 100 years old--a landmark that puts it in the top tier of enduring corporate successes. Even with this success, 3M is exchanging old ways for new. A new CEO is giving the corporation sharper focus and revised priorities.

    31. 31 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

    32. 32 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

    33. 33 Recommendations Deploy a DoD change discipline similar to Six Sigma Beware superficially applied, under-resourced “quality program” Use corporate electronic productivity model where smart DoD lags in areas ripe for networking: admin, training, personnel Continue to push cost-cutting as daily priority in DoD Profit-driven and efficient corporations still finding $100Ms Exploit DoD’s size to leverage spending Global sourcing teams, supplier relationships, e-Purchasing Refine DOD Identity in light of corporate successes What images are invoked when people hear “DOD?” (1:15) My experience at 3M leads me to the following recommendations: - First, the DoD should strongly consider a common change discipline such as Six Sigma. As LtCol Woltman said, similar change management disciplines are radically improving the agility and adaptability of corporations. Properly implemented, it would do the same for the DoD. I consider Six Sigma to be the “gold nugget” of my time at 3M. - Second, the DoD should follow in Corporate America’s footsteps and improve productivity through electronic networking. Administration, training and personnel management are all areas with low-hanging fruit. - Third, Corporate America is still finding $100Ms of dollars in efficiencies. So could the DoD. It’s a matter of emphasis and a matter of how you incentivize organizations and individuals to find savings. - Fourth, the DoD should take steps to further leverage its spending through global sourcing teams, supplier relationships and e-Purchasing approaches. Again, 3M is finding $100Ms on the table. - Finally, 3M has excelled in fostering its positive image and polishing brand names. The effort is calculated, deliberate and very successful. The DoD could also commit itself to a long-term strategy of connecting the public with positive perceptions.(1:15) My experience at 3M leads me to the following recommendations: - First, the DoD should strongly consider a common change discipline such as Six Sigma. As LtCol Woltman said, similar change management disciplines are radically improving the agility and adaptability of corporations. Properly implemented, it would do the same for the DoD. I consider Six Sigma to be the “gold nugget” of my time at 3M. - Second, the DoD should follow in Corporate America’s footsteps and improve productivity through electronic networking. Administration, training and personnel management are all areas with low-hanging fruit. - Third, Corporate America is still finding $100Ms of dollars in efficiencies. So could the DoD. It’s a matter of emphasis and a matter of how you incentivize organizations and individuals to find savings. - Fourth, the DoD should take steps to further leverage its spending through global sourcing teams, supplier relationships and e-Purchasing approaches. Again, 3M is finding $100Ms on the table. - Finally, 3M has excelled in fostering its positive image and polishing brand names. The effort is calculated, deliberate and very successful. The DoD could also commit itself to a long-term strategy of connecting the public with positive perceptions.

    34. 34 Global research-driven pharmaceutical company - 2d largest in U.S. Employees: 69,300 (60% U.S.) Revenues: > $40 B Locations: 70 countries, 31 plants, 16 distribution centers One of five major players in vaccine development 20% of worldwide market; ~ $1B in sales Corporate Strategy Focus on cutting-edge science, targeted and well-executed marketing, continued operational excellence 2002 a transition year to a new platform of opportunities Increase research spending in 2002 to $ 2.9 B (up from $2.5B) File or launch 11 new medicines and vaccines, 2002 to 2006

    35. 35 Among top 50 most respected companies worldwide (PWC, 2001) Ethics is a competitive advantage. Litmus test for all decisions ? “...medicine is for the people. ... The profits follow...”, George W. Merck (1950) Adapting to Changing Environment Position at leading edge of science is critical talent management external partnering/acquisition exploiting the web Cross-functional strategy teams break down silos Exploiting the web for communications and training Moving to self-service and new performance management system significant culture change throughout the company Merck has demonstrated consistent excellence for a long time. A couple of their recent honors are listed. Add to that - Top 25 Companies for Working Women (Working Woman) and Top 100 Best-Managed Companies (Industry Week). One of my objectives coming in was to explore the reality of their ethics-based foundation as reported in all of the literature. I found that the CEO believes that ethics gives Merck a competitive advantage in the industry. EVERYONE in the company knows this quote: “We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered that, the larger they have been.” - George W. Merck, 1950. Merck’s core ideology is very deep and very well-understood. Cutting-edge science is central to Merck’s success. They have a knack for creating innovative alliances. Merck has more than 40 partnerships with labs in academia and industry. Two acquisitions - Rosetta Inpharmatics, Inc. (2001) and SIBIA Neurosciences (1999) - were targeted specifically to enhance drug discovery research capabilities in genomics and CNS, respectively. Merck’s R&D effort already covers nearly every major therapeutic field but this year - Merck MRL will focus on neuroscience in a multi-site effort - UK, Japan, Canada, San Diego, Westpoint, and Rahway --- emphasizing the importance of virtual labs. Merck Marketing has become a force to be reckoned with within the last 3 years and has gone a long way toward breaking down silos. Self-service and the new performance management system are requiring a significant culture change at Merck. For example - the Merck way (like the military) is generally to wait for the 100% solution (an absolute necessity in drug development). For the new performance management system they went with about the 70-80% solution and are in fact - designing, developing, and fielding the system across the company simultaneously ---all the while focusing on the communications plan that will convince employees of its importance. They’re doing a super job of change management with this one. Merck has demonstrated consistent excellence for a long time. A couple of their recent honors are listed. Add to that - Top 25 Companies for Working Women (Working Woman) and Top 100 Best-Managed Companies (Industry Week). One of my objectives coming in was to explore the reality of their ethics-based foundation as reported in all of the literature. I found that the CEO believes that ethics gives Merck a competitive advantage in the industry. EVERYONE in the company knows this quote: “We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered that, the larger they have been.” - George W. Merck, 1950. Merck’s core ideology is very deep and very well-understood. Cutting-edge science is central to Merck’s success. They have a knack for creating innovative alliances. Merck has more than 40 partnerships with labs in academia and industry. Two acquisitions - Rosetta Inpharmatics, Inc. (2001) and SIBIA Neurosciences (1999) - were targeted specifically to enhance drug discovery research capabilities in genomics and CNS, respectively. Merck’s R&D effort already covers nearly every major therapeutic field but this year - Merck MRL will focus on neuroscience in a multi-site effort - UK, Japan, Canada, San Diego, Westpoint, and Rahway --- emphasizing the importance of virtual labs. Merck Marketing has become a force to be reckoned with within the last 3 years and has gone a long way toward breaking down silos. Self-service and the new performance management system are requiring a significant culture change at Merck. For example - the Merck way (like the military) is generally to wait for the 100% solution (an absolute necessity in drug development). For the new performance management system they went with about the 70-80% solution and are in fact - designing, developing, and fielding the system across the company simultaneously ---all the while focusing on the communications plan that will convince employees of its importance. They’re doing a super job of change management with this one.

    36. 36 Positive “branding” for DoD “Brand” DoD just as each Service is “branded” Partner with Industry/ Corporate America ID core competencies and focus on them Understand and take advantage of civilian sector capabilities Use Six Sigma across DoD Benchmark processes internal and external to DoD ID critical common processes Make them efficient and standardized Dedicated, fully resourced effort required Focus on branding - as it relates to industry view of working with DoD not as it relates to the recruitment effort. The services are branded very well and it works for recruitment. Focus on benchmarking - DoD doesn’t do a great job of benchmarking good business practices internally. There are many things that could be shared between services if we didn’t have such detrimental pride of ownership. We reinvent the wheel a lot and it’s unnecessary. Merck has been able to sustain success through continuous improvement. That’s a paradox to me because I’ve also seen a lot of resistance to change - “It’s not the Merck way.” --- very similar to what I’ve experienced in the military. I think strong leadership is the key to overcoming that. They are using six sigma in HR to streamline existing processes and line them up more directly with core competencies. Focus on branding - as it relates to industry view of working with DoD not as it relates to the recruitment effort. The services are branded very well and it works for recruitment. Focus on benchmarking - DoD doesn’t do a great job of benchmarking good business practices internally. There are many things that could be shared between services if we didn’t have such detrimental pride of ownership. We reinvent the wheel a lot and it’s unnecessary. Merck has been able to sustain success through continuous improvement. That’s a paradox to me because I’ve also seen a lot of resistance to change - “It’s not the Merck way.” --- very similar to what I’ve experienced in the military. I think strong leadership is the key to overcoming that. They are using six sigma in HR to streamline existing processes and line them up more directly with core competencies.

    37. 37 Diverse major businesses with common customers - Pratt & Whitney - Carrier - Otis - Sikorsky - Hamilton Sundstrand - UTC Fuel Cells Fortune’s “Most Admired” aerospace company ~ 154,000 employees (~80,000 overseas) Revenues: $28B Assignment: P&W’s F135 Joint Strike Fighter Engine Program Integrated Program Management Team Engineering & Manufacturing Development (EMD) Readiness System Development & Deployment (SDD) Implementation Integrated Product Team (IPT) Leaders Training Program Achieving Competitive Excellence (ACE) Initiative Team High Impact ACE Team (Sourcing & Parts Family Strategies) Major Businesses Pratt & Whitney - aircraft & engines, space propulsion systems, & power systems Carrier - heating & air conditioning systems Otis - elevators & escalators Sikorsky - helicopters Hamilton Sundstrand - aerospace & industrial systems UTC Fuel Cells Ranking 64th largest U.S. Corporation rated by Fortune Magazine 155th largest in the world Named “Most Admired aerospace by Fortune Current Employment 153,800 employees, including approximately 79,545 overseas Revenues $28.0 Billion (~55% Carrier/Otis, 30% P&W, 15% Flight Systems) Assignment F135 Program Conducted research at Pratt Com & Space, H/S, UTC Fuel Cells, & Sikorsky Major Businesses Pratt & Whitney - aircraft & engines, space propulsion systems, & power systems Carrier - heating & air conditioning systems Otis - elevators & escalators Sikorsky - helicopters Hamilton Sundstrand - aerospace & industrial systems UTC Fuel Cells Ranking 64th largest U.S. Corporation rated by Fortune Magazine 155th largest in the world Named “Most Admired aerospace by Fortune Current Employment 153,800 employees, including approximately 79,545 overseas Revenues $28.0 Billion (~55% Carrier/Otis, 30% P&W, 15% Flight Systems) Assignment F135 Program Conducted research at Pratt Com & Space, H/S, UTC Fuel Cells, & Sikorsky

    38. 38 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 Company Strategy Clear & simply stated (Road Maps); disseminated through ACE tools. End state clearly articulated, as is the “journey” (bridge)… How we get there? Core competencies / sources of competitive advantage widely understood Corporation focuses on core competencies & outsourcing all non-core and generic functions… thus keeping “what we’re good at in-house”. Able to adapt and evolve to external shifts in market place (e.g. manufacturing spare parts for competitor engine; adapting commercial systems/programs for military application (JT8D on JSTARS, PW2000/F117 for C-17). Acquisition/mergers follow related competencies/marketplaces… natural extensions of current competencies. Seeks to opportunities to leverage operational capability to “change the game” (e.g. gas turbine engines for ground power systems; leveraging technologies from several sectors (fuel cells) as well as suppliers capabilities). Culture Implementation of Lean Thinking & ACE permeate all facets of the org. Waves of change initiatives induce culture of “change is a way of life”. Management drives leaders/decision makers, designers, & manufacturers to stretch the limit (e.g. shaved 50% of a $600 mil project in 1/2 the developmental time for PW 6000; JSF119 for CDA(met sched & perf criteria) Merged companies drawn into parent philosophy (HS adopting IPD&ACE) Company Strategy Clear & simply stated (Road Maps); disseminated through ACE tools. End state clearly articulated, as is the “journey” (bridge)… How we get there? Core competencies / sources of competitive advantage widely understood Corporation focuses on core competencies & outsourcing all non-core and generic functions… thus keeping “what we’re good at in-house”. Able to adapt and evolve to external shifts in market place (e.g. manufacturing spare parts for competitor engine; adapting commercial systems/programs for military application (JT8D on JSTARS, PW2000/F117 for C-17). Acquisition/mergers follow related competencies/marketplaces… natural extensions of current competencies. Seeks to opportunities to leverage operational capability to “change the game” (e.g. gas turbine engines for ground power systems; leveraging technologies from several sectors (fuel cells) as well as suppliers capabilities). Culture Implementation of Lean Thinking & ACE permeate all facets of the org. Waves of change initiatives induce culture of “change is a way of life”. Management drives leaders/decision makers, designers, & manufacturers to stretch the limit (e.g. shaved 50% of a $600 mil project in 1/2 the developmental time for PW 6000; JSF119 for CDA(met sched & perf criteria) Merged companies drawn into parent philosophy (HS adopting IPD&ACE)

    39. 39 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 Architecture & Processes Empowerment at lowest levels of management (e.g. Module Centers designed to drive cost out of systems) Reduced suppliers (3000 to 200) to streamline, established closer partnership IPD bridged the communities (manufacturing with management, etc.) Execution Education for the Company: ITO University on campus used as standardized gateway to spread ACE & IPD learning to supervisors, engineers, suppliers & customers. For the work force, created educational prgms to improve skill sets Use of Scorecards & progress checks (Passport) to measure customer & employee satisfaction, and program milestone achievement Best business practices and common strategies shared via UTC coordinated leadership councils(in areas of engineering, manufacturing, IT, etc) Corporate Analysis Program provided exceptional feedback on how the company is performing with respect to five areas of analysis (“Strategic Clarity”, “Culture of Operational Excellence”, Advantaged Architecture & Processes”, “Well Orchestrated Journey”, and “Superior Alignment & Execution”. Electronic Work Instructions: Observed these first hand on the manufacturing floor at West Palm Beach Space Propulsion Facility. Architecture & Processes Empowerment at lowest levels of management (e.g. Module Centers designed to drive cost out of systems) Reduced suppliers (3000 to 200) to streamline, established closer partnership IPD bridged the communities (manufacturing with management, etc.) Execution Education for the Company: ITO University on campus used as standardized gateway to spread ACE & IPD learning to supervisors, engineers, suppliers & customers. For the work force, created educational prgms to improve skill sets Use of Scorecards & progress checks (Passport) to measure customer & employee satisfaction, and program milestone achievement Best business practices and common strategies shared via UTC coordinated leadership councils(in areas of engineering, manufacturing, IT, etc) Corporate Analysis Program provided exceptional feedback on how the company is performing with respect to five areas of analysis (“Strategic Clarity”, “Culture of Operational Excellence”, Advantaged Architecture & Processes”, “Well Orchestrated Journey”, and “Superior Alignment & Execution”. Electronic Work Instructions: Observed these first hand on the manufacturing floor at West Palm Beach Space Propulsion Facility.

    40. 40 ACE… application of Lean Tools Concept: Removal of waste; enhance flow (info, product, cash) Apply principles at operational levels Performance Management Process Concept: Individual Development Plans (IDP) products of PM Apply at operational levels Education Programs Concept: No contract/service obligation (tied into IDP) Apply across DoD (one standard, DoD-wide) Life after Military Service Concept: Civilian employee assistance Apply across DoD (Military.com equivalent) Ace is an application of Lean Tools Components of ACE are beyond Lean Thinking Lean Thinking - looks at flow & removing waste Three types of flow 1) Info (“order”) DoD … Requirements/identified 2) Product (“make”) DoD … Resources/equip 3) Cash (“pay”) DoD … Budget/manage $ Lean Thinking = Optimizes flow & eliminates waste (muda) Ace Tools allow removal of waste, identification of flow; any piece of ACE or 6Sigma does this. To accomplish LT, must have a sound system to enable it. LT helps enable flow of information of product. Differences between 6 Sigman & ACE. ACE was first; product of LT ACE Pilots at lower levels in contract to Black/green belts Otherwise essentially the same Ace is an application of Lean Tools Components of ACE are beyond Lean Thinking Lean Thinking - looks at flow & removing waste Three types of flow 1) Info (“order”) DoD … Requirements/identified 2) Product (“make”) DoD … Resources/equip 3) Cash (“pay”) DoD … Budget/manage $ Lean Thinking = Optimizes flow & eliminates waste (muda) Ace Tools allow removal of waste, identification of flow; any piece of ACE or 6Sigma does this. To accomplish LT, must have a sound system to enable it. LT helps enable flow of information of product. Differences between 6 Sigman & ACE. ACE was first; product of LT ACE Pilots at lower levels in contract to Black/green belts Otherwise essentially the same

    41. 41 Wholly-owned subsidiary of Sears, Roebuck and Co. Responsible for all logistical activities in the Sears supply chain Employees: 13,500 Operating Budget: >$1.5 B 31 Distribution centers nationwide (Avg: 1M Sq Ft/facility) Home Deliveries: >5,000,000 annually nationwide Average Inventory Value: >$600,000,000 Moves goods from 4,500+ vendors to 2000+ stores

    42. 42 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

    43. 43 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

    44. 44 Recommendations Exploit the Internet Purchase of non-defense-specific products Liquidate old/inoperative/scrap supplies and equipment Training Collaborative planning Adopt a Vendor Compliance Program Standards/Vendor Certification and Training Enforcement mechanism Cost recovery Adjust mindset from Logistics to Supply Chain Management Inventory control/reduce redundant inventory Reduce cycle times Partner with key suppliers Adopt accepted industry standards

    45. 45 Twenty-fifth Anniversary in 2002 1977 outgrowth of a CIA project World’s second largest independent software company Employees: 43,000 (21,000 US; 22,000 International) Revenues: >$10B year World’s premier provider of database software 42.9% of the market ~ 75% of DoD systems use Oracle database software Second largest provider of e-business application software Sales of $447M exceed competitors SAP, Siebel and Peoplesoft Two significant transformations in seven years From niche data base provider to software solutions provider From client-server products to web-enabled products Implemented own software across organization Oracle is celebrating 25th Anniversary this year Larry Ellison was original co-founder, as an outgrowth of a CIA relational database project Oracle is only behind Microsoft as the world’s second largest independent software company and sales this year are expected to be around $11 billion. It is the leading provider of information management software, combining it’s database software with it’s e-business application software. Oracle is a leading provider of database software across the market, and all types of DoD systems are supported by the Oracle database. However, it’s interesting to note that most of the systems are customized systems, such as the Theater Battle Management Command and Control System, and use the Oracle Database structure. DoD systems that use the Oracle Database for the backend range from Command and control, to email, to logistics, to personnel. Oracle was a late bloomer to the applications market, although they originally began development of e-business applications in 1989. They compete head to head with SAP, Siebel and Peoplesoft on many the their products, drawing the differentiation that they have a “suite of software solutions” across the enterprise. Reason I’m at Oracle is because of the two significant organizational transformation they’ve undergone over the past seven years. Previously mentioned, they moved out to embrace a two tier focus for development efforts. While keeping their database development efforts strong, they moved away from being a niche provider of relational database products, to an e-business software solutions provider. Secondly, their latest transformation came when the CEO, Larry Ellison, mandated that all development for the client/server environment would cease and they would web-enable all their e-business products. Additionally, they implemented their own products within the company and became a “test site” for their own software application products. Today, the entire Oracle corporation is run, using solely proprietary Oracle products, from HR, to Supply Chain Management, to e-Travel, to I procurement, to CRM products like their call center, and ERP products like their Oracle Financials. Oracle is celebrating 25th Anniversary this year Larry Ellison was original co-founder, as an outgrowth of a CIA relational database project Oracle is only behind Microsoft as the world’s second largest independent software company and sales this year are expected to be around $11 billion. It is the leading provider of information management software, combining it’s database software with it’s e-business application software. Oracle is a leading provider of database software across the market, and all types of DoD systems are supported by the Oracle database. However, it’s interesting to note that most of the systems are customized systems, such as the Theater Battle Management Command and Control System, and use the Oracle Database structure. DoD systems that use the Oracle Database for the backend range from Command and control, to email, to logistics, to personnel. Oracle was a late bloomer to the applications market, although they originally began development of e-business applications in 1989. They compete head to head with SAP, Siebel and Peoplesoft on many the their products, drawing the differentiation that they have a “suite of software solutions” across the enterprise. Reason I’m at Oracle is because of the two significant organizational transformation they’ve undergone over the past seven years. Previously mentioned, they moved out to embrace a two tier focus for development efforts. While keeping their database development efforts strong, they moved away from being a niche provider of relational database products, to an e-business software solutions provider. Secondly, their latest transformation came when the CEO, Larry Ellison, mandated that all development for the client/server environment would cease and they would web-enable all their e-business products. Additionally, they implemented their own products within the company and became a “test site” for their own software application products. Today, the entire Oracle corporation is run, using solely proprietary Oracle products, from HR, to Supply Chain Management, to e-Travel, to I procurement, to CRM products like their call center, and ERP products like their Oracle Financials.

    46. 46 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 Despite the on-going debate in the press, I have found that the Billion Dollar story is true. And, my findings are backed by a study conducted by Booz-Allen. During Oracle’s latest transformation, they focused on three major areas to move their organization to a true e-business. They consolidated all their systems, not just email, like HR and Financials. and you’ve heard that story. However, they also standardized their processes across the organization, from Oracle Europe to Oracle the Americas and the Far East. Oracle found that just like any other global organization, each of their business units had adopted their own ways of doing business. While that might have been beneficial for the independent business unit, it wasn’t beneficial for the organization as a whole. So, while they consolidated their systems, they also took the best practices of their business units, and standardized their processes and practices implementing their own software. Finally, they focused entirely on a self-service mentality. Even a group VP books his own travel electronically using e-travel. Filing expenses is as simple as filling out a voucher on line, and it’s automatically routed via email to your supervisor for approval and then on to Oracle Headquarters for electronic payment into the employee’s request account. And it’s web based, so you don’t have to be at your client computer to be productive. Oracle relies on a shared services paradigm that goes hand in hand with the standard business processes and practices. And in my discussions with several retired GO’s within Oracle, they found the “self service” culture a bit of a shock initially, but now find it liberating and a means to have more control, with less redundancy. In the military, we have the “self-service mentality also, but it’s not enhanced in any way by technology. I have to walk all over the base to register my car, to file my travel voucher and to plan my travel. In the end,.the one constant through the changes, has been that Larry Ellison, the dynamic, head-strong CEO of Oracle is the one who mandates change and makes it happen. Our challenge in the DoD is to find that Ellison, empower that person with the authority and dollars to transform DoD into a true efficient, technology enabled, e-business for it’s everyday operations.Despite the on-going debate in the press, I have found that the Billion Dollar story is true. And, my findings are backed by a study conducted by Booz-Allen. During Oracle’s latest transformation, they focused on three major areas to move their organization to a true e-business. They consolidated all their systems, not just email, like HR and Financials. and you’ve heard that story. However, they also standardized their processes across the organization, from Oracle Europe to Oracle the Americas and the Far East. Oracle found that just like any other global organization, each of their business units had adopted their own ways of doing business. While that might have been beneficial for the independent business unit, it wasn’t beneficial for the organization as a whole. So, while they consolidated their systems, they also took the best practices of their business units, and standardized their processes and practices implementing their own software. Finally, they focused entirely on a self-service mentality. Even a group VP books his own travel electronically using e-travel. Filing expenses is as simple as filling out a voucher on line, and it’s automatically routed via email to your supervisor for approval and then on to Oracle Headquarters for electronic payment into the employee’s request account. And it’s web based, so you don’t have to be at your client computer to be productive. Oracle relies on a shared services paradigm that goes hand in hand with the standard business processes and practices. And in my discussions with several retired GO’s within Oracle, they found the “self service” culture a bit of a shock initially, but now find it liberating and a means to have more control, with less redundancy. In the military, we have the “self-service mentality also, but it’s not enhanced in any way by technology. I have to walk all over the base to register my car, to file my travel voucher and to plan my travel. In the end,.the one constant through the changes, has been that Larry Ellison, the dynamic, head-strong CEO of Oracle is the one who mandates change and makes it happen. Our challenge in the DoD is to find that Ellison, empower that person with the authority and dollars to transform DoD into a true efficient, technology enabled, e-business for it’s everyday operations.

    47. 47 Recommendations Implement ASD(C3I) (ODITC) Virtual Pentagon Initiative Consolidate Pentagon IT under single joint organization Single Pentagon IT infrastructure architecture Migrate away from client-server architecture Leverage the web; begin with e-mail—easiest to do Re-host interactive software applications Secure, reliable, redundant architecture IAW NSTISSP No 11 Revisit “best of breed” mindset to minimize integration costs Phase out legacy systems Incremental adoption of web-based e-business software suite Accelerate easy to do, “low-hanging fruit” Common financial system, i-Procurement, e-Travel, web-enabled training/education Move DoD toward a full e-business architecture My first recommendation, on the surface, appears to be a no-brainer. But in discussions with the new Office for Information Technology and Communications in the Pentagon, formed after 9-11, it’s not so easy. And not something the services, agencies, and organizations want to happen. Not until a single organization is recognized as joint, is given the authority and funding, and the Pentagon IT dollars are taken from the individual services, will consolidation actually become a fact. The working group, headed by ODITC, immediately after 9-11, made numerous recommendations to implement a survivable IT architecture. But, due to cultural barriers, fell short of extending their recommendations to consolidate it all under a joint organization, and make empower that organization to implement a consolidated IT infrastructure for email and messaging, telephones, network connectivity, mainframe and server support. Their Virtual Pentagon idea is the beginning, but I would view it as phase one, and take it further to give a joint organization the power and funding to truly move the Pentagon IT architecture into the 21st Century, especially in light of 9-11 and the operational reality of needing survivable, redundant networks. However, the services are adamant that this not happen and are continuing to do their own thing. But all is not gloom and doom, some consolidation seems to be taking place at the service level. But there is so much more than could be done, and I would think the tragedy of September 11th would be the driving force to make it happen quickly. I visited with ODITC and heard their classified briefing. The current IT infrastructure at the Pentagon is not survivable, and there seems to be a misconception that it is. The creation of an organization to take control over the Pentagon IT would be the start. Won’t be easy and there will be a lot of push back and grousing at the service level. But this needs to include all entities, including OSD and the joint staff! Talk about a Cultural challenge—but with top down support it can happen. I looked at the current and even proposed Pentagon architecture. It’s so complicated it’s embarrassing…the Oracle email architecture is half as complex, and it handles email connectivity for global operations of 44,000 employees in a single Database instance at a single site, with a fully on-line, redundant back up at an alternate location two states away! Our IT networks are too important for this NOT to happen. The DoD also needs to migrate away from the Client Server architecture and leverage the web. The power of using web-enabled applications is tremendous. However, we need to stop granting waivers for these systems that don’t meet information assurance guidelines and hold the services accountable for following the National Security Telecommunications and Information Systems Security Policy number 11. Are you familiar with the policy? (if answer is no: this policy states that “preference shall be given to the acquisition of COTS Info Assurance and IA-enabled IT products which have been evaluated and validated in accordance with the common criteria, NIAP validation or FIPS validation). And, be a hard core nay sayer on waivers. Our systems are just too important to continue to have back doors, known vulnerabilities, and unreliable support. According to the Standish Group, one minute of downtime costs $2,500 to $10,000. This means even a 99.9% uptime costs an organization $5 million a year. Another preliminary recommendation is to really look at our best of breed mindset. I recognize this is easier said than done, and that regardless of the hype, no suite of software will be all it needs to be for the enterprise. But the goal should be to minimize the touch points to reduce the integration costs and requirements. I understand a great many of these cited initiatives are underway, but the pace is glacial. The question would be why, when Oracle can completely transform it’s entire organization, move to single processes and systems,across the entire enterprise in 18 months. I recognize that the company doesn’t have many of the challenges of the DoD, but there are more similarities than differences, and perhaps even more challenges when you consider Oracle has stockholders questioning its every move. We have stockholders, too, they are called taxpayers and the old barriers need to be broken down. Perhaps the easiest way to do this is make every Service Chief read “who moved my cheese!” I don’t know, but as you know, our wartime environment, means that we need to operate our organization efficiently and effectively. Simply doing away with the IMPAC card for everyday business supplies and implementing I-procurement across the DoD would be a start, something like Web-Mall for the Pentagon but on a grander scale. And it’s really not that hard to do. Finally, the DoD needs to recognize that software is developed using government process and procedures that could work for us with minimal changes. However, the level of customization is at an all time high, even though we preach COTS. We never buy COTS, and hence have along term support costs, and the inability to migrate to new databases structures and take advantage of new technologies when released, because the level of customization has made it impossible.My first recommendation, on the surface, appears to be a no-brainer. But in discussions with the new Office for Information Technology and Communications in the Pentagon, formed after 9-11, it’s not so easy. And not something the services, agencies, and organizations want to happen. Not until a single organization is recognized as joint, is given the authority and funding, and the Pentagon IT dollars are taken from the individual services, will consolidation actually become a fact. The working group, headed by ODITC, immediately after 9-11, made numerous recommendations to implement a survivable IT architecture. But, due to cultural barriers, fell short of extending their recommendations to consolidate it all under a joint organization, and make empower that organization to implement a consolidated IT infrastructure for email and messaging, telephones, network connectivity, mainframe and server support. Their Virtual Pentagon idea is the beginning, but I would view it as phase one, and take it further to give a joint organization the power and funding to truly move the Pentagon IT architecture into the 21st Century, especially in light of 9-11 and the operational reality of needing survivable, redundant networks. However, the services are adamant that this not happen and are continuing to do their own thing. But all is not gloom and doom, some consolidation seems to be taking place at the service level. But there is so much more than could be done, and I would think the tragedy of September 11th would be the driving force to make it happen quickly. I visited with ODITC and heard their classified briefing. The current IT infrastructure at the Pentagon is not survivable, and there seems to be a misconception that it is. The creation of an organization to take control over the Pentagon IT would be the start. Won’t be easy and there will be a lot of push back and grousing at the service level. But this needs to include all entities, including OSD and the joint staff! Talk about a Cultural challenge—but with top down support it can happen. I looked at the current and even proposed Pentagon architecture. It’s so complicated it’s embarrassing…the Oracle email architecture is half as complex, and it handles email connectivity for global operations of 44,000 employees in a single Database instance at a single site, with a fully on-line, redundant back up at an alternate location two states away! Our IT networks are too important for this NOT to happen. The DoD also needs to migrate away from the Client Server architecture and leverage the web. The power of using web-enabled applications is tremendous. However, we need to stop granting waivers for these systems that don’t meet information assurance guidelines and hold the services accountable for following the National Security Telecommunications and Information Systems Security Policy number 11. Are you familiar with the policy? (if answer is no: this policy states that “preference shall be given to the acquisition of COTS Info Assurance and IA-enabled IT products which have been evaluated and validated in accordance with the common criteria, NIAP validation or FIPS validation). And, be a hard core nay sayer on waivers. Our systems are just too important to continue to have back doors, known vulnerabilities, and unreliable support. According to the Standish Group, one minute of downtime costs $2,500 to $10,000. This means even a 99.9% uptime costs an organization $5 million a year. Another preliminary recommendation is to really look at our best of breed mindset. I recognize this is easier said than done, and that regardless of the hype, no suite of software will be all it needs to be for the enterprise. But the goal should be to minimize the touch points to reduce the integration costs and requirements. I understand a great many of these cited initiatives are underway, but the pace is glacial. The question would be why, when Oracle can completely transform it’s entire organization, move to single processes and systems,across the entire enterprise in 18 months. I recognize that the company doesn’t have many of the challenges of the DoD, but there are more similarities than differences, and perhaps even more challenges when you consider Oracle has stockholders questioning its every move. We have stockholders, too, they are called taxpayers and the old barriers need to be broken down. Perhaps the easiest way to do this is make every Service Chief read “who moved my cheese!” I don’t know, but as you know, our wartime environment, means that we need to operate our organization efficiently and effectively. Simply doing away with the IMPAC card for everyday business supplies and implementing I-procurement across the DoD would be a start, something like Web-Mall for the Pentagon but on a grander scale. And it’s really not that hard to do. Finally, the DoD needs to recognize that software is developed using government process and procedures that could work for us with minimal changes. However, the level of customization is at an all time high, even though we preach COTS. We never buy COTS, and hence have along term support costs, and the inability to migrate to new databases structures and take advantage of new technologies when released, because the level of customization has made it impossible.

    48. 48 Recommendations (Cont) Web-based education for recurring training Cyber seminars, routine “training,” real-time senior leader video presentations Benchmark Oracle’s robust programs Stay the course on acquisition reform Industry can help Make the rules work for high speed technology insertion Partner with IT industry to quickly transform DoD to an e-business Renewed industry “patriotism” e-business methodology works for Homeland Security Biometrics, consolidated databases, web-enable applications One area Dr. Chu expressly asked me to look at was how Oracle leverages technology to enhance it’s training and education. Oracle has absolutely the best technology-enabled training and education program I’ve ever seen. Employees can train on their own, from home or from work or from a hotel room when traveling for that matter. They can participate in distance learning, real time, via cyber seminars. In this medium, you call in a predetermined number to enter the conference, then go to a web site to access the slides, as they are being shown on the screen to the live audience. If an employee can’t attend a cyber seminar, the audio is recorded and the employee can go to a web site, and reply the seminar at a time of his or her choosing. For our military and civilian recurring training, leveraging technology to help our folks be more productive while at the same time, meeting our training requirements, I suggest we look closely at Oracle’s web-enabled training and education programs and benchmark them. I’d be happy to help with this initiative. Staying the course, and even speeding up, acquisition reform is a must. I know that Joe has seen it, too, at AMS, but the requirements the military levees whenever we ask for a proposal, is an expensive and time consuming prospect for companies. There must be a way we can entice companies to bid, while at the same time recognizing their costs to answer RFP’s. We also need to figure out that the FAR rules don’t work for quick adoption of technology. This has been a problem for as long as I’ve been in, and we don’t seem to have made much progress. Finally, it goes without saying that September 11 was a watershed event, not only for the DoD but for private industry. I was personally amazed at the level of support industry brought instantaneously to the fight. We need to capitalize on industry's renewed patriotism. Two days after the attack, a key leader in Oracle said the IT industry would be to this war, what the manufacturing industry was to World War II. These organizations are ready, of course, they see the dollars behind it, but even so, they believe that technology and information is the enemy of terror and they are ready to help us win. We need to hone in on their expertise and help us bridge the stovepipes and win this war. Additionally, many of the solutions that make good business sense, make good security sense, like combining biometrics with extensive database information to ensure physical security of airports, bases, etc. Consolidating databases, systems and email to reduce vulnerabilities, and web-enabling applications, using validated and evaluated secure systems, to share information. That concludes my portion of the briefing, are there any questions? Now I’ll turn it over to…. One area Dr. Chu expressly asked me to look at was how Oracle leverages technology to enhance it’s training and education. Oracle has absolutely the best technology-enabled training and education program I’ve ever seen. Employees can train on their own, from home or from work or from a hotel room when traveling for that matter. They can participate in distance learning, real time, via cyber seminars. In this medium, you call in a predetermined number to enter the conference, then go to a web site to access the slides, as they are being shown on the screen to the live audience. If an employee can’t attend a cyber seminar, the audio is recorded and the employee can go to a web site, and reply the seminar at a time of his or her choosing. For our military and civilian recurring training, leveraging technology to help our folks be more productive while at the same time, meeting our training requirements, I suggest we look closely at Oracle’s web-enabled training and education programs and benchmark them. I’d be happy to help with this initiative. Staying the course, and even speeding up, acquisition reform is a must. I know that Joe has seen it, too, at AMS, but the requirements the military levees whenever we ask for a proposal, is an expensive and time consuming prospect for companies. There must be a way we can entice companies to bid, while at the same time recognizing their costs to answer RFP’s. We also need to figure out that the FAR rules don’t work for quick adoption of technology. This has been a problem for as long as I’ve been in, and we don’t seem to have made much progress. Finally, it goes without saying that September 11 was a watershed event, not only for the DoD but for private industry. I was personally amazed at the level of support industry brought instantaneously to the fight. We need to capitalize on industry's renewed patriotism. Two days after the attack, a key leader in Oracle said the IT industry would be to this war, what the manufacturing industry was to World War II. These organizations are ready, of course, they see the dollars behind it, but even so, they believe that technology and information is the enemy of terror and they are ready to help us win. We need to hone in on their expertise and help us bridge the stovepipes and win this war. Additionally, many of the solutions that make good business sense, make good security sense, like combining biometrics with extensive database information to ensure physical security of airports, bases, etc. Consolidating databases, systems and email to reduce vulnerabilities, and web-enabling applications, using validated and evaluated secure systems, to share information. That concludes my portion of the briefing, are there any questions? Now I’ll turn it over to….

    49. 49 AMS, Inc. International business and information technology consulting One of 20 largest international business/IT consulting firms Headquartered in Fairfax, Virginia 7,000 employees, 49 offices worldwide 2001 revenues: $1.2 Billion 30 consecutive years of growth Market Presence Recognized Industry Leader One of Fortune Top 50 “Best Companies to Work For” Forbes Platinum 400 Company For standardization purpose – recommend either we ALL list what are assignments covered or NONE of us put it in. Linda: I agree and vote we eliminate assignment, as we can tell them if asked.For standardization purpose – recommend either we ALL list what are assignments covered or NONE of us put it in. Linda: I agree and vote we eliminate assignment, as we can tell them if asked.

    50. 50 AMS Observations 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

    51. 51 AMS Observations 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

    52. 52 AMS Recommendations Aggressive pursue use of Knowledge Management systems throughout DoD Maintains knowledge in house, impact of turnover lessened KM more than technology – good Change Management program is critical to KM acceptance/success Accelerate acquisition reform pace Allows government to fully leverage competition Mitigates risk for industry participants Continue incremental fielding for technology/products Gets capability to the warfighter quicker – the 80% solution works Benefits apply to software & weapons systems alike Continues development while providing capability in the field. Common Services Model works Potential savings can be realized consolidating Service specific common functions

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