Featured Image © Royal Air Force MOD 2024
Innovation’s centrality in combat
Innovation has tipped the balance of power in combat since time immemorial. Whether through fielding technology quickly, using equipment differently, deploying new tactics disruptively or simply operating contrarily, innovations have shifted battlefield dynamics in favour of the adopter who was out-gunned, out-numbered, out-manoeuvred or out of ideas. In the heart of the principle of war of surprise1, technological or tactical innovations can cause shock and confusion and knock adversaries off balance.
Luckily the spirit of innovation thrives in combat where personal risks are rather acute, responsibilities greater, delegations freer, oversight lesser and rewards faster. Those whiffing cordite, feeling the thump of Chinook rotors or covering 8 miles a minute at low level do not need life-preserving incentivisation; innovation thrives when one’s life is on the line.
But the innovation culture struggles back in Blighty. Conservatism bias, institutional inertia, risk anxiety, closed mindsets and consent-and-evade doctrines rail against change. Institutions are generally statically-stable, few have a growth mindset2 to adopt, adapt and embrace new approaches and organisations are typically pendulous, tending to the norm following disturbance. If innovations are deployed, budgets and processes slowly and persistently throttle them ensuring change doesn’t stick.
Defence is one such institution3. Perhaps because it is an instrument of last resort, never offered a second chance and loosing is existential, there is understandable reluctance to try new things. But bias towards convention, and procedural sedimentation of this approach, militates against taking institutional risk. Despite strident leadership commentary to the contrary, an insidious structural preference for stability exists which thwarts the capacity to commission, curate and capitalise on disruptive thinking and capabilities.
Defence innovation is atomised
The ligatures include taut finances, fear of failure, probity, horizon scanning, innovation wiring and the tyranny of turnover. There is no headroom in core budgets to scale innovative successes, so they stagnate in situ or scale elsewhere. Antiseptic to setbacks, Defence needs encouragement to fail in this area. Commercial and financial protocols sometimes prevail over operational pace. The Armed Forces are often too busy to stay in touch with emerging technology. The Defence innovation eco-system is atomised and needs better wiring. And rotating key people through key appointments is highly disruptive. We can do better.
This at a time when emerging technology is evolving extremely quickly. Advances in bio-sciences, AI, quantum, space, additive manufacturing et al are expanding the calculable, seeable, knowable and solvable universe. It is difficult to depict what the future will look like in 10 years, let alone 25, but the UK Ministry of Defence has in Global Strategic Trends: Out to 20554. It is genuinely impressive but knowingly speculative, noting that material progress has considerably outstripped all six of its previous editions’ predictions.
Extrapolation of this World view to a window on future warfare is even more difficult, not least because of the unparalleled developments in the last 10 years. Terrorist organisations have held petrochemical states to account with $100 drones; we have endured biological attacks at home; witnessed chemical strikes overseas; accept perforated borders on land, sea, sub-surface and in the air; know that underwater warfare is moving against commercial assets; cyber strikes are growing logarithmically in number, impact and cost; space warfare has commenced; and increasing nationalism coincident with retrenchment from multilateralism is making conflict cessation and resolution harder every day. Adoption of new approaches, adapting old equipment and contrarian ways in warfare have been strategically surprising.
As technology evolves, its utility diversifies and impact grows, combat innovations will have an increasing role in Defence. MoD must accelerate its surveillance, adoption, adaption and deployment of technology discoveries and scale those that succeed much, much faster than anything that is occurring today. ‘Adapt or die’ is not an airy leadership quip, but an increasingly vital ingredient of battlefield success – speak to the Ukrainians.
Freeing up innovation flow
Innovation works in commerce because risk is mainly financial and managed through a portfolio. The occasional high risk/high return venture (emerging tech, transformation, etc) buys out the many high risk/no return failures, while safe bets (infrastructure, etc) ensure long-term stability. Successes more than balance losses (if they didn’t, funds would fold) and businesses capitalise on breakthrough technology, novel practices and new markets, which keeps them ahead of peers.
To access this, UK Defence has done rather well at creating innovation centres. Navy X, the RAF RCO, Army Futures and the FCG (there are others) are less than 5 years old and have done magnificent work. Borne from shifting away from the weighty CADMID cycle, their budgets are just enough to prove concepts, but not to scale successes. Net, Defence innovation investment is ~1% of the budget which given the pace of emerging tech development, its capacity to disrupt and potential for disproportionate impact, seems small. It is certainly smaller than peer organisations who generally invest around 5% of budgets on innovation.
So, the Defence innovation eco-system needs broader top cover, modest de-regulation and gentle migration from the fringes to the centre of Defence if innovation flow is to be freed up. Progressive programmatic controls would propel lethality and effectiveness whilst protecting public finances. Graduated commercial models would curate emerging technology. Financial headroom in core budgets would enable successes to be scaled. Less polished (pareto) requirements would open the aperture on opportunity. And increased urgency would speed identification, testing, adoption, adaptation and deployment of innovation.
But Defence financial management is tough where cash is worked hard, and budgets overspent. There is never a surplus and certainly no space for in-year expansion without extreme manoeuvring around spending priorities. But tactical and technical advances constantly emerge and always within 12-month horizons. Ambition without cash is a form of hallucination, so if innovation is to be part of the Defence plan, uncommitted headroom must be mandated in budgets to enable agile adoption in year.
Rightly MoD is very careful with public money. It will always hit in-year spending targets, is subject to the greatest scrutiny, especially on its biggest programmes, and is whiter-than-white on competition rules and commercial fair play. But these principles do not prevent graduated freedoms to kindle innovation. Progressive commercial and financial delegations, where smaller projects attract less machinery, greater delegations and faster processes, would free up innovation flow.
In combat game-changing battlefield innovations (the stirrup, tanks, precision weapons, joint operations, space, drones, etc) have conferred overwhelming (literal and metaphorical) advantage. But wholesale adoption without cumulative proof points would be unwise. So, progressive adoption – covert operations, special forces, small theatres, combined arms operations, enterprise-wide – is a way for Defence to manage risk in a portfolio similar to commerce. Whereas big bets are just that – they are big, and they are bets.
The tech tractor beam
To stimulate some of this at home, MOD could consider the City’s angel-venture-equity approach. Its graduated risk, acceptance of failures, progressive commercial scrutiny, dedicated finance and bolder delegations would go a long way to encouraging the Department to take more risks and secure the big gains.
A Defence Angel framework would issue tiny investments, through minimal and local processes, accepting a 1:100 success rate, managed by scientists with a small net financial exposure. This would surveil emerging technologies, find Defence use cases and verify their scalability from the very very small to the very small (TRL 35 – concept proven). Successes would graduate to Venture where Service CTOs would drive portfolios that plan to deliver 1:100 successes (TRL ~4 - proven in a lab) from small investments, limited processes with a small net risk exposure. Again successes would be pulled to TRL~6 (proven prototype in the environment) through an Equity structure of bigger and fewer investments. The 1:10 conversions should mostly assimilate into core budgets and out to the frontline.
Governance of all this should be light touch. The framework, top cover and resources (people, time, authorities and cash) should be synchronised by Defence, directed by the Service Board, driven by the head of capability and managed by people ‘just back from the frontline’. This tech tractor beam would create an engine room of innovation that was simultaneously riveted by the operational challenges, relentlessly pursuing solutions and ruthlessly shedding its failures.
Defence should also look at using more market capital. Historic Private Finance Initiatives with excess profit margins (>25%) tainted the notion of market money, but a refreshed approach with sensible margins (5%) would unlock opportunity. The simplest adoption would be to mirror the UK Infrastructure Bank’s approach where government grants are matched by Bank of England debt guarantees and the sum is match-funded by market investors at a 1:4 or greater ratio.
This way one tax-payer’s pound catalyses the investment of ten. Or, if the existing MoD innovation funds were aggregated (£200m pa), debt guarantee matched by the Bank of England (£200m pa) and co-invested with market equity at 1:4 the net MoD innovation eco-system would be around £1.2bn pa or 2% of the MOD budget. This is enough to make a very big difference and propel innovation into combat whilst protecting the core programme from wider acquisition pressures within Defence and elsewhere.
Market capital may not be right for all of defence acquisition but there are enough projects that could be funded in this way to make a significant difference. Measured adoption could be steered through advice from the Bank of England, London Stock Exchange, UKRI, BBB, UKIB, British Private Equity & Venture Capital Association and National Association of Pension Funds. All of them have locus and interest in this approach’s success and would value the insight and access that the arrangement would generate.
Winning, that’s all that counts
Innovation is key to surprise which has been vital on battlefield since records began. But there are significant hurdles preventing the flow of new ideas to the front line which are institutional and cultural. However, if MoD adopted an angel-venture-equity approach to regulate speculative investments, accessed more market capital to grow its breakthrough technologies and mandated headroom in budgets to accommodate in year scaling, it would make a significant difference.
This would catalyse small and medium businesses, accelerate new ideas into combat and insulate operational risk. Fixing Defence innovation flow, through accessing market methods and capital, could be central to an enlightened Defence budget that propels emerging technology, capabilities and concepts more quickly to the battlefield to directly ‘protect the Nation and help it prosper’.
References
1 UK Defence Doctrine (6th Edition); published 3 November 2022.
2 Dweck, C. S. (2006). Mindset: The New Psychology of Success. New York: Random House Publishing Group.
3 E. Uyarra, J.M. Zabala-Iturriagagoitia, K. Flanagan, E. Magro; Public procurement, innovation and industrial policy: rationales, roles, capabilities and implementation; Res. Policy, 49 (2020).
4 Published 27 September 2024, accessed 15th October 2024; https://www.gov.uk/government/publications/global-strategic-trends-out-to-2055.
5 NASA; 27 September 2023; accessed 17 October 2024; https://www.nasa.gov/directorates/somd/space-communications-navigation-program/technology-readiness-levels/
