A high altitude balloon floats over Billings, Mont., on Wednesday, Feb. 1, 2023. The huge, high-altitude Chinese balloon sailed across the U.S. on Friday, drawing severe Pentagon accusations of spying and sending  excited or alarmed Americans outside with binoculars.

Measuring results in the fashionable world of defense investment

Recently, Defense Innovation Board Chairman Michael Bloomberg announced the creation of a Strategic Investment Capital Task Force. Comprised of successful investors like Reid Hoffman and even a generative artificial intelligence system — likely a first for the Pentagon — this task force will assess how defense works with start-up companies. It’s a subject of both hype and hope in Washington.

Hope spans 10 years of distinguished career of former Secretary of Defense Ash Carter in defense innovation. While much of Washington was still focused on counterterrorism, Ash foresaw China’s rise as the main security challenge. It was an early idea that shaped both the Pentagon and my life in significant ways.

At the height of counter-insurgency operations in Iraq and Afghanistan, I met in Ash’s office. Although he frequently discussed missile defense or lasers at the time, he ended that meeting quite seriously. “I want you to go do something for China,” he said. Only that.

But his go-figure-it-out commission dragged me into 10 years of unexpected government service, most of it working for him in the Office of Strategic Capabilities — his first of many such organizations.

Reading Donald Rumsfeld’s “snowflake” memos is a fascinating insight into what drove this particular Secretary of Defense. Ash Carter’s snowflakes are his delegated innovation organizations: the Defense Innovation Council, the Defense Innovation Unit, and the Office of Strategic Capabilities, among others.

As he recently attended SCO’s 10th anniversary, this snowflake’s “report card” was visibly front and center: 37 ranked game changers in the field, with nine operational today. An understandable habit: SCO was almost crushed when the top cover changed in years past. Only convincing measures helped it survive to thrive later.

More recently, at DIB meetings, it was clear that the “investment snowflakes” will need similar measures to avoid melting into the post-Carter era.

I discussed this with Ash while on the committee that founded AFWERX, and again while running that investment arm of the Air Force. Having investors inside a service procurement system, instead of around it, required measures that screamed payback to procurement managers and combatants alike. One of the “screaming” parameters for AFWERX was leverage: multiplying purchasing power – typically four to five times – via matching public and private funding on contracts.

Combined with some “hack-quisition” ninjutsu, the Air Force and Space Force have purchased and awarded over 2,500 investment contracts, including big $60 million STRATFIs to startups like Anduril and Shield AI. .

Although it was only one metric, he defended Ash’s bridge between Silicon Valley and a sometimes mercurial Pentagon. Others, like DIU’s creation of a US industrial capability for small drones, replacing those lost to China, also appear to be part of the defense of the bridge. And just like SCO, a strong defense will almost certainly be needed.

Kessel Run is an illustrative example. An Air Force software factory of 1,000 coders and recipient of the Pentagon’s highest acquisition awards, this organization began as a DIB-encouraged DIU coding project for tanker planning applications.

Highly successful, DIU has proven that agile software methodology can solve defense problems within business timelines. But the app project failed to anticipate the needs of a global military operating system, ultimately requiring a major overhaul to support air operations centers.

I ran this post-Carter Kessel Run stand-up, endorsing its acquisition plan and defending it against successive “return to coding stunt” assaults, including two budget torpedoes. Without our team’s prowess and DIU’s performance data, Kessel Run would never have formed, and with it, 20 subsequent Air Force and Space Force software factories, including the first platform of cloud and enterprise coding. ROI metrics are important, especially when top coverage becomes thin.

The top cover seems thinner on defense innovation these days. With the passing of Dr. Carter, I fear a divided Pentagon on business innovation, with growing antibodies against “tech sis” and “tech bro” companies, including new ways to work with them. This DIB Working Group is a serendipitous opportunity to examine roles and missions in the defense investment ecosystem, including those of defense bounties, and metrics that scream value for warfighters and taxpayers .

While awaiting the results of the DIB, my experience at the Pentagon points to five defense investment principles worth sharing:

Find better opportunities. Warfighters plan for needs based on the systems they know and use. Unknown opportunities can often be a game-changer, but they’re hard to find in the ever-changing tech ecosystem. Technology watch, due diligence, and early customer development can reverse mission prospects.

Leverage addressable market potential. The dominance of the fighters is the goal. But by pursuing it, jeopardizing military reuse or commercial dual use kills purchasing power, transactions and trust. Such danger takes many forms: excessive requirements, outdated regulations, island acquisitions and insufficient funding. The Pentagon is simply more accustomed to “.mil” pandering than “.com” partnership. Unleashing broader addressable market value can multiply defense impacts.

Place bets for portfolio returns. The over-distribution of development dollars is one of the many forces perpetuating thedeath valley.” Like the private sector, defense investors (including labs) should place larger productization bets as a culmination of earlier stages of the investment pipeline. And this pipeline should have understandable bridges between small customer development contracts, larger prototyping, and final production. Many companies today are unsure whether they are on a recurring revenue highway or a demo dead end.

Improve purchasing power. Value will always have a cost component. Investments should have measurable returns, not wave of hands to private capital. As defense investment contracts grow in importance, audits will no doubt follow. But the quantification of leverage and increased purchasing power is where they can shine.

Manage for long-term confidence, not short-term gain. Many companies have the choice of the market. Making defense attractive means upholding the Pentagon’s reputation as a trusted innovation partner as much as it is a battlefield.

Whatever the end of the defense innovation record, defending the bridge that Ash built with business innovators for 10 years would be a fitting tribute to his legacy, a legacy that lives on in snowflakes and snowflakes. other inspired organizations, all tasked with “doing something” about the urgent national security mission.

Will Roper is a former United States Air Force Assistant Secretary for Acquisition, Technology, and Logistics.

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