One is None, Two is One

Good evening and welcome to those of you who joined us this past week. We were wading through all 269 innovation organizations for this week’s post and lost track of time - sorry we missed our time on target! A common and oft- used buzzword in the defense community is innovation and the government’s solution to this organizational challenge seems to be adding bureaucracy. We explain in more detail below…

This week’s post:

• ⚙️ Too Many Innovation Orgs?

• 💰 Term Sheet

• 🚩 Red Team Update

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Too Many Innovation Orgs?

We’re doing something a little different this week. AoT readers working in defense tech may have seen a report called “Companies Ask if Pentagon’s Innovation Ecosystem is Getting Out of Hand'' circulating on the website of National Defense: NDIA’s Business & Technology Magazine. For AoT readers less familiar, it’s an argument you’ve heard before. It may help to read or skim that article, but it’s not necessary this week. The crux of the argument is essentially this: the DoD responds to the complex problem of institutionalizing innovation (seems like an oxymoron to us) and adopting commercial tech by creating more organizations and pathways consistent with Pournelle’s Iron Law of Bureaucracy. This leads to a positive feedback loop which makes it even harder for non-traditional defense tech participants to know where to interface with DoD and how to do it.

We agree with the core of the argument - building the arsenal of tomorrow requires innovative thinking and leveraging commercial technology, and the means to do those things is definitely not “more DoD organizations.” In fact, we launched this newsletter to arm those working on the arsenal with knowledge of how to navigate challenges inherent to working in defense tech - from both the government and commercial sides. The argument and its supporting evidence provide a great opportunity to highlight some of these challenges, and where we think more nuance is needed. Each quote is from the linked National Defense Magazine article.

Definitely agree here. It’s difficult to know how to do business with DoD because there are so many organizations, and it really takes advanced knowledge of what each does and what kind of money they have (we touched a bit on RDT&E money here, which is the most likely kind a defense tech start-up would be receiving).

On the other hand, it’s interesting to lump Congress into the befuddled mix since many of these organizations are mandated, explicitly or implicitly, in past National Defense Authorization Acts. Every time the ghosts of NDAAs past called for reports, alignments, or the like, the DoD often responded with more organizations like wet gremlins. And don’t forget that organizations with extramural R&D budgets above $100M (for SBIRs) and $1Bn (for STTRs) are Congressionally required (!) to set aside 3.2% and 0.45% of those budgets, respectively - like we talked about here. Of course they will do that by creating a -werx organization.

It’s only doomscrolling if you scroll. If you answer a few top-level questions, you can easily cut that 269 to 140ish (written sarcasm doesn’t usually work well). But to be fair, the site does try to map your use case to relevant organizations with a few screening questions that AoT readers have seen here before, including how the tech maps to the 14 critical technology areas and what TRL the tech is at.

Let’s also not forget that while there are nuances in selling to DoD, there’s also no commercial market sherpas (except as business models). Meaning, commercial firms have to do their own market research, customer discovery, product-market fit, etc. Turns out that’s very difficult to do well, so maybe much of acquisition reform should be focused on creating more-informed customers on the buy-side rather than trying to communicate organizational structure to the sell-side. Especially given that those organizational structures are often just abstractions of how things actually get done.

Show me your budget, and I’ll show you your priorities. We try to follow where the money is going to know who and how to engage, and if you’re consistently reading our Term Sheet, we think that you will too.

Sorry, just couldn’t pass up the opportunity to note the irony in how one phase of DoD’s effort in addressing the proliferation of innovation organizations is to…create even more structures?

Yes, innovation theater is a real thing. Yes, commercial firms sometimes sell vaporware to consumers just as defense organizations sometimes sell innovationware to Congress and the American people by extension. But is competition generally healthy for getting the best products at the lowest price? Also yes.

Somehow “duplication of effort” has become a DoD phrase du jour which artificially justifies singularly-focused organizations and programs, but is also at odds with the principle of competition in a free-market economy. Singular perspectives are the opposite of innovation. We think that a race requires at least two horses and some duplication is not necessarily a bad thing. There are lots of ways to become more efficient without sacrificing this principle.

This is one of, if not the, biggest issues with reforming defense tech: the term “warfighter” is thrown about with such regularity that it’s become worse than cliché. Organizations in and outside the government focus on Platonic-ideal warfighters, mission statements are devoted to them, and companies serve them. But who is the warfighter? Can we find him or her and go talk to them? In a manner of speaking, yes, but there are two problems with this: the warfighters are almost never the person buying the product (we talked about this here), and even if they were, it’s way too general of a term to mean anything. It’s the commercial equivalent of calling your core customer “person.”

So what did we get wrong, and what did we get right? Drop us a line by replying to this email about this topic or anything else defense tech-related.

Red Team Update

China Beats SpaceX, Blue Origin and Relativity Launching World’s First Methane-Fueled Rocket into Orbit

• The US Space Force confirmed Chinese reports that a methane fueled rocket made it to orbit. The Zhuque-2 rocket, developed by Chinese company Landscape, successfully reached orbit, launching from the Gobi Desert

• The Zhuque-2 is the first ever methane fueled rocket to reach orbit. Multiple US commercial launch companies are working on methane-fueled rockets: Starship (SpaceX), New Glenn (Blue Origin), Neutron (RocketLab), Vulcan Centaur (ULA) and Terran 1/R (Relativity)

• Methane, a greenhouse gas, does burn “cleaner” than kerosene. SpaceX is focused on methane as a fuel source because of the ability to harvest methane while on Mars. China plans to match SpaceX’s 2022 launch pace in 2023 with 60+ launches by year end

Russia to Equip New Nuclear Submarines with Hypersonic Missiles

• Russia will equip its Yasen-class nuclear powered submarines with Zircon hypersonic missiles according to the head of the top Russian shipbuilding company

• The sea-based Zircon hypersonic missiles have a range of 900km (560 miles) and can travel at several times the speed of sound

• President Vladmir Putin said earlier this year that Russia could start mass supplies of Zircon missiles as part of the country’s efforts to boost its nuclear forces. Russia tested the Zircon missile earlier this year in the western Atlantic Ocean using the Admiral Gorshkov Frigate

About Us

Our team has 30+ years of combined experience as military officers using the end products. We’ve worked in both government and industry. From MIT to Wharton, Wall Street to biotech, and DARPA to the flightline, we offer you a unique perspective on how to navigate America’s defense tech industry.

The opinions expressed in this newsletter are solely those of the authors and do not necessarily reflect the views of DoD, our employers or any affiliated organization. This newsletter is for informational purposes only and is not intended to provide legal, financial or professional advice.