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FINAL REPORT of the Secretary of Defense Corporate Fellows Program 1999-2000

2. SDCFP Background. SECDEF concerns for future Service leadersOpen to organizational and operational changeRecognize opportunities made possible by info techAppreciate resulting revolutionary changes underway Affecting society and business nowAffecting culture and operations of DoD in future

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FINAL REPORT of the Secretary of Defense Corporate Fellows Program 1999-2000

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    1. DR. WHITE, SECRETARY WIDNALL, CNO WE ARE PRESENTING TO YOU THE OUTBRIEF OF THE SECOND YEAR OF THE SECDEF FELLOWS PROGRAM.DR. WHITE, SECRETARY WIDNALL, CNO WE ARE PRESENTING TO YOU THE OUTBRIEF OF THE SECOND YEAR OF THE SECDEF FELLOWS PROGRAM.

    2. 2 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 THE SECDEF FELLOWS PROGRAM BEGAN WITH A TWO-FOLD REALIZATION AT HIGH LEVELS WITHIN DOD THAT: WE WERE ENTERING AN ERA OF REVOLUTIONARY CHANGE IN BOTH THE OPERATIONS AND BUSINESS OF THE MILITARY, FUELED BY THE POSSIBILITIES OF INFORMATION AGE TECHNOLOGY. THE CIVILIAN SECTOR WAS SUCCESSFULLY ADAPTING TO AND EXPLOITING THE INFORMATION REVOLUTION BY RESHAPING THEMSELVES MORE RAPIDLY THAN DOD THE SECDEF FELLOWS PROGRAM BEGAN WITH A TWO-FOLD REALIZATION AT HIGH LEVELS WITHIN DOD THAT: WE WERE ENTERING AN ERA OF REVOLUTIONARY CHANGE IN BOTH THE OPERATIONS AND BUSINESS OF THE MILITARY, FUELED BY THE POSSIBILITIES OF INFORMATION AGE TECHNOLOGY. THE CIVILIAN SECTOR WAS SUCCESSFULLY ADAPTING TO AND EXPLOITING THE INFORMATION REVOLUTION BY RESHAPING THEMSELVES MORE RAPIDLY THAN DOD

    3. 3 SDCFP Origin RMA Senior Steering Group recommended: - SECDEF Fellows Program - SECDEF Strategic Studies Group - Other (Concept Development Center, etc..) Established by SECDEF memo - October 6, 1994 DoD Directive 1322.23 - September 2, 1995

    4. 4 SDCFP Organization Two officers from each Service (USMC one) - High flag/general officer potential - O-6 or O-5 - Senior Service College credit (except Army) Eleven months at Sponsoring Company Group Education Permanent Staff - SDCFP Director, Admin Asst. - USD(P), USD(A&T), Net Assessment for oversight - National Defense University for Admin support

    5. 5 SDCFP Objectives 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

    6. 6 SDCFP Results Program objectives fulfilled - Education, education, education - More Sponsors than Fellows available - Inter/intra-group experience sharing Unique corporate experiences - Strong corporate support - Executive/operational level mix - Mergers/restructuring

    7. 7 SDCFP Sponsors 99 - Prior American Management Systems, Andersen Consulting, Boeing, CNN, Caterpillar, Citibank, Cisco Systems, DirecTV, FedEx, Hewlett-Packard, Lockheed Martin, Loral, McDonnell Douglas, McKinsey & Co., Microsoft, Mobil, Netscape, Oracle, Northrop Grumman, PricewaterhouseCoopers, Raytheon Systems, Sarnoff Corp, Sears, Southern Company, Sun Microsystems 00 - 01 ABB, Agilent Technologies, Andersen Consulting, Caterpillar, Enron, Human Genome Sciences, Northrop Grumman

    8. 8 1999-2000 Fellows LTC Keith Armstrong McKinsey & Co. Houston, TX RADM(S) Steven Enewold Lockheed Martin Gaithersburg, MD Lt Col Brenda Johnson Sarnoff Corporation Princeton, NJ Col Darren McDew Sun Microsystems Palo Alto, CA CDR Burt Palmer Citigroup New York, NY Col Art Sass Federal Express Memphis, TN

    9. 9 - World-wide Management Consulting Firm: McKinsey and Company is probably the business world’s best kept secret. Its almost 75 years of success can be attributed to a handful of things, most importantly a clear and decisive vision and top quality work. So what differentiates this firm from the other consulting firms? Mainly its people, which I will discuss more about in a moment! - McKinsey was the first management consulting firm to develop the client support / engagement team. Instead of engaging a client with a singular focus aimed at only solving a perceived problem, McKinsey chooses to include employees from the client to assist in getting to the meat of the problem. McKinsey does, what in essence, is a preparation of the battlefield. They gather all available information on the client and the industry before work begins. Their goal is to be fully prepared upon entry into the client situation. At the same time, they get buy-in from the client by including them in on the problem solving process. This client / McKinsey relationship allows the team to focus, not only on the perceived problem, but also underlying problems be it organizational, human relations, production, distribution and so on. McKinsey has shown a constant 15% per year growth rate over its life span, and although it is not the largest consulting firm in terms of revenue, it is the most lucrative for its employees. One of the more impressive impacts of this company is that it grows business leaders. Listed on the slide are only a fraction of the key companies lead by McKinsey alum. - Mission: The Firm’s mission is startlingly simple, but is truly the basis for the firms success. I find it interesting how it is similar to the Army’s mission. For instance, we help our allies (clients) improve by providing a free and democratic world in which to grow (Operations Other Than War - Deterrence) while at the same time improving our own forces especially by attracting the best soldiers to fight and win the nations wars. There are many similarities between McKinsey and the armed forces yet we operate so differently. - Goal: The goal of the firm could have been written for the military and certainly by the military. Simply stated, it means that McKinsey will apply all of its resources to assist a client, 24-hours a day, anywhere in the world. Sort of sounds like echoes from the past - Global Reach, Global Power.- World-wide Management Consulting Firm: McKinsey and Company is probably the business world’s best kept secret. Its almost 75 years of success can be attributed to a handful of things, most importantly a clear and decisive vision and top quality work. So what differentiates this firm from the other consulting firms? Mainly its people, which I will discuss more about in a moment! - McKinsey was the first management consulting firm to develop the client support / engagement team. Instead of engaging a client with a singular focus aimed at only solving a perceived problem, McKinsey chooses to include employees from the client to assist in getting to the meat of the problem. McKinsey does, what in essence, is a preparation of the battlefield. They gather all available information on the client and the industry before work begins. Their goal is to be fully prepared upon entry into the client situation. At the same time, they get buy-in from the client by including them in on the problem solving process. This client / McKinsey relationship allows the team to focus, not only on the perceived problem, but also underlying problems be it organizational, human relations, production, distribution and so on. McKinsey has shown a constant 15% per year growth rate over its life span, and although it is not the largest consulting firm in terms of revenue, it is the most lucrative for its employees. One of the more impressive impacts of this company is that it grows business leaders. Listed on the slide are only a fraction of the key companies lead by McKinsey alum. - Mission: The Firm’s mission is startlingly simple, but is truly the basis for the firms success. I find it interesting how it is similar to the Army’s mission. For instance, we help our allies (clients) improve by providing a free and democratic world in which to grow (Operations Other Than War - Deterrence) while at the same time improving our own forces especially by attracting the best soldiers to fight and win the nations wars. There are many similarities between McKinsey and the armed forces yet we operate so differently. - Goal: The goal of the firm could have been written for the military and certainly by the military. Simply stated, it means that McKinsey will apply all of its resources to assist a client, 24-hours a day, anywhere in the world. Sort of sounds like echoes from the past - Global Reach, Global Power.

    10. 10 - World-wide Management Consulting Firm: McKinsey and Company is probably the business world’s best kept secret. Its almost 75 years of success can be attributed to a handful of things, most importantly a clear and decisive vision and top quality work. So what differentiates this firm from the other consulting firms? Mainly its people, which I will discuss more about in a moment! - McKinsey was the first management consulting firm to develop the client support / engagement team. Instead of engaging a client with a singular focus aimed at only solving a perceived problem, McKinsey chooses to include employees from the client to assist in getting to the meat of the problem. McKinsey does, what in essence, is a preparation of the battlefield. They gather all available information on the client and the industry before work begins. Their goal is to be fully prepared upon entry into the client situation. At the same time, they get buy-in from the client by including them in on the problem solving process. This client / McKinsey relationship allows the team to focus, not only on the perceived problem, but also underlying problems be it organizational, human relations, production, distribution and so on. McKinsey has shown a constant 15% per year growth rate over its life span, and although it is not the largest consulting firm in terms of revenue, it is the most lucrative for its employees. One of the more impressive impacts of this company is that it grows business leaders. Listed on the slide are only a fraction of the key companies lead by McKinsey alum. - Mission: The Firm’s mission is startlingly simple, but is truly the basis for the firms success. I find it interesting how it is similar to the Army’s mission. For instance, we help our allies (clients) improve by providing a free and democratic world in which to grow (Operations Other Than War - Deterrence) while at the same time improving our own forces especially by attracting the best soldiers to fight and win the nations wars. There are many similarities between McKinsey and the armed forces yet we operate so differently. - Goal: The goal of the firm could have been written for the military and certainly by the military. Simply stated, it means that McKinsey will apply all of its resources to assist a client, 24-hours a day, anywhere in the world. Sort of sounds like echoes from the past - Global Reach, Global Power.- World-wide Management Consulting Firm: McKinsey and Company is probably the business world’s best kept secret. Its almost 75 years of success can be attributed to a handful of things, most importantly a clear and decisive vision and top quality work. So what differentiates this firm from the other consulting firms? Mainly its people, which I will discuss more about in a moment! - McKinsey was the first management consulting firm to develop the client support / engagement team. Instead of engaging a client with a singular focus aimed at only solving a perceived problem, McKinsey chooses to include employees from the client to assist in getting to the meat of the problem. McKinsey does, what in essence, is a preparation of the battlefield. They gather all available information on the client and the industry before work begins. Their goal is to be fully prepared upon entry into the client situation. At the same time, they get buy-in from the client by including them in on the problem solving process. This client / McKinsey relationship allows the team to focus, not only on the perceived problem, but also underlying problems be it organizational, human relations, production, distribution and so on. McKinsey has shown a constant 15% per year growth rate over its life span, and although it is not the largest consulting firm in terms of revenue, it is the most lucrative for its employees. One of the more impressive impacts of this company is that it grows business leaders. Listed on the slide are only a fraction of the key companies lead by McKinsey alum. - Mission: The Firm’s mission is startlingly simple, but is truly the basis for the firms success. I find it interesting how it is similar to the Army’s mission. For instance, we help our allies (clients) improve by providing a free and democratic world in which to grow (Operations Other Than War - Deterrence) while at the same time improving our own forces especially by attracting the best soldiers to fight and win the nations wars. There are many similarities between McKinsey and the armed forces yet we operate so differently. - Goal: The goal of the firm could have been written for the military and certainly by the military. Simply stated, it means that McKinsey will apply all of its resources to assist a client, 24-hours a day, anywhere in the world. Sort of sounds like echoes from the past - Global Reach, Global Power.

    11. 11 - World-wide Management Consulting Firm: McKinsey and Company is probably the business world’s best kept secret. Its almost 75 years of success can be attributed to a handful of things, most importantly a clear and decisive vision and top quality work. So what differentiates this firm from the other consulting firms? Mainly its people, which I will discuss more about in a moment! - McKinsey was the first management consulting firm to develop the client support / engagement team. Instead of engaging a client with a singular focus aimed at only solving a perceived problem, McKinsey chooses to include employees from the client to assist in getting to the meat of the problem. McKinsey does, what in essence, is a preparation of the battlefield. They gather all available information on the client and the industry before work begins. Their goal is to be fully prepared upon entry into the client situation. At the same time, they get buy-in from the client by including them in on the problem solving process. This client / McKinsey relationship allows the team to focus, not only on the perceived problem, but also underlying problems be it organizational, human relations, production, distribution and so on. McKinsey has shown a constant 15% per year growth rate over its life span, and although it is not the largest consulting firm in terms of revenue, it is the most lucrative for its employees. One of the more impressive impacts of this company is that it grows business leaders. Listed on the slide are only a fraction of the key companies lead by McKinsey alum. - Mission: The Firm’s mission is startlingly simple, but is truly the basis for the firms success. I find it interesting how it is similar to the Army’s mission. For instance, we help our allies (clients) improve by providing a free and democratic world in which to grow (Operations Other Than War - Deterrence) while at the same time improving our own forces especially by attracting the best soldiers to fight and win the nations wars. There are many similarities between McKinsey and the armed forces yet we operate so differently. - Goal: The goal of the firm could have been written for the military and certainly by the military. Simply stated, it means that McKinsey will apply all of its resources to assist a client, 24-hours a day, anywhere in the world. Sort of sounds like echoes from the past - Global Reach, Global Power.- World-wide Management Consulting Firm: McKinsey and Company is probably the business world’s best kept secret. Its almost 75 years of success can be attributed to a handful of things, most importantly a clear and decisive vision and top quality work. So what differentiates this firm from the other consulting firms? Mainly its people, which I will discuss more about in a moment! - McKinsey was the first management consulting firm to develop the client support / engagement team. Instead of engaging a client with a singular focus aimed at only solving a perceived problem, McKinsey chooses to include employees from the client to assist in getting to the meat of the problem. McKinsey does, what in essence, is a preparation of the battlefield. They gather all available information on the client and the industry before work begins. Their goal is to be fully prepared upon entry into the client situation. At the same time, they get buy-in from the client by including them in on the problem solving process. This client / McKinsey relationship allows the team to focus, not only on the perceived problem, but also underlying problems be it organizational, human relations, production, distribution and so on. McKinsey has shown a constant 15% per year growth rate over its life span, and although it is not the largest consulting firm in terms of revenue, it is the most lucrative for its employees. One of the more impressive impacts of this company is that it grows business leaders. Listed on the slide are only a fraction of the key companies lead by McKinsey alum. - Mission: The Firm’s mission is startlingly simple, but is truly the basis for the firms success. I find it interesting how it is similar to the Army’s mission. For instance, we help our allies (clients) improve by providing a free and democratic world in which to grow (Operations Other Than War - Deterrence) while at the same time improving our own forces especially by attracting the best soldiers to fight and win the nations wars. There are many similarities between McKinsey and the armed forces yet we operate so differently. - Goal: The goal of the firm could have been written for the military and certainly by the military. Simply stated, it means that McKinsey will apply all of its resources to assist a client, 24-hours a day, anywhere in the world. Sort of sounds like echoes from the past - Global Reach, Global Power.

    12. 12 1999-2000 Fellows LTC Keith Armstrong McKinsey & Co. Houston, TX RADM(S) Steven Enewold Lockheed Martin Gaithersburg, MD Lt Col Brenda Johnson Sarnoff Corporation Princeton, NJ Col Darren McDew Sun Microsystems Palo Alto, CA CDR Burt Palmer Citigroup New York, NY Col Art Sass Federal Express Memphis, TN

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    16. 16 1999-2000 Fellows LTC Keith Armstrong McKinsey & Co. Houston, TX RADM(S) Steven Enewold Lockheed Martin Gaithersburg, MD Lt Col Brenda Johnson Sarnoff Corporation Princeton, NJ Col Darren McDew Sun Microsystems Palo Alto, CA CDR Burt Palmer Citigroup New York, NY Col Art Sass Federal Express Memphis, TN

    17. 17 Sarnoff Corporation The Company Founded in 1942 as the RCA research lab For-profit subsidiary of SRI International since 1987 Innovative electronics-based research organization 750+ employees, $130M revenue, two new patents every week 19 successful spin-offs, first IPO in May 00, more soon Contract R&D, manufacturing, and recently an Internet Incubator Balance in tech creativity and business discipline Scientists & engineers into entrepreneurs, PMs, and leaders Assignment: Life Sciences and Systems Business Unit All phases of technology venture development and execution Strategic planning, change leadership, & process improvement Biotechnology (two ventures, brainstorming, DSB Task Force) DoD-Sarnoff R&D Strategic Supplier Alliance Breakthrough Rapid Improvement Team (RIT)

    18. 18 Observations/Recommendations Technology = survival of the smartest DoD not aggressive in tracking/contacting the marketplace DoD access to technology is decreasing Intellectual Property is key - more security means less talk & pubs DoD seen as a slow, unprofitable & fragmented market Intellectual property is only useful if it creates value sooner than later Can’t find the right DoD customer, R&D rarely transitions to warfighter Marketplace going at hyperspeed; DoD takes too long, too many stakeholders, untimely payments, full & open competition, low fees Cost sharing favors large, established companies- NOT new ventures Expand use of strategic alliances (R&D, National Technology Alliance), spin-offs (CIA’s In-Q-Tel), govt teaming, commercial-like contracts People are like PCs – bio-hacking, bugs, reprogramming, enhancers Concerns: Ethical use of technology, David & Goliath issues

    19. 19 Observations/Recommendations Engineered Pathogen Identification and Countermeasures (EPIC) Program The Concern The Human Genome program will soon complete the map of the human genome. While the human genome map promises beneficial advances in disease understanding and treatments, the program will also provide the knowledge needed for development of new and unknown pathogens for biological warfare. The results of the human genome sequencing will be published and openly available. Adversaries will be able to use this data to engineer biological weapons. The infrastructure and investment needed to do this are minimal National Posture US biological warfare research is largely focused on known pathogens (e.g. anthrax, plague, Ebola, etc.). There is little research on potential engineered pathogen agents and no operational capability to deal effectively with a domestic attack. There is no established system for early detection of domestic biological attacks and no capability to rapidly sequence a pathogen DNA, compute its protein structure, design and test antigens, and manufacture remedies or vaccines on a mass scale for the American people. This "bug to drug" cycle takes at least 5-10 years to develop and deploy treatments. An effective biological attack response requires shortening this cycle to weeks or months. Technology Challenges Shortening the response cycle from years to weeks will require major breakthroughs in five key areas: Biosensors and diagnostics that can detect and identify previously unknown pathogens in a matter of hours (today’s research is focused on known agents) Capability to sequence an unknown pathogen's DNA and completely characterize proteins and biological pathways, in days rather than months Rapid computational methods to map the protein molecular structure and find promising binding sites for drug molecules (which today takes many months) Ability to design and test antigens rapidly, with confidence of efficacy and safety (which today takes years) Ability to transition experimental drugs quickly into high volume production and provide delivery mechanisms for effective treatment of large populations The technological breakthroughs needed in these five areas can be realized only with a concerted effort. 1. See Living Nightmares: Biological Warfare Threats Enabled by Molecular Biology by Steven M. Block, Ph.D., Member, JASON Group; for The New Terror, Facing the Threat of Biological and Chemical Weapons, Hoover Institution Press, Stanford University 2. DARPAs planned spending in FY01 for genetic sequencing of biological agents totals $2.5 million. This effort will be transferred to the Department of Energy. Focused funding at the National Institutes of Health (NIH) and the Center for Disease Control and Prevention (CDC) are unknownEngineered Pathogen Identification and Countermeasures (EPIC) Program The Concern The Human Genome program will soon complete the map of the human genome. While the human genome map promises beneficial advances in disease understanding and treatments, the program will also provide the knowledge needed for development of new and unknown pathogens for biological warfare. The results of the human genome sequencing will be published and openly available. Adversaries will be able to use this data to engineer biological weapons. The infrastructure and investment needed to do this are minimal National Posture US biological warfare research is largely focused on known pathogens (e.g. anthrax, plague, Ebola, etc.). There is little research on potential engineered pathogen agents and no operational capability to deal effectively with a domestic attack. There is no established system for early detection of domestic biological attacks and no capability to rapidly sequence a pathogen DNA, compute its protein structure, design and test antigens, and manufacture remedies or vaccines on a mass scale for the American people. This "bug to drug" cycle takes at least 5-10 years to develop and deploy treatments. An effective biological attack response requires shortening this cycle to weeks or months. Technology Challenges Shortening the response cycle from years to weeks will require major breakthroughs in five key areas: Biosensors and diagnostics that can detect and identify previously unknown pathogens in a matter of hours (today’s research is focused on known agents) Capability to sequence an unknown pathogen's DNA and completely characterize proteins and biological pathways, in days rather than months Rapid computational methods to map the protein molecular structure and find promising binding sites for drug molecules (which today takes many months) Ability to design and test antigens rapidly, with confidence of efficacy and safety (which today takes years) Ability to transition experimental drugs quickly into high volume production and provide delivery mechanisms for effective treatment of large populations The technological breakthroughs needed in these five areas can be realized only with a concerted effort. 1. See Living Nightmares: Biological Warfare Threats Enabled by Molecular Biology by Steven M. Block, Ph.D., Member, JASON Group; for The New Terror, Facing the Threat of Biological and Chemical Weapons, Hoover Institution Press, Stanford University 2. DARPAs planned spending in FY01 for genetic sequencing of biological agents totals $2.5 million. This effort will be transferred to the Department of Energy. Focused funding at the National Institutes of Health (NIH) and the Center for Disease Control and Prevention (CDC) are unknown

    20. 20 1999-2000 Fellows LTC Keith Armstrong McKinsey & Co. Houston, TX RADM(S) Steven Enewold Lockheed Martin Gaithersburg, MD Lt Col Brenda Johnson Sarnoff Corporation Princeton, NJ Col Darren McDew Sun Microsystems Palo Alto, CA CDR Burt Palmer Citigroup New York, NY Col Art Sass Federal Express Memphis, TN

    21. 21 Sun Microsystems The company A teenager in the Silicon Valley—founded in 1982 35K+ employees; $15B+ revenue; #150 in fortune 500; $163B market cap Undergone continuous innovation and reinvention since 1982 "The network is the computer"... and still is Refocused: workstations to enterprise servers and software to services Today: “We’re the dot in .Com” and… the “O in the Old Economy” Vision: #1 provider of products, technologies and services for enabling the net economy Assignment : Assistant to VP, Chief Information Officer (CIO) Contributions to Sun Active member of Sun’s staff:Information Management Group, Leadership Council, Public Policy Forum DoD ambassador; leadership “consultant”; disciplined perspective

    22. 22 Sun Microsystems Observations Technology big bets Service driven network: applications delivered to the browser Massive scale: bandwidth costs declining 30-50%; usage up 3-4X Continuous, real-time availability mandatory Business strategy Focus on core competencies 1st Acquire to build business position; partner to fill gap “e-” everything or mothball it! Strategic planning horizon: 20 months v. 20 years @ DoD Innovation and speed to market valued and highly rewarded Challenging work, compensation packages keep the best Greatest strength (agility) is also greatest weakness Leadership gaps negatively impacts retention and execution Being the UNIX employer of choice aids recruiting!

    23. 23 Recommendations Accelerate transition to electronic environment Use DoD expertise to get security procedures right Partner to develop “MyMilitary.mil” portal Personalized, content-rich service…anywhere, anytime Web enable ALL tools and processes Great way to “advertise” to present and future workforce Grant universal internet access to troops Leverage economic position: FREE internet service and PCs Remove barriers: MILCON, financial, hardware, policy Invest in “thin client” architecture Perfect for the Pentagon…billions in savings Totally Wireless for workers authorized cell phones Cell phone & laptop OR desktop PC w/ desk phone…not both “Smart card” must include additional applications Purchase card, Credit card, Club card, building access Outsource non core IT function; insist on interoperability

    24. 24 1999-2000 Fellows LTC Keith Armstrong McKinsey & Co. Houston, TX RADM(S) Steven Enewold Lockheed Martin Gaithersburg, MD Lt Col Brenda Johnson Sarnoff Corporation Princeton, NJ Col Darren McDew Sun Microsystems Palo Alto, CA CDR Burt Palmer Citigroup New York, NY Col Art Sass Federal Express Memphis, TN

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    28. 28 1999-2000 Fellows LTC Keith Armstrong McKinsey & Co. Houston, TX RADM(S) Steven Enewold Lockheed Martin Gaithersburg, MD Lt Col Brenda Johnson Sarnoff Corporation Princeton, NJ Col Darren McDew Sun Microsystems Palo Alto, CA CDR Burt Palmer Citigroup New York, NY Col Art Sass Federal Express Memphis, TN

    29. 29 Federal Express World’s largest express-transportation company Serving 210 countries worldwide Employees: 156,000 Revenues 1999: $17 Billion Ground Transport Vehicles: 44,500+ Aircraft Fleet: 650 (air cargo fleet second only to USAF) Assignment: FedEx Strategy Core Team Embed strategic thinking throughout the company Identify potential future market spaces Validate market spaces against plausible realities (scenarios)

    30. 30 Federal Express Observations Strategic Planning (6-18 Months) Short-term, narrow scope Flexible budget process accommodates changes in strategic plan Recruiting/Retention Issues Approximately 22% annual turnover (mostly lower levels) Morale among tenured employees (12+ years) Operate Independently- Compete Collectively FedEx: Express, Ground, Custom-Critical, Logistics Transportation/Distribution/Information Network “Best in the world”? Recruiting: Internet, head-hunters, campus recruiting, employee referrals stock ownership universal lunch on the house free sodas, coffee, tea and popcornRecruiting: Internet, head-hunters, campus recruiting, employee referrals stock ownership universal lunch on the house free sodas, coffee, tea and popcorn

    31. 31 Recommendations Invest in an all out effort to integrate military logistics throughout DoD -- REINVENT where necessary… Emphasize distribution over transportation Integrated information network Continue to explore and invest in Web-based technology Don’t let best get in the way of better DoD must posture itself for highly skilled personnel Better to partner than compete with Corporate America Recruiting: Internet, head-hunters, campus recruiting, employee referrals stock ownership universal lunch on the house free sodas, coffee, tea and popcornRecruiting: Internet, head-hunters, campus recruiting, employee referrals stock ownership universal lunch on the house free sodas, coffee, tea and popcorn

    32. 32 Common Observations/Recommendations Operational Change Organizational Change Transformation Service and DoD Implications

    33. 33 Common Findings Human Resources Dealing with DoD Information Technology Information Security Technology Use/Access Strategic Planning/Resource Allocation Business Best Practices Partnerships/Alliances/Teaming Internal Organization

    34. 34 Human Resources Common Findings Renew focus on DoD strengths for recruiting Institutional values … duty, honor, country Leadership development, education and training Challenging work, significant responsibility at early age Gender & race-blind mentoring - diversity as a strength Ensure leaders understand impact; assigned HR accountability Performance report comment Help DoD close cultural divide with civilian community Carefully manage the top 10% … and the bottom 10% Benchmark “Fortune 100” - become equivalent War for Talent EXISTS - no easy fix; apply all available resources now or experience greater costs later Intellectual property, intangible assets more valuable than fixed assets Talent migratory; long-term dedication, loyalty waning - Corporate culture: Some aspects of the McKinsey corporate culture are very similar to the military. We see our own talented officers, warrant officers, and enlisted personnel migrating to greener pastures just as private industry sees their employees coming and going. The lure of service to your country or devotion to your employer is not as strong as it once was. For example, due to quality of life issues and other companies poaching McKinsey employees, the firm suffers an attrition rate of 50-60% within the first four years of any given year group. Only 20 % of what’s left will make it to Director or the highest levels of the firm. With the existing up or out policy no one makes it to retirement. They either quit or are asked to quit, are hired away with a more attractive offer, or are presented an incentive package at age 55 that is so lucrative that no one in the history of McKinsey has ever turned it down. We are experiencing similar retention problems, most of which are explained away as quality of life issues and for which we cannot through additional dollars. - Several differences of note are that McKinsey is a very flat, non-hierarchical company where highly qualified, aggressive consultants can build their own kingdoms. Each employee can operate independently within the Firm IAW general guidelines and limited mentoring. Each employee must meet certain gates for promotion to the next level, some moving faster than others. Although the engagement team process works well with clients, it does nothing to foster teamwork or develop leaders as we know them. It is rare that you will have two of the same people on consecutive studies. We have seen what that type of concept does to tank and Bradley crews or air crews. Employees are free to use their special talents for personal and corporate gain. In fact, they are rewarded for new and innovative thinking. They are rewarded for taking on the hard jobs. They are incentivized. The underlying force that pushes this corporate machine is money - big money in the form of pay and benefits. If it were not for the pay and benefits, McKinsey would be defunct. - Winning organization’s best practices: I think for us most of these are common sense, but the challenge for DoD is how to be new and innovative within the oldest, largest, busiest, and most successful company in the world. We have a sound strategy and are constantly evaluating and updating that strategy. By the way, strategy in the private sector is a very strange and illusive phenomenon. Many companies cannot get their arms around the concept or the industry they are in is changing so quickly that their strategic horizon is 3-6 months out. Execution, in my mind is the military’s strongest suit; we truly deliver value to our customers! The last two areas are much more difficult to define. Our organization is certainly not fast and flat, nor would I advocate that it would be the correct structure for the military, but I would like to give you an opinion on talent. - Corporate culture: Some aspects of the McKinsey corporate culture are very similar to the military. We see our own talented officers, warrant officers, and enlisted personnel migrating to greener pastures just as private industry sees their employees coming and going. The lure of service to your country or devotion to your employer is not as strong as it once was. For example, due to quality of life issues and other companies poaching McKinsey employees, the firm suffers an attrition rate of 50-60% within the first four years of any given year group. Only 20 % of what’s left will make it to Director or the highest levels of the firm. With the existing up or out policy no one makes it to retirement. They either quit or are asked to quit, are hired away with a more attractive offer, or are presented an incentive package at age 55 that is so lucrative that no one in the history of McKinsey has ever turned it down. We are experiencing similar retention problems, most of which are explained away as quality of life issues and for which we cannot through additional dollars. - Several differences of note are that McKinsey is a very flat, non-hierarchical company where highly qualified, aggressive consultants can build their own kingdoms. Each employee can operate independently within the Firm IAW general guidelines and limited mentoring. Each employee must meet certain gates for promotion to the next level, some moving faster than others. Although the engagement team process works well with clients, it does nothing to foster teamwork or develop leaders as we know them. It is rare that you will have two of the same people on consecutive studies. We have seen what that type of concept does to tank and Bradley crews or air crews. Employees are free to use their special talents for personal and corporate gain. In fact, they are rewarded for new and innovative thinking. They are rewarded for taking on the hard jobs. They are incentivized. The underlying force that pushes this corporate machine is money - big money in the form of pay and benefits. If it were not for the pay and benefits, McKinsey would be defunct. - Winning organization’s best practices: I think for us most of these are common sense, but the challenge for DoD is how to be new and innovative within the oldest, largest, busiest, and most successful company in the world. We have a sound strategy and are constantly evaluating and updating that strategy. By the way, strategy in the private sector is a very strange and illusive phenomenon. Many companies cannot get their arms around the concept or the industry they are in is changing so quickly that their strategic horizon is 3-6 months out. Execution, in my mind is the military’s strongest suit; we truly deliver value to our customers! The last two areas are much more difficult to define. Our organization is certainly not fast and flat, nor would I advocate that it would be the correct structure for the military, but I would like to give you an opinion on talent.

    35. 35 Human Resources Common Findings Money NOT only key lever to attracting & retaining top talent Increase total compensation and benefits package Tax exemption options Launch “Mileage Plus” frequent flyer program Match market value Reduce gap between officer and enlisted salaries Build “Perks@work” web site; leverage DoD buying power Provides one-stop shopping for employees Raise QOL attention to detail; use new methods and techniques Gen-X is different, not better or worse Recruit individuals; retain families Vet new ideas outside the Pentagon Pick “low hanging fruit”; do easy fixes … quickly Robust health and dental plans, dual worker family plans, adult day care, telecommuting, on-site child care, hospice services, major signing bonuses, incentive pay, investment packages (TSP or 401K for active duty) Develop military to civil service transfer plan - Corporate culture: Some aspects of the McKinsey corporate culture are very similar to the military. We see our own talented officers, warrant officers, and enlisted personnel migrating to greener pastures just as private industry sees their employees coming and going. The lure of service to your country or devotion to your employer is not as strong as it once was. For example, due to quality of life issues and other companies poaching McKinsey employees, the firm suffers an attrition rate of 50-60% within the first four years of any given year group. Only 20 % of what’s left will make it to Director or the highest levels of the firm. With the existing up or out policy no one makes it to retirement. They either quit or are asked to quit, are hired away with a more attractive offer, or are presented an incentive package at age 55 that is so lucrative that no one in the history of McKinsey has ever turned it down. We are experiencing similar retention problems, most of which are explained away as quality of life issues and for which we cannot through additional dollars. - Several differences of note are that McKinsey is a very flat, non-hierarchical company where highly qualified, aggressive consultants can build their own kingdoms. Each employee can operate independently within the Firm IAW general guidelines and limited mentoring. Each employee must meet certain gates for promotion to the next level, some moving faster than others. Although the engagement team process works well with clients, it does nothing to foster teamwork or develop leaders as we know them. It is rare that you will have two of the same people on consecutive studies. We have seen what that type of concept does to tank and Bradley crews or air crews. Employees are free to use their special talents for personal and corporate gain. In fact, they are rewarded for new and innovative thinking. They are rewarded for taking on the hard jobs. They are incentivized. The underlying force that pushes this corporate machine is money - big money in the form of pay and benefits. If it were not for the pay and benefits, McKinsey would be defunct. - Winning organization’s best practices: I think for us most of these are common sense, but the challenge for DoD is how to be new and innovative within the oldest, largest, busiest, and most successful company in the world. We have a sound strategy and are constantly evaluating and updating that strategy. By the way, strategy in the private sector is a very strange and illusive phenomenon. Many companies cannot get their arms around the concept or the industry they are in is changing so quickly that their strategic horizon is 3-6 months out. Execution, in my mind is the military’s strongest suit; we truly deliver value to our customers! The last two areas are much more difficult to define. Our organization is certainly not fast and flat, nor would I advocate that it would be the correct structure for the military, but I would like to give you an opinion on talent. - Corporate culture: Some aspects of the McKinsey corporate culture are very similar to the military. We see our own talented officers, warrant officers, and enlisted personnel migrating to greener pastures just as private industry sees their employees coming and going. The lure of service to your country or devotion to your employer is not as strong as it once was. For example, due to quality of life issues and other companies poaching McKinsey employees, the firm suffers an attrition rate of 50-60% within the first four years of any given year group. Only 20 % of what’s left will make it to Director or the highest levels of the firm. With the existing up or out policy no one makes it to retirement. They either quit or are asked to quit, are hired away with a more attractive offer, or are presented an incentive package at age 55 that is so lucrative that no one in the history of McKinsey has ever turned it down. We are experiencing similar retention problems, most of which are explained away as quality of life issues and for which we cannot through additional dollars. - Several differences of note are that McKinsey is a very flat, non-hierarchical company where highly qualified, aggressive consultants can build their own kingdoms. Each employee can operate independently within the Firm IAW general guidelines and limited mentoring. Each employee must meet certain gates for promotion to the next level, some moving faster than others. Although the engagement team process works well with clients, it does nothing to foster teamwork or develop leaders as we know them. It is rare that you will have two of the same people on consecutive studies. We have seen what that type of concept does to tank and Bradley crews or air crews. Employees are free to use their special talents for personal and corporate gain. In fact, they are rewarded for new and innovative thinking. They are rewarded for taking on the hard jobs. They are incentivized. The underlying force that pushes this corporate machine is money - big money in the form of pay and benefits. If it were not for the pay and benefits, McKinsey would be defunct. - Winning organization’s best practices: I think for us most of these are common sense, but the challenge for DoD is how to be new and innovative within the oldest, largest, busiest, and most successful company in the world. We have a sound strategy and are constantly evaluating and updating that strategy. By the way, strategy in the private sector is a very strange and illusive phenomenon. Many companies cannot get their arms around the concept or the industry they are in is changing so quickly that their strategic horizon is 3-6 months out. Execution, in my mind is the military’s strongest suit; we truly deliver value to our customers! The last two areas are much more difficult to define. Our organization is certainly not fast and flat, nor would I advocate that it would be the correct structure for the military, but I would like to give you an opinion on talent.

    36. 36 Dealing with DoD Common Findings

    37. 37 Information Technology Common Findings Accelerate INFOTECH transformation to electronic environment Use DoD expertise to get security procedures right Partner to develop “MyMilitary.mil” portal Personalized, content-rich service…anywhere, anytime Web enable ALL tools and processes Great way to “advertise” to present and future workforce Grant universal internet access to troops Remove barriers: MILCON, financial, hardware, policy Leverage economic position: FREE internet service and PCs Invest in “thin client” architecture Perfect for the Pentagon!…billions in savings Totally Wireless for workers authorized cell phones Cell phone & laptop OR desktop PC w/ desk phone…not both Outsource non core IT function; insist on interoperability

    38. 38 Information Security Common Findings Information Security Cyber attacks increasing DoD and commercial systems similar Firewalls ONLY PARTIALLY effective “Off-the-shelf” hacking tools available Information protection requires training and tools Commercial systems (banking) are the edge leading Centralized IT management Network monitoring Intrusion detection and tracking Ethical hacking required before fielding systems Recommendation: Partner with industry for process, training and tools

    39. 39 Technology Use/Access Common Findings DoD use of Technology (Infotech, Biotech, Nanotech) Need Board/Council for the Ethical Use of Technology Personnel privacy/security concerns w/ DNA collection and use Partner with industry on potential use of DoD DNA database Train personnel on biotech & nanotech just like for infotech Need new doctrine, strategy, tactics, international agreements Integrate approach for biotech & nanotech acquisition and use “David & Goliath” studies to look at vulnerabilities & asymmetrical attacks Outsource everything not core to DoD DoD needs Commercial Mindset to access Technology Consider R&D as a commercial service; max use of commercial-like contracting Conduct Entrepreneurial training for all personnel Provide all DoD personnel online access to best business literature & tools Use “Commercial front door” Databases connecting DoD with enterprises and vice versa Organization/infrastructure to support commercial interface Send 50% of Defense Leadership and Management Program (DLAMP) to industry Integrate DoD personnel working in industry using common web umbrella Enhances interaction across programs and participating sponsors Use Change Management Center’s Commercial Business Environment? Recruiting: Internet, head-hunters, campus recruiting, employee referrals stock ownership universal lunch on the house free sodas, coffee, tea and popcornRecruiting: Internet, head-hunters, campus recruiting, employee referrals stock ownership universal lunch on the house free sodas, coffee, tea and popcorn

    40. 40 Strategic Planning/Resource Allocation Common Findings Strategic Planning Everybody talks it, few actually do it “Strategic window” shorter than DoD 6 to 20 months v. 20 years Short-term window drivers Competition Technology Business Environment Resource allocation Flexible processes support strategic plans DoD’s resource allocation plan must be more flexible

    41. 41 Business Best Practices Common Findings “Executives” must understand more than profession of arms Military and civilian; officer and enlisted Initiate “business” training at commissioning source & PME No price is low enough for a bad buy; avoid “deal fever” As important to kill a bad acquisition as to close a good deal! Treat change acceleration as a process: have a champion Create shared need: reason must be instilled In organization Shape vision: desired outcome must be clear, widely understood Fully Commit: key people must invest, demand attention Make change last: learning transferred throughout organization Monitor progress: set benchmarks, establish accountability Install trained CIO at wing/brigade level “Smart card” must include additional applications Purchase card, credit card, club card, building access Leadership conferences reinforce values and vision

    42. 42 Partnerships/Alliances/Teaming Common Findings Determine core competencies first Build on TRUST; must be win-win Look for long term commitments for non-core competencies Re-compete only if necessary Complicates planning and execution for all parties Develop web-based business partnering database Accessible to government and Industry Facilitates inter-service/agency teaming and benchmarking Outsourcing is a partnership—not just a hand off

    43. 43 Internal Organization Common Findings Agile & fast are the most important attributes Flexible, task organized, not hierarchical Decision-making and execution mostly decentralized Business models keep pace with the marketplace Org structure keeps pace w/ new business strategies Dedicated change agents, top-line outside consultants Very customer oriented (internal and external) Want repeat and new business Resolving issues quickly is key Quality check with customer surveys Automated support (pay, travel, legal, IT, financial, etc.) Dynamic & very proactive top leadership No transformation without it

    44. 44 Backup Slides

    45. 45 DoD-Sarnoff Strategic Supplier Alliance RIT (Research and Development Partnerships)

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