Executive Summary

In August 2023, Deputy Secretary of Defense Kathleen Hicks made a clear case that the Department of Defense (DoD) must do better in “creat[ing] and exploit[ing] change as a military opportunity.”¹ To effectively deter conflict, and win should deterrence fail, the broader national security community needs to leverage all elements of U.S. defense ingenuity, from the largest defense contractors to the smallest new entrants. The breadth and depth of today’s challenges demand nothing less.

Leaders in the DoD are seeking to leverage and incorporate private sector advances into military capabilities. Many of these efforts to date have been “bottom-up,” warfighter-driven actions to solve specific tactical needs. There are several cases of “top-down,” leadership-driven projects, but these instances have required leaders at the highest levels of the department to scale and cut through bureaucracy. While significant progress has been made in terms of organization and authorities, barriers and challenges remain to implement new capabilities at scale.

While the DoD is able to deliver relevant, urgent capabilities to U.S. warfighters at speed and scale from traditional and nontraditional sources with existing authorities, policies, and procedures, it fails to do so in a regular, institutionalized fashion because of a risk-averse culture that often does not leverage existing options that are new, agile, and responsive. This report identifies seven integrated factors required to achieve this speed and scale:²

1. Senior Leader Support: Leadership within government and industry must create a supportive culture with appropriate resourcing and the necessary talent. Leadership support must be paired with execution mechanisms that can translate inputs into actions.
2. Empowered Product Team: This engine drives the entire effort by employing delegated authority to integrate multidisciplinary inputs from government and industry by combining operators, technologists, engineers, acquisition professionals, security experts, and budgeteers with team leadership.
3. Defined Problem Statement: A “concise statement of what problem is going to be solved in the context of a larger mission and overarching strategic guidance” requires sufficient specificity to guide the capability development process without being prescriptive.³ Such statement of mission need allows an empowered product team to explore and iterate a range of solutions.
4. Iteration with End-User Feedback: Early iteration, experimentation, and testing result in better acquisition outcomes, system performance, and end-user acceptance. Utilizing a DevAcqOps approach focused on modular systems and open architectures results in shortened timelines, creates feedback mechanisms, and improves customer outcomes.
5. Acquisition Tradecraft: This is the know-how of contracting vehicles and acquisition tools to repeatably streamline the DoD acquisition system with tailored approaches that result in an effective acquisition outcome.
6. Identified Transition Partner: Deploying an innovative capability to warfighters requires movement from development to acquisition and sustainment with a transition partner. As technology enables more hardware-enabled and software-defined systems, challenges can often arise as software becomes the driver of war fighting capability, and traditional paradigms of system ownership erode. Moving to a capability of record approach may permit greater agility to identify transition partners for an increasingly software-defined future.
7. Consistent Funding: Good planning and responsible financial execution require stable funding. Consistent funding “represents buy-in both from broader Departmental budget offices and Congress. This is the ultimate form of stakeholder consensus.”⁴

Flowing from these seven factors are four thematic and deliberately broad recommendations. The goal is to improve the speed and scale of innovation across the breadth of the Department of Defense and national security community:

1. Improve Innovation Leadership: Senior leaders across the DoD should hold themselves personally accountable for specific innovation initiatives with clear, public updates and success metrics. This action will provide an example for leaders at lower echelons to adopt similar accountability and success metrics.
2. Develop Talent: The military services need to create talent management and career development pathways for innovation leaders that rotate promising individuals through, at a minimum, operational, research and development (R&D), and acquisition assignments. Emphasizing cross-functional experience recognizes the basis of success for many of the best program managers in the DoD today.
3. Create Iterative, Flexible Processes: The DoD must embrace an acquisition culture that drives modular, agile, iterative, and responsive approaches across the widest possible array of programs. A DevAcqOps approach that reduces foundational technical risk in a program’s life while embracing iteration and adaptation is vital to maximize both overall system performance and mission fit.
4. Increase the Velocity of Innovation: The DoD needs to increase the number of programs that adopt rapid, iterative approaches to fielding capability. This action is only possible if Congress provides flexible and timely funding that allows the DoD to move funds in the year of execution. Allowing program executive offices (PEOs) to address the art of the possible, both in terms of acquisition tradecraft and available technologies, will catalyze innovation velocity across the DoD.

If implemented, these broad recommendations will improve the DoD’s ability to field new capabilities with speed and at scale. In an environment characterized by multiple geopolitical threats to a rules-based world order, it is incumbent upon the DoD to continue evolving its business systems to allow emerging technologies to be applied to war fighting capability in a relevant timeframe.

Introduction

In August 2023, Deputy Secretary of Defense Kathleen Hicks made a clear case that the Department of Defense (DoD) must do better in “creat[ing] and exploit[ing] change as a military opportunity.”⁵ The emergence of capable and dynamic peer competitors, namely the People’s Republic of China (PRC) and a revanchist Russia, are stressing U.S. global interests. To effectively deter conflict, and win should deterrence fail, the broader national security community needs to leverage all elements of U.S. defense ingenuity, from the largest defense contractors to the smallest new commercial entrants. The breadth and depth of today’s challenges demand nothing less.

At the same time, sources of technological advancement for military systems increasingly exist outside the established defense industrial base. The 2023 National Defense Science & Technology Strategy identifies 14 critical technology areas: biotechnology, quantum science, future generation wireless technology (futureG), advanced materials, integrated network system-of-systems, trusted artificial intelligence (AI) and autonomy, renewable energy generation and storage, microelectronics, space technology, advanced computing and software, human machine interfaces, directed energy, hypersonics, and integrated sensing and cyber.⁶ Of these emerging technologies, 11 (80 percent) are being incubated and developed by a range of nontraditional suppliers outside the legacy defense industrial base.⁷

This reality is neither new nor surprising. During the Cold War, the U.S. government was the dominant source of research and development (R&D) funding. However, by the mid to late 1970s, this trend reversed with business sector R&D spending overtaking government outlays.⁸ This accelerated in the late 1980s and continues today. In 2022, business spending on R&D funding hit an all-time high, accounting for over 71 percent of all U.S. R&D spending. This pattern is not because of declining government spending, but rather the massive explosion of business spending on applied R&D activities.

Observing this trend, DoD leaders are seeking to leverage and incorporate private sector advances into military capabilities. Over the past 20 years, the DoD established new organizations to accelerate technology adoption and create homes for innovation, including the Defense Innovation Unit (DIU), the Strategic Capabilities Office (SCO), the Office of Strategic Capital (OSC), the Navy’s Disruptive Capabilities Office, and AFWERX.⁹ The challenge is to scale these activities across the department so that commercial sector innovations can be leveraged for military capability, often with minor modifications in order to interface with existing fielded capability and cyber-hardening.

Many of these efforts to date have been “bottom-up” action driven by warfighters to solve specific tactical needs. There are several cases of “top-down” efforts driven by leaders at the highest levels of the DoD, who wield their rank to cut through bureaucracy in order to rapidly scale innovation. To date, the most successful, large-scale disruptors, SpaceX and Palantir, developed outside the legacy DoD acquisition system. Each had to sue the U.S. government to change its contracting process, which demonstrates the institutional resistance to disruptive business models.¹⁰ While significant progress has been made to translate multiple years of congressional authorities, provided in National Defense Authorization Acts (NDAAs), into policy and implementation guidance, barriers and challenges remain to implement technological innovation at scale.

Despite this sobering truth, industrial firms are standing at the DoD’s proverbial gates with innovative solutions to pressing operational challenges. In many instances, there are not clear entry points for such firms to engage with the department to secure meaningful contracts. The DoD has recognized these challenges for at least 10 years. The aforementioned DoD organizations are embracing new pathways for engagement and using expanded acquisition authorities to rapidly contract with new organizations. While significant progress has been made in terms of organizations and authorities, barriers and challenges remain.

For this reason, the Center for a New American Security (CNAS) convened the Defense Technology Task Force in 2023 and 2024. This diverse group from government, industry, academia, and the investment community explored three major questions:

1. Given existing authorities, how does the current DoD system need to change in order to realize the potential value in the innovation ecosystem?
2. What are the specific changes required from the perspective of alignment, speed, and scale to ensure that needed capabilities reach the field on relevant timelines?
3. What lessons can be learned from successes across the broader national security enterprise that can be applied to the DoD?

After initial meetings, the group quickly narrowed its focus.¹¹ Overall, members agreed that the DoD has the ability to field hardware, software, and services much faster than it currently is, while using only existing authorities. Acquisition practices alone will not speed capability delivery. The DoD would benefit by implementing the budget flexibility recommended by the March 2024 Planning, Programming, Budgeting, and Execution (PPBE) Commission Report (for which one of the Defense Technology Task Force tri-chairs and report authors served as vice chair).¹² Additionally, while small, high-performing, and leadership-supported groups have had notable successes, they have yet to be replicated across the DoD to become common practice.

Over the course of six meetings, the Defense Technology Task Force heard from current and past practitioners about their successes and failures with defense innovation. Leveraging these discussions, the collective insights of the task force, separate case study analysis, and additional research, the authors concluded that while the DoD is able to deliver relevant, urgent capabilities to U.S. warfighters at speed and scale from traditional and nontraditional sources with existing authorities, policies, and procedures, it fails to do so in a regular, institutionalized fashion because of a risk-averse culture that often does not leverage existing options that are new, agile, and responsive.

Today, the DoD is constrained by nonmaterial factors relating to people and process. These constraints cannot be solved by direct legislative intervention or intermittent senior leader focus. Rather, the culture of DoD must shift toward rewarding the outcomes of speed and scale in capability development instead of rigid adherence to process. In the past, the department has demonstrated a selective ability to go fast and achieve scale, especially in wartime. However, regularly leveraging these approaches across the entire DoD enterprise requires changing incentive structures for personnel to encourage rather than punish creativity and appropriate risk-taking.

Based upon the discussion of the Defense Technology Task Force, this report outlines the problems facing innovation adoption within the Department of Defense and identifies the common factors behind successful programs. This analysis is paired with near-term recommendations that could help change and shape DoD’s overarching culture to achieve greater agility and alignment with warfighter needs. These recommendations include policy and process adaptations that do not require legislative changes.

The DoD has the tools to achieve these objectives. The uncertain and increasingly dangerous security environment from Kharkiv to Taipei stresses the innovation imperative for the DoD across multiple timeframes and theaters.

About the Defense Program

Over the past 15 years, CNAS has defined the future of U.S. defense strategy. Building on this legacy, the CNAS Defense Program team continues to develop high-level concepts and concrete recommendations to ensure U.S. military preeminence into the future and to reverse the erosion of U.S. military advantages vis-à-vis China and, to a lesser extent, Russia. Specific areas of study include great power competition, developing a force structure and innovative operational concepts adapted for this more challenging era, and making hard choices to effect necessary change.

Acknowledgments

The authors would like to thank several groups and individuals for their support. To the task force members and participants: Your willingness to contribute your time, expertise, and insights made this effort possible and dramatically enriched this report. To the CNAS team: Stacie Pettyjohn for her overall leadership of the Defense Program and getting this report over the finish line; Molly Campbell for her role as task force coordinator, ensuring that meetings ran smoothly from start to finish and her role writing the Task Force 59 case study; Philip Sheers for his role writing the Project Maven case study; the countless other CNAS staff who helped with meeting execution and note taking; Maura McCarthy and Emma Swislow for their excellent editorial help; and Melody Cook for her wonderful design work. This report was made possible with support to the Defense program.

As a research and policy institution committed to the highest standards of organizational, intellectual, and personal integrity, CNAS maintains strict intellectual independence and sole editorial direction and control over its ideas, projects, publications, events, and other research activities. CNAS does not take institutional positions on policy issues, and the content of CNAS publications reflects the views of their authors alone. In keeping with its mission and values, CNAS does not engage in lobbying activity and complies fully with all applicable federal, state, and local laws. CNAS will not engage in any representational activities or advocacy on behalf of any entities or interests and, to the extent that the Center accepts funding from non-U.S. sources, its activities will be limited to bona fide scholastic, academic, and research-related activities, consistent with applicable federal law. The Center publicly acknowledges on its website annually all donors who contribute.