Steve Blank

A version of this article – co-authored with Raj Shah and Joe Felter – previously appeared in War On The Rocks.

After hearing from 20+ guest speakers, including two Secretaries of Defense, Generals, Admirals and Policy makers in our Technology, Innovation and Modern War class – the direction of technology and the future of national security came into sharper focus. This series of articles will offer suggestions to transform the DoD to face the challenges ahead.

As it is currently organized, the U.S. government is ill-equipped to deal with the growing number of national security challenges that exist at the intersection of commercial and defense technology. Innovation opportunities are slipping between Washington’s organizational gaps, and America’s enemies are too.

President Joe Biden has already taken several steps that suggest he recognizes the gravity of this problem. He has elevated the science adviser to a Cabinet-level position, appointed a number of talented individuals to high-level cyber security posts, and created a national security adviser for cyber and emerging technology. But more changes are needed. Most importantly, Biden should create a deputy national security adviser with sufficient staff and authority to coordinate innovation and technology policies across the entire government.

Blurred Lines
From artificial intelligence to biotechnology, U.S. national security is inexorably and increasingly intertwined with commercial technology. Unlike in the Cold War, advancements in areas with important national security implications come from private sector research labs and are driven by consumer demand rather than government directives. Yet it remains unclear who in the government now sets policy for — or has final say over — issues that cross the boundaries between academia, defense, commerce, and diplomacy. In addition to the National Security Council, bureaucratic contenders currently include the Commerce Department, Federal Communications Commission, Federal Aviation Administration, Council of Economic Advisers, Treasury Department, the Office of Science and Technology Policy, and the Office of Management and Budget.

In theory it is the National Security Council that should coordinate a “whole of government” response that brings together tools from different agencies to address emerging threats. Indeed, this was the purpose for which the council was created in 1947. However, Cabinet members who are responsible for vertical portfolios still manage the government’s large functional agencies, and there continues to be significant overlap between those who handle commercial, defense, and diplomatic policy. It is this organizational design that creates blurred bureaucratic lines and weakens U.S. national security. 

There are a number of specific areas where these blurred lines led to subpar policies that undermined America’s technological competitiveness and left the country weaker against adversaries like Russia and China. Consider four recent examples: semiconductors, drones, the SolarWinds hack, and SpaceX’s Starship.

In the absence of a coordinated technology and industrial policy, the United States has become dangerously reliant on computer chips produced in a handful of countries for all its defense and commercial needs. Originally, all of America’s computer chips were produced in Silicon Valley. Today, none are made there. The United States is dependent on two companies, Taiwan Semiconductor Manufacturing Co. in Taiwan and Samsung in Korea, for the chips used to build a substantive part of its defense electronics. Around 60 percent of the chips Taiwan Semiconductor Manufacturing Co. makes are for American companies. Even Intel, the supplier of most of the central processing units used in desktop computers and data centers, will be outsourcing manufacturing of its next generation of chips to Taiwan. Taiwan Semiconductor Manufacturing Co. has announced that it will build a chip factory in the United States, but even when complete it will produce less than 3 percent of the company’s capacity in Taiwan.

In the case of drones, the U.S. government also missed an opportunity to maintain the country’s competitive edge. Where there was once a nascent U.S. commercial drone industry, the Chinese company DJI now controls 69 percent of the global market. Not only is DJI at the cutting edge of such crucial drone technologies as motors, speed controllers, radio modules, cameras, and artificial intelligence, but it has also allegedly used its hobby drones to map U.S. military installations. As a result, the former assistant secretary of the Air Force for acquisition, technology, and logistics lamented that the lack of Defense Department support for American drone startups was a critical missed opportunity.

In some cases, the danger is more immediate. The SolarWinds cyber attacks revealed how the failure to secure commercial software can compromise even well-secured government networks. In this case, the Russian government exploited commonly used civilian network management software in order to infiltrate the Treasury, State, and Defense departments. By adding malicious code to the SolarWinds update tool, hackers gained access to the data of 18,000 customers — including many in the U.S. government.

Efforts to harden government agencies and protect sensitive information against infiltration will fail so long as adversaries can circumvent them through commercial companies. Private companies have lobbied Congress against requirements that would mandate expensive investments to secure their systems. Furthermore, financial penalties for large-scale breaches of commercial companies are trivial. SolarWinds received national attention because it was an attack on the government, but cyber attacks on private companies continue unabated.

Finally, the fate of the SpaceX Starship offers an example of how government oversight agencies can stifle innovation when they are unable to keep pace with the speed of contemporary technological development. In temporarily halting test launches of the SpaceX Starship, the Federal Aviation Administration sought a lengthy investigatory period that put unnecessary roadblocks in the way of a company that is transforming access to space. In innovation, failure is part of the process. Test rockets blow up, test airplanes may crash. If you do not push the envelope and discover the limits of your design you are not innovating fast or far enough. It goes without saying that you strive to minimize loss of life and property, but the rules governing innovation programs should recognize a heightened need for speed. The U.S government appreciated this when developing rockets and experimental aircraft in the 1950s and 1960s — better organization could help it apply this understanding again today.

Reorganize to Win
To solve these problems, the White House needs to ensure there is a single organization that has stewardship of all the issues that cross existing lines between national security, commerce, and technology. 

An effective way to do this would be to create a new deputy national security adviser. Armed with sufficient resources and influence, this position would be given real responsibility to help shape the budget, trade policy, and alliance strategy. This adviser would ideally sit on both the National Security Council and National Economic Council, where they could coordinate policies covering a range of technological and scientific issues. These would include the fields of artificial intelligence, machine learning, biotech, hypersonics, and microelectronics, to name just a few. This position would also be responsible for building a civil-military alliance for protecting civilian assets and incentivizing private companies to do work with a national security payoff. The reach of the new deputy national security adviser could also be enhanced by putting appointees in key agencies such as the Department of Defense, the Office of Management and Budget, and the Office of Science and Technology Policy who would be responsible for leading and coordinating innovation policy across the government.

The Biden administration may opt for a different form of reorganization. Several plausible alternatives have been proposed. Regardless of the approach, the important thing is for Washington to recognize and close the organizational gaps its adversaries have exploited.

Filed under: National Security | 1 Comment »

A version of this article – co-authored with Raj Shah and Joe Felter – previously appeared in The National Interest.

After hearing from 20+ guest speakers, including two Secretaries of Defense, Generals, Admirals and Policy makers in our Technology, Innovation and Modern War class – the direction of technology and the future of national security came into sharper focus. This series of articles will offer suggestions to transform the DoD to face the challenges ahead.

—

“We need to couple the $150 billion a year U.S. Venture capitalists (VCs) spend to fund new ventures with the speed and urgency that the DOD now requires.”

We stand at a crossroads of history. The decisions this new administration makes about how to engage, incite, and rally the full force of American capitalism will determine whether we stand in the backwash of China’s exhaust or we continue to lead.

In the twenty-first century our country’s military and economic power will rely on the rapid development and deployment of new technologies—5G, microelectronics, cyber, AI, autonomy, robotics, access to space, drones, biotech, quantum computing, energy storage, and others yet to be invented.

The technologies we employed to prevail in the Cold War and the War on Terror were largely developed by big defense primes and U.S. government labs, but today most of the advances come from commercial vendors—many of them Chinese. For the first time in the history of modern civilization most of the technologies needed for the military are driven by consumer demand and the potential for profit—not government directives.

China is executing a plan to win with new technologies through its strategy of Military-Civil Fusion—they’ve torn down the barriers between Chinese companies and academia and its military. Its purpose is to improve China’s military technology by integrating Chinese industry and academia so it can develop the Peoples Liberation Army into a world-class military equal or superior to the U.S. Meanwhile, its Orwellian National Intelligence Law mandates that citizens and companies must cooperate with state defense and intelligence work. (Yes you, Apple and DJI.) Simultaneously, the Chinese Communist Party is integrating party leadership in both state-owned companies and private businesses (which account for 60 percent of the country’s output).

The takedown of Jack Ma, founder of Alibaba and Ant Group, is a warning shot to every Chinese CEO that regardless of a company’s size, the party and government are back in control.

China’s Military-Civil Fusion and National Intelligence Law stacks the deck against every U.S. and Western company. You’re not competing against an individual Chinese company; you’re competing against the Chinese government.

What it means for the U.S. military is that our national security is now inexorably intertwined with our success in leading in commercial technology. Developing, maintaining and safeguarding our technological edge will be key to prevailing in great power competition.

Today, the DOD requirements and acquisition systems are driven by a sixty-year-old model predicated on 1) predicting the future (both threats and technology), 2) delivering solutions decades out optimized for lifecycle costs and 3) assuming that government labs and incumbent prime contractors drive technological innovation. Every one of those assumptions are no longer true.

Maintaining our technology leadership will require the DOD to understand that delivering new/disruptive innovation versus execution of existing technologies happen at different speeds, with different people, organizations, culture and incentives. Buying the next incremental version of a gun, tank, plane, ship, means you can (hope to) predict its lifecycle cost, delivery schedule, etc. And you can assume that with enough dollars it will appear.  That’s not how innovation actually happens. And we are living in that new world where innovation is happening continually. We don’t need to abandon our methods of buying incremental improvements, but we must have a parallel set of activities—at scale—to keep up with our adversaries who already understand this.

How can we effectively compete? One of the reasons the United States prevailed in the Cold War with the Soviet Union was that total government control of innovation is an inherent weakness. When the Soviets launched ideological purges of their best and brightest and jailed their dissidents, they throttled innovation at scale. There were no Soviet Steve Jobs or Bill Gates. Meanwhile in the U.S., venture capital was funding startups led by iconoclasts, troublemakers and dissidents. The result has been a half-century of continuous and extremely profitable disruptive innovation.

The U.S. military must now invest in new capabilities and concepts to reimagine how it fights. It needs to use rapid/agile innovation, disposable systems that take advantage of innovations in the commercial technology base. We need to couple the $150 billion a year U.S. Venture capitalists (VCs) spend to fund new ventures with the speed and urgency that the DOD now requires. We need to leverage the inherent advantages of a capitalist democracy and align public and private sector incentives to drive technology advances.

We need a Civil-Military Alliance. One that’s driven by incentives, not coercion. By public-private partnerships, not government control. Private industry, from primes to startups incentivized at scale, will ensure our leadership in science, in industry, and in new technologies.

A few suggestions:

For a Civil-Military Alliance the DOD needs new sources of disruptive innovation and ideas. Not as replacements for the valuable prime contractors we have but as complementary partners who are agile, can attract the best and brightest, and are willing to bet their company on new ideas.

In the 20th century most military contractor-built hardware, and software was an add-on. When an upgrade was required, a new contract was needed, which took years. The new generation of military systems will be built around software with hardware as the add-on. Upgrades can happen over the air in weeks not years.

Today, the world’s innovation ecosystem for new technologies are VCs and startups. To make Civil-Military Alliance work the DOD needs to understand that no investor wants a new startup to spend three years going through the existing DOD requirements and acquisition process when there’s a viable alternative in a commercial market.  (Today, even if a startup gets an early DOD award of a million dollars it’s not enough to incent the technologies they need.)

Few inside the department of defense understand how the commercial venture capital/startup innovation ecosystem works. Going forward, inside every service acquisition arm there needs to be a deputy who can go to a whiteboard and draw how private investors make money. And more importantly work with them to get the best and brightest of their portfolio companies engaged.

One solution is that the DOD needs to pick new entrants as winners at scale. Today, no DOD acquisition chief wants to be in front of Congress explaining to a committee chair why the incumbent vendor in their district lost. That will happen unless both the DOD and Congress clearly articulate that the process for picking winners for existing incremental changes is different from disruptive ones. And that the default ought to be new vendors. Each service should pick 1-2 startup/scale-up winners and buy heavily.

As part of the Civil-Military Alliance, the U.S. needs to massively reinvest in critical technologies. China has invested over $100 billion in moving its manufacturing base from making low-tech products to rapidly developing ten high-tech industries including electric cars, next-generation computing, telecommunications, robotics, artificial intelligence, and advanced chips. They’ve raised over $50 billion just for building an indigenous semiconductor industry.  We need to pick critical industries and do the same at scale. Not only the incumbents but with new entrants.

Another part of a U.S. Civil-Military Alliance would be transforming our existing government R&D Labs. The U.S. spends $15 billion a year on forty-two Federally Funded Research and Development Centers (FFRDCs)—twenty-six R&D labs, ten study and analysis centers, and six system engineering and integration centers. Set up in WWII and scaled during the Cold War, the truth is that most of them are no longer the country’s cutting edge. We need to radically reorient their relationship with the new centers of innovation.

Finally, the existing prime contractors have sat out the innovation game. While many have a token VC arm, today they are not leading in disruptive technology, particularly if the profit incentives are to continue to lobby and build the status quo and get a new contract every time a system needs an upgrade. We need serious incentives to have primes get into the disruptive innovation game. They need to actively invest in and buy startups—at startup multiples—with billions, not millions. Their CFOs need to tell us what incentives (tax write-offs, acquisition preferences, etc.) can be tied to rapid delivery and deployment—not demos—of new technologies and systems.

This is a critical time for our nation. Our adversaries aren’t waiting. The Biden administration can choose business as usual and let U.S. leadership in technology disappear and the country founder in the backwash of the coming China age. Or it can choose to build a Civil-Military Alliance ensuring our leadership in science and in industry, while maintain our core values. Our hopes for peace, security, and self-determination around the world, require us to make this effort.

Filed under: National Security | 5 Comments »

A version of this article – co-authored with Raj Shah and Joe Felter – previously appeared in Defense One.

(Update: After this article was written the Secretary of Defense fired every member of all 40+ defense advisory boards and will start anew. Hopefully the suggestions in this post will help inform how they reconstitute the boards.)

Last week the Biden administration delayed seating several Trump appointees to defense advisory boards. It’s a welcome signal that incoming leaders recognize these groups are essential, not just patronage jobs. But the review needs to go much further than that.

One of the many changes the Department of Defense needs to make is to reimagine the role and makeup of its advisory boards and ask them for 10x advice, not 10% advice.

—-

The Defense Department is at a crossroads. Incremental improvements are no longer good enough to keep up with China; the Pentagon needs substantive and sustained changes to its size, structure, policies, processes, practices, technologies, and culture. The last administration asked most of the Pentagon’s 40-plus boards for advice on small improvements — with a few notable exceptions, such as the Innovation Board’s Software Study and the work of the National Security Commission for AI — the latter an independent effort chartered by Congress.

This is no longer sufficient. The DoD needs to ask for big ideas, boards who can deliver transformative advice, and it needs to reshape its boards to provide them.

What’s an Advisory Board?
DOD’s Advisory Boards are comprised of individuals outside of the organization who can provide independent perspectives and advice. An advisory board has no official role in managing – they can’t hire, fire, or order people to do things.  All they can do is offer advice.  But with the right membership and senior support, they can have tremendous impact. In the past decades, advisory boards have challenged conventional thinking and nudged leaders towards major policy changes.

Most of the DOD advisory boards are in the services or agencies. For example the Army and the Air Force each have their own Science Board, the military academies each have an advisory board they call the “Board of Visitors.” The office of the Secretary of Defense has 7 advisory boards: Policy, Innovation, Science, Business, Military Personnel Testing, Women in the Services, and Sexual Assault. (Steve had the pleasure of serving on one – albeit for a short time.)

Different Advisory Boards for Different Times
In times where the status quo is sufficient – when your company or country is the leader –  advisory boards are asked for advice about improvement – how to improve your existing systems. You appoint advisors who have detailed knowledge of existing systems and have long term institutional knowledge and connections. And you generally discourage Ideas that might disrupt the status quo.

However, these are not normal times. Incremental improvements no longer assure that our country can compete. For example, rapid innovation in new technologies – cyber, AI, autonomy, access to space, drones, biotech, etc. – is no longer being led by military/government labs, but instead comes from commercial vendors – many of them Chinese. The result is that unlike the last 75 years, the DOD can no longer predict or control future technologies and threats.

So it’s time for DoD leaders and staff to hand off requests for advice about incremental improvements to consulting firms and refocus their advisory boards on critical competitive issues.

The first order of business is overhauling the boards’ membership to support this turn toward rapid innovation. In the past, the DOD has had some extraordinarily effective advisory boards. During the Cold War examples included the Jasons, the Gaither Committee, the Land Panel, and numerous others. More recently the Defense Innovation Board had admirably carried that torch. Unfortunately several advisory boards have become moribund resting grounds for political apparatchiks.Today’s challenges demand the DOD’s advisory boards appoint the best and brightest regardless of party.

We believe the new administration can quickly refocus their boards in three steps: 1) reset the membership of the current DOD Advisory Boards to support rapid innovation 2) Think strategically about the future, and 3) Set high expectations for engagement and implementation.

Reset board membership and structure to support rapid innovation and transformation

• 1/3 DOD insiders who know the processes and politics and help ensure non-standard solutions actually get implemented. They can steer the board away from dead-ends or incremental solutions.
• 1/6 crazy DOD insiders – the rebels at work. They are the Uniformed and civilian leaders with great ideas that have been trying to be heard. Poll senior and mid-level managers and have them nominate their most innovative/creative rebels
• 1/3 crazy outsiders. Innovators and technologists with new, unique insights in the last two years, who are in sync with the crazy insiders to build 10x solutions
• 1/6 outsiders who represent “brand-name wisdom”. They provide top cover and historical context. Connectivity to large institutions required for implementation at scale

Once the new members are in place, DoD should ask for big and bold ideas in several key areas, including:

Think strategically about the future

• Technology and innovation: Given finite budgets, how best to evaluate, choose, and scale a plethora of new technologies and new operational concepts?
• Business practices: Examine and explore entirely new ways of building commercial partnerships and influencing the private sector.
• Policy: Ensure we understand our adversaries and how they are fusing together military, economic, and private markets to challenge us. What issues require educating Congress and DOD leadership?
• Human capital: How should we reshape the DoD’s personnel architecture to attract more technologists and fit into today’s more sclerotic career paths?

Finally, DoD leaders should ask for more than ideas; they should engage and lead the boards. They should set high expectations for engagement and implementation, and work up and down the chain to ensure recommendations are achievable. Do we need new authorities, laws, organizations? Do we need to reprogram existing budgets? Acquire new ones?The boards should report to the principals of their sponsor organizations, who should regularly review whether the boards have delivered real value to the mission.

Americans are ready to answer the call to service to help the DoD and the nation reform and strengthen.  The Biden Administration and DoD leadership have the rare opportunity to completely rethink and reset its Advisory Boards.  Successfully taking on this challenge will not only repair strained ties between the public and private sectors but is essential to the future defense of our nation.

Lessons Learned

• Flush all the political appointees from the advisory boards. (Update: Done- fired everyone not just the new appointees..)
• Replace them with people with the experience and expertise needed to help the U.S. keep its competitive edge
• DOD leadership needs to ask and act for transformational, contrarian and disruptive advice
  • And ensure they have the will and organizations to act on it
• Move requests for advice for incremental improvements to the consulting firms that currently serve the DOD

Filed under: National Security | 5 Comments »