One-on-one with Lockheed's Marillyn Hewson

Like much of the rest of the defense and aerospace industry, Lockheed Martin faces serious challenges and is undergoing some profound changes.

Its biggest customer, the U.S. Defense Department, is shrinking its budget, and tighter funds have created a very competitive marketplace. But there are still investor expectations and the need to position the company for future growth.

Leading the way through these changes is chairman, president and CEO Marillyn Hewson. She took the reins of the company on Jan. 1, 2013, and Lockheed Martin plunged into one of the toughest years on record with budget cuts, sequestration and the eventual government shutdown.

But despite those strong headwinds, Hewson has quickly established a presence that is different from her predecessors at Lockheed Martin, but is still one that fits with the company’s 100-year history.

While staying loyal to the company’s roots as an aerospace and defense company, she’s as likely to describe Lockheed Martin as a technology company focused on innovation. Aerospace and defense just happens to be the company’s biggest market.

She’s also establishing herself as a business leader beyond the defense and government markets. Look at her LinkedIn profile and see who else was viewed by the people who viewed her profile. The names include Bill Gates; Marissa Mayer, Yahoo CEO; Meg Whitman, Hewlett-Packard CEO; and Richard Branson, founder of the Virgin Group. It doesn’t include other aerospace and defense executives.

In late June, I had the chance to sit down and talk with Hewson about her vision for Lockheed Martin and how the changes she is initiating fit that vision. What follows is an edited transcript of that conversation.

WT: What values guide you as you decide what direction to take the company?

Hewson: When you step back and look at any company, it is important to have sustained profitable growth.

We are in a market that is different than it was 10 or 11 years ago. We are coming off of two wars, and our primary customer budgets have declined. So, it is a different environment.

So how in that environment do you continue to be a strong viable company that attracts capitals so you can invest in research and technology and continue to grow your product line and continue to grow the company?

In any environment, but more so now with the budget pressures our customers are facing, it is critical to be listening and responding to your customers.

We have put a strong focus on the customer relationship and making sure the customer is the center of everything we do. The focus starts with our leadership and goes throughout the company.

That is important anytime, but even more so now that they are dealing with so many unpredictable situations like the rising tensions in the world and the budget pressures our customers have.

We need to be right there with them, listening and responding.

WT: How does this translate into action?

Hewson: The hallmark to why we are performing well in a down market is our focus on performance. Performance drives everything else -- meeting our commitments, meeting costs, schedules, quality and technical commitments we have made.

When we perform well for our customers, that’s when the company performs well.

I’ve been with the company 31 years, and I’ve never seen the company perform better on programs.

That speaks to our leadership team. They have decades of experience. They have managed through ups and downs in the business, and this is a cyclical business.

And it speaks to our workforce. We invest a lot in our workforce, on training and development. We bring in top talent, and we invest a lot in retaining that top talent. Those are the folks who get the work done every day.

WT: You talked about sustainable growth, but your primary market [the U.S.] is contracting. Where will the growth come from?

Hewson: As you look at where we are today, our opportunities are international.

One of the steps we took was standing up Lockheed Martin International last year, which puts more focus, resources and leadership around growing our business internationally. [The goal for the company is 20 percent of revenue from international business by the end of 2014 and more going forward.]

We are already in 70 countries, and we have over 1,000 partners throughout the world.

Rolling out Lockheed International was a way to make sure we were focused from an enterprise standpoint. Rather than having each sector going to market individually.

How do we bring the depth and breadth of the entire portfolio to our international customers? How do we make sure we partner with them and their countries and their local businesses and their universities? How do we meet their desire to develop their own technology?

[A good example of this is Lockheed Martin’s relationship with Israel, which likely will be the first non-U.S. country to fly the F-35 fighter. Lockheed Martin is establishing a facility to manufacture F-35 wings in Israel, which will help the country advance its technological and industrial base.]

Another example is Lockheed Martin Canada, which was originally established to support Lockheed’s Canadian customers, but now is selling products and services internationally. Earlier this year, Lockheed Martin Canada sold its combat management system to the Royal New Zealand Navy. [The sale was Lockheed Martin Canada’s first export.]

WT: As you make these changes at Lockheed Martin, what do you think the company will look like in the future?

Hewson: We’ll still be a leading global security and aerospace company. If you look at the F-35 alone, we’re to be pretty much an aerospace company. And our satellite programs are going to be here five and 10 and 15 years from now.

Those are key elements of our business and will continue.

Missile defense will continue to be important around the world. We’ll continue to be engaged in ISR and with the things we do in cybersecurity.

If you look out five or 10 years, we’ll have a larger global footprint. We are going to market and investing with these countries, whether it is with joint ventures or working with suppliers or making acquisitions or developing their capabilities in their countries, we’ll be front and center internationally.

And there are new areas we are investing in that have the potential to be big growth areas: directed energy, autonomous robots, advanced materials like nano technologies, quantum computing, advanced manufacturing, 3-D printing.

Those are areas that will grow, and that will allow us to bring more technologies to our customers.

WT: Is there a common thread that ties all of those things together?

Hewson: The common thread is that we are a technology leader. We have a history of innovation that goes back 100 years. And that innovation is very much focused on providing governments with capabilities for protecting their citizens as well as providing essential citizen services.

We are also a company that pursues advanced scientific discovery.

As countries look to protect their citizens, we are going to be there for them, and that requires that we be on the leading edge with our technology. We have to be looking at how we can get them an advantage over an adversary or potential adversary.

How can we get them the capabilities that deter a conflict?

And there are essential services, whether it is air traffic control, IT services, airport management. Governments look for companies like ours that can bring breadth and scale.

And with advanced scientific discovery, we’re pursuing Mars and the Orion spacecraft. That’s our history, and that is a large technology focus that takes a company of our scale and our innovative culture to be able to accomplish.

WT: What building blocks do you need to put in place to make sure that culture stays in place when someone else is sitting in the CEO chair?

Hewson: We talk about our core values – performance excellence, doing the right thing and respecting others.

Those three elements give us a foundation of integrity. We are going to do the right thing, and we are committed to meeting our commitments.

A company that performs and is investing in the future is the one that prevails.

Secondly, we are not just focused on today. We are looking beyond today. How do we provide next-generation products now? How do we invest to meet the needs of the future?

We have to prioritize where we invest our dollars. We have to have our workforce constantly focused on being the best they can be.

It’s human capital, it’s research and development, and it’s performing on the work we have every day.

WT: How do you balance the short-term versus the long-term?

Hewson: From quarter to quarter, things occur. Maybe we have layoffs and we have to take a special charge. Or, we settled a claim and got a return, or settled a claim and had a payout.

We have things that happen, so we have to have enough bandwidth to accommodate those things.

But on an ongoing basis, we are managing this company for the long term.

Look at the F-35 and how long the development cycle is. You have to look long term to accomplish something like that.

That is what investors expect from leaders.

For example, our sales were down last quarter. They were down last year. Our DOD sales are down significantly over the last few years.

Yet, we have held up in terms of our investors because they see the market we are operating and that we can manage through this market.

We are performing on the right things and we are making the right calls in terms of the business and taking proactive actions to adjust our cost structure. They see we are investing in the right areas, so when the market turns we can turn with it.