Innovation is a journey, and it needs a destination: an end user. With a new White Paper due out soon, Defence is starting to acknowledge once more the benefits of local industry innovation at a time of rapid strategic and technical change, so for DST Group, academia and the Australian defence industry, the journey resumes.
Gregor Ferguson | Sydney
The announcement by former Prime Minister Tony Abbott on 4 August that the Australian government will invest some $89 billion over the next 20 years in acquiring and sustaining new submarines and surface ships for the RAN was welcomed by Australia’s naval and defence industry. The Prime Minister added that this program includes a continuous build of surface warships, essentially creating an enduring Australian industry capability.
This was a watershed moment for Australian industry when taken in conjunction with a fundamental re-organisation of defence acquisition, the change three years ago in the leadership of the Defence Science and Technology Group (formerly DSTO) and Defence Minister Kevin Andrews’s speech to AMCHAM, the American Chamber of Commerce, in late-August promising Government support in the new Defence White Paper to “promote, harness and translate innovative ideas into practical capability.”
First, some history: from the 1940s to the 1980s DSTO and its precursors did a lot of research that generated new Intellectual Property (IP), much of it extremely useful and valuable. Commercialisation of this IP during the 1990s alone generated unique operational capabilities (Nulka, JORN and LADS are the best known examples) and either direct income or measurable budget savings equivalent to the cost of running DSTO over the 15 years to 2005.
With past innovations and subsequent commercialisation successes such as JORN, DST Group has form in moving from good ideas to reality. Credit Defence
While DSTO seemed to eschew commercialisation for many years, ADM understands that DST Group’s own as-yet-unpublished research suggests it has actually delivered some $20-25 billion worth of value since 2003. Highlights include projects such as JDAM-ER, cyber security deals with Northrop Grumman Australia, and IP relating to submarine combat systems and heavyweight torpedoes.
ADM understands that there are another 20 similar knowledge transfer deals in the pipeline. However, notwithstanding a refreshed commitment to what it terms knowledge transfer, DST Group’s mandate to commercialise is not reflected in its KPIs; publication of this research will undoubtedly explain more about DST Group’s current and future approach to commercialisation, especially in light of the new Defence White Paper.
As a generalisation, Defence and the ADF have little appetite for risk, and so avoid developmental projects unless they are unavoidable or there is a compelling capability-based reason for doing them (think CEAFAR and CEAMOUNT, and JDAM-ER). Therefore, as industry would attest, there is little customer ‘pull’ from the end user to stimulate local innovation in new products and services. Therefore also, Defence lacks experience of handling developmental projects with all the ambiguities and uncertainties they involve.
This makes it harder for local companies to sell a new product to Defence, and is therefore a disincentive to companies that might otherwise invest in higher levels of R&D. If they can’t sell directly to Defence, many firms have tackled Global Supply Chains as an indirect route to both local and export markets – think of the JSF project, or the trajectories of firms like Quickstep.
But it’s arguable also that many local firms don’t understand what it takes to be competitive in a market where, like it or not, they are up against global competition. The author’s own research into defence product innovation showed a clear distinction in levels of self-funded R&D between successful and unsuccessful innovators.
It’s that customer ‘pull’ – the ‘destination’ mentioned in the intro – that’s the driver of innovation activity in any market and that has been lacking in Australia’s defence market. That’s despite strategic investments by DSTO, Defence’s Capability Development Group and the former DMO in world-class R&D programs and innovation facilitators: RPDE; the CTDs; the Defence Materials Technology Centre (DMTC); and the Defence Industry Innovation Centre (DIIC). These have generated good outcomes for both the ADF and industry. It remains to be seen how the new Defence White Paper and industry policy statement will treat them, but they have delivered genuine value that deserves to be preserved and enhanced if possible; Andrews’s comments suggest this is possible.
One of the best examples of how to handle innovation in a rapidly evolving, high-threat environment, has been Diggerworks. This was set up as a joint construct of Defence (including DSTO), industry and the R&D community expressly to deliver innovation: rapid technology and capability upgrades in response to emerging user needs. It was extremely successful and challenged the current model for capability development and acquisition.
"One of the best examples of how to handle innovation in a rapidly evolving, high-threat environment has been Diggerworks."
The limitations of the current model were acknowledged by then-Chief of CDG LTGEN John Caligari when addressing an audience of SMEs during Land Forces 2014. He pointed out that the ADF’s acquisition money was committed five years in advance, there was very little flexibility in the Defence Capability Plan (DCP) once it was published, and getting a project into the DCP was a lengthy process. All of which stifles innovation.
So what reason is there to believe things might improve, both for Australian innovators and for Defence? There are three.
Firstly, DST Group under Dr Alex Zelinsky is explicitly championing the concept of innovation in Defence through a series of targeted forums and seminars. DST Group is looking for opportunities to work with industry to help solve the problems facing its major stakeholder and customer, the ADF.
Secondly, the success of Diggerworks demonstrates that there is a reliable and efficient mechanism for harnessing together end users, defence scientists and industry to deal with short-notice contingencies and challenges. These will undoubtedly erupt again over the next two, or five or ten years, as they did in Iraq and Afghanistan. It’s impossible to predict what the precise nature of a technical or operational challenge might be, but Defence has demonstrated that it’s possible to create with industry a joint mechanism that fosters innovation and delivers a quick, effective response.
Thirdly, the $89 billion worth of naval construction and sustainment announced by the Prime Minister extends a market for industry innovation that has until now been small and vulnerable to the Defence project cycle. The innovation destination here is not necessarily the operator of the submarines and surface ships in question. Prime contractors responsible for designing, delivering and sustaining new submarines or warships to a budget and a schedule with an explicit, long-term focus on efficiency and cost reduction will need trusted, efficient and innovative suppliers.
So there’s increased scope for Australian innovators who can provide expertise and product into the supply chain, both locally and globally. In this context an industry customer is probably better able than Defence to determine where a supplier’s innovation can make a positive difference, and which risks are worth taking; this makes for a more robust and sustainable innovation 'market'. Only where operational capability is impacted should Navy have the final word.
However, Australian industry’s ability to contribute depends on its ability to maintain and refresh its own expertise — a function of its capacity and appetite to invest in R&D. This has been sorely tested over the past eight years and even if Defence does become more open to local industry engagement and innovation it’ll be a while yet before the market starts rewarding keen players.
In the meantime, local firms will need to invest a little more in their understanding of what Defence and the ADF need, and how potential overseas prime contractors will position themselves to meet those needs. One of the keys to innovation success is market and customer knowledge and DST Group is one of the gateways to the customer; local firms may be well advised to stay close to it.
Dr Gregor Ferguson, a former editor of ADM, is Executive Manager Industry Development at Maritime Australia Limited, the organiser of the Pacific 2015 International maritime Exposition. He is also the convenor for Maritime Australia’s Industry Innovation Awards. He completed his doctorate into factors affecting innovation in Defence in 2013 through the University of Adelaide.