The 12 Pre-Conditions for Innovation Success – 1: the Customer

Why is innovation important in the defence market? Because a small country deploying a small defence force won’t derive either an operational or economic advantage doing the same thing as everybody else, only cheaper. Innovation – in equipment, organisation and process - is the difference between being ordinary (possibly irrelevant) and vulnerable, on the one hand, and strong, resilient and prosperous on the other.

Defence is a monopsony market. That means the defence customer has a significant shaping effect on the market: its size, its behaviour and the barriers to entry. If he is the launch (and possibly sole) customer for a new piece of equipment, or service, then its success depends to a significant degree on how he addresses both the operational need and the opportunity to be innovative in meeting it. It also depends on the partners and suppliers he chooses to deliver this new capability – and making a wise choice is a pre-condition (one of many) for innovation success.

So what are the pre-conditions for innovation success that the defence customer needs to satisfy? There are a dozen, in my view, and they need to shape key attributes and behaviours on the part of Defence and the ADF. Boiled down to their essentials, this is what I think they are:

1    1.   Nurture and grow your technical expertise
2.   Nurture and grow your professional expertise
3.     Maintain your situational awareness: keep abreast of emerging threats as well as emerging technologies and their potential effects on your own capabilities and operations
4.     Understand your needs and articulate them properly
5.     Be methodical in conducting R&D and capability development: this will help you understand your needs, as well as helping you identify solutions
6.     Seek opportunities for innovation in your organisational practices, processes and procedures as well as in your equipment inventory (innovation in the latter is usually wasted without innovation in the former as well)
7.     Take every opportunity to engage with and inform your industry and research base – the more they know about what you do, how you do it and what difficulties you face (within obvious limits!), the better able they are to support you – see Israel as an example
8.     If it needs to be done at all, do it quickly. Urgency eliminates irrelevancy: a short deadline ensures a focus on the outcome, not the process
9.     Establish a disciplined acquisition strategy that both reflects the urgency of the need and tolerates sensible risks (see 1 and 2 above) and remember that obsessive risk-aversion is itself another source of risk
10.  Appoint a champion with sufficient seniority to drive the project forward in spite of bureaucratic obstacles – or to kill it, if this turns out to be the correct course of action; and give him or her the best possible project team
11.  Make sure you’re nurturing your industry base – In a technology driven monopsony a smart customer doesn’t allow his industry base to fall into a technical rut or to fall behind in a technology sense. 
12.  Nurture a culture and capacity to work with your industry base to identify opportunities and develop solutions, both for yourself and also, potentially, for allies and export customers.

Defence – the ADF, CASG and DST - is mobilising itself to satisfy these pre-conditions. The 2016 Defence White Paper and Defence Industry Policy Statement kick-started the change process. But to continue satisfying the pre-conditions for innovation and operational advantage in both Industry and Defence we need to see the emerging cultural changes embedded permanently in the ADF and in Defence’s capability development and acquisition processes. The early signs are very promising – but these are unsettled times: Defence and Industry together need to make these changes future-proof.

Innovation – what is it, really?

I’ve had a couple of interesting conversations this week about Innovation. The Australian government’s National Innovation and Science Agenda (NISA) is now nearly two years old and its effects are being felt across the defence industry, which is my principal work area. The idea of innovation is gaining traction but a lot of people still don’t understand it and many are still a bit intimidated by it as a result.

So what is innovation? David Chuter, CEO of the Innovative Manufacturing CRC, and I, agreed quickly on this.

Let me start by saying what it’s not. Innovation is not Continuous Improvement. And it’s not Invention. The former is a succession of incremental steps, building gradually on everything that’s gone before. The cumulative effect may be significant, but each little change is just that – a little change. The latter is merely a good idea, unless somebody does something with it – puts it to use. Then it may become an innovation.

So what is Innovation? Innovation, as I’ve written before, is about addressing needs and introducing change. You’re either solving somebody’s problem, or you’re enabling them to do something they couldn’t do before. Importantly, you’re not helping them to do the same old thing, just a little bit better - you’re giving them the opportunity to change completely what they do and how they do it.

Case in point: improving the cornering speeds of racing cars. Over the years designers have played with springs, tyres, rubber compounds, brakes, dampers, anti-roll bars and ever-lower centres of gravity, with varying degrees of success. But the history of the sport is marked by a succession of major innovations, each of which transformed the design of racing cars.

First came mid-engined cars, pioneered by Cooper in the late-1950s to replace the old front-engined classics (that’s how Jack Brabham won his first two world championships). The 1959 Cooper T51 was lighter and had better weight distribution, which didn’t alter as fuel was expended during a race. Soon everybody copied it. Then, in the late-1960s, came, first, aerofoils and then full-width wings, pioneered by Jim Hall of Chaparral – inverted aerofoil sections that pressed cars down on to the track to increase grip, and therefore cornering speeds, while reducing braking distances. These were adopted by Formula 1 teams, were eventually banned when they outgrew the strength of the cars, and then re-allowed but under strict control.

Then came ground effect, in two iterations. First in the 1960s Jim Hall pioneered the use of what were, in effect, vacuum cleaners to suck the air out from under a car and increase downforce and therefore grip. These were promptly banned, but Colin Chapman of Lotus re-introduced ground effect years later as a design feature of the underside of a racing car, increasing grip once again. This triggered a revolution as constructors sought to emulate his success. And once again, ground effect was banned once the downsides and dangers became obvious.

And it continues. Today, racing teams invest huge amounts in both computational fluid dynamics and wind tunnel testing to refine the aerodynamics of their cars. That’s one of the reasons the sport is so expensive (and, by the way, if you’re looking for a job as an aerodynamicist out of university, look to a racing team as well as the aerospace industry). Trouble is, everybody has access, potentially, to the same technology within the same rigid framework of construction regulations, and modern regulations are quite prescriptive, so it would appear the potential for game-changing innovation is fairly low. We’ll see.

The point is, that each wave of innovation wrought a significant change in the design of contemporary racing cars. The pioneer who introduced it usually achieved an immediate advantage, which was eroded when rivals started to adopt the same ideas and catch up with the leader.

Something else worth considering is this: Most of the raw knowledge of car design and aerodynamics that went into these pioneering racing cars already existed. But it took lateral thinkers like Jim Hall, Colin Chapman and Cooper’s Owen Maddock to apply this knowledge and expertise in a new way, experiment with it and then create a significant competitive advantage.

That’s one of the things about innovation: an innovation is something that’s new in its context, not necessarily something that’s entirely new and unheard-of. An example: airline pilots use iPads to display navigation charts, check lists and other information, rather than carry bulky and heavy reams of paper around with them. The use of an iPad in this way is an innovation because it changes significantly how pilots do things, but it wasn’t necessary to re-invent the iPad to do so.

What was necessary in each of these examples was an understanding of what an end user or customer really wanted, and then the knowledge and imagination to provide that in a new and advantageous way. There was no black art involved. 

And that’s how innovation works – it's essentially practical: innovation changes things for people who are doing things. That's not a bad working definition.

Industry and Innovation on show - a contrast in styles

The past couple of weeks have been a contrast in styles. I spent the last week of September at the International Astronautical Congress (IAC) in Adelaide and most of the following week at the Pacific 2017 International Maritime Expo in Sydney, of which I’m part of the organising team.

Both events have been judged by attendees to be a great success. It’s hard to judge Pacific 2017 from the inside (though the feedback has been universally positive), but I was certainly impressed by IAC. And I can see some interesting differences.

Both events gave plenty of scope for innovators to shine, especially small, agile SMEs and start-ups. The difference, however, was that IAC was unashamedly a global event that drew prime contractors and national government agencies from around the world: NASA, the European Space Agency, Lockheed Martin, Boeing, Airbus, Ariane Group, CNES, the Chinese space community and even the nascent space agencies of nations like the UAE, South Africa and Romania. Of course, the Australian Federal government was there in force, too. And there were Astronauts – real, live men and women from around the world who’d been into space, many of them several times and for weeks or months at a time. We were able to meet and listen to real heroes, including two – that’s right, two – Australian astronauts. Name them both – I challenge you!

Pacific 2017 was different, and no less exciting. It was dominated (deliberately so) by a major national customer, the Royal Australian Navy, which is undertaking its most significant force structure upgrade in peace time. Australia is about to start building 12 submarines, nine Future Frigates, 12 Offshore Patrol vessels and more than 20 Pacific Patrol Boats. Not surprisingly, the world’s naval prime contractors were in Sydney, along with a massive ‘tail’ of SMEs from Australia and around the globe and an unprecedented number of senior naval officers from the Indo-Asia-Pacific region and further afield.

The big contrast between these two events, and the industrial activity they embody, lies in the nature of the markets they showcased.

IAC showcased an industry, research and government community that is global, diffuse, fragmented and outward-looking, one that offers both heavily resourced prime contractors and the tiniest of start-ups multiple paths to market. The space sector supports a vibrant, international innovation and high-technology eco-system. You could feel this vibrant mood among Australian space entrepreneurs and SMEs who suddenly found themselves confronted with literally dozens of potential opportunities and contacts – venture capital providers, potential customers, research partners. The global and relatively unrestricted nature of the space market meant that entrepreneurs and innovators had massive freedom to seek out and pursue opportunities – borders weren’t barriers and inspiration was everywhere, and there was a sense of urgency about getting into space and getting on with business. 

IAC was a portal into a global market, and the announcement on Day 1 that Australia would form its own Space Agency (at long last!) was a critical step towards opening that portal.

By contrast, the majority of exhibitors and Trade Visitors used Pacific 2017 to focus principally on a major domestic customer. The sheer size of Australia's naval market gives it dominant status in the Indo-Asia-Pacific region, but Pacific 2017 was also an outward-looking showcase for Australian firms looking to export to the region and the northern hemisphere: the USA and Europe.

The defence industry is global, but the majority of SMEs tend to think and act local – that’s simply a function of their size and resources. The monopsony nature of the defence market in most countries means that the size of the market in any one country, and the way it behaves, and the barriers to entry, are dictated by a sole customer. And unless that customer wants to engage with its local industry base and promote defence exports, the scope for innovation is diminished.

Happily, the Australian Federal government has taken this on board. Yes, Defence remains a monopsony, and market authority – the ability to specify, to shape, to actually purchase defence goods and services – remains closely held in a single organisation. But the changes in defence industry policy and engagement since early 2016 mean there’s unprecedented scope for defence innovators and start-ups, and increasingly also for exporters. Australian SMEs, primes, research establishments and universities will all benefit.

The defence business environment in Australia is probably better than it has ever been, and this shone through at Pacific 2017. In particular, the Maritime Australia Industry Innovation Awards and Defence Science Institute's Innovation Pitchfest showcased a very lively community of energetic and ambitious SMEs.

But an essential truth remains. Innovation is sparked by contact and communication: you need to be talking to the end users, and you also need subject matter expertise to understand a challenge, a problem or an emergent opportunity. And there’s serendipity as well – unexpected insights from conversations, simple observation and shared experiences can throw up all sorts of opportunities. Pacific 2017 provided a melting pot to enable that kind of contact; and at the time of writing there are more than 20 Australian defence firms, under the Department of Defence's 'Team Defence Australia' banner, showcasing their products and services to the vastly greater US and global markets at the AUSA Show in Washington DC – wouldn’t it be great to see twice that number in a couple of years’ time?

For all sorts of good reasons, the defence market can’t organise itself like an unrestricted, unregulated commercial market (and if you don’t understand why then it’s worth making the effort to do so, otherwise you’re doomed to disappointment). The defence business will never be like the space business, but if the Department of Defence wants to sustain and grow a vibrant, creative technology and innovation eco-system here in Australia, if it wants to get the best from Australia’s creative technology firms, start-ups and innovators then it needs to maintain and if possible expand its current open stance towards industry and academia.

It could start by showcasing some its heroes and making them more accessible to both the general public and the industry that’s there to support them. Does anybody remember the publicity afforded during WW2, and the positive effect this had on civilian morale, to warriors such as ‘Bluey’ Truscott, Paddy Finucane and the Australians who formed part of the Dambusters? The modern ADF has plenty of its own heroes – men and women who can share their frontline experiences and expertise, inspire youngsters to join the industry (or the ADF) and who can help explain to smart, defence-savvy industry experts what their problems are. They can inspire Australian firms in a way that nothing else does – not even a purchase order. And they can help ensure that the ADF gets what it needs.

PS: Australia's two astronauts are Andy Thomas (everybody knows that!) and Paul Scully-Power. How many people remember a third Australian member of the NASA astronaut corps who never made it into space? His name is Philip Chapman - he was selected for Apollo 14 but resigned from the program in protest at NASA's decision to build the Space Shuttle. Ironically, it was the Space Shuttle that transported both Scully-Power and Thomas into orbit. 

ENDS

State governments, defence exports and industry development

I was struck by a recent article in Defence Connect about the detrimental effect of State vs State competition on the prospects for Australia’s defence industry. The article cites some key industry players, including Chris Jenkins from Thales, Mark Burgess from Quickstep and Victorian defence advocate and former cabinet minister Greg Combat. They all agree that the State vs State model is ‘less than optimal’, to use Combet’s words.

The subsequent conversation on LinkedIn was driven by Grant Sanderson’s comment: “If the Federal Government is intent on building a self sustaining, export oriented defence industry then it needs to internalize two critical lessons. Firstly locally developed IP is the well spring of innovation and international competitiveness. Buying overseas designs where local capability exists is detrimental to their strategy. Secondly there needs to be a constructive approach to the development of strategic centres of excellence rather than a Darwinian free for all between states and regions.”

I couldn’t agree with Grant more, and I’m encouraged that recently appointed State government defence ambassadors and advocates such as John Harvey and Peter Scott (NSW) and Raydon Gates (WA) understand the need for a strategic, national approach.

I’d like to make a couple of points of my own, however.

Firstly, State governments will always try to look as if they’re doing something useful for their voters. That usually means chasing exports or winning something off another state – essentially, treating business and industry development as a zero-sum game.

Secondly, State governments have often stepped in where the Federal government has been conspicuously absent in supporting industry’s efforts to grow and become exporters. They’ve been trying to fill a vacuum that doesn’t exist (at least to anything like the same degree) in most other industrialised nations. However, competition between the States has sometimes confused potential export customers, especially when there hasn't been a moderating Federal government presence.

Thirdly, The Federal government has turned on a sixpence (in strategic and policy terms) by suddenly becoming a vocal (and I believe committed) champion of industry development, innovation and exports, across all sectors of manufacturing and related industry. This has happened over little more than 18 months, since December 2015; the defence focus dates back to the release of the Defence White Paper and Defence Industry Policy Statement in February 2016.

So there’s been a bit of a perfect storm: we suddenly have a defence shopping list that’s worth nearly $300 million over the next quarter-century; we have a government that’s committed to spending as much of this money as possible in Australia (alright, still a minority share, but more than we could have hoped for previously); a government acknowledging that a competitive industry needs to broaden its mental horizons and pursue innovation; and a university and research sector that’s woken up to the fact that there’s likely to be unprecedented and growing demand for its research and knowledge ‘smarts’.

Oh, and we need our new submarines, frigates, patrol boats and armoured vehicles in a bit of a rush, which goes counter to the idea of a measured, integrated whole-of-Australia approach. It should be noted that we’re only facing this rush because the Rudd and Gillard governments shamefully refused over some six years to commit any money towards the Navy’s submarine and frigate programs, resulting in the current ‘valley of death’ and the haste to get design and construction work under way.   

So my response to Grant’s comment was this: “You don’t build export-ready industry capability without addressing the local market first and we haven’t seen the REAL money flow through the looming maritime and land projects as yet. And turning around the Australian government’s previous deliberate policy of allowing market forces to shape industry – and then refusing to act as a market player – will take time. Meanwhile, the Navy needs submarines, the Army needs new armoured vehicles and the urgency of those requirements doesn’t sit comfortably with the deliberate, concurrent development of industry capability across many technology domains and industry sectors. We’re talking about trying to achieve a generational task in only a few years.  I think we need to calibrate expectations and achieve the greatest leverage possible for every bit of industry activity over the next 5-10 years.”

Export-ready means having world-class product. That takes time to develop. It also requires an understanding of the market and the customer. That doesn’t happen overnight. Today’s exporters started on their journey years ago; tomorrow’s exporters need to start now – or better still, yesterday.

So what’s the role of the State governments in all this? They don’t sign contracts with the Federal government. They don’t build ships and submarines and armoured vehicles. They don’t re-paint and service warships. They don’t train soldiers, sailors and airmen and women. At best, they can help create local business conditions that favour investment decisions by industry and the Federal government.

They can invest in education and training; they can adjust local taxes and charges to make a city or region more attractive; they can support investment in market knowledge and a physical market presence at trade shows domestically and overseas; they can be advocates for an entire industry sector – and South Australia is the standout example of this. But they can’t award defence contracts and they can’t make promises to export customers on behalf of either the Federal government or industry. 

Ultimately, their power is limited.

The Federal government is looking to become more engaged with industry, to support industry development by championing both innovation and exports. It is filling the vacuum previously exploited by the State governments.

If the current business environment persists and develops the way that industry hopes, it seems to me the States need to re-consider their roles. If the Federal government is looking, for the first time in ages, to think and act strategically, then there’ll be more work around than Australian industry can handle in its present state. Helping to increase industry capacity by growing the trained workforce, and increasing capability by enhancing innovativeness, is a critical role the State governments must play. This isn’t a zero-sum game any longer: all States can share a much bigger prize, but they must be willing to work for a common benefit.

Moderate Islam is the heart of the solution

Once the shock of last night's horrifying terrorist attack in London and last month’s terrorist atrocity in Manchester had subsided, the media commentary that followed had me thinking. 

There’s a battle raging for the hearts and minds of the Muslim world and it’s essential that Moderate Islam wins. Because if the moderates don’t win we risk a much bigger war between Islam generally and the western, or secular, world. Moderate Muslims don’t want that and nor does the west because it could be a fight to the death, and they’re usually brutal and bloody - especially for the losers.

The perpetrator last month was an Islamist terrorist. That we know. It’s almost certain the perpetrators last night were Islamists as well. They justify both their cause and methods using Muslim scriptures. In one sense – their willingness to inflict terrible violence on those with whom they disagree – they’re little different from the murderous zealots who committed terrible atrocities in the name of Catholicism or Protestantism a few centuries ago, and those of us brought up in the Christian tradition (if not the faith itself) would do well to remember this.

However, the Islamist cause and methods are generally denounced by a majority of Muslims, just as the majority of people brought up in the Christian tradition have renounced and denounced the sectarian prejudice and violence that have disfigured their faiths from time to time.

There’s a difference, however. In modern times the liberal Christian tradition has generally promoted something approaching a benign and tolerant democracy. Liberal societies can tolerate difference and dissent – some better than others, admittedly, as any Irishman or southern European could tell you. And as a result the temper of a Liberal society as a whole, both spiritual and temporal, makes political and sectarian violence a thing of evil. The same isn’t true in many (though not all) Muslim countries.

During the years of the ‘Troubles’ in Northern Ireland, and during the terrorist campaigns of the 1970s and ‘80s in places like Italy and Germany, national and spiritual leaders repeatedly condemned violence in the strongest terms.

Moderation and tolerance had a voice that mostly drowned out the message of violence. This voice was heard in homes, at schools, at places of worship. It argued for peace, it argued that the terrorist was the grotesque ‘other’ whose taste for violence placed both him (or her) and the cause itself beyond the pale. This same tolerant, inclusive voice made welcome immigrants from a diversity of faiths and backgrounds, not least Muslims.

In most free countries this voice of reason and tolerance (helped by an open and honest media) has helped prevent the radicalisation of generations of passionate, grumpy youths. It has spoken through the law, through the media, through governments and national leaders to deny terrorists the legitimacy they crave and the support that follows. In the West, the general de-legitimisation of extremist movements, whether terrorist or not, has been a victory for the common people, for human values and for the societies that sustain them.

Are we seeing the same in the Muslim community? That’s a genuine question: notwithstanding the lonely courage of a few Imams and community leaders, is the voice of reason and tolerance being heard enough in the Muslim community?

The point is that Moderate Islam risks being painted crudely with the same brush as the Islamists if Muslim leaders won’t emerge who can champion the cause of peace and tolerance and give a voice to these values which can then be amplified in family homes, in schools and in mosques.

Moderate Islam must give voice to reason and tolerance – especially tolerance, where Muslims choose to live in or alongside a secular or non-Muslim nation - and deny radicals the sense of legitimacy that empowers them to carry out barbarous acts of murder.

It seems to me that the prevention of radicalisation and the de-radicalisation of Islamist would-be-terrorists must begin among the Muslim community at large. You see, not all Muslims are Islamists, but all Islamists are Muslims. If the voice of Moderate Islam is not heard then the atrocities committed in the name of Islam will define the faith as a whole in the minds of onlookers. The consequences for the majority of peace-loving, tolerant Muslims living in Western countries who are good citizens and decent members of society, could be serious.

That’s the battle that’s being fought for the hearts and minds of Muslims, and it’s essential that Moderate Islam wins. And Moderate Islam needs the patience and support of the wider non-Muslim community if it is to win. This must be a shared endeavour because the consequences of defeat will be catastrophic. But first we need to hear the voice of Moderate Islam, of Muslim leaders who can promote and defend peace, reason and tolerance. If Moderate Islam has no voice, or if that voice is silenced, then the faith as a whole will have been hijacked by an extremist minority that, by default, has placed Islam at war with the rest of the world. 

In the meantime, we mourn those poor innocent souls who have died violently at the hands of murderous terrorists, and try to comfort their loved ones, and thank God for the kindness, and courage, of strangers who sought to help them.