Is the Defense Company Business Model Broken? Insights from Munich Security Conference
Photo: Mircea Geoana, Former Deputy Secretary General of the NATO; Member of the Security Innovation Board, Munich Security Conference
The Future of Defense Tech Manufacturing & Innovation event in the framework of the Munich Security Conference showed that upcoming defense players, while still struggling, are necessary to make defense more resilient and adaptable in weeks rather than months to add mass and speed. Essential Insights from the Panels.
Speakers included high-ranking NATO and US military leaders, CEOs and founders of defense and defense AI startups such as Firestorm, Helsing, and Frankenburg Technologies, and management of legacy makers such as Rheinmetall and Saab, Inc.
Insights from the Panels
- With the war in Ukraine, everything has changed. Before, the focus in defense was often on quality. Now, it is about quality AND speed to quantity.
- Legacy systems will still be around in 10 years and beyond, but newcomers that have emerged over the last couple of years bring speed of implementation, adaptability, and asymmetrical measures to the battlefield - central assets in today´s and future warfare.
- Software is changing the battlefield, with a massive effect on upgrading legacy systems. Even a software defense prime is thinkable one day, according to Ned Baker, who is Managing Director at defense AI company Helsing.
- A challenge for defense hardware startups is that they typically lack scalability for state militaries. Going from 10 to 100 to 1000s drones a month is a tremendous challenge. On the other side, startups often miss clear communication with (potential) clients.
Looking at the Greater Picture
- Part of the challenge in creating deterrence is to secure massive funding. To secure funding, communicating threats has to become way better, believes Edward Vaughan, US Major General and Executive Director, Joint Rapid Acquisition Cell and Former Director of Space Operations (DSO).
- Large investors with deep pockets have to come on board, including banks, sovereign wealth funds, and large tech companies. Part of that would also be to make it easier and more acceptable to invest in defense and make state guarantees for defense contracts.
- One central part of the defense and security equation is to make supply chains more resilient.
- Military-grade regularly means “worse quality” with a higher price tag, according to Kusti Salm, CEO of Estonian missile developer Frankenburg Technology. In comparison, civil innovations, such as the smartphone are typically better in quality while being cheaper because of mass production and the number of feedback loops from consumers indlucing iterations. One way to fix this is to focus more on dual-use and integrating civil technology more often.
Conclusion
Defense primes with their legacy systems and startups with the latest defense tech while competing in the marketplace, in the end, all have the same enemies.
