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SADILP 2017 Concept Paper Industry Diversity & Strategy Defence Industry – Disrupt or Be Disrupted

Luke Burley

Scott Curtis

Andrew Marshall

Bradley Spencer

Robert Wieczorek

Defence Industry – Disrupt or Be Disrupted

SADILP 2017 Concept Paper – Industry Diversity & Strategy of 15

Abstract To create true sovereign industry capability, we must embrace disruptive thinking and incubate disruptive technology. The incubation of disruptive technology can only be realised through collaboration and co-creation by bringing together diversity in industry. Disclaimer: This paper represents the views of the individual authors as part of the SADILP 2017 program and does not necessarily reflect the position or views of the organisations that they would usually represent.



Table of Contents 1 Diversity Defined ......................................................................................................... 4

2 Disruption .................................................................................................................... 6 3 The Road So Far .......................................................................................................... 7

4 Disruptive Innovation .................................................................................................. 9 5 Acquisition 4.0 ........................................................................................................... 13

6 Recommendations ...................................................................................................... 14 7 References .................................................................................................................. 15



1 Diversity Defined

“Diversity: The art of thinking independently together.” – Malcolm Forbes

The diversity discussion within the workplace has made some positive steps to incorporate strategies which include a broader range of people within the defence industry. The Defence Diversity and Inclusion Strategy 2012-2017 has made it a clear objective to attract, recruit, develop and retain women, indigenous Australians, CALD, disability, LGBTI, mature age, youth and future people into Defence [1]. This is a great initiative and has started the journey to fulfil the potential of diversity in the workplace, but it is only the start. This is part of the national Defence approach, but what is happening within Defence Industry?

Looking beyond the diversity of physical, social, and cultural attributes, to achieve technological innovation, disruptive thinking and creative inspiration, we need to think collaboratively from different perspectives. This may sound nonsensical, but it is essential for creating an environment that stimulates creation and industrial growth for the defence industry.

Figure 1 Hiring for Cognitive Diversity [2]



In an industry full of specialists, the need for collaboration across industry sectors, professions, and organisations is paramount to the future success of defence industry. Within a workplace that has a uniform approach to recruiting and developing staff, they also have their own unique language and way of thinking that permeates throughout the organisational culture. This can be very beneficial in closed circumstances where the outcome is familiar and controllable. But when it comes to innovation and creativity for solving new problems, this uniform approach only hinders development and new ways of thinking.

In these circumstances, like those presented to current industry in the need to create true sovereign industry capability (whatever that turns out to be defined as by our current government), we must utilise and incorporate the expertise and approaches of professionals from a range of organisations (small business up to large primes) and discover ways of sourcing new thinking into current project supply chains. It is through the collaboration of industry specialists (primes) with multiple small businesses that provide a broad skillset and an agile approach to solving problems where innovation, then change and finally disruption can occur. There are many other benefits to cultivating workforce diversity than creating well-rounded teams. Diversity helps to:

a. Guard against groupthink and expert overconfidence.

b. Increase the scale of new insights by bringing together multiple ideas in new ways.

c. Identify individuals within teams and organisations best suited to solve difficult problems [3].

The evolution of diversity beyond physical attributes, backgrounds, generational differences and lived experience culminates in the space of thought diversity. Through research in neuroscience, it has been identified that there are cognitive differences in the ways people think, act and work [2]. This could be the key to bringing together the right groups of people to solve difficult problems. While this approach can be used within a single business to improve the range of abilities within a team, it can also be an approach that benefits industry when thinking about the project supply chain and future capability.

Developing diversity within Defence Industry is imperative to sparking disruption. It is necessary in:

a. Creating and maintaining a military and industrial advantage on a global scale to ensure our safety as a nation and to strengthen our economic position in a global market.

b. Ensuring survival in the rapidly evolving global environment of the 4th Industrial Revolution, more commonly called the Internet of Things (IoT).

c. Changing the way defence approaches and executes acquisition and sustainment to ensure it remains at the forefront of military technology and business processes.



2 Disruption

It is easy to sit back and enjoy what new technology trends are bringing into our home and take them for granted. Approximately ten years ago we were amazed by the first iPhone released by Apple to an eager crowd and only now do we see how the revolution of smart phones has connected the world.

If the Australian Defence Force (ADF) is to remain at the cutting edge of technology trends, take a moment to reflect on how much has changed over the past ten years. Now consider what Defence Industry could achieve given sufficient focus areas and resources.

Ten years on from the iPhone release we have seen countless technologies flow through the Gartner Hyper Curve (see Figure 2) including that of 3D Printing. Only with time and resources are the benefits of these new technologies commercialised for mass deployment.

Figure 2 Hype Cycle for Emerging Technologies, 2016 [10]

Given the time it takes (for very good reason) to ensure the right technologies are funded, researched, and developed into defence based products, Defence Industry must be years ahead of the game. If the ADF is to maintain an edge it will face a time where conventional styles of warfare will end; to some degree one could argue that time is already here considering the electronic warfare systems of today.

Fast forward into the future only a few years to 2020-2030; there are technologies on the horizon that could change the battle space. Examples of this include:

a. humanised interfaces to the Internet;

b. printable replacement human organs;

c. the number of robots will outnumber humans; and

d. the Internet of Everywhere.



These may not appear disruptive for Defence Industry now. However, consider how printable organs could revolutionise ADF health care, perhaps healing a wounded soldier. This is but one trend on a growing list that has the potential to disrupt an industry.

Numerous sources depict a world interconnected with computers able to process at the same speed as the human mind. In parallel there will be an estimated one trillion sensors connected via the Internet supporting a data revolution and a $19+ trillion-dollar economy.

Biometric or ingestible sensors and artificial intelligence are two areas that have both a growing concern but also have a great potential to disrupt many industries. Consider an adversary with armed drones utilising an Artificial Intelligence (AI) capability, coupled with electronic warfare systems, cloaking technologies, embedded solar photovoltaic and a human like skin that heals.

While AI driven, armed drones might sound farfetched, emerging research into materials suggests a future where an invisibility cloak is possible. A future where ultra-light and super strong nano-based materials are grown in a lab environment, clothing can generate an electrical charge, a polymer based substance could behave in a similar way to a human muscle while being able to conduct an electric charge, or perhaps being able to turn any surface into a display. The year 2030 really is not that far away and perhaps what we are researching today could already be superseded.

Defence industry, coupled with Defence, has a long list of programs that support research and development. However, the pace is growing at an ever-growing rate. To remain ahead of the game, to protect our nation and to secure our interests, it is critical that we do not become complacent.

3 The Road So Far

Before discussing what can be done to achieve greater diversity and therefore innovation and disruption from defence industry, it is essential to acknowledge the initiatives already being enacted within the sector. This will be a catalyst to identify where those initiatives may fall short and therefore inform improvements. It can also serve as a refresher to what efforts are already in place, so any recommendations avoid repetition of the same outcomes.

Rapid Prototyping, Development and Evaluation (RPDE) [1]. The RPDE initiative was a defence and industry collaboration agreement that sought to very quickly examine new technologies to emerging problems within defence. It did so through “Quicklook” activities whereby defence canvased industry for advice and ideas or through “Tasks” that were of longer duration and provided a prototype solution. Overall this was a successful program in terms of stimulating new and creative ideas at an accelerated rate. However, some potential shortcomings were:



a. Participation was restricted to organisations that were party to the RPDE agreement. This tended to limit the involvement to those already in the defence industry and at the exclusion of small companies with fledgling technologies.

b. Quicklooks and Tasks were generally initiated by the Commonwealth after it identified a problem to be investigated. In other words, it was somewhat prohibitive for industry to put forward a technology or concept. It was about seeking a solution to a known problem and not seeking unknown problems from emerging solutions.

c. Even when a Task could provide a prototype with measurable benefit, it was still only a prototype and conversion to a product often required defence to use the lessons learned to inform an open tendering process in accordance with the Commonwealth Procurement Rules [5]. It did not allow for further carriage of the new solution in its current form.

Defence Innovation Hub or Centre for Defence Industry Capability (CDIC) [6]. The CDIC took over the functions of the RPDE at the end of 2016. This initiative takes an alternate view by providing advice and guidance to Small-Medium Enterprises (SMEs) to educate them on how to become successful in the defence sector. At first glance this appears productive as it certainly is a complex industry and provision of education to any SME is not restrictive. Moreover, the scheme makes grants available to improve SME capability and allows for unsolicited innovation proposals to be submitted. However, two issues become apparent on closer investigation:

a. Referring to [7], it outlines a set of potential “pre-requisites” (even for unsolicited proposals) that are not necessarily achievable by a fledgling company.

b. The overarching solution is to partner these SMEs with Prime Contractors – an outcome which still retains one step of removal between defence and the innovative young company and still waits for defence to initiate the need.

Defence Teaming Centre (DTC) [8] and Industry Capability Network (ICN) Gateway [9]. These are bodies established with similar goals as the CDIC, albeit more industry initiated. Like the CDIC, the main premise is for education and networking of SMEs.

Systems Program Office (SPO) Panels. From a CASG initiated perspective, some SPOs in recent times have established “Panels” of approved industry organisations to provide specialist short notice materiel. For example, the Health SPO (HLTHSPO) has established a supplier panel that was “on-call” to provide Medical and Dental related equipment and supplies. The advantage to defence is undertaking an upfront approval of an organisation to be on the panel in exchange for shortened acquisition cycles of small quantities of refreshed and updated supplies. This keeps in step with technology refresh. But again, the downside is that if an SME is not approved on the panel, it is out in the cold. Any acquisition is still initiated by the Commonwealth upon identification of a need.



Australian Defence Contracting (ASDEFCON) changes. Finally, recent changes to the ASDEFCON templates has permitted less onerous flow down of management and oversight from Prime Contractors to the next tier than the Commonwealth previously required (examples include Earned Value Management and complex Configuration Management Systems). Put more directly, the Prime Contractors are more able to engage SMEs that would not normally work in defence because they couldn’t accept the burden of the contract mandated terms; they were excluded. The Prime Contractors are able to manage the residual risk in an effective manner. However, this arrangement still has defence reliant on the prime contractors as its interface to industry, i.e. it still transfers the problem and keeps defence removed from any innovation.

This section has endeavoured to highlight that defence has made genuine initiatives targeted at the involvement of SMEs to improve diversity and innovation within the sector. However, two overarching inhibitors are shown to be:

a. a risk averse approach (limiting participation to more established SMEs and transferring the management to the Prime Contractors); and

b. the assertion that defence will seek the solutions it needs from industry rather than hear about the new disruptive solutions to the problems it is about to have.

4 Disruptive Innovation

As the Defence sector in South Australia prepares to embrace and welcome an unprecedented level of activity based around multiple Commonwealth projects, it is vital that the state reaps both the short term and long-term benefits that accompany these opportunities. The traditional approach to developing future products, systems and services will undoubtedly provide jobs and prosperity to the state during the development and build of proposed capability. There is now a ‘once in a lifetime’ opportunity to develop the local supply base and create technology, systems and hardware that can be exported globally, leaving residual long-term skills and capability within the SA labour market.

The 2016 Defence Industry Policy Statement clearly highlights the Commonwealth’s direction on supporting and driving innovation within the sector, bringing together a number of programs and the associated investment needed to deliver and sustain Australia’s Defence capabilities. This is shown in Figure [12].



Figure 3 Proposed innovation model ([12] p31)

The focal point has been to provide an environment and associated funding to support various entities in developing new technology, processes and products through the Defence Innovation Hub. The push for innovation has not fully embraced the issues that industry currently faces which include, but are not limited to:

a. The integration of SMEs relies on large Prime Contractors to manage and drive projects on behalf of the Commonwealth.

b. Finding key technology innovators who currently reside outside the defence sectors sphere of influence and / or have not developed the link to potential defence applications.

c. Financial pressure to deliver commercialised outcomes.

d. Small businesses are agile, innovative and not constrained by the traditional thinking of Defence industry but have less capability and scale to meet the onerous requirements (quality, traceability, project management, etc.) that is required within the defence sector.

e. Collaboration in defence needs to learn from other sectors and leverage the capabilities that exist in non-traditional suppliers/providers.

The rise of 4th Industrial Revolution technology is often funded by the ‘big end of town’ due to early adoption and ongoing development costs. The life cycle of new technologies has become shorter as has the opportunity to leverage these innovations with leading global innovators citing 18 months ([13]) as the typical ‘useable’ window for products and technology before being superseded by further iterations. Defence works on an extended cycle with programs being as long as 15 years (for example, the Joint Strike Fighter [14]).

The perceived purchase of Intellectual Property by the Commonwealth in years gone by has been replaced with a desire to force innovation into the system through the Innovation Hubs and other initiatives but the ecosystem of innovation is much more complex and requires more than just funding (although this is a vital component). A report in the Harvard Business



Review in 2016 highlighted three key steps to developing a truly innovative ecosystem [15]. These steps, which have been refined and proven in the following years, are:

1. Get the right people involved. An innovation network must include the senior ‘sponsors’ that can fund projects, leaders who have had success with past innovations, technical experts, and external consultants. The ecosystem relies on this expertise, drive, and ability to break through the myriad of barriers (internal and external). There is a need to decouple the commercial pressures and typical drivers from these senior sponsoring entities to allow true innovation to develop. A mechanism must be developed to allow leading innovators and technology developers to both be found and embraced within the defence network.

2. Cultivate the network. This extended group should have opportunities to mix together in productive ways. Hold regular meetings, events, and talks where innovators from across an organization can get together and share their experience. Lead innovators need to meet regularly with a variety of groups within a company that are working on innovative projects to help connect groups that are undergoing similar problems. Co-location of different businesses / skill sets, removal of traditional IP barriers (protective mind sets) and an open theatre for development of ideas (unconstrained innovation) are vital to creating agile and revolutionary innovation.

3. Educate others. For best innovation practices to diffuse through an organization, it is important to develop those ideas before projects begin. The innovation network should implement a company-wide education program on how to develop good ideas and how to transform good ideas into actionable plans to bring those ideas to market. These lessons should be delivered both to the future leaders within the company (which many companies do well) as well as broadly to the rank-and-file who will ultimately play a significant role in innovation success (which fewer companies do well).

The ‘Quadruple Helix’ ecosystem (Figure ) needs to be developed around these above steps to ensure disruptive technologies and innovations are provided with the best opportunity to succeed.



Figure 4 - Quadruple Helix ecosystem

The main aim of a true innovation hub is to form a network that is responsible for promoting innovation, but does not control or restrict the innovation outcomes. The ability to identify and collaborate with technology experts outside the current defence sphere without the overburdening requirement to show a rapid Return on Investment (ROI) is a key enabler of creating a truly collaborative incubator style space that allows innovation to grow and thrive. This requires funding to be provided without onerous ROI stipulations and without protectionist agendas in terms of IP to allow Australia to develop future products, systems, and services that both support the sovereign capability of the nation and create a successful export industry. This in turn will allow Australia to move from a net importer of defence / arms to an export centric country ([16]) with true sovereign capability that will underpin both the nation and the economy into the future. This will provide exponential benefit from the upcoming ‘once in a generation’ opportunity that Australia has in this space.

The defence network, based around a structure of business, academia and research needs to be able to solve problems openly and aggressively without constraints and top down governance that often hampers true innovation. Such a structure will allow innovative ideas to not only be formed, but will ensure they thrive and develop in a timely manner whilst developing global leading IP that can be exported.

OEM Suppliers

Hardware Supplier (s)

Software Supplier (s)

Algorithm Developer (s)

Technology Expert (s)

Others

Government

Academia

Public Research

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Industrie 4.0

OEM Suppliers

Government

Academia

Public Research

Org’s

Embedded Aim: to find and incubate new technologies without parent entity commercial pressure



5 Acquisition 4.0

Defence spends great effort in communicating from the inside out what the capability environment looks like for the future. This is captured in artefacts like the Defence White Paper and the Integrated Investment Portfolio. These artefacts are presented to industry as a roadmap to guide the development of technology solutions that will be required to support new capital acquisition. This mechanism is, however, internally focused and is built on a technological view that is constrained to looking only at current and past technology (rearward view).

The Defence White Paper somewhat recognises the role disruptive technology will play in defining the future Force where it states:

“In addition to the actions of countries, non-state actors have the growing ability to adversely impact the global commons through activity such as …… the use of readily available and highly disruptive technology including cyber capabilities. ([11] p46)

The commercial industry has been forced to develop products to meet the demands of the 4th Industrial Revolution. It has been forced to innovative in ways that keeps technology relevant to the growing complexity of the 21st century and leverages the greatest advances in scientific learning. New advances in robotics, artificial intelligence, nanotechnology, quantum computing, biotechnology, the Internet of Things, 3D printing and autonomous vehicles as just some examples of how disruptive technology will transform the battle space of tomorrow. Disruptive technology exists in all facets of tomorrow’s world, not just cyber-terrorism and the strategic policy guidance needs to reflect that.

For Defence to remain at the cutting edge of technology, a different kind of White Paper needs to be commissioned; an Industry driven white paper that talks in terms of future technology trends and outlines a technology roadmap from a fourth Industrial Revolution frame of reference. This would enable Defence to take the best of what we know about the battle space today and merge it with a forward-looking disruptive technology view. From these two frames of reference a common technology picture would emerge that seeks to embrace the opportunities disruptive technology provide while at the same time draw from experience to temper the risks associated with embracing such new technology.

To put this converged view into action will require a new approach to technology incubation and development. Traditional Capability Life Cycle approaches must also evolve to meet the pace of technology evolution. The discrete linear phases of “Acquire”, Utilise” and “Dispose” must give way to more agile, iterative technology development and delivery mechanisms. The concepts of Initial Operating Capability (IOC) and Final Operating Capability (FOC) imply discrete and absolute phases of Capability delivery that neatly align with contract delivery mechanisms. However, this development archetype does not align with the way in which disruptive technology is being discovered, developed, and deployed.



Defence and industry must work together to define new mechanisms for project/program delivery. Those mechanisms must allow for iterative delivery of capability beyond a simple 2-stage IOC/FOC approach. The First Principals Review seeks to improve delivery of capital projects through improved governance and decision making however fundamentally more work needs to be done to transform the Capability Life Cycle to allow for disruptive technology insertion, continuous delivery of capability and the concept of disposal must be transformed to support technology reuse and evolution, rather than replacement.

6 Recommendations

To create true sovereign industry capability, we must embrace disruptive thinking and incubate disruptive technology. The incubation of disruptive technology can only be realised through collaboration and co-creation by bringing together diversity in industry. The following initiatives provide a foundation to enable this to occur:

1. Defence needs to embrace an approach that pulls technology in from industry by moving away from the traditional outward facing problem driven approach to innovation. Defence needs to fund free thinking, not by “allowing” unsolicited proposals to be evaluated, but instead by going out into industry, uncovering candidate technology that is worth investing in and truly investing in it with a venture capitalist mind set.

2. Defence needs to embrace mechanisms for collaboration that enables the co-creation of IP & products. Government initiated environments are required that incubate start-ups/SME’s and incentivises interaction with larger technology providers. Prime contractors would embed staff, technology, and processes into the incubator. The benefits of this approach are two-fold:

a. Prime contractors will become exposed to innovation pipelines; and

b. SME’s gain access to a new road to market.

3. Commercial industry needs to influence the Force Design and Capability Acquisition process to ensure by the time Capability makes it into the Integrated Investment Portfolio it is described in terms of Sovereign IP, technology and innovations created through the incubators mentioned above. This ensures Australia looks to invest in technology that will ultimately meet the Capability needs of the Defence Force but also have a path to the international market (boosting economic prosperity and Sovereign Industry Capability). Both Defence and Commercial industry must work together to co-create a new White Paper view and transform the Capability Life Cycle to embrace a new delivery mechanism that fundamentally embraces disruptive technology.



7 References [1] Defence Diversity and Inclusion Strategy 2012-2017. Available from

http://www.defence.gov.au/Diversity/_Master/docs/strategy/DDIS-12-17.pdf, accessed 27th October 2017.

[2] Scott Page, 2007. The Difference. Princeton University Press. [3] Diversity’s new frontier. Available from https://dupress.deloitte.com/dup-us-

en/topics/talent/diversitys-new-frontier.html, accessed 27th October 2017. [4] RPDE – Rapid Prototyping, Development and Evaluation. Available from

http://www.rpde.org.au/, accessed 14th October 2017. [5] Commonwealth Procurement Rules. Available from

https://www.finance.gov.au/procurement/procurement-policy-and-guidance/commonwealth-procurement-rules/, accessed 14th October 2017.

[6] Defence Innovation Hub. Available from https://innovationhub.defence.gov.au/, accessed 14th October 2017.

[7] Centre for Defence Industry Capability – New to Defence. Available from https://www.business.gov.au/Centre-for-Defence-Industry-Capability/New-to-Defence, accessed 14th October 2017.

[8] Defence Teaming Centre. Available from http://www.dtc.org.au/, accessed 14th October 2017.

[9] Industry Capability Network Gateway. Available from https://gateway.icn.org.au/, accessed 14th October 2017.

[10] Hype Cycle for Emerging Technologies, 2016. Available from https://www.gartner.com/newsroom/id/3412017, accessed 14th October 2017.

[11] Department of Defence. 2016 Defence Whitepaper. Commonwealth of Australia, 2016. [12] Department of Defence. 2016 Defence Industry Policy Statement. Commonwealth of

Australia, 2016. [13] Presentation provided by Magnus Melander – (CEO W-Bird and Connectcompute.com)

at 2016 South Australian IMPACT awards. [14] ABC News Article, 2 March 2017. Available from http://www.abc.net.au/news/2017-

03-02/f35-fighter-jets-concerns-dismissed-by-lockheed-martin-boss/8317284, accessed 16th October 2017.

[15] Managing Multiparty Innovation. Available from https://hbr.org/2016/11/managing-multiparty-innovation, accessed 16th October 2017.

[16] The Independent (newspaper). Major players in the arms market 2015-16 (Data from Statista Charts).

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