Podcast Summary
Bridging the gap between military and commercial tech: The Defense Innovation Unit (DIU) was created to accelerate technology adoption in the military by connecting with the commercial tech sector and using other transaction authorities to create prototypes quickly.
The defense procurement system we have today might not be the most effective one for the rapidly changing technological landscape. The Defense Innovation Unit (DIU) was established in 2015 to bridge the gap between the commercial tech sector and the Department of Defense (DOD) to harness innovation and accelerate technology adoption. Initially, DIU focused on building this connection and proving that commercial technologies could be used to solve military problems quickly. Over the years, it has evolved to include using other transaction authorities to create concrete prototypes for warfighters within short timeframes. With the pace of change in technology, particularly in areas like artificial intelligence, biotechnology, and autonomy, the DOD needs to continue rethinking its traditional business model to effectively defend against adversaries.
Revolutionizing DOD-Startup Interactions: DIU's efforts led to a significant increase in DOD's adoption of innovative technologies from startups, and DIU 3.0 aims to ensure the DOD can deter major conflict or win a fight by solving critical problems and scaling solutions.
The Defense Innovation Unit (DIU) has revolutionized the way the Department of Defense (DOD) interacts with startups over the past decade. Starting from a small number of interactions in 2015, DIU's efforts have led to a significant increase in the adoption of innovative technologies within the DOD. This shift was driven by both the DOD's recognition of the potential impact of startups and the startups' ability to deliver capabilities that make a difference. However, the journey is not over yet. The focus is now on applying this capability for true strategic impact by solving critical problems and scaling solutions across the department. DIU 3.0 represents this new phase, where the organization is elevated to directly report to the Secretary and is tasked with ensuring that the DOD can deter major conflict or win a fight. The ecosystem has changed dramatically since 2017, with a greater emphasis on education for both sides about how startups and the DOD operate. The business model for acquiring technology has also shifted, recognizing the importance of harvesting innovation from the commercial world and the vibrant startup sector.
Bridging the gap between defense industry and commercial investment: The Defense Innovation Unit (DIU) is helping to clarify the demand signal and path to scale for companies in the defense industry to attract more investment and talent.
The commercial model for developing and implementing new technologies in the defense industry is gaining traction, but there are challenges that need to be addressed for this approach to be successful. Companies like SpaceX have shown that commercial investment in R&D can lead to groundbreaking advancements, but understanding warfighting problems and navigating the acquisition, budgeting, and contracting process are crucial for success. The Defense Innovation Unit (DIU) is working to bridge this gap by providing education, support, and clarifying the demand signal for companies. However, there is still a need for better communication between the defense industry and potential investors or founders about which problems matter most and the potential for scaling solutions. By clarifying the demand signal and the path to scale, the defense industry can attract more investment and talent to address the complex and evolving warfighting challenges.
Traditional defense industry models hinder innovation: DIU values startups for faster, lower-cost, autonomous system development; traditional defense industry models can lead to longer timelines and higher costs
The traditional business models and incentives in the defense industry, particularly with cost-plus fixed fee contracts, can hinder innovation and efficiency. These models often encourage longer development timelines, higher costs, and a greater focus on risk absorption by the government. In contrast, startups bring a different business model, embracing risk-taking and quicker development cycles. DIU sees value in startups for developing lower-cost, more autonomous systems that can be deployed at scale. The incentive structure for primes, with cost-plus contracts, can lead to longer development timelines and higher costs, but for technologies where private capital can support development, a more competitive and frequent procurement process could lead to better outcomes for the defense industry.
Defense industry shifts towards affordable, autonomous systems: The Defense Department is embracing innovative technology, regardless of origin, to meet demands of rapidly changing tech landscape, making it easier for companies to integrate with defense use.
The defense industry is shifting towards more affordable, autonomous systems and moving away from building expensive, exquisite capital assets. This transformation opens up opportunities for companies to make a material impact without requiring massive capital investments. It's important for the Defense Department to harness both innovative technology from the commercial world and defense-specific technology to meet the demands of the rapidly changing technological landscape. The Replicator program is an example of how the Defense Innovation Unit (DIU) is putting this approach into practice, bringing more transformative capabilities to the department in a faster and more efficient way. The prime versus startup distinction is less relevant, and the focus should be on innovative approaches and technologies, regardless of their origin. The Defense Department needs to make it easier to integrate commercially derived technology with the additional security features required for defense use. The incentives for companies to work in this model depend on their ability to take risks and adapt to the firm fixed price contracts, which can be challenging for those not accustomed to it.
DOD's Replicator Program: Developing Critical Capabilities Quickly: The Replicator program is a DoD initiative to create autonomous capabilities against threats in 18-24 months, breaking down systemic barriers and promoting hybrid architecture for exquisite and mass-produced capabilities, impacting scaled startups with top-level support and a collaborative environment.
The Replicator program is a Department of Defense initiative aimed at developing critical, treatable autonomous capabilities to counter adversarial threats within a short timeframe of 18 to 24 months. This program not only focuses on the technical aspect but also aims to break down systemic barriers to change across the department, making it easier to implement similar solutions in the future. Rooted in first principles, Replicator is a push from the top of the department for mass production of capabilities to deter and win conflicts. The program addresses the disconnect between program executive offices and combatant commanders by promoting a hybrid architecture of both exquisite and mass-produced capabilities. The Replicator program's impact on scaled startups is significant, as it provides top-level support and a collaborative environment for driving innovation and producing large quantities of capabilities to meet operational needs.
DIU shifts focus from prototypes to deployment: The Defense Department is prioritizing the deployment and integration of technology into operational plans over creating prototypes, in response to the evolving threat landscape and the need for effective countermeasures against drones and other low-cost technologies.
The focus on technology development in the Defense Innovation Unit (DIU) has shifted from creating prototypes to deploying them at scale and integrating them into operational plans. This shift is necessary for the Defense Department to effectively respond to the changing nature of warfare, particularly in the face of pervasive drone and other low-cost technology threats. The urgent need for change and top-down leadership are key drivers of this shift. The metric for success must now be measured by the impact on operations and deterrence, rather than the number of prototypes produced. The defense industry's increasing embrace of commercially derived technology and the erosion of traditional air and missile defense capabilities further highlight the need for this change. The defensive posture must adapt to the constant threat environment posed by these technologies.
Shifting Defensive Capabilities in the Current Threat Landscape: Improve speed, scale, and talent to effectively defend against aerial and surface threats, with a focus on procurement reform for better startup integration.
The current threat landscape requires a significant shift in how we approach defensive capabilities. This shift includes being able to defend against various aerial and surface threats constantly, which necessitates a wide array of technologies and software to understand and respond. The responsibility falls on industry leaders and the acquisition system to provide the military with the best available equipment. Three key areas for improvement are speed, scale, and talent and techniques. The pace of change is accelerating, requiring the ability to evolve systems quickly and keep them updated. Scale is crucial for strategic deterrence, and we must improve our ability to implement solutions at a larger level. Lastly, talent and techniques are essential, not just the tools themselves but also how they are employed. Procurement reform discussions are ongoing, and there may be small tweaks to the process that could be beneficial to startups, such as more effective use of Other Transaction Authority (OTAs) and larger production contracts.
Shift from requirements-based to problem-based acquisition: Emphasizing problem-solving over requirements can lead to cost-effective, mission-value rich alternatives in military acquisition.
The current acquisition system in the military is heavily focused on requirements and the size of platforms, rather than identifying and solving problems effectively. This approach can lead to expensive and inflexible solutions, while overlooked opportunities for more cost-effective and mission-value rich alternatives. To improve this, there's a need to shift from a requirements-based acquisition system to a problem-based one, allowing industry to propose solutions to identified challenges. Additionally, placing more emphasis on the mission value extracted from capabilities, rather than their cost, can lead to more effective and efficient use of resources. The federal workforce, being largely rule-following, can find it challenging to adopt new acquisition strategies. Therefore, promoting education, training, and examples of successful alternative acquisition methods at a senior level is essential to make these patterns more commonplace and understood.
Modernizing government procurement for innovation: The government needs to focus on cultural shifts and effective implementation to modernize procurement, share best practices, provide templates, and create a culture that values innovation to achieve significant bets on new companies and technologies at scale, leading to increased mission impact through AI systems.
While the government has the necessary authorities to modernize its procurement system and bring in innovative solutions from the private sector, the real challenge lies in cultural shifts and effective implementation. Success stories, such as DIU, SHIELD, and other new entrants making an impact on top-tier defense programs, are the ultimate goals. These successes would indicate that the government is taking significant bets on new companies and technologies at scale, leading to increased mission impact through artificial intelligence systems. To achieve this, it's crucial to share best practices, provide templates and patterns, and create a culture that values innovation. By focusing on wins, delivering impact, and institutionalizing these changes, the DOD can continue to make progress and turn the "big ship" of the defense industry towards a more innovative future.
Shifting mindset for effective conflict resolution: To address complex challenges and prevent conflicts, we must deliver real impact, foster a risk-taking mindset, and acknowledge uncertainties as opportunities for progress.
In order to effectively address complex challenges and prevent major conflicts, it's crucial to deliver real impact and create lasting change. This involves not only making significant progress with tangible results, but also fostering a mindset shift towards taking on financial, process, and reputational risks. By doing so, we can avoid creating unnecessary risks to mission and personnel in future conflicts. This shift in mindset is essential for success in the defense innovation ecosystem. It's important to remember that most risks we face are not true risks, but rather uncertainties. By acknowledging this and taking calculated risks, we can make meaningful progress and contribute to American dynamism. To learn more, visit a16z.com/80summit for exclusive talks from policymakers, founders, and funders.
