United States Senator John McCain (R-AZ), who is Chairman of the Senate Armed Services Committee, provided keynote remarks yesterday at the U.S. Chamber of Commerce in Washington, DC. Senator McCain’s remarks related to defense acquisition reform generally, but more specifically related to the need for the Department of Defense to streamline acquisition of new, innovative technologies.
McCain, who over the last several months has proposed sweeping acquisition reforms, told the audience that “our Defense Department has grown larger but less capable, more complex but less innovative, more proficient at defeating low-tech adversaries but more vulnerable to high-tech ones.” He would go on to explain that “the Department of Defense must be able to access innovation in areas such as cyber, robotics, data analytics, miniaturization, and autonomy – innovation that is increasingly likely not to come from Washington or the defense establishment.”
In one of the most illustrative comments, McCain said: “Innovation is measured in 18-month cycles in the commercial market. The Defense Department has acquisition cycles that can last 18 years.” Senator McCain would go on to point out that the Department of Defense “spent $46 billion between 2001 and 2011 on at least a dozen programs the never became operation.”
There is no doubt that the acquisition system employed by the Department of Defense is broken. Of course, with an agency as large as the Department of Defense, a woefully inadequate response to technological advances and adoption of cutting edge innovation should be anticipated.
Anyone who has ever done business, whether personal or professional, with the government has to know that a stark difference exists between government time and private sector time. There are no doubt numerous reasons for the lethargy of government, but with respect to innovation it is hardly surprising that the Department of Defense finds itself wholly incapable of existing in an innovation marketplace that Senator McCain rightly characterizes as being measured in 18 month increments.
According to the Defense Department website, the U.S. defense apparatus has more than 1.4 million active duty military personnel, 718,000 civilian personnel, and 1.1 million National Guard and Reserve forces. This makes the Department of Defense the largest employer in the United States. To give additional perspective, the Pentagon has triple the floor space as compared to the Empire State Building.
The fact that large, established private sector companies lose the ability to innovate is well known. It is widely known that innovation overwhelmingly happens in small companies and entrepreneurial start-ups, in research labs and universities, sometimes even in the garages of the classic independent inventor, or the basement of a laid off engineer who finally has time to work on his own projects.
When any company gets too large it loses the ability to innovate. We have seen this play out over and over again throughout history. The most innovative breakthroughs almost universally come from small enterprises, research institutions and individuals. It is the rare exception when a large entity can come up with something truly revolutionary. One example of a large entity that continually pushes the envelope is IBM, but they are the exception not the rule. Despite IBM’s size they have long engaged in purely speculative research, which means a portion of the IBM R&D team intentionally operates as would an academic or research institution. But for every Watson innovated by a large company there will be dozens of revolutionary innovations made by much smaller enterprises.
As a company grows decision-making becomes remote and removed by layers of bureaucracy. Large, established companies in the technology sector tend to be publicly traded companies that have divergent interests and issues that require attention, but which also take management’s eye off the ball so to speak. These publicly traded companies also have shareholders to please, and most CEOs operate on a 3-year horizon, or less. A significant number of high tech CEOs operate on a quarter-to-quarter basis, chasing stock prices ever higher without a long-term plan, or even an intermediate plan. Of course, while innovation life cycles tend to last for 18 months, truly revolutionary innovation cannot happen in that short time frame. Paradigm shifting innovation requires many years of planning and a culture that will support the development life cycle.
No longer nimble and responsive, a corporate structure that isolates innovator from executives simply does not support a vibrant innovation ecosystem. Too many layers between a potentially promising innovation and the visionary who can champion the project is precisely why large tech companies buy smaller, nimble, exciting, innovative companies. Apple, Google, Facebook, Oracle, Cisco and virtually every large pharmaceutical company and biotechnology company has fallen prey to their own size and lethargy.
We know the private sector is far more nimble and responsive than the public sector, and we also know that giant tech companies have long since lost the ability to come up with paradigm shifting innovation in all but the most extreme, outlying case. So why then should it shock anyone that the Department of Defense, the largest employer in the United States, finds it impossible to innovate or even adopt outside innovation within any relevant timeframe?
Like massive corporations that have become too bloated to innovate, the answer for the Department of Defense must be to become smaller, more nimble and less afraid of failure. This is not to suggest that Congress should shrink the military or lay off civilian employees. Instead, if achieving and adopting more innovation is the goal, as it should be, the answer is to break apart the innovation responsibilities from an agency that has grown too large to do anything other than stifle innovation.
Senator McCain ended his remarks at the Chamber of Commerce by saying that the problems facing the Department of Defense can be solved “if we create an acquisition system that enables the Department of Defense to take advantage of the creativity and ingenuity of America’s innovators and entrepreneurs.” To this I simply say — Amen! Of course, facilitating America’s innovators and entrepreneurs means Congress cannot further complicate the patent system that is so necessary for innovators and entrepreneurs to succeed.