2. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 1 Fostering Innovation David Spong President American Society for Quality Former President Aerospace Support, Integrated Defense Systems, Boeing

3. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 Innovation The Key to Sustainability “Innovate or die.” “ This is the New Economy. The Old Rules do not apply…” “ But it must be relevant so we must forecast the future! 2

4. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 What Is Innovation? Instituting significant change that adds value: Increasing efficiency Increasing effectiveness Reducing costs Developing new profit streams 3

5. Microsoft, Redmond, WA 30 September 2010 Needs for Aerospace/Manufacturing Processes Reduced Cycle Time Reduced Tooling Just-In-Time Inventory Lean Six Sigma 4 Products Lightweight Structures Increased Reliability Reduced Maintenance Improved Fuel Consumption

6. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 So What’s the Problem: Obstacles to Innovation* External Government and other legal restrictions Economic uncertainty Inadequate enabling technologies Workforce issues arising externally 5 * IBM 2006 CEO Study Internal Unsupportive culture and climate Limited funding for investment Workforce issues Process immaturity Inflexible physical and IT infrastructure Insufficient access to information

7. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 6 All Embedded in the Right Culture Involve Integrate Innovate The “Sweet Spot” Only at the intersection do you get relevant innovation How do we facilitate Innovation? The Compelling Case For the Three “I’s”: Integration, Involvement & Innovation 6

8. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 Signs of Lack of Innovation Fear of failure is palpable (shoot the messenger) A complex process with multiple levels of approvals exists for screening new ideas A small group is the expected source of new products or services for the organization Suppliers and customers seldom contribute to new product and process ideas Ideas that originate inside of one country are rarely adopted by others 7

9. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 Signs of Dis-integration Each part of the organization seeks to maximize its own profit or “success” Strategies and plans are developed independently and often in competition Financial and operational measure- ment systems are not linked with or reinforced by reward and recognition systems Suppliers and stakeholders held at arms length Customers viewed only as sources of revenue and irritation 8

10. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 The Common Denominator : Organizational Culture Observed behaviour Group norms: standards and values Espoused values: published, public Formal philosophy: mission Rules of the game Climate: group interaction Embedded skills Habits of thinking, acting, paradigms Shared meanings of the group Metaphors or symbols 9 * Organizational Culture and Leadership by Edgar H. Schein

11. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 Leadership Cultural aspects of an organization can only be set and sustained by leadership! 10

12. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 11 “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people you have, how you're led, and how much you get it.” Steve Jobs, Fortune, Nov. 9, 1998 US computer engineer & industrialist (1955 - ) How do you foster Innovation?

13. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 12 The Leader’s Role Engines Steering Communi cations Navigation Catering Entertain ment Captain The “Leader” Management Set of processes used to keep people and technology running smoothly Leadership Set of processes that creates/adapts organizations to significantly change th em Uncharted Waters

14. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 13 2-20 Technical and professional expertise Solving problems & analyzing issues Innovation Practicing self-development Drive for results Establish stretch goals Taking responsibility for outcomes/initiativ Display high integrity & honesty Developing strategic perspectives Championing change Connecting outside world – networking Communicating powerfully and prolifically Inspiring/motivating others to high performance Building relationships Developing others Collaboration & teamwork LeadingOrganizationalChange Character PersonalCapability Focus on Results InterpersonalSkills From the “Extraordinary Leader”, Zenger & Folkman (2002) Leadership Attributes

15. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 14 Culture – A Set of Shared Vision/Values/Beliefs/Goals Corporate Citizen Innovation Teamwork Agility Sharing & Supportive Learning Diversity Quality Customer Satisfaction Integrity Stakeholder Requirements & Expectations Safety The Organization Join if espouse shared values Leave if cannot accept shared values Shared Value Filter The Leader establishes the culture to be shared by his/her behavior

16. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 15 Mission, Vision & Values Mission Provide world-class sustainment solutions to our aerospace customers Vision People working together as the world’s number one provider of innovative sustainment solutions 10 Year Objective We will be a recognized world-class, global business, providing sustainment solutions aligned with our customers’ evolving needs Values Leadership Integrity Quality Customer satisfaction People working together A diverse & involved team Good corporate citizenship Enhancing shareholder value Culture/IntegrationCulture/Integration

17. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 16 Leadership System Stakeholder Requirements & Expectations Vision & Values Set and Communicate Direction Perform to Plan Reward & Recognize Organizational & Employee Learning Organize, Plan, and Align Be Role Models Be Role Models Empower Teams Empower Teams Continuously Improve Continuously Improve Motivate Employees Motivate Employees Analyze & Compare Analyze & Compare Customer Work force Suppliers Community Shareholders Corporate Citizen Innovation Teamwork Agility Sharing & Supportive Learning Diversity Quality Customer Satisfaction Integrity GP30117.ppt

18. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 17 Focused Survey IDS – 58 Questions –1 Narrative question – Results to only the Business, Function, Department? Level – Results not actionable Aerospace Support – 58 Questions – 3 Narrative questions + – 28 Focused questions – Results to the Business, Program, Function, Site, to the manager level with 5 or more D/R – Results actionable Summary for 17 key issues Exec summaries for each Bus, Site, & Function CultureCulture

19. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 Code Of Conduct Enabled by the correct behavior where messengers don't get shot and failures are not punished but learned from 18

20. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 19 We insist on integrity, first and foremost We tell it like it is We communicate openly and candidly in all our dealings We respect, honor, and trust one another We work toward consensus Disagreement is healthy and encouraged, but once a decision is made, we proactively support it We have one conversation at a time Our silence is consent We focus on issues and ideas rather than titles or personalities We actively listen and question to understand We do not attack the messenger We identify clear objectives and expectations for our meetings We start on time, observe time limits, and end on time We praise in public, we coach in private We have a bias for velocity Operating Principles Have Fun... Enjoy the journey and each other CultureCulture

21. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 Employee Involvement A Human Resource Focus on developing a team-based culture with a robust recognition and rewards program 20

22. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 21 The extent of workforce commitment – both emotional and intellectual – to accomplishing the work, mission, and vision of the organization Members of the workforce find personal meaning and motivation in their work An engaged workforce benefits from trusting relationships, a safe and cooperative environment... Employee Involvement

23. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 EMPLOYEE INVOLVEMENT (EI)  Is it a Culture?  Is it a Belief?  Is it a Way of Life? "It is not a new program, project or process. EI is a cultural change in the way we treat each other and work together. It is a journey in which people apply their skills to improve individual, team and organizational performance continuously. This leads to employee satisfaction and improved business results.“ Raj Kanungo  Is it Teams?  Is it Belonging?  Is it a Process? InvolvementInvolvement

24. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 23 Leadership Drives the Employee Satisfaction Index Leadership Effectiveness Deciles 10987654321 ESI Percent Positive 90 80 70 60 50 40 30 78 73 71 66 62 60 58 52 47 39 Poor Leadership Results in Low Satisfaction Great Leadership Results in Top Quartile Satisfaction Good Leadership Results in Okay Satisfaction CultureCulture

25. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 24 Managers Level of Leadership Effectiveness (Deciles) 10987654321 Percent Positive on Employee Involvement 100 90 80 70 60 50 40 30 Great Leadership Results in Top Quartile EI Good Leadership Results in OK EI Poor Leadership Results in Low EI Leadership Drives Employee Involvement InvolvementInvolvement

26. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 25 50% 50 54 58 62 66 19992000 2002 2003 2001 EI ESI New Leader Boeing Aerospace Support’s employees are more motivated

27. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 26 Employee Involvement Vision & Values Operating Principles Diversity “Open Door” Empowerment Recognition Ethics Cooking the “Soup” or Creating an Innovation Culture

28. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 27 Motivated Employees “Smells Good” Business Results “Taste Great” Employee Involvement Vision & Values Operating Principles Empowerment Recognition Ethics Focused Survey CC40170002.ppt Cooking the “Soup” or Creating an Innovation Culture

29. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 28 QUESTIONS?

30. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 Suggested Reading 29 The Making of a World-Class Organization E. David Spong and Debbie J. Collard. ASQ Quality Press The Extraordinary Leader John H. Zenger & Joseph Folkman. McGraw-Hill Tips for Teams Kimball Fisher, Steven Rayner, & William Belgard. McGraw-Hill

31. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 30 BACK-UP

32. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 31 ESI Employee Satisfaction Index EI Employee Involvement LE Leadership Effectiveness.76.75 (.59).69 (.47) xx(yy) - Pearson Correlation Coefficients (variance).77 (.60) Results of a multiple correlation between EI and Leadership Effectiveness predicting ESI Leadership + EI ESI

33. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 Biography EDUCATION D.Sc (Eng.) Washington University, St Louis, Missouri. M.Sc. (Eng.) University of Missouri at Rolla Missouri. B.Sc. (Eng.), Magna cum Laude) University of London, England. Royal Aircraft Establishment Engineering Apprenticeship, England EXPERIENCE HIGHLIGHTS The Boeing Company President of Aerospace Support, St Louis, MO McDonnell-Douglas Corp. Vice President/General Manager Airlift and Tanker Programs, Long Beach, CA Program Manager and Deputy Chief Engineer at Northrop, F-23 Program, Hawthorne, CA Propulsion System Design for F-15, F-18, AV-8B and F-4K aircraft, St Louis, MO. Curtiss Wright Corporation, Woodridge, NJ. Fighter Engine Design English Electric Aviation Ltd, Luton & Stevenage, UK Missile Aerodynamics 32

34. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 How Do You Change Culture? By acknowledging that organizations are systems By identifying and leveraging the natural interactions that exist By assessing the system to see what is working (Strengths) and what needs to be changed (Opportunities for Improvement) By using a model that reflects the complexity of organizations and incorporates all of the components of organizational culture 33

35. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 34 The Four Pillars of Organizational Greatness: 1) Establishment of a Rudolph Culture 2) Redefining Leadership as “Connecting People to Their Future”; 3) Developing a Corporate Constitution – an unwavering institutional memory that does not change no matter what! 4) Creating an Aligned Reward Structure – in alignment with the other three pillars.

36. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 What is a Rudolph (the Red-Nosed Reindeer”)? They are involuntary, passionate and creative contributors, maybe 10% of every organization They have a unique ability to perceive several contributing variables to a given situation. They tend to identify causes of problems and generate solutions more quickly and efficiently than their counterparts. They are historically labeled change agent, practitioner, square peg, radical, misfit, loose cannon, zealot, maverick, hero, radical, or innovator – among other names. 35 Only turn on their creative juices (“noses”) if supported by the culture

37. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 Strategic Planning Key mega- process used to Identify needs and opportunities that can stimulate Innovation 36

38. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 37 Key Data Factors (Jan-Mar) Yearly Assessments Guidelines/ Constraints (Boeing, IDS, AS) Lessons Learned and Process Improvements SBC EPT All Planning Councils 2 1 10 CC030131.11 Strategic Planning Mega-Process Execution (Jan-Dec) 8 All AS Employees Execute the Plan 9 Monitor the Plan VSP SPC & EPT Plans (May-Dec) SPCsFCs Develop Business Implementation Plans Develop Functional Implementation Plans BIPsFIPs EPT SBC Allocate Resources Create Financial Plan Goal Flow Down LRBP VSP 4 5 6 7 SBC - Strategic Business Council SPCs - Strategic Planning Councils EPT - Enterprise Planning Team FCs - Functional Council Strategies (Feb-Jul) Review and Refine SBC & EPT 3 Mission Vision Objectives Gaps (SWOT) Strategies

39. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 38 How do you achieve a vision? W h a t H o w $ $ T h i n k i n gT h i n k i n g T h i n k i n gT h i n k i n g P l a n n i n g Doing Strategies/ High Level Implementation Plans Strategies/ High Level Implementation Plans Execution Detailed Implementation Plans Detailed Implementation Plans Vision Strategic Intent Strategic Intent Business Results Vision achievement requires change and investment

40. 19 th Annual Conference on Quality in the Space & Defence Industry 14 March 2011 39 Spong SLT Bus & Site LT’s All the way to the people who do real work! The Leadership Shadow CultureCulture

41. Microsoft, Redmond, WA 30 September 2010 Needs for Aerospace/Manufacturing 40