Where do traditional defense companies fit in the Pentagon’s tech push?

January 31, 2020

Pentagon’s tech push

Culture Clash 2.0

Where do traditional defense companies fit in the Pentagon’s tech push?

Defense News Interview, January 2020

Leonardo DRS CEO Bill Lynn explains how larger, more traditional defense contractors can contribute to the Pentagon’s push for advanced tech.

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Transcript of Interview with Bill Lynn:

If you look back 20, 30, 40 years, a lot of the research on defense systems was actually inside the department and inside the defense industrial base itself. And often though that research was exported to the commercial sector– think GPS, think the internet coming out of ARPANET. That balance has shifted now so much more of the research, much more of the technologies that you need to have cutting edge fighting forces are coming from the commercial sector. I’m thinking now autonomous systems, cloud computing, quantum computing.

All of those technologies, really their origin is in the commercial sector. So you’re going as a defense company from a net exporter to a net importer. The balance hasn’t gone from 100 zero to zero 100, but it’s … I think the balance has shifted more in favor of commercial technology. So I think you have to have, as a defense company now, you have to have a much broader purview of the technologies that are going to be needed to put into your systems.

Well, it’s a holistic approach, but what you’re really looking for is a sustainable competitive advantage. You don’t tie exactly to individual programs, but you do want to have programs in mind that are inside the five year planning cycle because what you need to get is a return within a reasonable period of time and what you’re looking to do is basically get ahead of the field. Can you do something in terms of investing that’s going to give you some kind of advantage in the next competitions that you think is going to give the department, give the US military something that nobody else can provide?

Dual use can work in terms of the teaming, as I said, that a commercial company with commercial technology can team with a defense company and you can have the defense company sell into the department for the defense uses and the commercial companies sell into the commercial market for the commercial uses. I think it’s harder if you have a commercial company that’s trying to sell into DOD because they have all of the barriers to entry, whether it’s the auditing and accounting systems, it’s the relatively low profit ceiling, the relative smallness of the market compared to commercial markets.

And similarly, as I said, the defense companies do not have the right approach generally to commercial markets. They don’t have the channels, the sales force, they don’t necessarily have the agility to deal in the commercial market. So it’s somewhat of an unnatural act. So it’s that combination tends to work better than a defense company going into the commercial sector or a commercial company going into the defense sector.