How do you drive digital transformation at scale in a complex organization like the U.S. Navy? In this insightful session from Prodacity 2025, Justin Fanelli, Chief Technology Officer (CTO) for the Department of the Navy, shares his approach to breaking bureaucracy, accelerating innovation, and ensuring data-driven decisions lead to real outcomes.

From Operation Cattle Drive, which forces underperforming programs to "sing for their lunch," to World-Class Alignment Metrics (WhAMs) for measuring impact, Fanelli reveals how the Navy is disrupting itself to modernize faster than ever.

🔹 Key Topics Covered:

• Why the Navy is shifting from programs to portfolios
• How data-driven decision-making is replacing legacy bureaucracy
• Measuring innovation impact with World-Class Alignment Metrics (WhAMs)
• Why "if it takes too long, it doesn’t work" in government transformation
• How the Navy is eliminating failing programs & contracts
• The critical role of "Mavericks" in government change efforts

🕒 Key Highlights & Timestamps:
[00:03] - Introduction: Why innovation in the Navy must scale faster
[01:00] - The Navy’s shift to portfolio-based decision-making
[02:35] - World-Class Alignment Metrics (WhAMs): Measuring real outcomes
[05:44] - Shutting down underperforming programs with Operation Cattle Drive
[06:53] - Why programs must "sing for their lunch" to survive
[08:12] - Getting inside the funding OODA loop to move faster
[09:24] - The importance of execution over perfect ideas
[10:33] - Lessons from 25 pilot programs: What works and what doesn’t
[12:20] - Why incrementalism is an "irrelevance tactic" in digital transformation
[13:13] - Measuring across portfolios: Mission outcomes over traditional KPIs
[14:55] - How the Navy translated business metrics into military effectiveness
[16:36] - Creating a culture of comfort with ambiguity & rapid iteration
[18:30] - The three key strategies for driving change inside large organizations
[19:24] - The power of collective bragging to shift the status quo
[22:22] - Where the Navy is today: Crossing the chasm of innovation adoption
[24:19] - "It’s time for us to be the house"—making innovation the default

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Justin Fanelli (00:03):

I am here for you guys. We're here for you guys, right? So in general, the reason that we're still in the government during these wild times is to make a difference for our war fighters. And I see a lot of mavericks out there who are out there trying to do that. So I'll talk about how we're trying to do that within the Department of Navy. So Navy and Marine Corps, there's a tried and true history, and so that comes with a lot of traditions and a lot of cultural orientations. And so what we're trying to do right now is modernize and disrupt in a relevant timeline. And so what that actually looks like is making it an unfair fight even within the Pentagon. And so what we've done is we've said, Hey, let's figure out how to, the last two speakers said not be linearly better.

(01:00):

This is an exponential, and I can tell you any number of reasons. This is an exponential era. And so what does that look like? So that looks like within my PPO and one other, so within Department of Navy there are 18 PPOs, 60 total. It's a lot of buying organizations. This is where acquisition happens. We said, Hey, we need to move to portfolios. And so we converted program offices or programs of record into portfolios. From there, we started placing bets and looking at how do we be a lot more quantitative, as Douglas said, for looking at where we can have disruptive changes. This means working with very different partners, bringing new entrants in. So a quick one there is, for 15 years we've gone down in the number of partners we worked with. So we had a number went down every year for the last two years we've gone up. So long story, medium length is we are trying to put a lot more bets and placements into our infrastructure to find disruptive opportunities.

Bryon Kroger (02:13):

I'm just thinking in the context of the last talk, how are you, in fact, quick plug by the way, if you haven't read the Navy's, you published a world-class alignment metrics. Did I get that right? It's like a memo on world-class alignment metrics. How are you thinking about measuring that upfront? How are you informing your strategy of where to place bets in the first place? How are you measuring them on the backend to make sure your portfolios are efficient and you're funding the winners? Totally.

Justin Fanelli (02:35):

So I was at Davos two weeks ago and Yann LeCun, who's the AI czar at Meta, and then Neil Lawrence, who is an academic, but one of the founding fathers of where we are with current AI, they had a little tete. It was a bit of a rap battle. It wasn't contentious, but it was fun enough that Neil Lawrence looked at the audience and he said, let me explain how this works. We invent everything and then the people like Meta profitize it and then take all the credit. We're not very good at betting and then bragging. And so the world-class alignment metrics, the whams, we did an accelerating change design concept, ACDC to say, okay, how do we make this scalable? And so two things. One is scale is our number one challenge because we have a lot of pods within the Navy and Marine Corps, but everywhere in DOD, right, there are pockets of excellence.

(03:40):

How do we get the **** out of there into the hands of the warfighters at scale and at speed? Have you seen this amazing thing that's happening at this one base? Yeah, why isn't that happening everywhere? And so we needed a lever, we needed an Archimedes length lever to do that. And so what we did was we said, let's create asymmetries. Let's show that number one, we have a scoreboard. And number two, if you are doing a lot better, then it's obvious to everybody. And so for this reason, we used outcome driven metrics to say, here's the status quo and then here's the difference we're making, and then here's how we brag about that. So you asked about strategy. Our strategy is, and it goes into a little bit of detail, but to the points earlier, our strategy is what are we doing to enable the biggest impacts?

(04:31):

And then how do we cumulatively show those? I truly believe that, well, the time is not linear and people are not linear, but we look at this as a very zero sum game or still asses in seats. And so where we can show the difference that disruptive mavericks are making, we should double down on the data that supplies the story. So I heard you say earlier, there's the data piece and the narrative piece, the data foundation allows us to contextually brag a lot better. And then cumulatively we can do that in a pretty significant way where Neil Lawrence and people on the other side of the V are as sexy as Yann LeCun.

Bryon Kroger (05:19):

When you think about how to, so it's nice to hear that the innovation groups aren't having to fight for their existence. That's been a pretty big default across the entire department, all of federal government. But what about making the programs that aren't working well fight for their existence? You talk about bragging on the side of doing great work. What about the people who aren't? How are you handling that? How are you shutting down old programs and old contracts?

Justin Fanelli (05:44):

Yeah, that's a good question. So a couple things. One, you need a lot of data and momentum to break entrenchment. And so some of that is we're going for it. And some of that is like stakeout type strategy. And so we can talk about the timing and sequencing. I believe probably just looking around and then chatting during coffee. This should be a meritocracy and it isn't. So what are we doing about that? Number one, two years ago we started Operation Cattle Drive. So portfolio management 101 in my mind is treat your projects like cattle, not pets. We're far enough in the south that I can talk like this, I think. So the idea is everyone should have to sing for their lunch. And if you are not producing, we're not giving lifetime achievement awards. We're saying is it making a difference or not? And so this is the main reason that we converted those two to portfolios to say, I don't care if you are the program of record, what are you delivering?

(06:53):

What is the impact to users? And then on the backend, what are your whams? So that's number one. And so the two looking at the other 18 and then looking across Senator Wicker, who is in a pretty powerful position within Congress, has put out the Forged Act a couple weeks ago, less than two, where he said, Hey, let's move from PEOs to portfolios. So there are some strategic things afoot. The short answer to your question is we are looking to, so another ACDC structured, we are looking to divest. This is something that's super actionable where we're doing pilots or challenges and it can be tied to turning something all the way off. We're doing that what normally happens, what often happens is we say, oh, we can turn 80% off and then someone lets that linger. So a strategy that absolutely doesn't work in DOD is three to five year plans because if you run out of gas or someone rotates out, it dies on the, I've just never seen that work. And so we know the budget cycle is three to five years and we know the normal amount or an overfilled tank can get you two years. And so that's the reconciliation.

Bryon Kroger (08:12):

Yeah, that's powerful. Back in the early days of Kessel Run, I still tell this to teams all the time. We talk about getting inside the OODA loop of your enemy. If your enemy is the bureaucracy, often PMRs are conducted on a quarterly basis. So I say you need to deliver as much as you can within that timeframe. You need to disrupt the quarterly board. But this is a different take on getting inside the funding OODA loop. I really like that. I hadn't thought about it that way.

Justin Fanelli (08:36):

So I said, if it takes a long time, it doesn't work. Another thing that doesn't work is if you have the best idea ever, but you don't have the player coaches or the Mavericks here, it doesn't matter. We can have total mismatches if you don't have the operational go-getter and what we call pilot lead, but the person who is willing to give 150%, you'll just get paper cut to death. So when we evaluate our bets, we say, Hey, what is the asymmetry return on investment? And do we have someone who is willing to walk on fire? Because if you don't have that, it's generally, even if it's an awesome idea, it's not going to get there.

Bryon Kroger (09:24):

What are the things that aren't working or maybe some painful lessons that you all have learned as you've been going about this?

Justin Fanelli (09:31):

So I mean I'll give you some examples, but in general, calculating that a perfect idea with bad execution doesn't matter. And if you follow all the rules, you will not make it off the stage because the paper cuts will bleed you out. And so I'm not saying don't follow rules, I'm saying have enough data to leverage your point. And so I guess tale of two stories, tale of two cities is in some cases, so we ran 25 pilots two years ago. They said, Hey, you ran two, we should expand this, you should expand it to five. We said we're going to do 25. And then we literally tested every of my eight portfolios, but then some of the other groups to see what got out. And consistently it was unleashed. People succeed five to 10 times more than either leashed or rule bound or not outcome people.

(10:33):

And where we have outcomes that can win the day. There are some places where it still doesn't win the day. Either it wasn't ready or we ran at Augusto. And so speaking fairly freely, I think the Air Force, the Army, the Marine Corps, they have software factories. They're moving out. The pitches for Navy software factories have been fairly pockety to date. And so I think we haven't hit escape velocity and that particular example, there are other areas where, so flank speed is our network overhaul. They had been doing the same thing for six years when the flank speed team started and did it in a year and a half. And so that's not a totally fair characterization, but if you waterfall any of the steps, if you're not working Thursday night, your outlook isn't good. So we can talk about that in electronic warfare. We can talk about that in cloud and hybrid hosting. We can talk about what we're doing in co-locations, but almost always to your exact point, you just need to outgun the OODA loop. And that's true in my mind. That's as true within system or bureaucracy as it is and has been validated in Ukraine and the Red Sea now. And the relevance to the Davidson window is like it's not clear in everyone's mind. And I don't understand that. I'd say there are a majority of the organizations that we work with where people still are operating business as usual, and I think that's an irrelevance tactic.

Bryon Kroger (12:20):

When we talk about measurement, we actually, these talks are later on in the three days. But one thing I think people find it very easy to measure software delivery performance. A lot of folks are using dora. I know Dora is a part of your alignment metrics, but there's the mission metric that matters. Jason Frazier will talk about mission ratio. Alistair will be talking about one mission metric that matters, but these things often don't translate across portfolios. So how do you compare a targeting app to a finance app to maybe the nuclear football that only three people touch? A lot of times in consumer driven businesses, it's like monthly active users. Well, there's not very many active users of the football or the targeting software, but they're very consequential. How are you thinking about measuring across portfolios?

Justin Fanelli (13:13):

So this is my take KPIs, KPPs 120 years old industrial age. If you know what you want to measure, you can move it. And so most of the things we're talking about are either input or output metrics, and those are safe. The leap of faith or the difficult part is to go from output or input or output metrics to outcome metrics because it at some level either presupposes or conveys that you're an expert and no one's an expert based on how vast this is. But comparing that to the difference that it makes, if we say like, oh, we can't measure this perfectly. Ask Doug, if we can't measure this perfectly, should we just stop? Or should we try and make the difference that we're supposed to make? And so what we did was try to get kind of overwhelming support, try to make it exponential in terms of the amount of support.

(14:04):

And so we looked at OKRs originally, objective key results. And if you have unlimited talent, unlimited money like Silicon Valley, I think they work really well at the government. There's a lot more bottoms up. And so we said, what are our mission outcomes? Gartner called the business outcomes. We converted them to mission outcomes and what does this look like for enterprise it? What does it also look like for lethality? And so we took a stab at that, tried to get credibility. So we talked to the Fortune 20 C-suites and said, Hey, how would you think about this for it and enterprise IT so that we have at least defensibility? Who are you to think about this? These people come with a lot of experience. And then we looked at the lethality piece. So when we talked to CMC or CNO, we say, here's how you would convert this.

(14:55):

Your strategy matters a lot, but to just say, I can't compare, or we can't say that this is more important than this. Well, our money, just like the comment about if you don't think you should quantify life, well, you're spending already. And so by not stepping into that scary decision space, you're not doing anyone a service answer is we try to take that risk and then get feedback. And turns out critics often aren't the best suppliers of feedback. And so more people have gone along with it than probably I would've presuppose two years ago. And then as we get wins, and so this is something we need from all of you. Two things. One, the more outcome driven wins, the more that we make this case and then there's no going back. So if we burn the bridge behind us to show exponential victories like hashtag or otherwise, literally, let's stack those up. And then the biggest compounding factor is days like today where people who get it are around each other. One plus one equals three all day. And so if everyone's not already connected to each other here on LinkedIn and you're not because people are going to change organizations, especially in the government companies, that sort of thing, like keeping that community titer and allowing us to funnel that effort in the Margaret Mead small committed group can make a difference. Now is the best time I've seen in 25 years for that.

Bryon Kroger (16:36):

Nice. I love that answer. And I love that it almost even, I had to take a step back. You're talking about being really comfortable with ambiguity. I asked the question about the metrics and how do you compare some of these metrics? And the answer is, well, you don't really, you just start with where you are and what you can measure. That's a level of ambiguity that I don't think most people are comfortable with. You seem so comfortable with it that I almost didn't even notice or that you were comfortable with it. So how are you translating that to the rest of your org? I imagine you still have a number of Navy leaders all around you and below you that struggle with that. How are you creating that kind of culture

Justin Fanelli (17:17):

Iteratively? So number one, there are three key strategies in my mind for this, but in general, to create a groundswell, you find the unleashed people who get it and will support you both because that's strategically useful, but because they're just better to be around and you need them and you need them on the good times and the bad times. So find your unleashed people, Admiral Acano, first time she saw it, I get it. Let's support this. Let's move out. And then you get more traditional people and you say like, Hey, I don't know how I feel about this. Okay, Admiral O, and I'll come brief you. Oh, I don't know. So some of that. Second is rig the system so that we get passive income, best kind of income, passive wins, best kind of wins. And so the AC dcs say, Hey, innovation at the edge, these innovation groups or E four on a ship, if we have a way to catch this, man, I love being a player, but I realize there are so many gaps and issues that if we're not fishers of people, we're not going to get there.

(18:30):

And so we had to open up the gates and the way that we're trying to open up the gates is rig the system so that there's so much evidence. And so the support piece, the rig, the system, and then the scoreboard and the scoreboard is to say that if you do have a funnel to capture those things, and most people don't want to do the work, people here do, most people don't want to do the work to say, I have made my case. So if you say, Hey, looks like we've saved or avoided or added 10 billion of value, I don't like it. What have you done? Oh, it looks like you wrote some papers and pushed back on some people 10 billion. I want that smoke. And so that type of collective bragging allows us to as a community be stronger.

Bryon Kroger (19:24):

I like that We used to have a rule about intentions versus outcomes. It was never let the bureaucracy compare its intentions to your outcomes.

Justin Fanelli (19:33):

Oh, I like that.

Bryon Kroger (19:35):

And that became really powerful because inevitably everybody speaks in intentions. We all have the best intentions in the world. And I think one thing that's important to recognize is the innovation community. Often we fall short of the goals we have these big aspirations, we fall a little bit short of them. It still leaps and bounds ahead of the 10 year analysis of alternatives that cost $10 million. Totally.

Justin Fanelli (19:58):

And to that point, what you compare to matters. And so I think aspirational goals are super useful. They're good for motivating the team, they're good for getting the most out of people. They're not the baseline at the end of the day. So that's the high target, but you have to baseline against the status quo or the actual as is. And so we didn't have that, like NMCI, Navy Marine Corps internet has been around for a long time before I started working on it, I read that it was a ALI Band ploy to get the Navy and the Marine Corps to work slower. This is something that we've done to ourself. It wasn't baselined. We baselined it and then we said, Hey, what can you do to this? But we weren't judging people by what they said that they would do. I mean that helps. It helps for a reliability perspective. But we were looking at their status quo because what we found was if we only used their target and people said, well, that's not perfect. Well, we're not perfect now this, it's a useless comparison. We are only going to compare based on the difference. Now 10% improvement is not worth doing in most cases. We were looking for exponential gains and we've kind of had more people come into the space, which gives us better selection space.

Bryon Kroger (21:25):

I love that. That one comes up in cybersecurity. A lot of times there'll be fielded systems with tons of vulnerabilities and you try to fix something and redeploy the system with less vulnerabilities. And they're like, yeah, but it has 500 vulnerabilities, but the system out there has 600. We just improved a hundred. And they're like, no, you can't. It's not allowed.

Justin Fanelli (21:42):

It's a nonsense. And so when I look at the outcome driven metrics, we can say, here's the difference we're making. Are we supposed to be incrementally chipping away or trying to attain perfection that the person who gave that has never even seen ever anywhere?

Bryon Kroger (22:00):

Was there anything, as you're listening to Martin's talk in particular, I've been following the work that you've been doing and the larger navy community on world-class alignment metrics and everything else, the vision's there, the strategy's there. He said 95% of the people in most organizations don't understand the strategy. It's wild. Where do you think the Navy is at? Honest, look.

Justin Fanelli (22:22):

So Bay's theorem is helpful. The best thing I've ever heard in terms of the innovation diffusion curve is someone who had been in the trenches for a long time, he goes, man, I've been trying to get a hundred percent and I'm killing myself, and it's not good. Our job isn't to get a hundred percent, it's to get from the three point a half percent to the 13.5% and then we flow, right? So the short answer there is I loved that point. I would say from a Bayesian perspective, 15% conversion rate, these are estimates like eyeballing from 5% to 15% is sizable. I think now we have to get into more automation, really stick the landing on some kills and divestments and then make people afraid of being status quo at some level. I think there are some externalities that are maybe expediting that process if we can catch well.

(23:30):

And so I think specifically in his case, what we can do about that and kind of combining the decision stack and how to measure anything is, I was thinking about this. There are philosopher kings, there are player coaches. And so these hyphenated words, they come with outsized impact scientists. Investors scale what we're trying to do. So we're experimenters, but how do we make sure that it has billion dollar effects? And with these asymmetries, if we're all scientist investors, then we slant the table. It's time for us to be the house. If we rig the game, then we're the casino and then we just run the table.

Bryon Kroger (24:19):

I love that. And it's a refreshing answer too on the going from 5% to 15%, I think I was hoping you would give an honest answer and not say, oh, I think 80% understand our strategy because I think people overlook the diffusion of innovation curve and crossing the chasm. Usually we think about that in terms of product adoption, but it applies to idea adoption as well. And going from five to 15% is actually huge. That's where you get most of your hockey stick in product, and it's where you get a hockey stick in your org from an ideas perspective so that it might

Justin Fanelli (24:49):

Even get slippery. So there are a lot of getting through the chasm. It changes once you're scaled making an idea popular that can just go right then you're going to be a loser if you're not in the winning side. So you're going to get the second half if you get the first half. So we just have to get that next batch.

Bryon Kroger (25:11):

I love it. Thank you so much. I appreciate you coming out.

Justin Fanelli (25:14):

Thank you for having me.

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