SDCFP final Brief Part II

1
Final Report of the Secretary of
Defense Corporate Fellows Program 2002 - 2003
2
Agenda

• Background
• Common Findings/Recommendations
• Individual Experiences (time permitting)

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
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 issuesleading 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
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
SDCFP Results

• Program objectives fulfilled
• Education3
• 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
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
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
2002 - 2003 Fellows

• Lt Col Eric Best The Boeing Company St Louis,
  MO
• LTC David Clark Pfizer, Inc. New York, NY
• COL David De Vries IBM Business Consulting
  Services Fairfax, VA
• LtCol Clyde Frazier, Jr. Southern Company
  Atlanta, GA
• Col David Gerber FedEx Corporation Memphis,
  TN
• CAPT(S) Adam Levitt Sun Microsystems, Inc. San
  Jose, CA
• CAPT(S) Rick Ruehlin Raytheon Aerospace, LLC
  Jackson, MS

10
Agenda

• Background
• Common Findings/Recommendations
• Individual Experiences (time permitting)

11
Introduction

• Corporate Fellows and DoD Transformation in 2003
• Transformation is about culture
• Private sector leads in adaptationvery 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
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
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
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

15
DoD Core Matrix

• Unified Combatant Commands
• Basic Business Unit
• Build/Control Budget (PL)
• Task organization efficient

Real Estate Logistics Acquisition IT
Services Financial Management Depot
Maintenance Human Resources
Army
Navy
Air Force
Marines
Agencies

• Services and Agencies
• Hold the People
• Unique skill sets
• Own the Resources
• Train, Equip, Maintain

• DoD Shared Services
• Provide the Services
• No Service Unique
• Enterprise Wide
• Web Based

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
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
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)

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
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 OM Use or Lose
• Use total organization financial performance
  measures
• Develop more financial leadership from operator
  ranks

Standards simplicity smart spending
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
• Todays military leaders are transactional
• Morale and execution controllers

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 dont
• 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
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
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
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
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
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
The Boeing Company

• Worlds 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)

29
The Boeing Company Observations
SECDEF Corporate Fellows Program

• 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
The Boeing Company Observations
SECDEF Corporate Fellows Program

• 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
IBM Business Consulting Services

• New (and emerging) business unit
• BCS (Global) 60,000 Professionals in 160
  countries
• Worlds 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
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
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
IBM Business Consulting Services Observations
SECDEF Corporate Fellows Program

• 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
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
FedEx ExpressObservations/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
FedEx ExpressObservations/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
• Whats our strategic bandwidth?

38
FedEx ExpressObservations/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
Pfizer Inc. Company Overview
SECDEF Corporate Fellows Program

• Research Based, Global Pharmaceutical Company
• Corporate HQ New York City
• Employees 130 K
• Revenues 50 B
• RD 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
Pfizer Inc. Observations
SECDEF Corporate Fellows Program

• 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
Pfizer Inc. Recommendations
SECDEF Corporate Fellows Program

• 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
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

1
43
Southern CompanyObservations

• Corporate Strategy and Goals
• Americas 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

1
44
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

1
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
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 RD critical to transformation
• Innovation/transformational development critical
  to survival
• 1.9 B / YR with no reductions in or people

47
Sun MicrosystemsObservations/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 suppliers portal, System to System,
  B2B

48
Sun MicrosystemsObservations/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
Raytheon Aerospace LLC

• 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 OM budget
• Assignment CEOs office
• Company officer level responsibility /
  corporate-wide access
• Business acquisition transition team leader
• Enterprise Resource Planning (ERP) system source
  selection team

50
Raytheon Aerospace LLCObservations /
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
• Workmans 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
Raytheon Aerospace LLCObservations /
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
Raytheon Aerospace LLCObservations /
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 OM mentality
• Create an incentive for OM 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 JTFs)
• Logistical (e.g., industry contracts)
• Leverage SDCFP experience through Joint/OSD
  follow-on tours