Ass backwards

“The budget crisis should usher in a new era of innovation in defense

By Mark W. Johnson, Published: June 8

Mark W. Johnson is cofounder and chairman of Innosight, an innovation strategy firm, and the author of Seizing the White Space: Business Model Innovation for Growth and Renewal (Harvard Business Press, 2010). He served as a nuclear power–trained surface warfare officer in the U. S. Navy and currently serves on the board of the U.S. Naval Institute.

The Pentagon revealed last month that it would cost taxpayers more than $1 trillion to buy and maintain a fleet of F-35 joint-strike fighter jets over the long term. Even defense hawk Sen. John McCain called the number “jaw dropping.” Building enormously complex and expensive weapons systems not only busts the budget but requires years, even decades, to complete – the F-35 program is already a decade old. Meanwhile, we increasingly face mobile, adaptable enemies who are good at attacking our weaknesses with deadly innovation on the cheap.

Outgoing Secretary of Defense Robert Gates acknowledged those realties when he cut 20 big-ticket weapons last year to save $330 billion in future spending. Leon Panetta, who is expected to take over next month after confirmation hearings on Thursday, is likely to continue the Gates budget strategy: Spend less preparing for a theoretical threat against a conventional large Chinese army and focus instead on the more amorphous threats posed by stateless enemies, terrorists and unpredictable revolutions in the Middle East and failed states like the Sudan and Congo. 

For the U.S. military to succeed and prevail, and to equip America’s men and women who risk their lives fighting unconventional warfare, the Pentagon has no choice – no more blank checks from the American taxpayer. The Department of Defense must innovate. 

As we learned the hard way in Iraq and Afghanistan, our soldiers need mobile body armor, better protected vehicles, ubiquitous two-way communications, and highly portable surveillance and reconnaissance devices. If you ask soldiers on the ground in Anbar province, not one of them will demand an advanced nuclear submarine or a hundred-million dollar fighter aircraft.

And innovation isn’t just about technology. Innovation means adopting a completely different business model, one designed to confront an enemy that morphs and evolves in months, sometimes weeks. This new business model innovation will utterly transform the Pentagon’s glacial procurement cycle and low-volume production of expensive state-of-the-art weaponry. 

For a new kind of war, a new kind of business model

Innovation and business models are inextricably linked. Without the right business model, innovations will stall, waste billions and never stop the enemy – and worst of all, they’ll fail to produce what our soldiers need when they need it most.

The business model we have today – a military procurement  process for maintaining our core, large-scale capabilities – evolved during the Cold War. The U.S. military invested in expensive and complex weaponry that could deter the Soviet Union with the threat of massive destruction. To provide those weapons, defense contractors evolved into “solution shops”  that custom produce expensive, one-of-a kind technologies (like aircraft carriers, nuclear submarines and bleeding edge fighter jets) at relatively low volume and high margin. The research, design and manufacturing processes for these weapons are so complex and so intricate that their costs can only be estimated on a time and materials basis.”