Enabling Our Businesses Through Innovation

Thanks, T.C. It’s great to be here with you today. And thank you for this opportunity to
share my perspective on the business value of innovation.

Rebecca Rhoads
Vice President and
Chief Information Officer
Raytheon Company
Excerpts of remarks to:
Women in Technology International
Dallas, Texas
June 25, 2003

(Thanks to Mitchell K. Hobish of http://www.sciential.com for passing this along- Russ)

The theme of this conference is right on target — as businesses respond to relentless
competitive pressures — and are continually challenged with value creation. Reinvention
and innovation are at the core. My dad used to tell me that when gardening — to put all my
money in the soil. That is what innovation is to the Business environment. It enriches the
soil.

The level of interest and participation in this conference by us, Women in Technology, is
proof — as if proof were needed — that women are key in leading innovation in our
businesses.

And, we know that innovation isn’t merely “by chance” or by “pure luck”; it is predictable,
and achievable. “Innovation at will” is truly key to business growth and business survival.
That is why we are all here.

So, what’s a defense industry leader doing here talking to you about innovation?
Since our company, Raytheon, and the defense industry, is best known for its technology,
structure, products, processes, risk management and protocol, I can understand the
question.

That said, let me offer a perspective on innovation from my vantage point as a CIO in the
defense industry.
Let’s talk about the innovation imperative in defense for a few minutes. In the words of
our Secretary of Defense, Donald Rumsfeld, “Our challenge in this new century is a
difficult one: to defend our nation against the unknown, the uncertain, the unseen and the
unexpected.”

That may seem an impossible task. It is not. But to accomplish it, we must put aside our
comfortable ways of thinking and planning. We must take risks and try new things — so
we can deter and defeat adversaries that have not yet emerged to challenge us… in a
nutshell, innovate. The ability to innovate and adapt will be critical in a world defined by
surprise and uncertainty.

It is more than technology and product innovation, although these are critical elements.
Innovation is also understanding the context, the user and the customer and then
responding with a solution.

In Afghanistan, the troops were trained with the latest state of the art technologies. Yet
they used pack mules to transport equipment across some of the roughest terrain in the
world, riding at night, in darkness. They learned from their new allies, the anti-Taliban
forces. It was a combination of the ingenuity and innovation of the U.S. Special Forces, the
most advanced, precision-guided munitions in the U.S. arsenal, delivered by the joint
forces of the Navy, Air Force, and Marine Corp. crews, and the courage of Afghan fighters
— on horseback. Understanding technology, understanding the context, the user — and,
responding with a solution.

Today, our adversaries have changed and so has the deterrence calculus. The terrorists
who strike are clearly not deterred by the massive U.S. arsenal.

Innovation is essential for transforming our military capabilities to meet the 21st century
defense and homeland security needs for speed, agility, precision, intelligence and joint
operations. There are six defense department transformation goals: First, to protect the
U.S. homeland and our bases overseas. Second, to project and sustain forces in distant
theaters. Third, to deny our enemies sanctuary. Fourth, to protect our information networks
from attack. Fifth, to use information technology to link up different kinds of U.S. forces
so they can fight jointly; and sixth, to maintain unhindered access to space and protect our
space capabilities from enemy attack.
Innovation is the key enabler for this national transformation journey.
Innovation was a key homeland defense imperative as we turned existing technologies on
the new threats and vulnerabilities we experienced as a nation.

Our ability to apply
solutions, with speed, to the vulnerabilities of the new post 9/11 threat environment is a
great example of applying today’s technologies, and capabilities, to the context of the new
challenge, the new environment. Protecting our ports, protecting our critical infrastructure,
and enabling our first responders. This requires innovation.
So let’s now talk about Businesses and how innovation serves as a key business enabler.

Companies that have consistently outperformed their competition over several years are
often considered to be good innovators.
Whether the innovation is “little i” or “Big I”, it is a key business enabler.

“i”nnovations are incremental improvements to your current business model

“I”nnovations are game-changing enhancements to your business model or new
business models all together

And innovation at will is sustained, repeatable, ingrained, reinforced, purposeful, strategic,
proactive, and a part of the culture.
Competitive advantage is being commoditized at an accelerating rate — if you don’t
challenge your business models, your competition will. As competitive advantages become
commoditized, innovation truly becomes the business imperative. And it is important that
we keep the aperture wide open as we look at that business imperative. There are so many
areas and possibilities for innovation, we want to exploit them all. There are several types
of innovation. Let’s look at a few to stimulate our thinking. Let’s look beyond the obvious
technology or the ‘product’ innovation. There is:

Business model innovation. Dell challenged our paradigm on how the enterprise
makes money. McDonalds franchise model: design a terrific core idea that others
invest in, own and operate while paying you for the privilege.

Process innovation. Walmart ‘s real time inventory database and process tells
suppliers what needs replenishing and when, which gets transported without
waiting or inventory costs to otherwise inefficient markets like rural towns.

Service innovation. Lenscrafters — one of the more sophisticated customization
services — they can grind lenses to your prescription in an hour in any shape you
want.

Brand innovation. Nutrasweet was one of the first companies to insist its
ingredient be prominently displayed on the outside of the product as a promise of
quality — and a brand-building gambit. Disney has innovated brand extensions as
it leveraged its core brand essence from movies and theme parks to all forms of
family entertainment — from cruise ships to cuddly toys.

Marketing channel innovation. Dell — kiss high inventory and distribution costs
goodbye: Dell uses call centers and the Web to take customer orders and
assemble tailored products for them. Ebay is the best know market maker,
allowing individuals to buy and sell their products through Ebay mediated open
auctions.

Innovating the customer experience. Saturn purchase experience, and special
events for owners allowing customers to bond.

Innovating the packaging. Mission Tortillas had a zip lock seal one day!
Everyone followed.

Innovating the financing

And so on . . .

It is important in our businesses to develop a culture of innovation to leverage all types of
innovation and all opportunities. It needs to be in your Company’s DNA — every
knowledge worker is inspired.
Great innovation is when we react with “Why didn’t I think of that!”

The Customer is clearly at the center.

A laser sharp Customer focus is key to innovative solutions. Listening to your customers,
your users, will yield the insight to develop innovative solutions. Listening to the customer
makes it possible to respond to and deliver the unarticulated needs of the customer — true
innovation. This requires us to shift from the traditional to a problem-based and hence
solution-based mindset. You need only look at a few innovations to realize that seldom are
those needs articulated. None of us were demanding post-its until we tried one. We didn’t
know how much we needed a poor adhesive.
While we are typically organized by functions, or products, or business units, our customer
value stream is quite different. It is through the customer’s value stream that we can
deliver innovative solutions. Customer value proposition will drive business value!

I have over my career, had the opportunity to turn around several problem areas. Those of
you who have heard me talk before know that I am a proponent for taking on those
challenging jobs! Your leadership in these areas helps the company, helps the customer,
and accelerates the development of your leadership competencies — a win-win-win. (What
doesn’t kill you will make you strong…)

Those problem projects or areas are also a great opportunity for innovation. Get to know
the customer, understand the people, understand the technologies and processes, and work
with the teams to develop innovative alternatives and solutions.

Today, information moves at the speed of an email, money moves at the speed of a wire
transfer, people are mobile, and companies are global. We cannot get bogged down in the
bureaucratic processes of the industrial age. We must lead in the context of the information
age.

Some of our difficulties are self-imposed. We must guard against creating or sustaining a
culture that stifles innovation.

The paradox is: We must lead effectively in current markets while innovating effectively
for the future.

What we must do:

create a culture that supports risk taking and a common sense of urgency

empower employees and customers to take advantage of user based innovation

build diversity into your organizations and teams — diversity of thought,
perspectives and experiences

motivate teams on high risk projects

utilize processes/methodology to enable innovation and to link with Business
strategies

develop sources of information to create an information rich environment

In summary, we must understand our technology, we must understand people, and we must
understand customers and we must be willing to make decisions without having sufficient
information.
With so many women owned businesses thriving today, we have an opportunity to have a
significant impact business and industry wide as we focus on our customers, foster
innovation, recognize enablers and opportunities, and deliver solutions.

Transformation — and innovation — are processes, not events. The beginning of the end is
when you think you are done!
Thank you, and I look forward to your questions.

http://www.raytheon.com/newsroom/speeches/rr062503.pdf