Secretary of Defense Fellows Program FINAL REPORT of the Secretary of Defense Fellows Program

Secretary of Defense Fellows Program Agenda Program Overview - Background - Origin - Objectives - Organization - Tasking - Results Corporate Experiences - Sponsors - Observations - Recommendations

Secretary of Defense Fellows Program SDFP Background Current military- technical revolution - Political, economic, social - Shaped by information technology change Businesses outside DoD successful in: - Adapting to changing global environment - Exploiting information revolution - Structural reshaping/reorganizing

Secretary of Defense Fellows Program SDFP 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 DoDD September 2, 1995

Secretary of Defense Fellows Program SDFP Objectives Build a cadre of future leaders who: - Appreciate revolutionary changes in information and related technologies - Understand skills required to address changes - Recognize operational/organization opportunities - Will motivate Services toward innovative change

Secretary of Defense Fellows Program SDFP Organization Two officers from each Service (USMC one) - High flag/general officer potential - O-6 or O-5 - Senior Service College credit Permanent Staff - USD(P)NA oversight - SDSSG Director, Deputy, Admin

Secretary of Defense Fellows Program SDFP Tasking Ten months at Sponsoring Company Group Education - Seminars - Wargames Final Report and Briefing - To SECDEF and Services - Work performed - Insights gained applicable to DOD culture/operations - Recommendations for changes to DOD operations and organizations

Secretary of Defense Fellows Program SDFP Results Program objectives fulfilled - Education, education, education - More sponsors than fellows - Inter/intra-group experience sharing Unique corporate experiences - Strong corporate support - Executive/operational level mix - Mergers/restructuring

Secretary of Defense Fellows Program SDFP Sponsors Hewlett-Packard, Lockheed Martin, Loral, Oracle, Northrop Grumman American Management, CNN, CITICORP McDonnell Douglas, Microsoft, Sarnoff Andersen Consulting, DirecTV, Mobil, Northrop Grumman, Sears, Southern Company

Secretary of Defense Fellows Program SDFP Corporate Experiences Citicorp/Citibank - LtCol Gary Barthold CNN - COL Colin Dunn Microsoft - CAPT Jim Engler

Secretary of Defense Fellows Program Citicorp/Citibank Large, Complex, Global Enterprise - 90K Employees and 50M Customers - 3,200 Sites in 98 Countries Innovators in Management and Technology Corporate Technology Office - Strategic Planning - Risk Management - Organization - Operations - Information Security - Human Resources - Technology Development

Secretary of Defense Fellows Program Citicorp/Citibank Observations Increasing, Non-Linear Change - Uncertainty - Continual Strategic Adaptation Institutionalized Change - No One Predictable Scenario - Tradeoff Optimization for Adaptability - Adaptability provides Stability

Secretary of Defense Fellows Program Citicorp/Citibank Observations Top-Down Flexible Planning - Corporate Vision -- Long-Term Broad Common Direction / End State - Balanced Scorecard -- Near-Term Objectives and Metrics (Max. 6 Qtrs) - Windows on Risk -- Tripwires allow Timely Decision Making

Secretary of Defense Fellows Program Citicorp/Citibank Observations/Recommendations

Secretary of Defense Fellows Program Citicorp/Citibank Observations Information is the Core of the Financial Industry Adaptive, Enabling Information Technology Infrastructure - Information Technology as Flexible as Operations - Technology Fused with Business - Integrated Technology Processes

Secretary of Defense Fellows Program Citicorp/Citibank Observations/Recommendations Common Network Centric Architecture - Building Plan for a Responsive Infrastructure People - Military can not Compete with Compensation, Outsourcing Vendors - Strategic Partnership, Cooperative Solutions, Outsourcing Information Security - Operational Diligence, Continually Raising the Bar Innovation - Technical Solutions are Already Out There - Focus on Applying, Integrating, and Providing Guidance

Secretary of Defense Fellows Program Citicorp/Citibank Observations/Recommendations

Secretary of Defense Fellows Program Citicorp/Citibank Recommendations Agile, Adaptive, Flexible - Planning, Organization, Architecture - Shorter Planning and Programming Cycles - Accept and Manage Risk

Secretary of Defense Fellows Program Citicorp/Citibank Recommendations Common Architecture - Network Centric - System of Systems - Interoperable, Consolidated, Outsource - Adaptable, Scaleable - Limit Deviations, Cost vs Value Added - Directed from the Top, Tighter Fiscal Control Technology Fused with Operations - Information Technology can not be an Afterthought Planned Separately

Secretary of Defense Fellows Program Citicorp/Citibank Recommendations

Secretary of Defense Fellows Program Citicorp/Citibank Balanced Scorecard Financial Performance Customer / Franchise Performance Strategic Cost Management Risk Management People Management

Secretary of Defense Fellows Program Citicorp/Citibank Windows on Risk - Country Risk - Risk Rating - Counter-Party - Distribution / Underwriting - Equity / Sub-Debt - Product Concentration - Limits - Industry Concentrations - Price Risk - Liquidity Risk - Global Real Estate - External Dependency - Control (Audit) Risk - Technology - Business Risk Review - Legal

Secretary of Defense Fellows Program Citicorp/Citibank Windows on Risk

CEO GLOBAL REL BANKING PRIVATE BANK GLOBAL CITIBANKING EMERGING MARKETS CARDS OPERATIONS & TECHNOLOGY FINANCIAL CONTROL HUMAN RESOURCES EXTERNAL AFFAIRS AUDIT * DIRECTION COORDINATION MATRIXED ORGANIZATION * ADDITIONAL STAFF SECTIONS ARE NOT SHOWN RISK MANAGEMENT

Secretary of Defense Fellows Program SDFP Corporate Experiences Citicorp/Citibank - LtCol Gary Barthold CNN - COL Colin Dunn Microsoft - CAPT Jim Engler

Secretary of Defense Fellows Program Cable News Network News Standards: Accuracy, Balance, Timeliness “AT CNN, SPEED IS LIFE.” --Tom Peters Eight News Groups 31 Bureaus 1130 Affiliates Organization:

Secretary of Defense Fellows Program Cable News Network

Secretary of Defense Fellows Program CNN Observations Work Culture - Intelligent - Sense of Urgency - Dedicated - “No Frills” An “Innovation” Culture - Encouragement to grow, not maintain - Room for experimentation, mistakes

Secretary of Defense Fellows Program CNN Observations

Secretary of Defense Fellows Program CNN Observations Paperless, Deskless - Internet potential - Increased leader contact Adapting Technology - “Buy what’s helpful, not what’s new.” - Work culture is the key

Secretary of Defense Fellows Program

CNN Recommendations Change the Culture of the Force - Encourage growing, not maintaining - Make room for local experimentation, mistakes - Knock down traditional “idea firewalls” Expand DoD Internet/Intranet(s) Use - Internal functions (boundless) - External functions

Secretary of Defense Fellows Program

SDFP Corporate Experiences Citicorp/Citibank - LtCol Gary Barthold CNN - COL Colin Dunn Microsoft - CAPT Jim Engler

Secretary of Defense Fellows Program Microsoft 20,000 + employees / 50 countries and growing $8.67 Billion Revenue in FY 96 $12 + Billion in FY 97 R&D = 25% Revenue Enterprise Customer?? Equity Compensation Model “The Future ain’t what it used to be”

Secretary of Defense Fellows Program

Microsoft Observations Bill Gates - Vision / Technology / Business Executive Committee They Love a Good Fight - Sun Tzu strategy - No quarter given - Market domination, not share Customer focus

Secretary of Defense Fellows Program

Microsoft Observations Feedback - Customers/ Employees Partners - Strategic Alliances Creativity - No perks - Open communications demanded

Secretary of Defense Fellows Program Microsoft Observations “We eat our own dogfood” Organized Chaos Robust Intranet / Aggressive use of Internet Headcount, costs, infrastructure Hire the best, or just don’t hire

Secretary of Defense Fellows Program

Microsoft Recommendations Make the Network of Networks interoperable Leverage C3S technology - Communications, coordination, collaboration Cut non-warfighting infrastructure “Partner” long-term with leading-edge companies

Secretary of Defense Fellows Program

Microsoft Recommendations “Recruit Smart” for the 21st Century force Exploit advances in Distance Learning Purchase Info Tech training and support

Secretary of Defense Fellows Program

SDFP Corporate Experiences American Management Systems - CAPT Nan Honey McDonnell Douglas Aerospace - Lt Col Jim Kowalski Sarnoff Corporation - Lt Col Kim McKenzie

Secretary of Defense Fellows Program American Management Systems (AMS) Global business and information technology consulting firm – Business Process Re-engineering – Change Management – System Integration – System Development – System Implementation

AMS “Innovative solutions to its clients by partnering with them to achieve breakthrough performance through the intelligent use of information technology” Secretary of Defense Fellows Program

AMS Observations AMS Observations Business Process Re-engineering (BPR) – Military Sealift Command Change Management/Organizational Development – Achieving Breakthrough Performance (ABP) New Business Unit formation – Utilities Industry Secretary of Defense Fellows Program

AMS Observations AMS Observations Strategy and business/financial plan roll out – Rolling 3 YR plan Infrastructure Management – “Hotelling” People Management – Inclusive Leadership Committee (ILC) – ReVisioning Administrative Processes (RAP) Secretary of Defense Fellows Program

AMS Recommendations AMS Recommendations Acquisition - Limit time Culture - Focus on work environment - Incentivize efficiency/savings Organization - Info Tech can support any structure - Mobile computing and collaborative Info Tech at individual level Secretary of Defense Fellows Program

SDFP Corporate Experiences American Management Systems - CAPT Nan Honey McDonnell Douglas Aerospace - Lt Col Jim Kowalski Sarnoff Corporation - Lt Col Kim McKenzie

Secretary of Defense Fellows Program McDonnell Douglas Aerospace Footprint – $8B Revenue, 36,000 Employees, 14 Major US Facilities – US Government 68% of Business – International Sales 32% and Growing – 300,000 US Workers Tied to MDA Products Culture – Technological Innovation – Product Performance – “Fighterland USA”

Secretary of Defense Fellows Program McDonnell Douglas Aerospace Business Development Division - Sales Organization - Owns Market Planning and Analysis Team - Produces Strategic Plan and Operating Plan Phantomworks - Advanced Systems and Technology - Matrixes with Programs and Supporting Units Work Experience

Secretary of Defense Fellows Program McDonnell Douglas Aerospace

Secretary of Defense Fellows Program McDonnell Douglas Observations Strategic Planning – Formal Strategic Planning--PROGRAMMING – Scenario Based Planning--STRATEGIZING System of Systems (SoS) – Organize Around Mission Areas – Cross Traditional Boundaries – Design Products for SoS (Joint Warfare Center)

Secretary of Defense Fellows Program McDonnell Douglas Observations

Secretary of Defense Fellows Program McDonnell Douglas Observations Virtual Company – Time as Competitive Advantage – Link Partners, Suppliers, Customers – Invest in Technology That Gives MDA Advantage One Vector Off – Concentrate Resources on Core Business – Avoid “Intriguing” but Unrelated Business Opportunities – Spin-Off Companies/Negotiate Royalties

Secretary of Defense Fellows Program McDonnell Douglas Observations

Secretary of Defense Fellows Program McDonnell Douglas Recommendations Reconsider “Planning” in PPBS – PPBS Good at Budgeting--Not Strategy – Institutionalize Scenario Based Planning at Several Levels in DoD — Examples: AF 2025, Army After Next Restructure for Mission Areas – OSD Organized for PPBS--Reductionistic – Organize Around Holistic Mission Areas — Example--JROC

Secretary of Defense Fellows Program McDonnell Douglas Recommendations

Secretary of Defense Fellows Program McDonnell Douglas Recommendations Experiment with a Virtual JTF – Mission Area Focus--i.e., Precision Strike – Tie Core Competencies Together in Virtual Unit – Train as a Unit (Real and Simulated) “One Vector Off” Criteria – Core Competency is Warfighting – Example: — Organic Maintenance within One Vector — Depot Maintenance is Not within One Vector

Secretary of Defense Fellows Program McDonnell Douglas Recommendations Experiment with a Virtual JTF – Mission Area Focus--i.e., Precision Strike – Tie Core Competencies Together in Virtual Unit – Train as a Unit (Real and Simulated) “One Vector Off” Criteria – Core Competency is Warfighting – Example: — Organic Maintenance within One Vector — Depot Maintenance is Not within One Vector

Secretary of Defense Fellows Program SDFP Corporate Experiences American Management Systems - CAPT Nan Honey McDonnell Douglas Aerospace - Lt Col Jim Kowalski Sarnoff Corporation - Lt Col Kim McKenzie

Secretary of Defense Fellows Program Sarnoff Corporation Small, single-site enterprise Mission...create technologies that change the world Core competencies in three major areas: information, biotechnical, and solid state Growth experienced in three phases –Phase 1: RCA Corporate Research Laboratory –Phase 2: Spin-off and survival –Phase 3: Vision of “10-in-10”

Secretary of Defense Fellows Program Sarnoff Corporation Observations Guiding principle of operations--strategic adaptation Vision centric, top down planning Reorganizing principles –Optimize growth and reward performance –Preserve organization flatness –Spin-off non-core competency activities

Secretary of Defense Fellows Program Sarnoff Corporation Observations

Secretary of Defense Fellows Program Sarnoff Corporation Observations Creative Culture--hitech is a state of mind Highly efficient matrixed workforce Examples of Sarnoff Technologies –Micromachines/microfluidics –Data compression and distribution –Generalized Emulation of Microcircuits –3D Emersive Visualization Environment

Secretary of Defense Fellows Program Sarnoff Corporation Recommendations Organizing Ideas –Spinning-off with business principles –Partnership Brokers--both internal and external Creative Culture –Matrixing benefits through exchange programs Acquisition and the “Hollywood Business Model” –Commercial is more than catalog sales –Government Agency Teaming approach

Secretary of Defense Fellows Program Sarnoff Corporation Recommendations

Secretary of Defense Fellows Program Sarnoff Corporation Recommendations

Secretary of Defense Fellows Program SDFP Common Observations/Recommendations Internets/Intranets - Enterprise-wide architectures/protocols - Paperless/deskless/virtual Strategic Planning/Vision - Topdown, not bottom up Fiscal Planning months max Outsourcing – Personnel – Infrastructure

Secretary of Defense Fellows Program SDFP Common Observations/Recommendations Partnerships/Teaming Organizations - Flexible/dynamic structure - Change incentivized Culture - High employee value - Junior level participation Innovation - Risks taken/mistakes tolerated