Looking to Grow the Next Big Military Innovation? Plant a Seed Overseas

In the race to develop asymmetric advantages over potential foes like Russia, China, or Iran, America’s allies can’t afford to wait around while the U.S. military woos Silicon Valley and tries to get up to tech-sector speed. So here’s a proposal: instead of sending exclusively off-the-shelf arms and gear to smaller allies, defense companies should use these markets as test beds for low-cost innovations that might produce disruptive changes relevant to larger markets. The Pentagon can help, by setting up DIUx-style incubators in countries that face similar threats as the U.S.

Large defense contractors excel at sustaining innovation: evolutionary improvement to existing products. The upgrade of 4th-generation fighters with advanced electronics to create 4.5-generation fighters is a great example: F/A-18 Super Hornets and Eurofighter Typhoons offer much improved capabilities over their 4th-gen progenitors, but at a much better price than their 5th-gen competitors.

However, emerging defense industrial players around the globe are using disruptive innovation, often commercially derived, to erase some of the technological advantages that have underpinned the West’s military edge. Look at what is happening with armed UAVs. While American armed drones may be more reliable, Chinese UAVs can cost as little as one-fourth as much, and come with less red tape. This approach to underserved markets has allowed China to export its armed CH-3 and CH-4 UAVs to Pakistan, Nigeria, Iraq, Saudi Arabia, the UAE, and Egypt. And it’s not just aircraft; at a recent Asia market arms show, Chinese companies touted unmanned naval vessels that appear to have many of the autonomous and swarming capabilities sought by the U.S. military as part of the Third Offset. Indeed, Chinese or Russian procurement and exports, not those of the U.S., may be the leading indicators of where disruption will occur.

Other emerging defense industrial players, those in Israel and Korea, export missiles, defense electronics, trainer aircraft, and submarines to southeast Asia, the Middle East, and Latin America. They fulfill the disruptor’s role of serving previously non-consuming customers with lower-cost, good-enough solutions. As foreign technology progresses, it will likely produce products nearly equivalent in quality to American defense goods. These cheap alternatives could even become substitutes, shutting off international markets and economies of scale to a whole range of American defense manufacturers and service providers.

In commercial markets, disruptive innovation is consumer-driven. We do not know what will be disruptive until consumers vote with their pocketbooks. In defense markets, customers also look for better value, but there are only a few dozen militaries to whom Western firms can sell, and each market has its own political and strategic realities. Additionally, there is greater competition from other countries: Western suppliers accounted for 59 percent of all accessible spending in 2015, down from 62 percent in 2010, according to Avascent. Countries faced with urgent threats and more choice from international providers will likely seek out good-enough solutions wherever they can find them.

Vietnam and Estonia face similar strategic challenges: each has increasingly assertive neighbors with claims to their territory, and cannot depend on the U.S. to come to their immediate aid in the event of hostilities. With their survival at stake, hopelessly outmatched in conventional capabilities, they are more likely to turn to innovative technologies or operational methods. Allies like these would be very interested in technologies derived from the Defense Department’s “Third Offset Strategy” but simply do not have the budget to purchase gold-plated solutions.

This is exactly why leaders in the Pentagon and large defense firms should engage countries like these where budgets are low but the potential for truly disruptive solutions is high. Instead of viewing these markets as backwaters or places to offload legacy products, these high-threat, low-budget environments could be an untapped source of defense innovation. Once a low-cost asymmetric system is developed, it could be exported to similar countries or improved to sell to better-funded militaries who today face very real budget pressures in a time of dynamic threats. If a system can be proven effective against Russian hackers in Estonia or Chinese subs in the South China Sea, why wouldn’t the U.S. or other allied militaries be interested?

Already, large defense prime contractors are poised to disrupt new market areas by using commercial tech-sector innovation and their deep knowledge of the defense world. As an example, Boeing and General Dynamics are trying to disrupt the naval industry with acquisitions, investments, and partnerships in USVs and UUVs and are already selling their products to foreign militaries. And they can certainly do more in strategic hot spots around the world.

The Pentagon needs to understand where true disruptive innovation is occurring, both geographically and technologically. They need to study allies’ procurement plans and CONOPS, and encourage them to develop asymmetric capabilities through bilateral or multilateral R&D offices abroad. Allies with credible asymmetric deterrents to Russia, China, and Iran improve American security and increases our adversaries’ strategic uncertainty.

Done right, industry-led technological development can help re-invigorate American innovation and improve strategic ties with allies. It’s the right approach in an era where no nation can bet its security on a monopoly on good ideas.