Don’t Let the Pentagon Get Stuck in Silicon Valley
By August Cole and Chris Meissner
If Secretary of Defense Ash Carter did a Google search for who would make the biggest splash as the head of the Pentagon’s new innovation panel from Silicon Valley, he couldn’t have gotten a better answer than the executive chairman of the eponymous search engine’s parent company, Eric Schmidt. The move announced at the RSA cyber security confab in San Francisco makes clear to the Beltway the military is serious about closing its innovation gap with the commercial sector by reestablishing ties to the Bay Area’s tech heartland.
Yet if the Defense Department’s innovation scouts get too focused on the corridor between San Francisco and San Jose, they risk missing out on existing or nascent technologies from America’s other innovation hubs. There are many U.S. centers of entrepreneurship and innovation in areas such as software, robotics, gaming, aerospace and life sciences.
Of course, starting out in Silicon Valley makes sense. Giant tech firms like Google capture the headlines in America’s Bay Area innovation heartland, which accounts for a third or more of all venture capital money nationwide. The National Venture Capital Association tallied up venture investing in the United States at $48 billion in 2014, a decade high. Going to Silicon Valley and joining forces with titans like Schmidt sends a powerful signal that the status quo defense establishment needs a reboot. The Pentagon must not get stuck there, however. It needs to look nationwide.
This approach requires embracing decentralization, which is not how the Pentagon sources military hardware and services. While today’s defense industrial base is distributed throughout the country for largely political reasons (Congress and contractors seed taxpayer dollars throughout the 50 states to ensure support of the biggest defense programs), a handful of major defense companies sit astride the market.
An update of America’s defense industrial base — call it DIB 2.0 — is about expanding the roster of new players and innovators, to include entrepreneurs, venture capitalists and inventors throughout the country.
Beyond Silicon Valley, there are known tech centers such as Boston, with life-sciences firms as well as robotics companies like iRobot and Boston Dynamics (now owned by Google). In Wall Street’s shadow, New York has Silicon Alley as well as Big Data and social media and marketing analytics firms. Los Angeles counts CalTech, NASA’s Jet Propulsion Lab and of course Hollywood. San Diego has robotics expertise as well as data analysis. Pittsburgh possesses deep robotics expertise at Carnegie Mellon. Colorado and Utah have firms with expertise in cyber operations, cloud computing and geospatial information systems. Cleveland counts 3D printing specialists among its prominent companies. Perhaps the closest rival to Silicon Valley is Seattle — the hometown of Microsoft and Amazon, let alone Boeing’s birthplace. The Puget Sound can compete with the Bay Area as a global tech and innovation hub, as Xi Jinping showed last year during his state visit. Austin, Texas, is another innovation center for software and gaming, and of course music.
This is a lot of ground to cover, but it is not an impossible task for defense officials. It’s actually the same challenge venture investors have. Some turn to the Kauffman Index, an annual survey that highlights startup-rich areas, which could be of use to Defense Department R&D scouts in considering how to approach areas like Denver, San Diego or Miami. Fortunately, these cities can be visited on quick flights to and from Washington. A willingness to travel can pay off, according to recent research from MIT that found venture capitalists with direct-flight access to their portfolio companies produced more innovative firms.
With a Silicon Valley beachhead and commissions like the Defense Innovation Advisory Board taking shape, the Defense Department should cross-reference data like the Kauffman Index with existing military and defense communities. Miami, for example, is home to U.S. Southern Command, and the area is proximate to Central Command, Special Operations Command and NASA facilities. San Diego is home to the Navy’s 7th Fleet, a major Marine Corps base and it is home to the Navy’s West Coast SEAL teams. These mission-oriented communities have the advantage of being near military installations that represent their customers, as well as a veteran workforce. There also may be less competition from the biggest VCs and investors that are focused on the Bay Area.
Another approach is to follow the money of current VC investment beyond Silicon Valley, though it may be harder to differentiate — especially close to a core technology clusters. Richard Florida, who has studied venture capital funding for decades, recently wrote that San Francisco should be seen as the locus of VC investing, not to the south in Silicon Valley.
The Defense Department is on the right track by reinvigorating its relationship with the technology sector and VC community, but the following steps are necessary to make the whole effort a long-term success. Along the same lines as the Defense Innovation Unit (Experimental) or DIUx at Moffett Field, the Pentagon should establish “open-door” DIU (and drop the ‘x’) outposts in the Boston, Denver, San Diego and Miami areas and establish routine visits from science and technology officials. Officials should take a double-barreled approach: employ a sort of geographic innovation arbitrage around VC investment while also following the money, too. Education will be crucial for entrepreneurs and VCs who aren’t versed in America’s biggest defense challenges and the role technology and innovators must play in addressing them, such as the in-development Third Offset Strategy. Not to be overlooked are the veterans working in and around the tech sector, too, as connectors and networkers who understand the military’s mission but also the commercial cultures within which great ideas flourish in the private sector. At a policy and political level, two other steps are crucial: create clear policy around intellectual property management and investment outcomes. And keep Congress in the loop.
Good venture investors have certain traits. They get in early; they place lots and lots of bets because many will fail; they meet with almost anyone. The Defense Department needs to do the same. Looking beyond Silicon Valley is an important step to making sure the Third Offset and other strategic initiatives really are on the cutting edge, not playing catch-up. There is no better place to start reflecting that geographical diversity than the advisory panel Carter and Schmidt will put together in the coming weeks.
August Cole is co-author of Ghost Fleet: A Novel of the Next World War and writer-in-residence at Avascent, a consulting firm in Washington, D.C. Chris Meissner is a senior associate and defense/aerospace analyst at Avascent.
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