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[Music]
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technically I'm retired but I'm engaged
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with uh many things I'm on three
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publicly traded companies two here in
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the US company called
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aeroflex uh and ATK allian Tech Systems
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also one that trades on the London
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exchange cabam PLC I'm also an advisor
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to the Center for strategic and
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international studies and to Veritas
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capital and Investment Banking firm I'm
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also Vice chairman of the defense
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Business board and then in my spare time
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a trustee of a university and a charity
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and I run a little Consulting
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business let me summarize uh a little
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bit about what I talked about today in
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the keynote address to the Aerospace and
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defense conference the theme of the
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conference as you probably aware was
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strategic agility I tended to focus not
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as much on the strategy side of that but
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more on the agility side specifically
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the need to match a company's culture to
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one's strategy and how to rapidly change
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company culture because the commonly
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head belief is it takes years to change
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a culture in my own experience there are
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specific steps that one can take to
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accelerate that process so I went
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through the various steps first I
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covered very briefly my thoughts on
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strategy because my own pet peeve is
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many strategies are simply aspirational
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statements so they may be a goal but
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they're so General that they might apply
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to almost any company such as we wish to
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be world class who doesn't uh so they're
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not specific enough and they don't talk
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to
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the steps that a company needs to take
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to differentiate themselves in the
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marketplace so that's
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execution right so particularly use the
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example of Southwest Airlines who one of
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their tenants one of the pillars of
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their strategy is to be best value hence
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common fleet but the way they emphasize
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the value in the public domain is no
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baggage fees no change when you change
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your Airline reservation no change phase
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so they have something that actually
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sets them apart and helps Advance their
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strategy and clearly the bottom line
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reflects that then I went on uh to
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culture starting with the first step of
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taking an inventory of what the culture
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is but not by walking around and asking
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what's the culture like here because
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nobody knows how to answer that question
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I went through a series of questions
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like what's it like to work here uh
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what's the informal system what's the
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formal system how does information flow
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within this
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organization how does misinformation
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flow within the organization and
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questions of that elk that are a little
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more provocative and you get uh people
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to actually start talking about people
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at all levels start to talk about what's
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this place really
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like to change a culture I think the
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first thing one needs to decide is what
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do you have what's your strategy again
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let me give a couple of examples if your
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strategy like Southwest Airlines
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everybody cooperates that's the way you
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have these friendly people facing the
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public uh then you need to have a
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culture where people actually are
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working together if on the other hand
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you're running a car dealership or a
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series of car dealerships maybe you
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actually want to Foster competition the
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best salesman gets a big bonus every
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month the best dealership gets the
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reward every month and there's much less
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emphasis on cooperation and much more
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emphasis on cooperation if you're
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running a power plant you better have an
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emphasis in your culture of risk adverse
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if you're running an entrepreneurial
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banking business that uh gives Venture
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Capital to uh startups you better have a
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high tolerance or risk or you're not
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going to be very successful so it's not
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a question of what's a successful
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culture or what isn't a successful
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culture it's more a question of what
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culture do you have what do you need to
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advance your strategy and then what are
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the levers to affect that
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change I think the most effective lever
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is ultimately a a compelling case with
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Clarity made to the people how do you
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get their hearts and minds and the way
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you do that is to have something that is
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quite specific as I previously mentioned
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uh but also realistic and then some
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early SU esses so if we're if a strategy
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for example as Wharton is trying to do
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advance in the international marketplace
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they better start to devote some real
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resources have some tangible things some
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early successes so there's credibility
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around the internationalization of the
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business people start to see more you
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know you're recruiting more heavily
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overseas and possibly
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domestically and those kinds of specific
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steps uh actually get people to say you
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know this isn't just
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rhetoric the management of this
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institution is serious about doing this
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and I'm starting to see so maybe there's
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something I can do I have a friend in
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China or India maybe I can talk to them
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about uh coming here to
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school well I'll give you a an example
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in one of my early experiences in when I
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was one of the first jobs at as
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president of about a $200 million
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company and and this was a company in
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crisis hence they brought in a new
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president they weren't making money and
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were losing market share but the the
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most frequent manifestation when I did
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that cultural inventory was they were
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going from crisis management was
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spending most of the time solving
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problems crisis to crisis to crisis as a
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matter of fact they describe themselves
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as we're always putting out fires so I
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came up with the theme of we as a matter
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of fact the first management meeting I
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actually came out in a fireman's outfit
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complete with a captain's hat Chief's
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hat and an axe uh it actually got a
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pretty good laugh and then I made the
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point we've got to go from firefighting
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to fire prevention more to Smoky the
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Bear but it wasn't just that theme I had
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some underlying specifics behind here's
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the steps that we've got to take in
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order to affect that change still took a
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year to really turn the company around I
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shouldn't have to make many very many
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changes in the people they they just
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needed to kind of think in a new
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paradigm with regard to the Aerospace
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and defense environment admittedly the
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economy is improving but one of the
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points that I made is business as usual
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and Aerospace in defense is going to be
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very unusual going forward on the
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defense side we've had a 10-year
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wonderful period of increasing budgets I
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don't think there's very many people
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around that think that that's going to
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continue some talk about a stair step
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downward Ward but more likely we may
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have a bit of a slide going downward and
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anybody who's been in a roller coaster
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knows when you go over that top of start
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going down you get this bad feeling in
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the pity of your stomach and that's
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going to cause change on the Aerospace
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side we're seeing certainly growth and
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probably continued growth as the economy
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improves but the big change there is
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whereas the international market with
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great customers they're about to become
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great competitors China's talking about
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building an airplane India is talking
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about building an airplane so the
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competitive environment May well change
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you just have to look at the automobile
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industry and what happened to General
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Motors and Chrysler and Ford the
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dominant players US market foreign
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competition came in it's a different
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world
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today I don't have a crystal ball as to
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what's going to happen in m&a but I
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would suspect that this is a continuing
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process I I think the government is
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starting to send some signals that
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they're would be less happy now that the
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big guys are as big as they are they'
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probably be less happy about
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consolidation at that level and they'll
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still be reviewing everything on a
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case-by casee basis but I don't believe
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they will
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uh try to thwart what's typically gone
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on at the lower levels uh more
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consolidation but remember every time
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there's consolidation
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that also creates opportunities for new
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startups there's always people leaving
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these big companies or getting out of
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college starting their own companies so
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it's a it's in like in almost every
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industry it's a continuing uh Evolution
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I don't see that materially changing
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over the next decade compared with the
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last
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decade for those who can obviously in
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some of the defense business China is
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still considered you know on the other
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side of the fence and there's going to
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be very limited cooperation and very
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limited either selling or partnering on
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the Aerospace side and and some of the
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companies I'm working with
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uh most of the
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companies look to China as this huge
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Market which it is and have decided that
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they need to do it in a partnership
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basis so finding or establishing or
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transferring technology consistent with
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our export regulations and developing
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Partners in China has proven to be very
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successful both in addressing the market
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and frankly in also helping to address
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the US market because there's no
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question that they have capability lower
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cost capability in many segments of what
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they can
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do I tend to look backward you know
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those who you know the off said if you
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ignore history you're destined to repeat
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it if you look 5 years is in that cycle
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is a relatively short period of time but
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if you look at longer look at the great
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world
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powers uh going all the way back to
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Egypt
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Greece
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Rome more recently the United Kingdom
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and now the us one of the things that
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tends to happen is they don't last
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forever I know that sounds very
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unamerican but they don't last forever
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uh they tend to frequently lose their
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way and the cycle time gets shorter and
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shorter and
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shorter uh so we as Americans and we in
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the US better recognize
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that China India certainly as two
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examples they are going
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to it the current Club of one is going
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to expand hopefully we still be a great
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country and a great economic power and a
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great world power but we're not going to
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be alone May hopefully won't be
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adversarial the way it was us and the
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Soviet Union it's going to be something
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quite different but I don't see it as
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being the US and nobody else closely on
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our heels I think inevitably uh China
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will be there as a more equal partner
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going forward and you see many people
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recognizing that both on the industrial
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side and the uh political side starting
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all the way back with Nixon who you know
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opened uh started to open open the door
