1. SECDEF Corporate Fellows Program 1 Final Report of the Secretary of Defense Corporate Fellows Program 2002 - 2003

2. SECDEF Corporate Fellows Program 2 Agenda Background Common Findings/Recommendations Individual Experiences (time permitting)

3. SECDEF Corporate Fellows Program 3 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

4. SECDEF Corporate Fellows Program 4 SDCFP Organization Two officers from each Service – High flag/general officer potential – O-6 or O-% – 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, Admin Assistant – Net Assessment for oversight – National Defense University for Admin support

5. SECDEF Corporate Fellows Program 5 SDCFP Sponsors 03 - Prior – 3M, ABB, Accenture, Agilent Technologies, AMS, Boeing, Cisco, DirecTV, Enron, FedEx, Hewlett-Packard, Human Genome Sciences, Lockheed Martin, Loral, McKinsey & Co., McDonnell Douglas, Merck, Microsoft, Mobil, Netscape, Oracle, Northrop Grumman, PricewaterhouseCoopers, Raytheon, Sarnoff, Sears, Southern Company, Sun Microsystems, United Technologies 02- 03 – Boeing, FedEx, IBM Business Consulting Services, (formerly PwCC), Pfizer, Raytheon Aerospace, Southern Company, Sun Microsystems 03- 04 – Amgen, DuPont, General Dynamics, McKinsey, Microsoft, Northrop Grumman, Sarnoff

6. SECDEF Corporate Fellows Program 6 SDCFP Results Program objectives fulfilled – Education 3 DoD, individual officers, Sponsors – More Sponsors than Fellows available – Intra-group experience sharing Unique corporate experience – Strong corporate support – Executive/operational level mix – Mergers/restructuring

7. SECDEF Corporate Fellows Program 7 SDCFP Products 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

8. SECDEF Corporate Fellows Program 8 “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… “ Secretary of Defense Donald Rumsfeld Remarks to The National Defense University 31 January 2002

9. SECDEF Corporate Fellows Program 9 2002 - 2003 Fellows Lt Col Eric BestThe Boeing Company St Louis, MO LTC David ClarkPfizer, Inc. New York, NY COL David De VriesIBM Business Consulting Services Fairfax, VA LtCol Clyde Frazier, Jr. Southern Company Atlanta, GA Col David GerberFedEx Corporation Memphis, TN CAPT(S) Adam LevittSun Microsystems, Inc. San Jose, CA CAPT(S) Rick RuehlinRaytheon Aerospace, LLC Jackson, MS

10. SECDEF Corporate Fellows Program 10 Agenda Background Common Findings/Recommendations Individual Experiences (time permitting)

11. SECDEF Corporate Fellows Program 11 Introduction Corporate Fellows and DoD Transformation in 2003 – Transformation is about culture – Private sector leads in adaptation—very dynamic & competitive – Sluggish economy forcing corporate transformation – DoD transformation efforts in right direction This brief is not about computers and the Internet, however… – Networks drive transformation – IT innovation significantly leads our ability to adapt and exploit it – The private sector leads DoD in adapting to IT Organizational dynamics + IT = synergistic gain – Organization – Processes – People Many lessons to share!

12. SECDEF Corporate Fellows Program 12 Common Findings Organization – Understand the Core – Break Down Stovepipes Processes – Improve Processes – Share Services – Enforce Enterprise Architectures – Create Value – Reform Financial Management Personnel – Develop Future Leaders – Attract and Retain – Exploit Organizational Knowledge and Skills

13. SECDEF Corporate Fellows Program 13 Organization Understand the Core Corporate America focuses on core competences – Basis for market leadership and internal efficiency – Non-core activities outsourced through partnerships/alliances DoD should: – Develop and communicate DoD-wide core competences Develop warriors, adapt technology, integrate operations – Identify Service distinct capabilities Tie directly to core competence; relate to mission areas Determine overlaps, redundancy, dependencies Align organizations to produce capabilities efficiently/effectively – Partner with business for non-core activities Legislation must support mutually beneficial contract arrangements Leaders must use suitable, effective business strategies The nucleus of our capability

14. SECDEF Corporate Fellows Program 14 Organization Break Down Stovepipes Corporate America optimizes organizational performance – Open System Modular Organizations (Small/Medium Scale) – Integrated Matrix Structures (Large Scale) DoD should: – Small/Medium Scale (small unit task force) Develop modular organizations to improve agility Design open system organizations that plug and play into the Net Small unit joint training and operations – Large Scale (COCOMS & Services/Agencies) Align & integrate organizations around Joint core competencies Create effective DoD-wide shared services Avoid scale and seam limitations Create incentives for cooperative behavior Integration is the key!

15. Army Navy Air Force Marines Unified Combatant Commands Basic Business Unit Build/Control Budget (“P&L”) Task organization efficient DoD “Core” Matrix DoD Shared Services Provide the Services No Service Unique Enterprise Wide Web Based NORTHCOM SOUTHCOM EUCOM PACOM CENTCOM SOCOM STRATCOM TRANSCOM JFCOM Agencies Services and Agencies Hold the People ­Unique skill sets Own the Resources Train, Equip, Maintain Real Estate Logistics & Acquisition IT Services Financial Management Depot Maintenance Human Resources

16. SECDEF Corporate Fellows Program 16 Processes Improve Processes Corporate world uses large variety, number of tools – Lean, Six Sigma, Right First Time, Process Excellence, etc. – Tailored for incremental and big process change – Used for both admin and line processes DoD needs two kinds of approaches – Process redesign Leapfrogs, big, often zero-based – Continual improvement Incremental, marginal, symptomatic – Institutionalize both No “Department of Process Improvements” Situation drives timing and balance of each Top leadership support essential for any approach... Get the tools and use them

17. SECDEF Corporate Fellows Program 17 Processes Share Services Corporate America centralizes certain ‘common services’ – Common services become centralized Shared Services – Cuts costs, improves efficiency, eliminates duplication – Companies focus on their “Core Competences” DoD should: – Adopt Shared Services model from commercial industry – Identify common services to centralize Common management of more Joint DoD bases Depot Maintenance, Information Technology (IT) HR/Personnel (finance, uniformed medical, etc.) Supply Chain Management (not just logistics) Transportation – Support concepts; designate a champion – Institutionalize DoD-wide... Centralize towards efficiency!

18. SECDEF Corporate Fellows Program 18 Processes Enforce Enterprise Architectures Corporate America leverages industry best practices – Process improvement – Enterprise architectures – Uniform standards and enterprise systems DoD Should: – Focus on end-to-end system architectures (not just Financials) Integrated Operational (C4ISR) & Back Office systems Implement governance, processes to prioritize investments – Adopt & enforce industry accepted open standards – Implement DoD-wide self-service, web based solutions Financial Enterprise Resource Planning (ERP) Supply Chain Management – logistics / supplier portal Human Resources Management System (HRMS) – Enable mobility with security (e.g. DoD Common Access Card) Architecture + Standards = Interoperability

19. SECDEF Corporate Fellows Program 19 Processes Create Value Best businesses deliver maximum value to customer – Adopt culture of eliminating waste and improving quality – Get employees to think like customers DoD should: – Review unit-level processes for value Cultural change necessary; train leaders to ask “Why?” Empower lower levels; build cross-organization horizontal relationships – Implement Lean principles in acquisition process Continue spiral development in high tech programs to reduce risk and time Give life-cycle costs more consideration in procurement decisions Revise funding practices to be responsive in technology push environment – Adopt business approach to assessing and improving productivity “Show me the numbers” More people, pieces, or process? Maximize value across the enterprise

20. SECDEF Corporate Fellows Program 20 Processes Reform Financial Management Private sector business model fundamentals – Simplified and standardized financial management – Incentives for efficiency and effectiveness Get DoD from “As Is” to “Should Be” – Establish new structure and guidelines first Before investing in DoD-wide systems – Adopt applicable private sector practices Minimize number of financial organizations & reporting systems Change the rules, starting with O&M “Use or Lose” Use total organization financial performance measures Develop more financial leadership from operator ranks Standards + simplicity = smart spending

21. SECDEF Corporate Fellows Program 21 Personnel Develop Future Leaders Rapidly evolving markets force corporate leader adaptability – Years ahead in hi-tech evolution, global markets, networks – Leaders are integrators No similar drivers for DoD – Low bandwidth government, staff processes, recent conflicts – Corporate focus gets short shrift Still too service-centric Joint still out of pocket, should be mainstream – Sunk costs tyranny, decades-long acquisition cycles – Face-to-face communications a nice, but slow, expensive luxury – Today’s military leaders are transactional Morale and execution controllers

22. SECDEF Corporate Fellows Program 22 Personnel Develop Future Leaders (cont) DoD should: – Cultivate an “Agile Vision” Blend old and new into Joint CONOPS Technology cycle times now as short as command tenure Drive underlying technology & process flexibility Disassociate people with systems Systems go obsolete, people don’t – Exploit 21st Century Communications Agile vision requires fast, complete comms to entire organization Essential in large, geographically disbursed organizations Provide, train to, expect skillful use of all media Build cultural connections Global education for trans-cultural competence at all military levels Vital to expeditionary, coalition ops with decreased overseas presence

23. SECDEF Corporate Fellows Program 23 Personnel Develop Future Leaders (cont) DoD Should: – Identify, document, cultivate, promote integration skills Lateral leadership in matrixed organizations Connecting people and processes with IT Resolving tensions with win-win solutions, not messy compromises – Better understand networked organization incentives & discipline – Develop more flexible uniformed career paths Build “out of the silo” multi-perspective integrators Kill “up or out” mentality Build in more joint tours earlier; more service exchanges Extend high year tenure, promotion zones Make General/Flag Officer selection boards joint

24. SECDEF Corporate Fellows Program 24 Personnel Develop Future Leaders (cont) Move leadership from Transactional to Transformational – Push personnel, organization, resource decisions down Executive leadership focuses on vision/bounds, not daily operations – Increase accountability Demand and expect innovation Extend command tours; measure progress toward long-term vision Perception of mistakes will increase – Grow pool of leaders with transformation track records Increase speed, adaptability, innovation, business (risk/return) acumen

25. SECDEF Corporate Fellows Program 25 Personnel Attract and Retain Corporate America Strives to be the Employer of Choice DoD should: – Improve pay and promotion Eliminate pay gaps; refine uniformed “up or out” promotion system – Restructure benefit packages Portable and customizable – Promote flexible career paths External career learning experiences – Provide workplace predictability Longer tour lengths Earlier PCS notification OPTEMPO reduction “It Takes the Best to Be the Best”

26. SECDEF Corporate Fellows Program 26 Personnel Exploit Knowledge & Skills Corporate expertise and knowledge come from within – Close integration of business to process and culture – Outside consultants only for fresh ideas/complex studies – Conservation of overhead and general administrative costs DoD Should: – Increase use of internal resources and experts Values, strategy, and core business " Expertise is value Improved morale and pride of ownership Less paralysis by analysis – Faster & Cheaper More transformation stakeholders Hone the organization culture “Just Do It!!”

27. SECDEF Corporate Fellows Program 27 SUMMARY Organization, Processes, People inextricably linked – Transformation and operations Improved processes improve operations (i.e. VALUE) Transformation Leadership must be Involved Leadership Information Technology is an enabler, not an end state Maintain awareness of work force needs today and tomorrow Accelerate and continue DoD transformation initiatives

28. SECDEF Corporate Fellows Program 28 World’s largest manufacturer of commercial /military aircraft and satellites – Employees:169,000+ in 26 states, 61 countries – Revenue:$58 B (1/3 international, #1 U.S. exporter) – Suppliers:15,000+ in 81 countries – 1 of 4 large defense-focused companies still standing Corporate Strategy and Culture – Core businesses develop new products/services, provide growth opportunities – Employees are the competitive advantage – July 2002 re-alignment to improve customer focus Space & Comm + Aircraft & Missiles  Integrated Defense Systems (IDS) – “Think Globally, Be Local” Assignment: Unmanned Systems – Integration Team, UCAV Program, System Architecture – UAV National Industry Team (UNITE), National Defense Industrial Assn (NDIA) The Boeing Company

29. SECDEF Corporate Fellows Program 29 SECDEF Corporate Fellows Program The Boeing Company Observations Company size limits agility in marketplace that values speed/innovation – Growth resulted in widely dispersed and very diverse corporate cultures – Extensive outsourcing allows continued focus on core competencies – Employee involvement and empowerment emphasized Corporate re-alignment key to customer focus and future growth – Large defense contracts will keep IDS busy the next decade JSF contract loss limits Boeing as a fighter aircraft builder – IDS brings valuable large-scale system integrator capability under one roof – Internal organizational alignment complex Unmanned Systems unit leading UCAV market – Spiral development well suited Incremental capabilities introduction Concepts of Operations (CONOPS) development – Software key to success of Network-centric operations – International customers key to future profitability of unmanned systems

30. SECDEF Corporate Fellows Program 30 SECDEF Corporate Fellows Program The Boeing Company Observations Big Boeing reinvents itself to stay relevant – Bombers to commercial aircraft to integrator (50/50) To really change, we must change the way we think – Huge effort to focus on capability not platforms Major change takes time – 4-year process? (Gary Toyama) Focus on core – Get rid of non-core; ties directly to LEAN Strategy and Process are critical

31. SECDEF Corporate Fellows Program 31 IBM Business Consulting Services New (and emerging) business unit – BCS (Global): +60,000 Professionals in +160 countries – World’s largest consulting and services organization – Comprehensive capability spanning ideas to service Acquired PricewaterhouseCoopers Consulting - 2 Oct 02 – Largest ever for IBM – IBM - PwCC global operations fully integrated by 1 Jan 03 Assigned to US Public Sector segment; Reports to: – Transition/Integration Leadership & Chief Operations Officer Plan and execute integration of business cultures/systems by 1 Jan Plan and execute long-term business systems & processes – Lead Partner for Supply Chain & Operations Solutions – Lead Partner for Federal Defense Industry

32. SECDEF Corporate Fellows Program 32 IBM BCS Observations/ IBM BCS Observations/Recommendations Organizational Design: Used Best of Both – IBM back-office processes with PwCC client services matrix – Significant cultural shift and change management challenges for all – Short study time  Decision  Rapid execution  Adapt & Communicate DoD reduce number of studies for every decision Multiple Accounting Systems: – New BCS had multiple accounting & payroll systems – Focused on integrating essential processes quickly; long term look for new system – Significant change management issues and operational constraints DoD continue Financial Management System initiative – Shorten execution period, now 5 – 10 years – Global corporations have changed in less than a year

33. SECDEF Corporate Fellows Program 33 IBM BCS Observations/Recommendations Human Resources – Integration and transition resulted in overages and requirements – Somewhat fluid in a matrixed organization Growth from within similar to Military Experienced consultants brought in – IBM corporate culture emphasizes slow HR growth Significant analysis and re-use of existing personnel Turbulent downsizing during last decade – Extensive recruiting and retention program DoD exercise discipline and speed in sizing – especially HQ – Manage the resulting culture change – Leadership is key

34. SECDEF Corporate Fellows Program 34 SECDEF Corporate Fellows Program IBM Business Consulting Services Observations Must lead new business strategy and goals – “Be, Know, Do”. Change management requires dedicated leadership – Best with outside ombudsman Incorporate Enterprise IT with flexibility

35. SECDEF Corporate Fellows Program 35 FedEx Express Creator and Leader of Overnight Express Shipment – One of six FedEx-branded operating companies – Model information age company, but capital and labor intense 214,000 employees in 212 countries: 90% of global economy Nearly 600 aircraft, 1000+ facilities – 2002 revenue: $20.6B (paid first dividend) Culture – Unity of mission: “Absolutely, Positively” & “The World on Time” Perfect customer service – People-Service-Profit: No layoffs, hire from within Loyal employees, exceptional diversity Market Environment – Seasonal, demand-driven, economic bellwether – Main competitor: UPS Top strategic partner/customer: US Mail – 2001-2003 toughest period in FedEx history--very low growth Assignment: VP, Global Operations Scheduling, Control, Planning

36. SECDEF Corporate Fellows Program 36 FedEx Express Observations/Recommendations Still Refining “Operate Independently, Compete Collectively” – Classic joint issue: Service fault lines and confused customers Former brunt of jokes, US Mail provides ~35% of fleet utilization DoD: Parochial miscoordination is out, strategic partners are in Decentralized, Scalable Operations Enabled Rapid Growth – Mass-replicated facilities are locally customized and optimized – Facilities are labs -- innovation spreads rapidly High operations tempo, low personnel tempo – Well-delimited jobs with short, local, mostly on-the-job training – Nearly perfect dependability DoD should: – Combine ops, test, and training units: Cheap, flexible, innovative – Growing change is faster, more robust, less risky than deploying change – Decentralized control develops transformational leaders

37. SECDEF Corporate Fellows Program 37 FedEx Express Observations/Recommendations Centralized Scheduling and Planning Face Scale Problems – Accretion: Increasing size is a liability as agility and speed decrease Six months to settle after 9/11 and US Mail contract – System complexity exceeds cognitive abilities of a single person Optimization impossible Built-in scale limits slow planning, drive accretion -- “IT Sprawl” – Geography and time seams suboptimize fleet and facilities – Corporate investment in Large Scale Optimization lags FedEx growth Scheduling systems should lead growth--core competitive issue DoD should: – Centralization stifles growth and adaptability, promotes accretion – Replacing accreted systems is messy, expensive, absolutely necessary Adopt open standards, avoid built-in seams & scale limits in new systems – Decentralized strategy is an elusive goal in all planning What’s our strategic bandwidth?

38. SECDEF Corporate Fellows Program 38 FedEx Express Observations/Recommendations Core Problem: No Way to Value DoD Activities – No market, few transactions, little direct competition, no profit measure – Purchaser is not a direct recipient of DoD combat services The enemy is Good or bad value? Survey the Taliban? The Solution? – Restructure defense establishment to build in market mechanisms – Strengthen relative value by defining effects and capabilities Specify “what,” not “how” Stimulate off-the-shelf value and innovation vs mil-spec perfection – Vision must integrate COTS, pipeline systems, & CONOPS

39. SECDEF Corporate Fellows Program 39 SECDEF Corporate Fellows Program Pfizer Inc. Company Overview Research Based, Global Pharmaceutical Company – Corporate HQ:New York City – Employees:~130 K – Revenues:~ $50 B – R&D:~ $7 B Main business segments: – Health Care (Prescription Drugs) – Animal Health – Consumer Health Care (over-the-counter) – Includes Warner-Lambert and Pharmacia acquisitions Sales growth routinely more than double that of overall pharmaceutical industry

40. SECDEF Corporate Fellows Program 40 SECDEF Corporate Fellows Program Pfizer Inc. Observations Focused on creating value – Value from effort to develop medicines/reduce suffering – Value from effort to enhance health care delivery – Value to investors with business profitability Protection of intellectual property rights a significant concern – Competition from generic manufacturers New FDA efforts limit legal actions that protect drug patents Lesser legal IPR protection/enforcement in foreign markets – US strategic policy greatly affects ability to operate globally Focused on people – Stable/loyal work force – Advancement and reward policies promote productivity, enhance retention, enable high-quality recruitment at all levels – Menu for employees to tailor benefit packages to meet their needs

41. SECDEF Corporate Fellows Program 41 SECDEF Corporate Fellows Program Pfizer Inc. Recommendations DoD should: – Improve Pay and Promotion Remove pay gaps with civilian sector Refine “up or out” promotion – Refine Benefit Packages to Meet Individual Needs Provide menu of customizable benefits Portability – Recognize and Promote Flexible Career Paths Longer tour lengths Recognize skills learned outside the organization – Encourage Workplace Predictability Longer lead on PCS notification OPTEMPO reduction

42. SECDEF Corporate Fellows Program 42 1 Southern Company Leading energy producer in Southeastern United States Most admired electric company by Fortune magazine – Corporate Office: Atlanta, Georgia – Employees: Approx. 25,000 – Customers: 4 Million (electricity) – Revenues: $10.2 B Major Business Lines – Regulated Utilities – Competitive Generation – New Products and Services Generating Capacity and Service Area – Seventy-four generating stations – Five operating companies in four states – 120,000 square miles Assignment: Supply Chain Management (SCM) – SCM Leadership Team ~ Strategy and Supervisor meetings – Implementation of best practices and cost-savings initiatives

43. SECDEF Corporate Fellows Program 43 1 Southern Company Observations Corporate Strategy and Goals – America’s most trusted energy company – Focus on core competency: Regulated Utilities – Concentrate on service in Southeastern United States – Lead the industry in service and customer satisfaction Supply Chain Strategy – Supplying value through teamwork – Inventory and warehouse optimization – Contracting: compliance and standardization – Strategic sourcing through strategic alliances – Leverage savings throughout ‘entire supply chain’

44. SECDEF Corporate Fellows Program 44 1 Southern Company Recommendations Streamline Supplier Base and Eliminate Constraints – Create supplier/ contractor registration database – Reduce volume of paperwork for DoD suppliers – Formation of alliances and partnerships DoD-wide Supply Chain and Logistics Initiatives – Focus on the ‘entire supply chain’ – Implement supplier buy-back program – Establish freight management program – Adopt Commercial off-the-Shelf technologies for: Intra-service visibility of spare parts and supplies Warehouse Management Systems (WMS) – Outsource non-core DoD functions

45. SECDEF Corporate Fellows Program 45 Sun Microsystems, Inc. Disruptive innovator since 1982 – Continuous innovation and reinvention – 35K+ employees; $12.5B+ revenue – Vision: connect everyone and everything Network services to anyone, anywhere, anytime, on any device – Strategy: Network computing #1 provider of products, technologies and services Enables the net economy Assignment: Assistant to VP, Chief Information Officer (CIO) – Active member of CIO staff, Information Management Group – Strategic Planning Group – Leadership Council

46. SECDEF Corporate Fellows Program 46 Sun Microsystems Observations Core Competencies - corporate transformation foundation – Functional reorganization/Reductions in Force – Core business process identification & improvements – Strategic planning – business operating system – Strategic partnering / outsourcing Performance metrics drive business solutions – Six Sigma / Balanced Scorecards – Data / fact based decision making (right metrics / tools) Investment in R&D critical to transformation – Innovation/transformational development critical to survival – $1.9 B / YR with no reductions in $ or people

47. SECDEF Corporate Fellows Program 47 Sun Microsystems Observations/Recommendations Open standards and interfaces a viable alternative – Compatibility a viable alternative to proprietary systems – Improved security, added flexibility, reduced costs Flex Office concept offers productive benefits – Mobility – Thin Client computing Network Based Everything (Web enabled) – Drives availability and improves effectiveness – Productivity tools/applications – Knowledge Management – e-Business – supplier’s portal, System to System, B2B

48. SECDEF Corporate Fellows Program 48 Sun Microsystems Observations/Recommendations Adopt open standards/sourcing for DoD IT systems – Architectures and standards Invest in “Thin Client” technology – Pentagon, ships, aircraft, Mobile Command Centers – Cost savings, global mobility, DoD Common Access Card leveraged – Security improvement Apply Six Sigma to DoD business processes Implement IT Strategy – Consolidate portals, servers, applications, ERP systems – Web enable ALL tools and processes – Knowledge Management – All ways connected (mobility / discovery) – Disaster Recovery planning

49. SECDEF Corporate Fellows Program 49 Leading provider of aerospace & other technical services – $534M sales / $3B backlog (93% government) – Maintenance & supply management of 75 aircraft types – Commercial air service support to military operations & training 30-year legacy – Experienced management team and Board of Directors – Highly trained workforce, 5,685 employees in 32 countries – Long standing customer relationships Stable & high return business model – 100% win rate on prime re-competitions – Focused on growing DoD O&M budget Assignment: CEO’s office – Company officer level responsibility / corporate-wide access – Business acquisition transition team leader – Enterprise Resource Planning (ERP) system source selection team Raytheon Aerospace LLC Raytheon Aerospace LLC

50. SECDEF Corporate Fellows Program 50 Raytheon Aerospace LLC Observations / Recommendations Highly successful employee safety record – Implemented DuPont Safety Management Program – Corporate-wide application, annual goals for each business unit – Significant reductions, rates 50% better than industry average Recordable injury rates:  42% Lost work day rates:  29% Workman’s compensation:  27% DoD continue DuPont/Alcoa type safety programs in DoD – Implement safety tracking metrics and goal levels: At lowest echelon possible -- unit level Active duty & civil service workforce Motivate unit leaders/supervisors and change worker behavior Achieve higher personnel readiness & lower medical costs

51. SECDEF Corporate Fellows Program 51 Raytheon Aerospace LLC Observations / Recommendations Effective process improvement programs, ISO & 6 Sigma – Improved cash flow, interest savings, cost avoidance – Admin processes and line operations DoD Pick up where TQM/TQL left off – Expand quality programs beyond maintenance & depots Company strategy: Max customer value, reasonable ROI – Enduring partnerships with employees & customers – Reduce costs, eliminate waste, improve efficiency – Manage & leverage maintenance/inventory data information – Invest company resources, make capital expenditures accordingly DoD promote longer term contracts & partnerships – Encourage defense contractors to invest, plan, bear risk, improve service

52. SECDEF Corporate Fellows Program 52 Raytheon Aerospace LLC Observations / Recommendations “Lean business” practices – Low profit margin business, rigorous cash management – Incentives to reduce costs, improve cash flow & productivity DoD Change appropriation & budget authority rules – Break use-or-lose O&M mentality – Create an incentive for O&M under-runs Successful growth strategy – Focus on the customer, invest in internal growth when possible – Form alliances when possible, acquire complementary capabilities – Continually review corporate strategy & business plans DoD promote longer term alliances – Operational (e.g., standing-deployable JTF’s) – Logistical (e.g., industry contracts) – Leverage SDCFP experience through Joint/OSD follow-on tours