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					SECDEF Corporate Fellows Program




                       Final Report of the


         Secretary of Defense
      Corporate Fellows Program
                              2002 - 2003

                                             1
                                   Agenda
SECDEF Corporate Fellows Program




       Background

       Common Findings/Recommendations

       Individual Experiences (time permitting)



                                                   2
                      SDCFP Background
SECDEF Corporate Fellows Program

       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
                                                                     3
                    SDCFP Organization
SECDEF Corporate Fellows Program

       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

                                                                          4
                       SDCFP Sponsors
SECDEF Corporate Fellows Program

       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
                                                                          5
                          SDCFP Results
SECDEF Corporate Fellows Program

       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



                                                      6
                       SDCFP Products
SECDEF Corporate Fellows Program

       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


                                                                     7
SECDEF Corporate Fellows Program




      ―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




                                                                            8
                         2002 - 2003 Fellows
SECDEF Corporate Fellows Program
     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

                                                                  9
                                   Agenda
SECDEF Corporate Fellows Program




       Background

       Common Findings/Recommendations

       Individual Experiences (time permitting)



                                                   10
                              Introduction
SECDEF Corporate Fellows Program

        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!                           11
                      Common Findings
SECDEF Corporate Fellows Program

        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

                                                           12
                                 Organization
                      Understand the Core
SECDEF Corporate Fellows Program
       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                             13
                                Organization
                  Break Down Stovepipes
SECDEF Corporate Fellows Program
       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!                              14
                                 DoD ―Core‖ Matrix
    Unified Combatant
         Commands
• Basic Business Unit
• Build/Control Budget (“P&L”)
• Task organization efficient




         Army

         Navy
         Air Force
         Marines
         Agencies


  Services and Agencies                           DoD Shared Services
 • Hold the People                            •    Provide the Services
      -Unique skill sets                      •    No Service Unique
 • Own the Resources                          •    Enterprise Wide
 • Train, Equip, Maintain                     •    Web Based
                                  Processes
                        Improve Processes
SECDEF Corporate Fellows Program

       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                16
                                  Processes
                            Share Services
SECDEF Corporate Fellows Program
       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!            17
                                  Processes
         Enforce Enterprise Architectures
SECDEF Corporate Fellows Program
        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                 18
                                   Processes
                                Create Value
SECDEF Corporate Fellows Program
    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                       19
                                  Processes
            Reform Financial Management
SECDEF Corporate Fellows Program

       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                          20
                                    Personnel
                   Develop Future Leaders
SECDEF Corporate Fellows Program

       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

                                                                          21
                                       Personnel
            Develop Future Leaders (cont)
SECDEF Corporate Fellows Program

       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


                                                                                                22
                                   Personnel
            Develop Future Leaders (cont)
SECDEF Corporate Fellows Program


       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



                                                                               23
                                   Personnel
            Develop Future Leaders (cont)
SECDEF Corporate Fellows Program


       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




                                                                                    24
                                   Personnel
                         Attract and Retain
SECDEF Corporate Fellows Program


       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”
                                                                                25
                                       Personnel
                 Exploit Knowledge & Skills
SECDEF Corporate Fellows Program
       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!!”
                                                                        26
                             SUMMARY
SECDEF Corporate Fellows Program

       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

                                                                    27
                      The Boeing Company
SECDEF Corporate Fellows Program
    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)
                                                                                 28
                      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
                                                                                   29
                    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




                                                                    30
     IBM Business Consulting Services
SECDEF Corporate Fellows Program

       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

                                                                                 31
                   IBM BCS
        Observations/Recommendations
SECDEF Corporate Fellows Program

       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


                                                                                32
                   IBM BCS
        Observations/Recommendations
SECDEF Corporate Fellows Program

       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

                                                                         33
      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




                                                            34
                               FedEx Express
SECDEF Corporate Fellows Program
       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
                                                                                35
                FedEx Express
        Observations/Recommendations
SECDEF Corporate Fellows Program
       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
                                                                                 36
               FedEx Express
       Observations/Recommendations
SECDEF Corporate Fellows Program
      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?
                                                                                      37
               FedEx Express
       Observations/Recommendations
SECDEF Corporate Fellows Program


      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


                                                                                  38
                        Pfizer Inc.
                     Company Overview
SECDEF Corporate Fellows Program

       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
                                                                  39
                                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
                                                                                 40
                           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

                                                                      41
                       Southern Company
SECDEF Corporate Fellows Program

       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
                                                                              42
                      Southern Company
                        Observations
SECDEF Corporate Fellows Program

       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‘
                                                                      1
                                                                     43
                          Southern Company
                          Recommendations
SECDEF Corporate Fellows Program

       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
                                                                        44
                   Sun Microsystems, Inc.
SECDEF Corporate Fellows Program

       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


                                                                                 45
                      Sun Microsystems
                        Observations
SECDEF Corporate Fellows Program

       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


                                                                            46
              Sun Microsystems
        Observations/Recommendations
SECDEF Corporate Fellows Program

       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

                                                                         47
             Sun Microsystems
       Observations/Recommendations
SECDEF Corporate Fellows Program
      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
                                                                              48
                Raytheon Aerospace LLC
SECDEF Corporate Fellows Program
       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
                                                                          49
          Raytheon Aerospace LLC
       Observations / Recommendations
SECDEF Corporate Fellows Program

      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
                                                                               50
          Raytheon Aerospace LLC
       Observations / Recommendations
SECDEF Corporate Fellows Program

      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
                                                                          51
           service
          Raytheon Aerospace LLC
       Observations / Recommendations
SECDEF Corporate Fellows Program

      ―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
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