Concluding Thoughts on the Defense Innovation Ecosystem

After completing three previous articles describing the innovation ecosystem for the defense sector, I want to conclude with a few questions and my personal thoughts. The last 5 years saw a burst of new organizations, such as the Defense Innovation Unit and AFWERX, charged with spurring innovation. These come amid heightened emphasis on innovation from the military, congress, think tanks, and media. The conventional wisdom is that while the old system produced many achievements in the past that propelled it past the Soviet Union and provided the US one-sided victories in Iraq in 1991 and elsewhere, that America now needs to demand more from its innovation ecosystem in the face of the technological threat from China. But what exactly needs to be fixed, how do you best achieve results, and what are the signs that the DoD is successfully innovating?

The Innovation Pipeline

There are some arguments that America needs to invest more resources into basic research and development. DIU director Michael Brown made that argument in March, pointing to the decline in the spending on R&D investment as a percent of the economy. Others, such as former Google CEO and chair of the National Security Commission on AI, Eric Schmidt, say it isn’t about how much we spend but how we spend it. In an ideal world the US could both invest more and improve how it spends it. In the resource constrained world we live in, we probably need to think first about how we spend the $100+ billion RDT&E, $130+ billion procurement, and the maintenance part of the $230 billion operations & maintenance budgets. Laying these three budget items next to each other creates the department’s innovation pipeline, from birth in the lab to sustainment in the field.

While I believe there is a role for the federal government to invest in basic research, ramping up investment in the beginning of this pipeline will not produce the results the DoD is looking for. One reason why is the decades long timeframe associated with the full process. More importantly, however, there is wide recognition that there is already a lot of mature and affordable technology in the commercial sector that the DoD can leverage. This is the purpose behind several of the newer innovation cells such as AFWERX, the Rapid Reaction Technology Office, and the Defense Innovation Unit, to bring in commercial technology through prototypes in order to test and evaluate how well suited they are to defense needs. Essentially, the military services are creating on-ramps to shortcut this pipeline by skipping the research and development phases.

What these new initiatives and the commercial injection they are pursuing are still struggling with is the infamous valley of death. While the term applies to start ups across industries, young firms in the defense market have a specific struggle between earning small and temporary RDT&E funding, like a SBIR award, and earning larger regular contracts in a program of record. A large part of this is because of how the DoD plans the future defense budget well in advance. Difficulty staying afloat while waiting for a product to be budgeted into the Program Objective Memorandum (POM) is part of the reason so many startups are acquired by larger firms with the financial wherewithal to travers that valley. This matters because what really motivates entrepreneurs and venture capitalists, and the only thing that matters to the warfighter, are not the small prototype budgets but the high value and long-term acquisition plus sustainment budgets. That is the big payoff that draws talent and money into the industry. The most important change the DoD can make is to change the budgeting and acquisition process to shrink that valley of death.

Mike Brown laid out some ways Congress and the DoD can change procurement to speed up the process and facilitate innovation adoption when he discussed the “Fast Follower” strategy in his remarks at the 2021 Aspen Security Forum. The most revolutionary of his proposals is for Congress to stop authorizing purchasing a single platform and instead authorize purchasing a capability. The Defense Department would then manage sourcing that capability within budget, giving it flexibility to change vendors or upgrade models much faster. I am skeptical Congress would make such a substantial change to the budgeting process, but that sort of vision would be dramatic. We may get a chance to see what changes can be made, if the National Defense Authorization Act goes ahead with plans to create a commission to review DoD budgeting practices with a charter to suggest improvements to Congress. Within the structure of current law, there is a lot being done with Other Transactional Authorities (OTAs) to more rapidly buy commercial products for defense needs.

Where to focus scare innovation resources?

An issue that I’ve often scratched my head over is what guides the direction of defense innovation. Most of the innovation cells have priority areas they tend to focus their investment in such as quantum computing, artificial intelligence, biotechnology, and advanced materials. But how do we know those are the right focus areas? They are probably right, and often they are technologies that the private sector has already made a lot of progress in and are ripe to incorporate into defense, but what if we are missing something?

DIU’s focus areas according to https://www.diu.mil/about and the 2021 annual report

I think an ideal system would have a balance of top-down guidance and bottom-up feedback. Ultimately, the right innovations are the ones that are integrated into more effecting war fighting concepts of operations (CONOPS) and produce a real-world advantage. To that end, in addition to senior level direction to focus on certain areas, there also needs to be a desired outcome to strive for and work backwards from. Former Deputy Secretary of Defense Robert Work advocated that Pentagon leaders challenge the armed services to solve very hard, very specific problems. One such problem was to sink 350 Chinese navy and coast guard vessels in the first 72 hours of a war. Another was to destroy 2,400 Russian armored vehicles. What I like about Work’s approach is it is agnostic on how to achieve those goals, allowing commanders to experiment and find the best combination of technology, CONOPS and forces to achieve the mission.

Experimentation against a realistic problem to inform R&D investments and acquisition decisions with data seems like a great way to drive innovation. If top performers are then rewarded with meaningful contracts, the result is a system that communicates priorities and aligns resources across the DOD and industry. The best example of this in action appears to be the Project Convergence experiments the Army is running annually. Unfortunately, the Navy’s equivalent, Project Overmatch, seems very nascent and the Air Force’s Advanced Battle Management System appears to have been scaled back due to cost.

Creativity under budget constraints.

Generating the desired innovations does not need to break the budget. In fact, scarcity is an excellent motivator. If the services had all the resources in the world, it would be tempting to continue to fight in the same ways they have grown accustomed to with more and more forces. Historically, periods of scarcity often produce the greatest breakthroughs. I recommend the book “Innovation in the Interwar Period” for some notable examples including development of Blitzkrieg, Navy carrier operations, and the US Marine Corps concept of coastal assaults. All these developments occurred during a time of technological change but also when militaries were constrained by the great depression, treaty limitations, or both. As General Martin Dempsey said on a podcast, nobody in uniform will ask for less money, but that forces creativity.

Often, I see discussions on military innovation focus on the large powers of the US, China, and Russia. However, medium sized powers that don’t have the luxury of throwing mass at a problem can be very innovative. Take Israel for example, it is a small state with a budget a fraction of the size of the US but home to several capable defense firms and cutting edge capabilities including the Iron Dome defensive system. Likewise, Turkey’s TB-2 armed UAV proved very effective in conflicts in Nagorno Karabakh. Since the new technologies of cyber, automation, and artificial intelligence are relatively affordable and available, mid-sized powers are indeed very likely innovation engines.

What does success look like?

How will we know if things are going well on the innovation front? Here are a few indicators I think are positive.

Patrick Collins is a DIA intelligence officer and holds a master’s degree in security studies from Georgetown and an MBA from Cambridge University. He joined DEF in the spring of 2020 and is interested in defense innovation. The views expressed in this article are strictly his own and do not reflect the official policy or position of the Defense Intelligence Agency, DOD, or the U.S. Government.

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