SWJ just published an article I wrote on the strategic imperative for improving how DoD innovates. Check it out!
Courtesy of Gaping Void…
This is all pretty self-explanatory.
There is hardly an industry out there that hasn’t been deeply affected by tech. The old guard is being marginalized faster than anyone thought possible.
The opportunity is for those who are not burdened with the past to use chaos as their tool for success.
Now, who are those best using “chaos as their tool for success” in the contemporary military context? Is it our defense establishment or is it the diversity of state and non-state threats unencumbered by the burdens of legacy? Who owns the innovation high ground on the asymmetric battlefields of the future: speed or mass? If chaos reigns, then the first to identify and capitalize on opportunities has the decisive advantage.
Game developer Valve raised eyebrows recently with the internet release of it’s unorthodox employee handbook.
It sort of begs the question: is it possible for a defense company to create a great, scalable employee experience? God I hope so…
Former Lockheed Martin CEO, Norm Augustine, was a defense industry titan, but his greatest contribution to the business world might just be his 1983 book, Augustine’s Laws, in which he posits the absurdities of managing a large aerospace corporation. A recent editorial by David Smallwood (1203smal) reprises Augustine’s Laws. In reading this latest treatment, it occurred to me how shockingly relevant Augustine’s insights remain to the current defense industry.
“Large increases in cost with questionable increases in performance can be tolerated only for race horses and fancy women.” – Lord Kelvin
Kelvin’s idea forms the basis of Augustine’s Law XV: The last 10% of performance generates one- third of the cost and two-thirds of the problems.
Both treatments speak to the heart of the future of defense acquisition: 70% solutions delivered on-time and on-budget are infinitely better than 100% solutions delivered a day late and a dollar short…
Good read… More defense companies should take note.
Makes me wonder if it’s time for a TEDx Defense…
Smart Defense is about maximizing the return on our defense investment. Tightening Federal spending means that every tax dollar must go further. The conventional wisdom holds that less money spent on defense means less defense capability. The thinking goes that if I can buy ten Reaper UAVs today and I can buy only five tomorrow, then tomorrow I will have half the capability that I have today. Sounds reasonable, right?
Smart Defense asks the question: are there better and cheaper alternatives that allow us to do more with less? If you artificially constrain the solution space to “proven” ideas, technologies, etc. and view everything through the lens of legacy systems, then less budget translates to less capability – pure and simple. But if you ignore sunk costs and instead start by positing the “jobs” that our military needs to accomplish, it opens up a wealth of potential options. Relative to the aerial surveillance “job,” is the issue best characterized as “How many Reaper UAVs can we afford?” or “How many hours of uninterrupted surveillance can we afford?” While the former description is prescriptive based on a specific solution, the latter description is problem focused and makes allowances for the identification of disruptive innovations optimized to the functional need.
Pressure is the impetus for change. Since the end of the Cold War, the pressure has been building for the Defense industry to fundamentally re-imagine itself to reflect the realities of a changing world. The threat is different today than it was 20+ years ago. But after two wars and a score of contingency engagements around the globe, the Defense industry is all too ready to forget the lessons of recent conflicts and return to the happy predictability of a Cold War adversary.
Now the national budget crisis has introduced a different kind of pressure. Increasingly, the U.S. no longer has the resources to simultaneously equip for the wars we would prefer to fight and support the exigencies of the messy little wars we are fighting. Hard choices have to be made, and I predict that the Defense industry that emerges from this period of change will be fundamentally different from the one that we know today.
As a nation, we cannot afford to pay for a standing Defense industry as a strategic hedge against remote contingencies. More than ever, we need a Defense industrial base that is an extension of the commercial marketplace. One where costs, resources, and innovations can be shared rather than solely underwritten by the American taxpayer. Over the next 10-15 years, these dynamics will combine to produce a Defense industry that both consolidates and diversifies.
Expect investments in Major Defense Acquisition Programs (MDAP) to continue to fall for the foreseeable future in favor of smaller scale innovation programs that target emerging military needs. Decreasing MDAP investments erode the competitive advantages (e.g. size/scale, industrial base, processes, etc.) of the Tier 1 system integrators and enable mid and small size firms to more effectively compete for Defense dollars. Moreover, the migration of Defense spending from MDAP’s to small contract engineering and services-type contracts has incentivized many large defense businesses to move down market into more commoditized industry segments, where competition on price is fierce. For the Tier 1 systems integrators, the move down-market over the past decade has been accompanied by a divestiture of strategic infrastructure assets in order to create more competitive rate structures. One highly visible example of this trend is Northrop Grumman’s sale of Huntington Ingalls.
For good or ill, heavy infrastructure creates an implicit strategic focus (or center of gravity) for a company, and the loss of such infrastructure often leaves a gaping void. Combined with the competitive pressures to diversify and capitalize on smaller-scale opportunities, the Tier 1 companies of the future will increasingly resemble holding companies like L-3 Communications and to a lesser extent SAIC than tightly integrated Defense juggernauts like Lockheed Martin. To the extent that big infrastructure Defense survives the next two decades, it will emerge more lean, focused, efficient, and much, much smaller.
I want to circle back around to the issue of cost before wrapping up. The shrinking Defense dollar relative to the explosive diversity of future needs is the trend that will shape the emerging Defense economy. Historically, Defense contracts have been awarded based on two criteria: “lowest cost” (meaning lowest cost) and “best value” (meaning cost doesn’t really matter). In the Defense marketplace of tomorrow, “best value” takes on a new meaning: the bestest for the cheapest. Generally speaking, the engines of innovation in all industries are the small and mid-tier companies. In Defense, the role of the the Tier 1 systems integrators has largely become one of packaging up these innovations for sale to the government. Looking ahead, is the government going to continue to be willing to pay a premium to the market leaders for what amounts to flow-through innovation? I am guessing no.
I predict that all of the aforementioned factors will combine to produce a non-cyclical reduction of large Defense contractor market share by 30-40% over the next two decades, making room for substantial new mid-tier companies to emerge. I am working on a model that, if successful, will identify the companies who will capitalize on this trend. More on this topic in subsequent posts…
I had the opportunity to attend TEDxPennQuarter 2011 this past Tue October 18 with some members of the Mav6 team. For those of you not familiar with the TED experience, it can best be described as a celebration of creative ideas across the widest possible range of human interests. At a typical TED conference (typical is almost certainly not the right word…), it would be entirely normal to see a speech by a leading business thinker followed by a one-man “human beat box” show.
If you’re wondering what the point of such an eclectic mix of topics might be, I offer the following explanation: there is tremendous value in being exposed to how creatives from outside of one’s normal business or social context approach innovation. Such exposure forces one to challenge long-held assumptions and beliefs and seek out opportunities to improve (or disrupt) the status quo, which brings me to my point: what can the defense community learn from the TED experience.
From my perspective, there is no industry more ripe for fresh ideas than the venerable defense establishment. I am not saying that the defense industry doesn’t have brilliant, creative people, but structural and cultural barriers inhibit the diffusion of new ideas that cut against the grain. To a troubling extent, the only perspectives that seem to have a platform in the defense community are those that espouse some variation of the corporate view. So what happens when the threat evolves in a manner that no longer respects the status quo?
I am not advocating that we throw away convention in the defense industry. What I am saying is that as a community we need to make a more conscious effort to foster opportunities for the socialization and pursuit of radical ideas and innovations. Maybe we should look to the TED model and invite thinkers from orthogonal industries and disciplines to share their experiences with edgefighters and defense insiders. I can almost guarantee that such cross-pollinization of perspectives will yield unexpected solutions.
It was purely coincidental (I think) that TEDxPennQuarter 2011 took place the week after the 2011 AUSA Annual Meeting and Exposition. While the toys on display at AUSA get a 10 out of 10 for flat out cool, what the defense industry needs more of today is a celebration of the ideas (not artifacts) that will make a difference in modern security environment. Our ability to win this war will be less about an overpowering military arsenal than the ability to rapidly innovate – to capitalize on fleeting opportunities and challenges before our adversaries. And the form that this innovation will take does not follow a predictable linear progression of ideas. It will be sparked by crazy, disruptive ideas interacting with the defense ecosystem.
The annual AUSA meeting and exposition was held in Washington, DC this past week. As usual, military brass and acquisition professionals the world over converged on the nation’s capital for the Army hadj, but I couldn’t help but notice how this year’s event differed from its recent predecessors. By outward appearances, AUSA 2011 looked much the same as last year and the year before: the greatest land warfare show on earth filled to overflowing with awe inspiring mil tech to dazzle the mind (and the wallet). But thinly veiled below the glossy surface, the 2011 edition was punctuated by an air of quiet desperation as defense contractors scramble for market share in an era of diminishing DoD budgets.
I wonder if the days of military shows as we know them are drawing to a close. Is there a future for the “exquisite” technologies around which the modern military marketplace has evolved? Does the Pentagon’s diminishing discretionary buying power undermine the relevance of the extravagant mil tech bazaar? The more salient question may be: can companies continue to risk underwriting military specific technology innovations at anywhere near historical levels given the unpredictability of future defense requirements (and spending)? Today more than ever, DoD needs industry to shoulder MORE of the burden for R&D spending, but companies are understandably reluctant to invest with the defense market in a state of fundamental transition.
I have a couple of thoughts relative to the way-ahead.
1) The Pentagon and the defense industry can no longer afford to single handedly pay for defense R&D. Looking ahead, DoD simply will not have the buying power to sustain a robust organic tech base on its own, and the fleeting and uncertain nature of future military requirements makes it increasingly unlikely that the defense industry will shoulder the burden for R&D spending. The answer: outsource defense R&D to more robust technology ecosystems in the commercial marketplace. Leverage the massive investments in commercial aviation, personal electronics, etc. to offset DoD spending limitations and reorient defense R&D to truly “military specific” capabilities and systems, which should be narrowly defined. Future defense industry leaders will be the ones who do the best job of repurposing commercial technology quickly, cheaply, and reliably for military applications.
2) I assume that item #1 above is a foregone conclusion. It’s going to happen, like it or not, which brings me back to the future of the defense trade show. Don’t get me wrong. I personally love celebrating mil tech for its own sake. But as the center of gravity for technology innovation with relevance to the DoD marketplace shifts from the defense industry to commercial industry, will the Consumer Electronics Show supplant the AUSA exposition as the place where serious defense industry professionals gather each year to envision the future of mil tech? You can guess my answer. I see the venerable defense trade show as an anachronism that recalls an earlier time when the defense tech base set the pace for global technology innovation. Which is not to say that the defense trade show has outlived its usefulness. The real utility in events like AUSA lies in the networking and collaboration opportunities that such venues afford. To ensure their long-term relevance, these events should shift focus from mil tech to fostering collaboration across industries to address the problems confronting the military in the 21st century. I for one am hoping to see fewer MRAP’s and more “Googles” in the convention hall at next year’s AUSA…