Carter Announces Leadership, Organizational Changes at DIUx

By Jon Harper
Sec. Ashton Carter speaks Wednesday, May 11, in California.

MOUNTAIN VIEW, Calif. – Defense Secretary Ashton Carter is launching a major restructuring of the Pentagon's high-profile Silicon Valley outpost, the Defense Innovation Unit-Experimental.

DIUx was created last year to serve as a bridge between the Pentagon procurement bureaucracy and entrepreneurs in the nation’s leading tech hub. It was intended to help bring cutting-edge technologies into the Defense Department by building relationships with non-traditional suppliers.

Eight months after the new office opened its doors, and following some early successes and difficulties, the Pentagon is ready to launch “DIUx 2.0,” Carter said on May 11 at DIUx headquarters in Mountain View, California.

The next iteration “will be a test-bed for new kinds of contracting with startup firms,” he said. “They’ll work quickly to execute time-sensitive acquisition programs.  And they’ll move at the speed of business. We know how fast companies run here, and in other tech hubs around the country, and we expect DIUx 2.0 to run alongside of them. “

There will be key differences between the original DIUx template and the new version, senior officials told reporters on condition of anonymity during a briefing to preview Carter’s speech.

“There will be some structural changes to how DIUx does business and interacts with the tech community and how it operates overall,” said a senior defense official. “This is going to allow us to take it to the next level. … It’s a bigger project now and that requires more people involved, and that’s one of the reasons you’re going to see some of the changes.”

Under the new arrangement, the unit will report directly to Carter’s office.
The plan is to “give it more direct ties to the secretary so we can … make sure that it’s empowered to do things in a way that gives it more traction [so that it can] act more quickly and have a little bit more success,” said another senior official.

To facilitate the rapid uptake of promising technology, Carter has directed DIUx to work closely with the Defense Department’s rapid acquisition cells and research-and-development community.

DIUx will also undergo a major change in leadership. Some of the old guard will be replaced by those who have both a military and high tech business background. The new bosses were handpicked by Carter and his staff, the officials said.

“There are individuals that have in most cases either military experience or have been a little bit involved with the department but have then gone on to be very successful entrepreneurs in Silicon Valley themselves,” said a senior official. “We were mostly looking for people that could bridge the gap because they’ve been in both worlds and were very successful in both worlds.”

Raj Shah has been named the new “managing partner” of DIUx. Shah, a National Guardsman and an F-16 pilot, co-founded and served as CEO of a technology startup.

Also joining the leadership team: Isaac Taylor, who served as the head of operations for Google X, the company’s R&D facility; Vishaal Hariprasad, an Air Force Reserve captain who co-founded a cybersecurity start-up; and Chris Kirchhoff, who served as a civilian advisor to the chairman of the Joint Chiefs.

The new leadership group be joined by a team of reservists, who will serve at DIUx in a first-of-its-kind reserve unit, Carter said.  That team will be led by Navy Reserve Commander Doug Beck, an Iraq and Afghanistan combat veteran who works in his civilian life as Apple’s Vice President for the Americas and Northeast Asia, reporting directly to CEO Tim Cook.

To make the organization more “flat” much like Silicon Valley companies, Carter said he is establishing “a partnership-style leadership structure” for DIUx that includes technologists, investors and business executives.

While praising the current leadership for getting DIUx off the ground, Carter acknowledged that there have been bumps along the way. Silicon Valley CEOs continue to complain that the Pentagon’s acquisition process remains a major headache for tech firms that want to do business with the military. The hope is that bringing in leaders who have more tech industry experience will enable the outreach effort to proceed more smoothly.

At DIUx “there will be people in positions of leadership now who have …. had to deal with these issues themselves and will be able to talk the talk and understand where you’re coming from,” said a senior official.

Special innovation units won’t necessarily make contracting problems go away for Silicon Valley firms and tech startups, Pentagon leaders acknowledge.

“We are still the federal government and we’re going to have hurdles that not every institution has,” said a senior defense official. “But that doesn’t mean we can’t work to make it better. And DIUx is a perfect example of trying to approach these issues in a more user friendly way.”

The Pentagon wants to expand the DIUx model across the country.

DIUx 2.0 will be “a nationwide release,” Carter said. The Pentagon plans to open a second DIUx office in Boston, another major innovation hub.

“We’re not just iterating, we’re scaling,” he said.

The Defense Department is also “upgrading this DIUx’s processing power,” Carter said.

In the fiscal year 2017, the Defense Department requested $30 million in new funding to direct toward non-traditional companies with emerging commercially-based technologies that meet Pentagon needs.

“With co-investment from the military services, this number is really just a starting point,” Carter said.

DIUx will exercise “all avenues” to fund promising technologies, including merit-based prize competitions, incubator partnerships and targeted research-and-development efforts, he said.

A key purpose of the restructuring plan is to give the DIUx initiative durability as the clock winds down on the Obama administration. Carter “wanted to look at a way to ensure and almost incubate the model so that it’s something that would last longer than just the time he’s secretary,” said a senior defense official familiar with his thinking.

Topics: Cyber, Defense Department, DOD Leadership, DOD Policy, Infotech

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