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Working Group 4: Industrial Implications and Procurement

Chair: Professor Holger Mey (Germany), Vice President, Advanced Concepts, Airbus Defence and Space (TAG)

Co-Chair/Rapporteur: Joe Robinson (UK), CEO, Skyral Group

The Industrial Implications and Procurement Working Group focussed on how best to achieve and accelerate the development and fielding for future capabilities based on emerging and disruptive technologies. What innovation ecosystem (e.g., public / private / industry / academia / military partnerships, public/private funding, structures and processes) is needed to meet the future war challenge (deterrence and defence, crisis prevention and response, resilience) and how can that ecosystem be created? What are the most important obstacles and challenges to address to achieve and accelerate the development and fielding of future capabilities, including national and collective capabilities? How can nations and the Alliance incorporate best practices and enabling technologies (e.g., AI, digital twins, extended reality tools, modelling and simulations, new materials and advanced manufacturing, public/private cooperation) to accelerate research and development, testing and experimentation, and rapid scaling to meet security and defence needs? How can these best practices and enabling technologies reduce risk, reduce cost, reduce climate impact, and improve life cycle management (e.g., sustainment, supply chain security, upgrade, replacement and recycling)? What kinds of defence capabilities are best provided as a service while ensuring security of supply, effectiveness, and responsiveness to contingency and increased demand? What considerations and factors still need to be addressed in NATO and EU policies, structures, and funding mechanisms (e.g. DIANA, NATO Innovation Fund, European Defence Fund, PESCO, NATO / EU armaments cooperation) to best provide future critical capabilities?

Barbara McQuiston (US), Chair to the DIANA Board of Directors, Department of Defense

Giampaolo di Paola (Italy), President, AEREA (TAG)

Kevin Billings (UK), Hon Group Captain, Anduril

Martin Cronin (UK), Chief Executive, Syniad

Roelof Van Der Spuy (UK, South Africa), Strategic Advisor at Teledyne

Trygve Refvem (Norway), Executive Vice President (Ret.), Norsk Hydro (TAG)


Question: How best to achieve and accelerate the development and fielding of future capabilities based on emerging and disruptive technologies.

Core message

Effective adoption of new technology will provide a strategic advantage over our enemies which can improve both deterrence and the chance of victory in combat. This edge is best defined today by 2x overarching functions: 1) Increased speed of understand-decide-act cycle, leading to improved tempo of operations and 2) Increased lethality through increasingly smart autonomous systems. Both of these functions are, ultimately, the result of innovations in software. However, this is all for nought, without effective adoption: bringing new technology to bear on the mission. Governments have an innovation adoption problem, not an innovation problem per se. If we are to be serious about fixing this challenge, leadership at the highest level must focus on fixing this adoption process and be accountable for pulling through new technologies: from research to production capabilities.

It is not enough that our leaders are seeking to understand new technologies – that is only the first step – they must assign time and effort and make it their business to reform the policies that add friction to innovation pull through, shorten the processes, better align incentives and create a culture that embraces risk in a different way. There are fantastic examples of innovation adoption models in the alliance, we should be thinking of Picasso: Good artists borrow, great artists steal. Nations should steal these great examples, don’t reinvent the wheel!  Private sector will continue to be the beating heart of innovation (70% of all R&D comes out of the private sector) due to economics and talent. Commercial innovation will continue to accelerate as AI increases the productivity of industries. The effective adoption of dual use technologies will increasingly become essential to delivery of cutting edge capabilities.

Main findings

There were 4x main findings that we believe can help achieve and accelerate the fielding of future capabilities based on emerging technology: 1) Fix adoption, 2) Focus on partnerships, 3) Embrace new business models and 4) Government as an investor not just a customer.

  1. Focus on fixing the adoption of new technologies not on the tech itself. There needs to be an urgent focus on reforming the process and policy to fix innovation adoption. It’s not about the tech, it’s about reforming the process to adopt the right tech. Leaders in senior roles must make this one of their priorities here. There are few things that very senior leaders can focus on – we believe this innovation adoption is so important to deterrence and victory, that a senior leader should own this reform and make a stand to make it one of their very few missions. Without this focus and publicly declared accountability, effective innovation adoption will not happen at scale.
  • Work back from the outcome. Useful, practical and appropriate technology matters. This comes from focussing on rapidly testing, trialling and fielding new technologies that generate effects and, ultimately, new capabilities. Need to focus on delivering mission outcomes and work back from that.
  • Incentives are an issue. There needs to be a clear and transparent alignment of incentives, where every stakeholder involved in procurement and program delivery is incentivised to achieve outcomes and are not incentivised to simply follow existing processes successfully.
  • Measure success against new technology fielding. Metrics like SOCOM’s process – 590 days 185 days; 3 documents 1 document, 17 stages of review 9 stages of review – to keep us honest about how well we are doing and incentive program managers to remove friction and blockers.
  • Government is a fantastic early adopter. History has consistently shown this. There is an opportunity for the government to market themselves as the gateway to sell new tech into commercial space in order to attract dual use technology companies to the sector.
  • 2x motions to effective adoption: Brown Field and Green Field. This is both about integrating software into existing hardware (brown field) and pulling through new capabilities (green field). Both have different challenges:
    • Brown field: Effective Integration between current capabilities and new technologies matters. Modern software needs to be integrated into existing (procured or budgeted) hardware to ensure that near term platforms are able to be upgraded rapidly and empowered with the latest technology (ML, data processing and dissemination, AI, computer vision, data fusion etc).
    • Green field: This is about leaping the valley of death between pilot and production capabilities. We must Learn from where this process and policy reform has worked: UORs, Ukraine procurement, DARPA, SOCOM, DIANA. There are great examples in the ecosystem. They need to be understood, stolen and scaled. We should be aiming to achieve less than 3 months from successful pilot to production cap to keep SMEs alive). A proposed process to do this would be: see 1) Issue a challenge/problem to the market (get as many ideas as possible), down select (via demo, paper and interview – speed matters here), get mentors in place to support the downselected companies. 2) Test, demo and experiment on the mission and downselect successful test examples 3) deploy production capability linked to programmatic acquisition budget. Ensure the accountable nation is prepared for catastrophic success. A good model of this is the Transition Confidence Level (TCL) from SOCOM, which covers policy, procurement and enabling conditions: e.g.) data, processing, networks amongst commercial reform.
  1. Partnerships: Innovation adoption needs the right partnership behaviours to be successful:
  • Role of Government as a good customer for Industry: IP rules need to be more favourable. There needs to be more regular and rapid competitions. Software centric contracts need to be shorter, more flexible and performance based. There is no need for “bad lock-in” with software platforms and software centric hardware that are built on open standards. There is an opportunity for good lock-in through ecosystem value and benefit of the speed of integrating new best in class technologies. At each phase of procurement, companies must be able to make a profit. The delivery of new, relatively risky capability involving new tech, is hampered when desired outcomes are not communicated to industry in a timely and regular fashion – especially as they evolve. Stretch goals should be put into programs, with a big contract at the end of it, to encourage more risk taking and innovation in industry. There is a need to update the export of critical technologies criteria for ITAR and other national export requirements. Export policies are restrictive (especially US), they need to be revised in the age of software centric systems as this affects industrial strategy, especially decisions around where global companies develop their products. ITAR should move from an “assume ITAR and find a reason not to apply it” to “assume no ITAR and find a reason to apply it”. There are unintended consequences of ITAR (and similar national strategies) which encourages wasteful practices across the Alliance. Risk needs to be viewed through the lens of speed and time as the key variables. Fielding new technologies slowly to minimize risk is not only an incorrect interpretation of risk, it is damaging our ability to retain the edge. The need for faster fielding is a result of the threat and a function of pace of technological change.
  • Role of bigger industry supporting small industry: Mentorship and support from those who have served with successful Primes or tech companies that have scaled in Gov market is critical to support long term growth of SMEs. This needs to be done without risk of IP or talent theft.
  • National Industrial policy needs to be carefully balanced with capability needs: Defence industry is a national asset – sovereign support for the defence industrial base is alive and well, especially in Europe. We need to accept that the defense market is not necessarily a free market. But when any procurement is done, the authority needs to communicate the weighted scoring criteria on industrial policy vs. best capability regardless of national economic interest. Talent scarcity continues to weigh the dice on industrial capacity to create new technologies. Digital skills are evolving: Gov sponsored digital talent initiatives need to have the agility to evolve as AI shapes the type of skills required.
  1. Business models are evolving, which presents a significant opportunity for faster and more effective adoption:
  • New companies are emerging that are funded differently and will behave differently. Expect more as-a-service models as companies present ready baked products to Defence Depts that have been built with their own capital.
  • Software has transformed capability and the delivery of effects: It has enhanced the speed of delivery and capability improvement. It enables faster upgrades, and easier and cheaper through life support. Delivery as-a-service for software: over the air updates are changing the capability game, this needs to lead procurement and buying changes – more renting and expecting a through life service and less buying and owning.
  • Dual Use is only going to get more important and prevalent: A culture of defaulting to bespoke capabilities needs to be changed to a default of “don’t bespoke” with a focus first on COTs to create economies of scale. This needs to be balanced, however, with capability needs – mission needs – which should inform the need to bespoke first and foremost.
  • The “culture of security” in defence needs to be challenged: speed of delivery, rapid iteration and open standards does not mean a capability is less secure to cyber threats or information leakage. Rapid and effective iteration in contact with the mission has been found to make capabilities more reliable and secure, not less. The era of locking software in a box (on prem) is gradually coming to an end.
  • Evolution of defence specific standards should be seen as an opportunity. Military standards and certification needs to be reformed and carefully considered as the wrong standards are stifling innovation (they are irrelevant in software centric programs on open standards) but too loose certifications can be dangerous.
  • Success of new software centric capabilities need to be measured on 2x fronts: improvements to mission outcomes and reliability and quality of through life, evergreen service.
  1. Funding:
  • There is a gap in funding which is preventing adoption. This gap exists between TRL 3 to TRL 8/9 – pilot to production stage – which is unhelpfully exasperating the adoption problem. Government needs to fill this gap, especially in Europe, where there is a much smaller and more risk adverse VC community. Government needs to double down in Europe as an investor as well as a customer. NIF, NSSIF, In Q Tel are great models; we should steal and replicate them across the alliance and hire in experienced investors to run these funds to deliver a true public private partnership. This is an opportunity to align incentives between government and industry.

Appendix 3


Appendix 5

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