Closing the Defense Innovation Readiness Gap

The Defense Innovation Readiness Gap Series: Realizing Partnership Potential—the third annual report in this series—is accessible here. The 2023 edition of the The Defense Innovation Readiness Gap Series can be found here.

For the past ten years, much like corporations, ministries of defense (MoDs) have reported innovation as one of their top priorities, citing it as a key driver of geopolitical standing and operational advantage. Typically, this prioritization manifests in the ministries’ pursuit of several innovation best practices, including Silicon Valley “learning tours”, high-profile partnerships with brand-name companies and universities, reorganized innovation offices and investment hubs, and newly appointed chief innovation roles and officers.

Yet, despite their best intentions and considerable investment, many ministries, and the national legislatures and leaders that oversee them, remain dissatisfied with the results that these innovation best practices have produced. MoD leaders are beginning to recognize that a significant gap—an innovation readiness gap—exists between their aspirations for innovation and their ability to generate results. While seeking to foster and scale innovation at the rate and investment levels necessary to maintain the comparative advantage that they desire against their peer and near-peer competitors, MoDs are still struggling to understand and apply the critical dimensions of how best to pursue innovation and close the innovation readiness gap that exists.

Study and Findings

In Fall 2021, the Munich Security Conference (MSC) and Boston Consulting Group (BCG) undertook a comprehensive review of defense ministries’ innovation activities across the globe to understand and better explain the fundamental issues inhibiting defense innovation today. Leveraging BCG’s extensive private sector innovation experience across sectors (including defense and security), the joint MSC-BCG study team initiated its first, annual study of defense innovation around the world with a survey sent to 59 ministries of defense, plus the European Union and NATO. Survey questions yielded scores that enabled the team to compare the innovation readiness of MoDs to that of their private sector counterparts along 11 core dimensions of innovation. (See Exhibit 1.)

The findings from the study are described in more complete detail in our full report to the MSC. In short, the study confirms not just that the innovation readiness gap exists, but also that it is prevalent. Ministries of Defense face significant challenges on all 11 dimensions of innovation readiness. Not a single MoD currently matches the innovation readiness of the top tier of the private sector. (See Exhibit 2.) Nor do any of the MoDs’ scores exceed the threshold of basic innovation readiness, defined as having enough capabilities to innovate confidently on an ongoing basis (the red area represents the “readiness gap”). On average, MoDs scored 61.8 against a threshold score of 80. For 7 of the 11 dimensions, MoD scores also fell below the private sector benchmark average.

Ministry leaders may not be surprised to learn that they fall below private sector benchmarks in most of these 11 dimensions, but they should be inspired to action by the quantification of this gap. Interpreted in light of BCG’s prior research on highly innovative organizations, these scores indicate that most MoDs currently lack the organization, structures, focus, ambition, and talent to effectively innovate at scale.

Further, MoDs cannot rely on private sector innovation to provide the capabilities needed to maintain or regain technological advantages. MoDs are in a unique position to influence the defense landscape by recognizing the demand for innovation in their forces, aggregating that demand, and scaling up new technologies to meet it. As long as ministries continue to fall short in these activities, the innovation gap will persist.

What, Then, Must Be Done?

The BCG-MSC team synthesized the most impactful results into five overarching actions that each ministry of defense may take. (Each action is further detailed in the full report.) Although ministry priorities or specific readiness gaps may dictate the immediate prioritization of some actions over others, all of these actions can be implemented over time to scale innovation and achieve a military edge. The five actions are as follows:

• Define your unique role in the global innovation landscape. Choose your innovation model based on your country’s strategic advantages. There is no single one-size-fits-all approach. 
• Communicate a clear innovation ambition, and align incentives. Establish a clear innovation ambition, define focus areas, and prepare your workforce with tools and training. Retaining and attracting top talent requires a clear mandate, a common purpose, and reinforcing incentives.
• Actively manage your innovation portfolio. Set outcome-focused KPIs, track program success, and shift focus from individual project silos to a balanced, holistic, and robust project pipeline.  
• Prioritize developing meaningful innovation partnerships. Establish governance and structure to maximize the value of existing and future partnerships in the organization’s ecosystem. Expand focus from just adding partners to also increasing the value of existing partnerships and nontraditional defense stakeholders.
• Deliberately shape the defense innovation market. Influence investments through market signaling, aggregating demand, and employing open architectures and open systems.

For each ministry of defense, the stakes involved in addressing the defense innovation readiness gap are higher than they might first appear to be. By reducing the gap, a ministry can optimize its ability to fulfill its most basic mandate: protecting the citizenry that it serves.

MoDs must mobilize now to meet these challenges. The current pace of defense innovation no longer affords the time for long-term study or nebulous working groups. Ministers and secretaries of defense must provide direct and inspired leadership to close the innovation readiness gap and position themselves to fight and win in the age of 21st-century conflict. Many people are counting on them to achieve nothing less.