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Secretary of Defense Corporate Fellows Final Outbrief Academic Year 2008-2009.

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Presentation on theme: "Secretary of Defense Corporate Fellows Final Outbrief Academic Year 2008-2009."— Presentation transcript:

1 Secretary of Defense Corporate Fellows Final Outbrief Academic Year 2008-2009

2 Secretary of Defense Corporate Fellows 2 Fellows and Assignments Col David Zorzi, USAF Booz Allen Hamilton McLean, VA Col Robert Schutz, USMC FedEx Express Memphis, TN Col Scott Pleus, USAF Sun Microsystems Menlo Park, CA CAPT Joseph Leonard, USN Northrop Grumman Electronic Systems Linthicum, MD Col William Harrop, USMC Georgia Power Atlanta, GA COL Patrick Mason, USA Sikorsky Aircraft Stratford, MA LTC David LaGraffe, USA Sarnoff Corporation Princeton, NJ Lt Col James McCreary, USAF Johnson & Johnson Corporation Skillman, NJ CDR Darrell Lack, USN Raytheon Corporation McKinney, TX

3 Secretary of Defense Corporate Fellows 3 Agenda Program Overview Current Environment Observations & DoD Recommendations Discussion / Q&A Individual Experiences (FYI)

4 Secretary of Defense Corporate Fellows 4 SDCFP Background SECDEF concerns for future Service leaders –Open to organizational and operational change –Recognize opportunities made possible by info tech –Appreciate resulting revolutionary changes underway Affecting society and business now Affecting culture and operations of DoD in future Businesses outside DoD successful in: –Adapting to changing global environment –Exploiting information revolution –Structural reshaping/reorganizing –Developing innovative processes

5 Secretary of Defense Corporate Fellows 5 SDCFP Background DoD needs effective access to best executive level business practices applicable to operations & support –Strategic Planning –Organization –Change Management –Human Resources –Information Technology –Supply Chain –Outsourcing Infrastructure approximately 2/3 of Defense Budget –Reforms generate savings –Savings applicable to operational shortfalls

6 Secretary of Defense Corporate Fellows 6 SDCFP Organization Two or more officers from each Service –High flag/general officer potential –O- 6 or O- 5 –Senior Service College credit 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 Eleven months at Sponsoring Company Permanent Staff –SDCFP Director –Net Assessment for oversight –National Defense University for Admin support www.ndu.edu/sdcfp/sdcfhom.html

7 Secretary of Defense Corporate Fellows 7 SDCFP Results Program objectives fulfilled –Education DoD, individual officers, Sponsors –More Sponsors than Fellows available –Intra-group experience sharing Group visits with sponsor CEO’s and senior leadership Unique corporate experience –Strong corporate support –Executive/operational level duty mix –Mergers/restructuring Unexpected challenges, valuable insights

8 Secretary of Defense Corporate Fellows 8 SDCFP Sponsors 08 - Prior –3M, ABB, Accenture, Agilent Technologies, American Management Systems, Amgen, Boeing, CACI, Caterpillar, Cisco, CNN, Deutsche Bank, DirecTV, DuPont, Enron, FedEx, General Dynamics, Hewlett-Packard, Honeywell, Human Genome Sciences, IBM, Insitu Group, Johnson & Johnson, Lockheed Martin, Loral, McKinsey & Co., McDonnell Douglas, Merck, Microsoft, Mobil, Netscape, Oracle, Northrop Grumman, Pfizer, Pratt & Whitney, PricewaterhouseCoopers, Raytheon, Sarnoff, Sears, Sikorsky, Southern Company, SRA International, Sun Microsystems, Symbol Technologies, Vertex Aerospace 08-09 –Booz Allen, FedEx, Georgia Power, Johnson & Johnson, Northrop Grumman, Raytheon, Sarnoff, Sikorsky, Sun Microsystems 09-10 –Accenture, Apple, Caterpillar, Deutsche Bank, EADS, DuPont, General Dynamics, iRobot, NCR

9 Secretary of Defense Corporate Fellows 9 SDCFP Products 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 Report and Briefings directly –SecDef/DepSec, VCJCS, Service Secretaries & Chiefs, 30+ others –Business insights relevant to DoD culture/operations –Recommend process/organization changes

10 Secretary of Defense Corporate Fellows 10 “ And we must transform not only our own forces, but also the department that serves them by encouraging a culture of creativity and intelligent risk taking. We need to promote a more entrepreneurial approach to developing military capabilities, one that encourages people--all people--to be more proactive and not reactive, to behave somewhat less like bureaucrats and more like venture capitalists…” SecDef Remarks National Defense University 31 January 2002

11 Secretary of Defense Corporate Fellows 11 Agenda Program Overview Current Environment Program Recommendations Discussion / Q&A Individual Experiences (FYI)

12 Secretary of Defense Corporate Fellows 12 Current Environment Tremendous Uncertainty –Crafting strategy during uncertainty challenging –Unknown recession depth and length add to complexity “Leaning Operations” –Working capital depletion (cash struggles) –Supply chain reduction - “make it happen” –Sub-tier supplier risk; how much can they endure? –Product line adaptability for market turbulence Network Optimization (Supply and Distribution) –Reducing network redundancy –Increased risk to business; less adaptability Asset Utilization –Refocused analysis of value stream –“Balance Sheet” reductions –Short term focused

13 Secretary of Defense Corporate Fellows 13 Current Environment Extensive Scenario Planning –Hedging for numerous potential futures –Seeking diversified business model Time Domain Success –Flexibility and speed to market critical –Capital constrained but still focused E&D spending Convergences between Operating Companies –“Salesman” like approach from Corporate to Operating Companies –Linkage of product offerings across portfolio Balance of long term and short term –Achieving short term financials challenges the future –Shift to a balanced and sustainable approach –Trending competition difficult; is it true innovation or unsustainable

14 Secretary of Defense Corporate Fellows 14 Agenda Program Overview Current Environment Observations & DoD Recommendations Discussion / Q&A Individual Experiences (FYI)

15 Secretary of Defense Corporate Fellows 15 Achieving Excellence - Observations Strong sense of corporate identity –Relentless branding centered on strong values Caring for the world…one person at a time™ – J&J Southern Style – Southern Company Uncompromising ethics Safety…employees are truly valued Diversity of thought Productive work environment Prioritization of efforts…clear annual goals Accountability and rewards for results Recommendations –NSPS Stronger incentives for performance Stick with it; it will pay off –Broaden inputs for evaluations…team work

16 Secretary of Defense Corporate Fellows 16 Personnel Evaluations Current DoD Evaluation Process –Evaluations linked to supervisor input only –Performance appraisals Retrospective look at the past Focused on past accomplishments –Not a developmental model What am I doing/not doing well? How do I improve? How do I measure improvement? –No accountability for a mid-year review No structured process to evaluate for mid-course corrections

17 Secretary of Defense Corporate Fellows 17 Personnel Evaluations An Industry Approach –360 Degree Measurement and Reward System –Formal peer lead assessment Input: Up/down, lateral, and customer feedback Evaluation criteria –Alignment: Core Values tied to company level objectives –People Development (mentorship) –Competency –Self Development –Voice of the customer –Competency based career development model Focus on Knowledge, Skills, and Abilities (KSA) –Required to advance, move forward, and increase performance

18 Secretary of Defense Corporate Fellows 18 Personnel Evaluations Predictable Outcomes: 360 Degree Evaluation –Reduces Supervisor Bias (Independent verification of each employee) Competing interest within Service –Creates Specific and measurable development plan Inherent training –Assessors, peers, learn what leads to success Open and candid performance feedback loop Results driven review and institution value based alignment –Promotes Emotional Quotient (EQ) as well as Intelligence Quotient (IQ) –Self and social awareness; self and relationship management Motivation for helping each other (eliminates stovepipes) Rewards for teamwork, collaboration, cooperation Recommendation –Explore applicability of 360 degree evaluations Both uniformed and GS (NSPS) systems

19 Secretary of Defense Corporate Fellows 19 New Directions in Data Center Design Data center consolidation –Harnesses power consumption, cooling requirements – Reduces real estate footprint Current world-wide internet power consumption costs $7.2B annually –Will continue to increase Data center's design has evolved considerably –50%+ annual power savings Ultra-thin clients –Improve security –Reduce power consumption, support costs Ultra-thin client applications save $70 of energy, per desktop, per year Enhanced security features, portability, manpower savings, and refresh rate savings make Return on Investment (ROI) attractive Recommendations –Determine ROI for DoD wide datacenter redesign –Re-think PC based infrastructure in DoD Power, security, manpower, mobility savings

20 Secretary of Defense Corporate Fellows 20 Transitioning New Technology Maintaining U.S. technical superiority key element in U.S. military policy DARPA mission “Maintain superiority and avoid technological surprise” –Service S&T focus is near-term –Basic research focus is far-term –DARPA management philosophy, “Bridging the gap.” R&D companies confronted with several difficulties –R&D has high uncertainty WRT cost estimates, time schedules –Knowledge/visibility of needed combat capability in R&D companies is not high –DARPA support ends when new tech “demonstrated” – but not field ready –Services reluctant/unable to fund the systems engineering Necessary to properly develop new technology into a capability –Corporate perspective – the gap is often not bridged Recommendations –Participate fully in Service Materiel Enterprise –Establish Joint organizational element  Relevant Service PEO’s, Combat Developers  Enables transfer process of promising capabilities –Generate organizational momentum

21 Secretary of Defense Corporate Fellows 21 Technology On/Off-Ramps Weapon systems development often fields antiquated equipment –Larger issue than implementation of “open system architecture” Driven by differing developmental cycle times –Structures – Propulsion –Avionics – Software –Imagery – Network Connectivity Desire to have “tight package” at preliminary and critical design Mandate to have cost, schedule, performance, and risk understood Recommendations –Identify and flow product cycle times early –Ensure systems engineering plan facilitates technology on/off ramps –Link development to key technology decision points More than current technology readiness assessment process –Accept potentially sub-optimized integrated design Facilitates greater ease of upgrades and technology insertion

22 Secretary of Defense Corporate Fellows 22 Rapid innovation with production in mind Need “best source” innovation –Rapidly Inside (if we can anticipate), Responsive to, or Countering adversaries timeline /reaction loop –Cheaply, in large quantities with repeatability and reliability –Supported by parts, technical support, training Exportability –How can we prepare capabilities (technologically and policy)? Positioning for the Future

23 Secretary of Defense Corporate Fellows 23 Recommendations –Focus investments in capabilities / technologies that: Leverage evolving next-gen. tools and applications –Support real-time decision making Have shorter development life-cycles Are applicable to multiple domains –Interoperability and integration Are open –Architecture, Systems, Source Are secure –Tamper proof –Reliable suppliers Positioning for the Future

24 Secretary of Defense Corporate Fellows 24 Crafting Incentives for Industry Crafting effective awards/incentives very challenging –Inconsistencies between services & programs –Internal program inconsistencies due to change Negative connotation of “award” –GAO perspective of “reward” versus profit –Poor understanding of risk, profit, and program turbulence Stagnant government process –Criteria and award strategy not evolving –Award criteria often a second tier activity –No recognition of company impact (good and bad) Recommendations –Must be a key discipline taught and discussed at DAU –Establish government / industry cooperative exchange to address incentive methods –Align award/incentive criteria with key program phases/transitions –Obtain contractor feedback of program office performance (360 degree assessment)

25 Secretary of Defense Corporate Fellows 25 Agenda Program Overview Current Environment Observations & DoD Recommendations Discussion / Q&A Individual Experiences (FYI)

26 Secretary of Defense Corporate Fellows 26 Agenda Program Overview Current Environment Observations & DoD Recommendations Individual Experiences (FYI)

27 Secretary of Defense Corporate Fellows 27 Strategy and technology consulting –Specializations Organization & Strategy Economic & Business Analysis Supply Chain & Logistics Intelligence & Operations Analysis Information Technology Systems Engineering & Integration Assurance & Resilience Modelling & Simulation –Privately held corporation; founded 1914 –2007 revenue $4B –20K employees –Annual growth averaged 13% per year for past 15 years Great Place to Work Honors –“100 Best Companies to Work For” Fortune, 2005-2008 –“100 Best Companies for Working Mothers” Working Mother, 1999-2008 –“Best Places to Launch a Career” Business Week, 2006-2008 –“Best Place to Work in IT” Computerworld, 2003-2008 Assigned to VP, International Defense Cooperation Booz Allen Hamilton

28 Secretary of Defense Corporate Fellows 28 Observations Major Investor – Carlyle Group private equity firm –April 2008: Carlyle buys controlling interest for $2.5B –August 2008: Booz Allen buys out Commercial partners (Booz & Co.) –Carlyle holding Booz Allen for growth; operating as silent partner Initial Impressions –Unique Culture – teamwork, collaboration, cooperation, service to client Culture of ownership and service throughout…similar to military Emotional Intelligence (EQ) as important as IQ – Self-awareness, self-management, social awareness, relationship management Building “results that endure” with the client, not just what RFP states Vertical vs Horizontal hierarchy – flexible to serve the market –Partnership Mindset – decisions made by what makes sense, not profits One Profit and Loss (P&L) statement for entire firm (unlike all competitors) Eliminate stovepipes – all partners motivated & rewarded by helping each other No competing interest within firm –Core Values Client service, entrepreneurship, excellence, teamwork, diversity, respect, fairness integrity, trust, professionalism Not just lip service; woven into fabric of firm

29 Secretary of Defense Corporate Fellows 29 Observations Team Measurement & Reward system – 360 o Evaluations –Supervisors, peers, subordinates –Performance measured on core values –Performance measured on people development, revenue, managing cost Challenges –Carlyle Group’s potential call option –Maintaining unique culture with fast growth Predicting continued double-digit growth –Superior repetition in market –Government

30 Secretary of Defense Corporate Fellows 30 FedEx Corporation –Operating Companies: Express, Ground, Freight, Custom Critical, Office –Support Companies: Trade Networks, Services, Supply Chain Services Strategy –“Understanding how access works is the key to harnessing power” –“The Purple Promise – make every FedEx experience outstanding” –“People, Service, Profit” –Operate Independently, Compete Cooperatively, Manage Collaboratively Assignment: FedEx Express –Global Operations Center Global Operations, Scheduling, Command & Control, and Planning –Disaster Recovery And Contingency Operations (DRACO) Business Continuation, Airport/Hub Reconstitution, Crisis Management FedEx Express

31 Secretary of Defense Corporate Fellows 31Observations Challenges –Revenue generation and recessionary economy –Trend is toward deferred service with lower profit margins –Control costs domestically for increased margins –High capital cost enterprise - replace aging aircraft fleet –Compete with UPS’s single, large, efficient network –Generate seamless enterprise brand with independent operating companies Good but not mistake-proof –China expansion delays –Diminished European penetration –Unionization: Railway Labor Act v. National Labor Relations Act Superior focus –Mission Oriented –“Only as good as tonight’s sort” –Measure, Measure, Measure -- Record Service Quality Indices (SQI)

32 Secretary of Defense Corporate Fellows 32 Observations QDM – Quality Driven Management –“Deliver market-leading customer experience, business excellence, and financial return through a quality oriented culture and day-to-day application of Quality Science.” –TQM philosophy without time consuming techniques –Drive QDM culture and process down to individual employee –Common training, tools and techniques –Root cause seeking analysis and continuous improvement mentality –Relentless customer focus (Purple Promise) and matching metrics (SQI) Leadership –Pragmatic leadership and managerial culture –Operational excellence –Fast and adaptable –Supported by strong company identity –Excellent information access –Emphasis on learning, freedom of action, and employee participation

33 Secretary of Defense Corporate Fellows 33 Worldwide network computing infrastructure solutions –Primary products segments Core: SPARC/X86 systems, storage, Solaris, JAVA, MySQL Service Provider: private & public cloud computing, data centers Professional Services –Primary customers: Telco, Financials, Government –100 countries –33.4K employees (5 - 6K layoffs CY09) –10 yr stock - $253.88 - $2.83, Currently $4.08 FY08Q2 revenue loss $1.65B – Major corporate restructure announced Corporate vision - “The Network is the Computer©” –Everything and everybody connected to the network … however they want –Take pride in challenging mainstream IT Open source offerings, “Green” hardware, Edge/cloud computing Assignment: IT/Chief Technology Office –Leadership & IT strategy mentoring –Horizontal program manager –Evaluating new technologies/business practices/workplace environment Sun Microsystems

34 Secretary of Defense Corporate Fellows 34 Observations Strategy – Enterprise computing in the open network – Thin/cloud computing model provides cost savings and security – Software as a Service (SaaS) model for efficiency – Business Process Outsourcing where financially smart Execution - 15K new customers each year – Engaging academic/student market – Redefine IT business norms Information Management (IM), social networking, client options Organization – Intellectual Property focus on competitive advantage Subscription for rest Never want to be a “custom” application Enterprise Resource Planning (ERP), network, telephony Culture – We connect to work … we don't go to work Completely mobile friendly environment Corporate culture does not require extensive face-to-face

35 Secretary of Defense Corporate Fellows 35 Culture of today's employees – E-mail is dead, IM and social networking critical – More productivity with employee chosen clients Mobility computing – Pushing applications to the edge – Wireless connectivity – Soft copy to increase pace with limited/dispersed manpower Non-Customized SaaS/Business Process Organization (BPO) Allow DoD to break from constant patch-and-update spiral Adaptation vs. custom solutions Observed Trends

36 Secretary of Defense Corporate Fellows 36 Northrop Grumman Third largest U.S. defense contractor –Four business areas; five operating sectors –2008 sales: $33.9 billion; $78 billion total backlog –120K employees, 50 states, 25 countries –Balanced, Diversified: DoD 62%, Int’l 19%, Other USG 13%, FMS 4% –Leading capabilities in: Systems integration, C4ISR and battle management, Information technology and networks, Defense electronics, Naval shipbuilding, Space and missile defense Northrop Grumman Electronic Systems (NGES) –2008 sales: $7.1 billion; $16 billion total backlog –20.7K employees, 22 major US locations, 27 International Locations –Develops, produces, integrates and supports: High performance sensors, intelligence processing, navigation systems, power, power control, and ship controls for commercial and naval ships Assignment: Business Development and Strategic Planning Division

37 Secretary of Defense Corporate Fellows 37 Northrop Grumman Electronic Systems Market Assessment (Northrop Grumman) –Defense/Intelligence top-line budget authority driven by threat environment Transition to force modernization / reset from war supplementals Pervasive need for information, electronics, and technical services Competencies match evolving national security priorities Programs well supported in FY09 budget and the FYDP –National security trend - address the full threat spectrum From traditional “force-on-force” defense to “securing the global commons” Non-DoD opportunities aligned with corporate capabilities growing faster than DoD Federal, State, and local governments; international Sector Strategy (Northrop Grumman Electronic Systems) –Superb products that provide mission solutions at an affordable price point –Modular open system architectures supporting an adaptable product line Readily tailorable to address a dynamic and diverse world market –Continuous improvement of program and financial processes

38 Secretary of Defense Corporate Fellows 38 Sector sets strong program performance and realistic growth objectives –Maintain/continuously improve program execution record (cost/schedule) –Leverage customer relationships, technology leadership, international channels Customer, product, value chain, geographical adjacency moves –Identify opportunities for strategic relationships Joint Ventures, teaming, licensing –Practice active portfolio management for efficiencies Mergers, acquisitions, divestitures, organizational restructuring Selective first-tier global defense company –Strengthening its Tier 2 position as a preferred supplier –Assuming systems integrator, principal subcontractor, preferred supplier roles –Leveraging transformation for discriminating technology and mission solutions –Sound leadership and business processes Observations

39 Secretary of Defense Corporate Fellows 39 Corporate cross-sector integration key to customer focus, future growth –Strong management team, lessons learned mitigate some acquisition risk –Acquisitions bring large-scale system integrator capability under one roof –Internal organizational alignment a major challenge Organization focused on human capital –Recruitment, retention, leader development, incentives Always looking to improve –Effective mission assurance / continuous process improvement programs Enterprise Resource Planning (ERP), Lean, Six Sigma, GreeNG Improving cash flow, inventory management, cycle times Consolidating functions and facilities, reducing redundancy Leveraging tools to reduce costs, eliminate waste, improve efficiency Observations

40 Secretary of Defense Corporate Fellows 40 Sub-regional energy company –Largest subsidiary of Southern Company (#178 of Fortune 500) –Investor owned, tax paying utility serving 2.3 million customers –2007 Operating revenues – $7.6B 34% commercial 32% residential 19% industrial 11% wholesale 4% other –Consistent high rankings in customer satisfaction – key to rate justification Vision - To be the best customer service organization in the industry by influencing – both internally and externally – the profitable growth and success of Georgia Power and Southern Company Assignment – Distribution Organization –Assist development of talent acquisition strategy Improve recruitment of Veterans Georgia Power

41 Secretary of Defense Corporate Fellows 41 Observations Strategic Goals –Continue the strong emphasis on safety! Target ZERO! –Lead the industry in service and customer satisfaction –Maintain strong relationships with external stakeholders Customers, regulators, local community leaders, elected officials, electric cooperatives –Continue to earn top quartile returns Long-term earnings per share growth rate of 5 percent –Grow earnings through profitable sales End-use, products and services, enhanced services, customer choice, other initiatives –Make “Southern Style” a reality –Continue to build employee trust Organization –Hybrid line-matrix organization Decentralized non-Metro Atlanta operations Matrixed Metro Atlanta ops, personnel and some financial functions –Highly paternalistic; generous personnel policies; loyal workforce Challenges –Meeting revenue targets in a challenging economic environment

42 Secretary of Defense Corporate Fellows 42Observations World class safety program – Initiated “Target Zero” safety program in 2004 – Steady decline in all categories since inception OSHA recordables, lost workdays, medical attention – Successfully implemented a significant culture change – Culture of safety permeates every aspect of operations Codified in the “Core Safety Beliefs”: Safety takes precedence over all other requirements Safety is a personal value All hazards can be controlled The “Spirit of Safety” is constant Talent acquisition – Talent acquisition centralized at the holding company level Recruiters do not have hiring authority – No clear and overarching process for identifying/satisfying talent requirements Internal customer dissatisfaction Local, unsynchronized individual business unit solutions – “It’s easier to do it myself”

43 Secretary of Defense Corporate Fellows 43 We pioneer flight solutions that bring people home everywhere…every time™ Sikorsky Aircraft Continued Growth over past 3 years –8,000 to 15,000 employees –Revenue increase from $2.6B to $7B –Margin Expansion: 10% in 2010; $10B in Revenue –Mergers and Acquisitions Significant backlog of aircraft orders Stabilization in Execution – meeting commitments Focused on regaining technological leadership –Investment of Engineering & Development dollars –Creating “self-actualizing” platforms Globalization

44 Secretary of Defense Corporate Fellows 44 Assignment Activities CH-53K Program Management Team –$4B ACAT I-D Acquisition, Cost + Award Fee –Transitioning from Preliminary Design to Critical Design –Funding Profile Issues –Re-baseline and Restructure Potential –Award Fee Determination Period Sikorsky Aerospace Services –After market business segment –Transition to Condition Based Maintenance (CBM) –Development of Performance Based Logistics (PBL) solutions Operations –Supply chain management processes –Criticality of Enterprise Resource Planning System –Achieving predictable and stable build cycle

45 Secretary of Defense Corporate Fellows 45 Observations Genuine passion for rotorcraft and Sikorsky “Adapting” to the transformation –Helicopter Manufacturer in CT to Global Aerospace Firm –Influx of new senior management from outside the Company Criticality of Contracting methods –Award/payment criteria drive company actions –“What behavior is the government reinforcing?” Managing distributed development –Numerous “design houses” –70% of CH-53K outsourced –Sub-Tier Supplier management –Technology “on-ramps and off ramps” Obsolescence before IOC Use of Enterprise Resource Planning (ERP) Systems –Linkage with Integrated Master Schedule

46 Secretary of Defense Corporate Fellows 46 Raytheon Leading U.S. defense contractor –72,000 employees world-wide –2007 sales - $21.3B –Business units Integrated Defense Systems Network Centric Systems Intelligence and Information Systems Space and Airborne Systems Missile Systems Technical Services Corporate Strategy –Focus on key strategic pursuits –Leverage knowledge in core defense markets –Expand international business –Be a customer focused company Assignment: Network Centric Systems

47 Secretary of Defense Corporate Fellows 47 Observations Engineering dominated company –Focused on high tech solutions Continually working to improve internal and external perception Struggling to redefine from a product to services based company Strong process focus –Highly detailed with continuous improvement focus –Raytheon Six Sigma yielding success Attitude and personal commitment to continuous improvement Strong buy-in at senior management and functional levels

48 Secretary of Defense Corporate Fellows 48 Research, development & engineering firm –For-profit subsidiary of SRI International –Delivers vision, video and semiconductor technology innovations that empower clients to see/sense, understand and control complex environments. –450 employees –> 40% with advanced degrees (Ph.D. and M.S.) –2008 revenue $100M DoD trusted foundry New focus on products Assigned to VP for Video, Communications, Sensing, Networking Sarnoff

49 Secretary of Defense Corporate Fellows 49 Assignment Activities Planning and executing new venture: InSitech-MTAC –Nonprofit consortium for new Technology Center at Ft. Monmouth, NJ –Awarded $3.5M grant from State of New Jersey –Goal to grow $200M enterprise –Co-authoring bylaws, teaming agreements, proposals Working business development projects –Biometrics –Vital signs monitoring/Traumatic Brain Injury (TBI) –Chip scale atomic clock Video Argus – advanced video compression program

50 Secretary of Defense Corporate Fellows 50 Bridging the research-to-fielded gap Difficulties in maintaining profitability in R&D –75% Federal Government funding –Fixed price contracts are money losers –Venture capital disappearing Prime/subcontractor relationship does not work well for the subObservations

51 Secretary of Defense Corporate Fellows 51 Johnson & Johnson World’s Most Broadly Based Producer of Health Care Products –Revenues exceeding $61B annually…120,000+ employees worldwide –Operations in 57 countries; products sold in 200+ countries –Barron’s… “company most respected by investors”: #1 / 2006, #2 / 2007, #1 / 2008 Three Major Market Segments –Consumer Products ($14.5B) –Pharmaceutical ($24.9B) –Medical Devices & Diagnostics ($21.7B) Key Priorities –Winning in health care –Capitalizing on convergence –Accelerating growth in emerging markets –Developing leadership and talent Assignment – Consumer Engineering, Technology and Innovation (ETI)

52 Secretary of Defense Corporate Fellows 52 Observations/Recommendations J&J Credo…deeply rooted corporate culture –Strategy, Vision, Moral Compass, & Statement of Heritage all in one! –Responsibilities to: #1 Patients, #2 Employees, #3 Community, #4 Shareholders –Credo-based Decisions: Tylenol Scare; Preservation of Reputation/Brand Decentralization –Management responsibility placed at level closest to the customer –Truly a “family of companies”…drives decentralization’s “entrepreneurial spirit” –Challenge to centralize where it makes sense (i.e…IT, HR functions) Recruitment & retaining employees is superb Facilities, IT tools, flexible work schedules, benefits Sense of transforming lives


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