On Tuesday, April 19, 2016, Northrop Grumman Chairman, Chief Executive Officer and President Wes Bush addressed the Charleston Area Alliance Annual Dinner in Charleston, West Virginia. Below are his remarks.
Innovation and Greater Charleston*
It is great to be with all of you this evening. West Virginia means a great deal to my wife Natalie and to me, and we are honored that you would invite us to be here.
I'm especially excited to be asked to speak on the topic of innovation.
We have come together this evening on an Air National Guard base named after a great West Virginian, James Kemp McLaughlin.
Most of you know the story of how, 73 years ago, then Captain McLaughlin piloted the lead bomber on a raid of several hundred B-17s against the ball-bearing plants at Schweinfurt, Germany.
Because of the limited range of Allied fighters at the time, the bombers had no fighter escorts. These brave bombing crews continued their mission despite encountering German fighters that outnumbered the American bombers almost 3 to 1.
American losses on that raid were so severe that they threw the entire Allied bombing strategy into doubt, which in turn led to the development of longer range Allied fighters.
The effects of that mission are still felt today, as it led to a determination on the part of the U.S. Air force to ensure its ability to always have air superiority.
Ever since those days our national security strategy has been based on technological superiority – not parity, but clear superiority. "No Fair Fights" has been our military's mantra, and “innovation” its primary enabler.
Companies like Northrop Grumman work tirelessly to ensure that our nation’s men and women in uniform never have to go into harms’ way in circumstances of technological parity with their opposition.
American innovation is at the heart of our ability to continue this core element of our national security strategy.
Innovation is just as relevant to our economies – national, state and local – as it is to our national security strategy.
There is a direct relationship between the quality and superiority of our innovation on one hand, and our prosperity, quality of life, and economic security on the other.
At the heart of innovation is the eagerness to try new ideas and to do things differently. And this is especially important when the current approach is simply not going as well as is desired.
A willingness to take risk and try a different approach, and to accept the inevitable setbacks that occur along the way, is a hallmark of successful organizations – whether they be nations, states, educational institutions, or businesses.
There is a mindset that goes with this innovation perspective that approaches the problem a certain way.
Instead of bemoaning the current situation, and focusing on what the organization is lacking, it instead reframes the problem and focuses on how to take advantage of its assets in new ways.
Our journey at Northrop Grumman over the past decade is an example of what can happen by addressing a challenge with that spirit of innovation.
In the middle of the last decade, Northrop Grumman was simply not performing very well relative to its competitors.
Our financial performance was lower than the average in our industry, our competitive win rates were not very good, and we had program execution and quality problems in a number of our businesses.
None of us were happy with the situation. It was clear to many of us that this company had exceptional people, sound values that focused on serving our customers, and an amazing array of technological capacity.
We knew we could do better, if we could just make the hard changes necessary to get us on a different vector of performance.
So we forced ourselves to be very candid about what was not working, and we committed to driving change.
As a first step, I announced on the day I became CEO that we were moving our headquarters from Los Angeles to the DC area to enable us to be closer to our primary customers and to restructure our corporate operations.
We then restructured our business operations, into a more streamlined operating structure.
We divested businesses that were not the best fit to our strategy,
And we made numerous leadership changes,
We also aligned our incentives around top-tier performance benchmarks,
And worked hard to create a culture of engagement and inclusion in our company where everyone can bring everything they have to help us be a better company.
The result is that we are now out-performing our competitors and, for that matter, most of the S&P industrials – our three year total shareholder return last year was in the 98th percentile.
We’re winning new competitive contracts and are poised to grow after seven years of decline in U.S. defense budgets.
There is a new spirit of success in the company – and it is translating into a flow of innovative ideas that reminds me every day how humbling it is to work with such an amazing group of people.
I feel incredibly fortunate to be a part of the team that has accomplished so much, and is so eager to do more.
Our story at Northrop Grumman is not an isolated case of a successful change driven by innovative thinking. There are so many case studies of this – in companies, in universities, in non-profit organizations, and yes, in states and local communities.
The story of the Research Triangle in North Carolina is a good case in point.
Following WWII, state leaders saw the need to make some form of major investments to curtail the state’s fading economy.
Their idea? Create a research and development park that could potentially leverage the science and engineering knowledge inherent in three of the state’s major universities; Duke University in Durham, the University of North Carolina at Chapel Hill, and North Carolina State University in Raleigh.
Those visionaries included the state treasurer, a local bank president and a local builder. In turn, they worked with NCSU faculty and administrators, and the governor (Luther Hodges).
That core of boosters eventually met with over 200 companies - but none were interested due to a lack of lands set aside and devoted to the purpose.
The visionaries were not deterred.
Governor Hodges partnered with a local banker to secure those lands. Both men recognized, however, a need to make the Research Triangle an entity for public service – not just for private gain.
As a consequence of this recognition, the nonprofit Research Triangle Foundation of North Carolina was created, eventually raising the money in 1958 to acquire both the land needed to establish the park and create as a focal point for the park, the Research Triangle Institute.
It would be the job of the Institute to conduct research for government, and industry, in addition to serving as the home of the Foundation.
Today, this area is home to many innovative companies, and forms a core part of the economic strength of the state. It did not happen overnight, and it took determination and vision to be successful.
Silicon Valley is another example of an innovation center that was developed by those with a vision.
It was the Stanford academician Frederick Terman who had an idea – to convince the university to lease some of its lands for an office park, but one reserved for technology companies. Doing so would bring needed cash to the university while creating jobs for new graduates.
It was first named “Stanford Industrial Park,” then “Stanford Research Park.”
Stanford created the Honors Cooperative Program to allow full-time employees of those companies to pursue graduate degrees from the University on a part-time basis.
Stanford graduates William Hewlett and David Packard, and their new company, were among the first tenants in 1953. And success built on success over many decades to create what is today an incredibly powerful economic engine.
In each case, that common theme I mentioned earlier came into play – there was a view that the assets available to the participants could be used to do something new and different.
It took vision, leadership, and determination. If you read the histories of each of these cases, you will see that there were many who were opposed to what was being done. But others persisted, and turned visions in to reality.
There are a number of states around the country that are struggling to re-invent themselves. And I would say that is especially true in states that have historically been more "commodities based."
Sometimes that dependence on certain commodities works well because of a long-term need for some of those commodities.
But those economies that focus exclusively on that component of the global economy will be far more vulnerable to unpredictable economic winds, and shifting needs across classes of commodities, than the more diversified, innovation-based economies that consume those commodities.
Innovation-based economies rely on some simple attributes – bringing great people together, creating environments where their ideas can flourish, and establishing the partnerships that are required to sustain an innovation ecosystem.
Properly conceived and managed, this approach has the power to expand economies, elevate standards of living, and confer opportunity on future generations – and that applies as much here as anywhere.
I see that potential right here in the great state of West Virginia.
Realizing the potential will require leaders, and especially business leaders, in the state to come together to focus on some basic questions – such as what are our key strengths, and how can we best leverage those strengths to create new vectors of economic growth.
And those leaders will need to have the right mindset – success will not happen in a few years – it will take decades.
We all know that West Virginia has amazing assets:
- In the realm of physical assets, the investments that have been made in transportation and telecommunications are important enablers. There is also abundant energy availability.
- The state also has geographic advantages being a "connector state" between the east coast and Ohio, Pennsylvania, and Kentucky;
But most importantly, West Virginia has a superb human capital base.
This great human capital base starts with the values evident across the state – this is a place where trust and a person’s commitment means something.
And there are amazing universities here that generate graduates on par with anyplace else.
Today, though, these assets are generating human capacity that largely leaves the state. We need West Virginia to be a net importer of talent, and that perspective alone can help drive innovative actions and ideas.
It is entirely possible that West Virginia has more advantages available to it than Silicon Valley or North Carolina's Research Triangle did before those areas were anything more than good ideas.
I see no reason why West Virginia could not embark on a similar course of economic renaissance.
Each of you is as capable a visionary as anyone. Each of you is as well-equipped as anyone else to understand the topography – political, economic and cultural – that must be negotiated.
There are already examples of progress along these lines in West Virginia – The High Technology Foundation in Fairmont and the Aerospace Complex in Bridgeport are two good examples. And Northrop Grumman is involved in both. And the work the Alliance is doing in Charleston is very important.
This Alliance, in particular, represents the type of partnership that is required to jump start this process.
Between the business leadership in the state, the great universities, and state and local government leaders, all the pieces are here.
This is the age of innovation and its enabler is human capital. That is good news for places such as West Virginia where there is such a deep rooted connection by its people to the success of the state.
In some circles, it is popular these days to predict American decline. I strongly disagree. Decline is a choice, not a fate – for businesses, for nations, states and localities.
The difference between those that decline and those that prosper is one of choices and actions.
None of these choices or actions are ever easy. And the fact that they are hard is usually a sign that they need to be done.
Coming together with a determination to make those choices and take those actions is the first step.
And this Alliance can do so much good for West Virginia by being the group that enables these steps to be taken.
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*Please note this speech was originally titled, "Innovation and the Economy."