ONE DEFENSE: BRIDGING THE PENTAGON AND SILICON VALLEY

STEPHEN RODRIGUEZ AND GREGG SYPECK

NOVEMBER 12, 2015

http://warontherocks.com/2015/11/one-defense-bridging-the-pentagon-and-silicon-valley/

Former Secretary of Defense Donald Rumsfeld once said, “try to make original mistakes, rather than needlessly repeating theirs [previous Administrations].” The Department of Defense is on the verge of repeating old mistakes and in the process of committing some original ones, including some in the name of innovation. Over the past year, Secretary Hagel, and now Secretary Carter, have launched several new defense innovation initiatives starting with the Defense Innovation Marketplace and the subordinated Defense Innovation Initiative. This houses the much-lauded Defense Innovation Unit – Experimental (DIUx) as well as the lesser-known Long Range Research & Development Plan. These organizations and initiatives were all created with the intent of expediting the government research & development (R&D) process as well as helping the Department of Defense access the best, most innovative technologies in the non-traditional marketplace. What’s not to like? Quite a bit, actually. We need more than partial solutions. This problem will not be solved by Band-Aids on a sucking chest wound. It’s time we bring together the Pentagon, the industrial base, and the technology sector to develop a comprehensive approach to defense innovation.

One of the latest Pentagon initiatives to encourage innovation, DIUx was launched to “position the Department of Defense to be more open to the infusion of non-traditional technical ideas and talent.” On their website, the Department explains that DIUx “is designed to create a hub for increased communication with, knowledge of, and access to innovating, high-tech start-up companies and entrepreneurs and their leading edge technologies.” While communication with, knowledge of, and access to Silicon Valley need significant improvement, these are not the core of the innovation problem. Rather, the core problem is that, in most cases, it’s simply not worth it for outsiders to engage the Department of Defense. It requires a significant investment of time and resources with little promise of a favorable return on investment. DIUx highlights the cultural gap between Silicon Valley and the Pentagon. Only in diplomacy and government is the phrase “tangible progress” used in the same sentence as “relationship building.” In Silicon Valley, “tangible progress” is a phrase reserved for project milestones when code is written, products are delivered, and checks are deposited. It’s not clear the Pentagon leadership understands that while better relationships are necessary, they are far from sufficient to actively engage Silicon Valley innovators in the development of solutions to defense problems.

Loren Thompson suggests that Silicon Valley won’t partner with the Pentagon because of poor margins, inadequate protections for intellectual property rights, high regulatory burdens, the government’s lack of trust in market forces, and the role of the political system. Whether or not these are precisely the reasons for the Valley’s lack of participation, it’s worth considering the concepts underlying Thompson’s suggestions. If margins are smaller, and intellectual property rights less favorable, there exists a problem with incentives. If regulation is a burden, there exists a problem with the rules and the system itself. If the government cannot embrace the idea that commercial practices encourage efficiency, and that innovators aren’t convinced that outstanding performance and efficiency will trump politics, there exists a problem with trust. Unfortunately, the Pentagon’s efforts to date are not targeted at improving incentives, making the system less burdensome, or establishing trust. Allocating a few million dollars a year and setting up shop at Google’s Moffet Field to “be more open,” and to “increase communication… and access” is a good start, but it’s a far cry from what’s required to tear down the barriers that exist between companies innovating outside of the defense industry and potential customers in the Pentagon with requirements, money, and a recognized need for innovative solutions.

Without question, the challenge of bringing greater outside innovation to the challenges facing the defense industry is a complex undertaking involving a large number of stakeholders. Among the most influential of these stakeholders are the venture capital community and the defense industrial base. Venture capital investments in Silicon Valley in the second quarter of 2015 alone were $9.1 billion. Firms investing in Silicon Valley companies who have chosen to operate in commercial and consumer markets (rather than the defense industry) possess influence in the start-up community. They should be included in the design and implementation of the solution to the defense innovation problem. Similarly, the defense industrial base needs to be included in the development of a new approach to defense innovation. To date, this stakeholder has been marginalized. Yet, the defense industrial base has been one of our nation’s critical strategic assets since the 1950’s and it is uniquely qualified to build complex systems for defense applications. The defense industrial base advocates the use of commercial “state of practice” technologies from outside their own industry, however they don’t appear to be invited to participate in this latest wave of Pentagon innovation initiatives. After focusing on Silicon Valley since taking office, Secretary Carter recently explained that we also need the innovation provided by traditional defense contractors. He described them as one of the “channels of innovation.” While true, it is not enough to say “you’re innovative, too.” It would be far more productive to engage these traditional defense contractors in developing the optimal defense innovation base.

To maximize the infusion of commercial innovation into the defense industry, the Pentagon is going to have to do more than build relationships. A program here and an initiative there make for good headlines, but real innovation requires fundamental changes involving incentives, systems, and trust. These changes impact a lot of people and organizations, and therefore require that this large and diverse group of stakeholders work together toward the same goal.

Any proposed solution to this yawning technology gap must integrate all stakeholders, including military, defense industry, and non-traditional enterprises: What we might call “One Defense.” This approach can leverage a relatively new Defense Department concept known as Technology Domain Awareness (TDA) to create a new defense innovation operating system to integrate all stakeholder groups. Unlike other nascent initiatives in this space, TDA leverages the acquisition concept of Learning from Investment to provide information and resources to underwrite and scale defense product innovation.

Because this approach includes groups who are not all familiar with (or interested in learning) defense industry practices, One Defense requires the use of under-utilized contracting mechanisms. For example, the Other Transaction Authority (OTA) is a little known, Eisenhower-era contract vehicle that unencumbers commercial technology providers of many of the burdens that come with doing business with the Federal Government. In addition, Cooperative Research and Development Agreements (CRADAs) could begin to address some of the intellectual property issues. By beginning to address the concerns of non-traditional enterprises and providing attractive alternatives to traditional government contracts through these mechanisms, we can ensure America’s military technological edge regardless of constrained defense R&D spending, market-driven proliferation of advanced technology, and increased operational uncertainty. These services address defense acquisition shortfalls around access, resources and research.

When executed by a seasoned team with access to a diverse network, One Defense will connect Defense Department stakeholders to an extended community of innovators in global academia and industry in order to rapidly source, develop, and demonstrate high-potential technologies. Yet it doesn’t stop merely at community building like other endeavors. Its mission is also to inform acquisition decision-makers with an understanding of the technology landscape as it relates to future mission needs and increase opportunities for the Department of Defense to leverage the global high-tech marketplace. Unique in this regard, One Defense doesn’t shy away from the defense industrial base. Rather it embraces it as a critical and logical next step when engaging non-traditional providers. Acknowledging the natural advantages that a Lockheed Martin or Northrop Grumman provides from an integration and management perspective, One Defense seeks to accelerate the component and subcomponent technology development to achieve “better, faster, cheaper” outcomes.

Unlike most Defense innovation activities which focus on a single specific geographic area or type of organization, One Defense is an approach that includes all domestic and international businesses, start-ups, academic institutions, and nonprofits with products or expertise relevant to defense-related capability needs. Only by building a community of thousands of diverse partners will the Department of Defense obtain quick access to innovative solutions. By leveraging consortia, associations and other membership organizations, the Department of Defense can efficiently gain access to a range of capabilities and services to speed the flow of outside innovations to defense, to include engagement opportunities, infrastructure services, and co-investment opportunities, while leveraging available contracting mechanisms to lower barriers to entry for many of these organizations, which are not primarily oriented towards doing business with the Pentagon.

If the Department of Defense adopts an overarching One Defense approach, its ability to organize and maximize the impact of other defense innovation initiatives and leverage industry groups will increase dramatically, as will its ability to quickly access a large group of innovative solutions, and to gain important information about technology trends. This approach will attract non-traditional providers by creating a slate of incentives that intuitively breaks the “fee for service” decision calculus currently held by federal contractors, while respecting and the unique and important roles played by the defense industrial base. Perhaps most importantly to individuals in all stakeholder groups, One Defense will create a community of like-minded technologists, organizations, and investors interested in supporting national security objectives.

Stephen Rodriguez is a Venture Partner with Abundance Partners. He is also a Term Member at the Council on Foreign Relations and President of the Foreign Policy Initiative’s Leadership Council.

Gregg Sypeck is Founder and CEO of Strategy in Motion. He is a strategy and operations executive who has held leadership positions in Defense and commercial technology organizations.