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Secretary of Defense Corporate Fellows Final Outbrief Academic Year 2013-2014.

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Presentation on theme: "Secretary of Defense Corporate Fellows Final Outbrief Academic Year 2013-2014."— Presentation transcript:

1 Secretary of Defense Corporate Fellows Final Outbrief Academic Year 2013-2014

2 Secretary of Defense Corporate Fellows Agenda Program overview Industry trends & recommendations –Talent Management –Managing Innovation –Acquisition Process Improvement –Cybersecurity & Leveraging IT –Managing through Budget Uncertainties Further discussion / Q&A 2

3 Secretary of Defense Corporate Fellows Program Overview SECDEF concerns for future Service leaders –More open to organizational and operational change –Recognizing opportunities possible by emerging technologies –Appreciating resulting revolutionary changes 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, technologies and projects 3

4 Secretary of Defense Corporate Fellows Program Overview Fellows have access to best executive level business practices –Strategic Planning –Organization –Change Management –Human Resources –Technology Development (including Information Technology) –Supply Chain –Outsourcing Builds 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 4

5 Secretary of Defense Corporate Fellows Program Overview Reports and Briefings – Monthly Reports and Professional Paper published at end of year – Mid and Year-end Briefings to Pentagon Leadership DEPSECDEF, VCJCS, Service Secretaries & Chiefs, 25+ others –Business insights relevant to DoD culture/operations –Recommended process/organization changes 5

6 Secretary of Defense Corporate Fellows Program Overview All Military Services – Active, Guard, Reserves –O-5/O-6 (post-command or equivalent community milestone) –Thoroughly screened; High General/Flag officer potential –Senior Service College equivalent Pre-assignment Group Education –Current political/military issues; leading edge technologies –Meetings with senior DoD officials, business executives, –Members of Congress, the Press, former sponsors, alumni –Graduate business school Executive Education Ten to Eleven Months at Sponsoring Companies Group visits to each sponsoring company –Meeting CEOs, Senior Leadership team, other executives – Presentations on sponsor’s business sector and best practices 6

7 Secretary of Defense Corporate Fellows Corporate Sponsors Prior Years 3M, ABB Group, Accenture, Agilent Technologies, American Management Systems, Amgen, Andersen Consulting, Apple, Boeing, Booz Allen, CACI, Caterpillar, Cisco, Citigroup, CNN, Deutsche Bank, DirecTV, DuPont, EADS, Enron, ExxonMobil, FedEx, General Dynamics, Georgia Power, Google, Hewlett-Packard, Honeywell, Human Genome Sciences, IBM, Insitu, iRobot, JPMorgan Chase, Johnson & Johnson, Lockheed Martin, Loral, McKinsey, McDonnell Douglas, Merck, Microsoft, Mobil, Netscape, NCR, Northrop Grumman, Oracle, Pfizer, Pratt & Whitney, PricewaterhouseCoopers, Raytheon, SRI/Sarnoff Labs, Sears, Shell, Sikorsky, Southern Company, SpaceX, SRA International, Sun Microsystems, Symbol Technologies, Union Pacific, United Technologies, Vertex Aerospace Current Year (2013-2014) 3M, Amgen, Honeywell, Insitu, iRobot, Johnson & Johnson, McKinsey, Microsoft, Morgan Stanley, Norfolk Southern, Northrop Grumman, Raytheon, Shell, SpaceX, SRI International Next Year (2014-2015) Autodesk, Booz Allen, CACI, Cisco Systems, Dynamic Aviation, FedEx, General Dynamics, Georgia Power, JPMorgan Chase, Lockheed Martin, McAfee, Oracle, Hewlett-Packard, SAP, Sikorsky, Union Pacific 7

8 Secretary of Defense Corporate Fellows Fellows and Corporate Assignments Col (sel) Josh Olson, USAF 3M Company, St. Paul, MN Col (sel) David Peeler, USAFAmgen, Inc., Thousand Oaks, CA COL Michael McTigue, USAHoneywell Aerospace, Phoenix, AZ Col George Schwartz, USAF Insitu, Inc., Bingen, WA LtCol Pete Mahoney, USMC iRobot Corporation, Bedford, MA Col Mary Burrus, ANGJohnson & Johnson, New Brunswick, NJ LTC(P) Larry Dugan, ARNGMcKinsey & Company, Washington, DC LtCol Ahmed Williamson, USMCMicrosoft Corporation, Reston, VA CDR Clark Childers, USNMorgan Stanley, New York, NY Col (sel) Walt Yates, USMCNorfolk Southern Corporation, Norfolk, VA COL James Kaine, USANorthrup Grumman Elec. Systems, Linthicum, MD CDR Tony Jaramillo, USNRaytheon Space & Airborne Systems, McKinney, TX CDR Shelby Mounts, USN Royal Dutch Shell, New Orleans, LA CAPT Billy Palermo, USNSpace-X Corporation, Hawthorne, CA Lt Col Terry L. Thiem, USAFRSRI International, Menlo Park, CA 8

9 Secretary of Defense Corporate Fellows Corporate Sponsor Locations 9

10 Secretary of Defense Corporate Fellows Agenda Program overview Industry trends & recommendations –Talent Management –Managing Innovation –Acquisition Process Improvement –Cybersecurity & Leveraging IT –Managing through Budget Uncertainties Further discussion / Q&A 10

11 Secretary of Defense Corporate Fellows Innovation Dynamic Global and Geopolitical Environment Big Data / Information Competition for Resources Fiscal and Budgetary Pressures Strategy starts with Megatrends  Talent Management  Managing DoD Innovation  Acquisition Process Improvement  Cybersecurity & Leveraging IT  Managing through Budget Uncertainties

12 Secretary of Defense Corporate Fellows Marketplace TrendsDoD as Customer Industry Response during ‘Age of Austerity’ 12 “Innovation” -- What is the Next Big Disruptive Idea (BDI)? Positioning Against Dynamic Global Pressures Positioning Against Dynamic Global Pressures Mixed Signals & Expectations Reorienting Investment Strategies

13 Secretary of Defense Corporate Fellows Industry Trends Rapid Internal Restructuring –Targeted and paced force reductions –Focus on value proposition for shareholders, customers, employees –Examples: iRobot in 2012; SRI International 2013 Aggressive Portfolio Management ‒ Pronounced pivot to commercial, international markets ‒ Recalibrating business cases; capabilities that are / can be commercialized ‒ Heavy risk identification & management for capital deployment strategies Dynamic Global Pressures –Commercial companies penetrating national security marketplace Vice defense contractors transitioning to commercial marketplace –New entrants leveraging commercial technology & robust private capital –Outpacing traditional incumbents 13 Disruptive / Innovative Technologies Will Come From New, Nimble Entrants

14 Secretary of Defense Corporate Fellows DoD as Customer: Mixed Signals & Expectations Increasing use of Lowest Price, Technically Acceptable (LPTA) criteria ‒ Instead of Best Value ‒ Increasing requirements for upfront prototypes/demos at higher tech readiness Levels are changing the cost equation ‒ Most companies OK with open architecture/modular Comes with a premium that must be paid upfront by DoD “identify and pursue clearly defined Grand Challenges” ‒ S&T priorities for FY15 budget in 2013 OMB memo ‒ 2015 FDYP RDT&E plan asks industry to invest more R&D funds, but “prototype and shelve” potential technologies Spend capital for S&T R&D without identified payoff ‒ Not practical without procurement –“higher, faster, farther” & low, slow production directly at odds with high-tech commerce & “better, quicker, cheaper ” (Defense News, 21 Apr 2014) 14 “ We do not do ‘recreational’ S&T R&D” - Chief Scientist, Major Defense Contract or

15 Secretary of Defense Corporate Fellows Agenda Program overview Industry trends & recommendations –Talent Management –Managing Innovation –Acquisition Process Improvement –Cybersecurity & Leveraging IT –Managing through Budget Uncertainties Further discussion / Q&A 15

16 Secretary of Defense Corporate Fellows 16 Civilian companies struggling w/ recruiting military –War for Talent is global “Great Crew Change” of skilled technical workers looming Technical industry competing for experienced talent –Need technically skilled to fill their troughs –Companies do recognize and like Veterans’ “soft skills ” Leadership, teamwork, decision making, risk management Maturity, reliability, dedication –Most companies don’t recognize military technical tal ent Some are figuring it out (Microsoft Software Systems Academy) –Civilian compensation incentives impact retention significantly Recruit Develop Retain Talent Management

17 Secretary of Defense Corporate Fellows 17 Recruit Develop Retain Talent Management Effective companies expend great effort developing future leaders –Corporate leaders develop annual/long-term/stretch goals upfront Performance evaluated against those goals –Leader’s time specifically structured Ensures they’re not “Too busy working to care” about the next generation –Intentional social interactions included –People valued and handled in a way that recognizes they can walk tomorrow High potentials are important, but so is everyone else DoD training pipes are robust but can be improved –Leverage emerging cheap training solutions, e.g., X Box-like gaming console Easily adaptable, highly effective way to deliver broad content spectrum Significant cost reduction alters traditional classroom resource requirements –Improve quality/effectiveness over static-motion training –Younger personnel need look/feel of high quality graphics, “real world” content

18 Secretary of Defense Corporate Fellows 18 Leverage civilian education, innovation/tech development investments –Close Civil-military divide through increased training/refresher in career paths Closer to sources of change, innovation, new technology developments –Train in commercial world vs. traditional military schools Increased span of overall personnel education Reduced brick and mortar cost efficiencies –Increase perceived value of transitioning military personnel in civilian eyes Narrative battle/same language –Unlock opportunities for resource efficiencies in military labs Fill in “Valley of Death” between development silos –Make a down payment for future industrial mobilization –Historical precedent includes Harvard Business School on a large scale WW II four month long Navy War Adjustment Course Recruit Develop Retain Talent Management

19 Secretary of Defense Corporate Fellows 19 Culture crisis a recipe for losing the Talent War –Successful companies have strong culture; people are proud of it –Value of military service now more uncertain Unfocused messaging isn’t delivering through the noise End of wars Budget uncertainty/drawdown impacts –Leadership endorsing reduced compensation increases Global uncertainty and mixed messages from senior leaders Loss of confidence in the institution –Improving economy without a clear call to serve = predictable outcome –DoD can't compete with industry on compensation CAN do a much better job selling the value of service today Compensation structures providing loyalty and longevity incentives WORK Talent Management Recruit Develop Retain

20 Secretary of Defense Corporate Fellows Agenda Program overview Industry trends & recommendations –Talent Management –Managing Innovation –Acquisition Process Improvement –Cybersecurity & Leveraging IT –Managing through Budget Uncertainties Further discussion / Q&A 20

21 Secretary of Defense Corporate Fellows 21 ‘Innovate’, ‘innovation’, ‘innovative’ found 33 times in 2014 QDR Why is innovation important? ‒ Need to reduce acquisition time – get products to warfighter faster ‒ Need to reduce cost due to budget cuts, sequestration ‒ Need to maintain technology advantage on the battlefield What is innovation? ‒ Rapid creation and delivery of a needed capability to the warfighter On and off the battlefield with sustainable/equitable life cycle costs For both DoD and defense industrial base. Managing Innovation Key to Success: Standard definition of Innovation

22 Secretary of Defense Corporate Fellows 22 I ndustry’s innovative technology experiences ‒ Development not a short-term proposition A journey requiring a significant time (3 -5 years or more) to implement ‒ Requires a change in the overall culture of an organization ‒ Requires sustained, long-term commitment from Leadership ‒ Requires training and buy-in at all levels of the organization ‒ Requires funding and dedicated personnel Can not be an additional duty ‒ Better to start programs with experienced contractor personnel Do not try to build internal teams too early ‒ Have to accept there will be failures when reaching for stretch goals Managing Innovation Innovation is a process that must be managed and requires manpower, time and funding to be successful

23 Secretary of Defense Corporate Fellows Agenda Program overview Industry trends & recommendations –Talent Management –Managing Innovation –Acquisition Process Improvement –Cybersecurity & Leveraging IT –Managing through Budget Uncertainties Further discussion / Q&A 23

24 Secretary of Defense Corporate Fellows Large joint/combined requirements programs not delivering promises ‒ Consuming resources that could be used to address real needs ‒ Expectations vs. Reality Future Combat System, Littoral Combat Ship and Joint Strike Fighter Adverse industrial base impacts –Simplify programs and shorten acquisition/development cycles Improve success rate and keep high tech engineers in the game –Minimize requirements; define needs at highest acceptable level Provide flexibility in system solutions –Focus on effective platform capabilities and open architectures I ncorporate follow-on capability upgrades –Fail Fast 24 Acquisition Process Improvement Realistic expectations are critical to program success

25 Secretary of Defense Corporate Fellows Traditional requirements based acquisition ineffective/inefficient ‒ Locks in requirements before understanding what is achievable ‒ Long system development timelines lead to excessive costs Capability delivered to the warfighter much later than needed Embrace capabilities based acquisition ‒ Approach to be use when looking for revolutionary change Capitalize on innovations ready now –Off-the-shelf solutions often provide 80-90% of desired capability Remain agile to prevent technical surprise 25 Acquisition Process Improvement Capabilities based acquisition can save cost and deliver greater capability to the warfighter sooner

26 Secretary of Defense Corporate Fellows Program offices are incapable and/or not empowered to develop and execute streamlined, innovative acquisition approaches –Develop and empower Program Managers to be innovative Open to planning and executing non-standard acquisition strategies –Overcome institutional adversity to change Restructure program offices with right expertise and technical support –Use full flexibility that Federal/Defense Acquisition Regulations allow Tailored acquisition approaches should be the norm –Shepherd strategies through approval process Program Executive Offices and Acquisition Executives –Validate engineering and cost models –Ensure effective Human System Integration issues understood/addressed early 26 Acquisition Process Improvement Capable and empowered program offices are critical to application of larger acquisition goals i.e.. Better Buying Power initiatives

27 Secretary of Defense Corporate Fellows Strict FAR part 15 application drives cost ‒ Barrier to new market entrants and reduces competition – Expand usage of FAR part 12 - Commercial Item Acquisition – Many high-tech domains no longer belong solely to Govt/DoD – Affordable form, fit, function trumps need for excessive documentation Cost Plus contracting incentives not aligned with cost saving – Use fixed price contracts where practical – Negotiate mutually beneficial milestone payments 27 Acquisition Process Improvement Commercial procurement practices better posture DoD to capitalize on commercial capabilities and innovation

28 Secretary of Defense Corporate Fellows Compliance with government Cost Accounting Standards (CAS) ‒ Drives substantial overhead ‒ Only slightly more accurate than commercial data Evaluate the actual value to the customer –Force compliance only when absolutely necessary Leverage Generally Accepted Accounting Principles (GAAP) data Rely on far less expensive independent accounting audits –Recognized industry experts (Deloitte, KPMG, Ernst & Young, PWC) Cost Data Reporting requirements add additional cost burden –Do not levy requirement on fixed price contracts –Replace collection of rearward looking data Use market research to predict commercially derived systems future costs 28 Acquisition Process Improvement GAAP is more affordable and perhaps more useful than CAS

29 Secretary of Defense Corporate Fellows Excessive operations and support cos ts ‒ Not adequately addressed ‒ Lack of focus on systems sustainment Combine life cycle support for platforms with common components –Increase Common Automatic Test Systems for common components –Use Original Equipment Manufacturer (OEM) Special Test Equipment (STE) –Place Field Service Repair (OEM STE) closer to the flight line –Increase Centers of Excellence Eliminate redundancy by combining facilities that have like work 29 Acquisition Process Improvement Capitalize on efficiencies in life cycle support

30 Secretary of Defense Corporate Fellows Agenda Program overview Industry trends & recommendations –Talent Management –Managing Innovation –Acquisition Process Improvement –Cybersecurity & Leveraging IT –Managing through Budget Uncertainties Further discussion / Q&A 30

31 Secretary of Defense Corporate Fellows 31 People – Get the right people on the bus –Recognize, understand, build capable cyber force Operates within cyberspace as an operational domain –Prepare trained and ready Cyber Forces Identify cadre of IT Acquisition Professionals –Identify distinct skills and training for offensive AND defensive cyber Remain committed to Cyberspace domain: Organize, Train and Equip a relevant force. People ProcessTechnology Cybersecurity & Leveraging IT

32 Secretary of Defense Corporate Fellows Cybersecurity & Leveraging IT 32 Process - Take acceptable risks & avoid analysis paralysis Clearly articulate product / solution requirements to industry –Ensure funding availability is programmed into solution delivery Resist “requirements creep” that increases cost and time-to-target Avoid imposing unnecessarily expensive security controls –Don’t buy an insurance policy which costs more than what is being insured Develop IT/Cyber Ecosystem commensurate w/ Industry...Industry standard meets/exceeds DoD’s (e.g., Financial & Tech markets). People Process Technology

33 Secretary of Defense Corporate Fellows Cybersecurity & Leveraging IT 33 Technology – Use the right weapon for the target –Dramatically improve IT Portfolio Management –More efficiently leverage commonly used IT too ls Increase operational reach and business efficiencies –Develop, articulate, execute unified departmental enterprise strategy Implement Joint Information Environment (JIE) aggressively –Reform IT Acquisition Process More Cyber engineers Reduce layers of unnecessary administrative review –More driving instructors and fewer traffic cops Synergize current joint capabilities thru IT awareness…leverage Industrial innovation. People ProcessTechnology

34 Secretary of Defense Corporate Fellows Agenda Program overview Industry trends & recommendations –Talent Management –Managing Innovation –Acquisition Process Improvement –Cybersecurity & Leveraging IT –Managing through Budget Uncertainties Further discussion / Q&A 34

35 Secretary of Defense Corporate Fellows Fully Centralized Cost Management Organizations –CEO level sponsorship and mandate –Organized adjacent to Company Sourcing Operations –Business units partnerships; not just mandated changes Benefit reductions forced to business units via CEO / COO –Compensation reductions Targeted outsourcing, location strategy, salary/bonus deferrals, manpower reductions –Non-Compensation reductions Sourcing contract renegotiations, targeted expense reductions & furloughs –Non-operational business units Included in efficiency programs Company-wide sourcing –Silo’d organizations forced to utilize firm-wide sourcing synergies –Exceptions tracked and monitored by a central authority Corporate Management through Budget Uncertainty 35

36 Secretary of Defense Corporate Fellows 36 Recommendations for DoD Fully Centralized Cost Reduction Effort across ALL businesses –Exceptions destroy cost reduction efforts –Incentives for behavioral change must have teeth Highest level sponsorship and backstop –Industry partnerships with Business units Not simply mandating reductions Strategic Sourcing mandated –Incentivize away from exceptions (negative or positive) Organizational effectiveness programs for overhead/operational functions –Cultural shift from wartime spending mindset for all Services and components Reduce individual and institutional complexity –Achieve increased Operational efficiencies Managing through Budget Uncertainties

37 Secretary of Defense Corporate Fellows Agenda Program overview Industry trends & recommendations –Talent Management –Managing DoD Innovation –Acquisition Process Improvement –Cybersecurity & Leveraging IT –Managing through Budget Uncertainties Further discussion / Q&A 37


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