WASHINGTON — The Pentagon’s new strategy for the defense industry speaks the language of innovation.

In the cover letter alone, it calls for “generational” change, a “modernized industrial ecosystem” and more work with “innovative new technology developers.”

To an extent, these are slogans of the tech-style companies trying to remake what and how the Pentagon buys. The document is, in part, a test of how tightly their ideas are taking hold, industry executives say.

In interviews with Defense News, many such firms said they were glad to see their priorities in such a high-level document. Still, they said, what matters more is not what the plan says, it’s how the plan is implemented.

“From my experience, government strategies are a dime a dozen,” said Chris Brose, head of strategy for defense technology company Anduril. “The real money is made in execution.”

Brose’s stance is similar to how other companies — including those selling more traditional weapons — have described the document. They want to see the Pentagon take meaningful steps toward change, like buying more off-the-shelf systems, incentivizing innovation and making it easier for small businesses to meet security requirements.

Still, the stakes are higher for firms like his, whose slice of the defense budget is smaller and who argue that legacy suppliers can’t move quickly enough to outcompete China.

The strategy identifies a similar problem. China’s manufacturing strength in certain areas “vastly exceeds” that of the U.S. and western allies, it says. And yet, it’s not clear to what extent the Pentagon sees innovation as an answer — even if it wants to do more business with such companies.

“We really have to address the current and acute challenges as well as the future threats,” said Laura Taylor-Kale, the Pentagon’s head of industrial base policy, in a briefing.

A.J. Piplica, CEO of hypersonics startup Hermeus, said he appreciated the strategy’s emphasis on increasing production capacity. Still, he told Defense News the document lacks detail on specific capabilities.

“I think a lot of the tactical actions that maybe sit below this strategy probably focus more toward the capacity side,” Piplica said. “What’s missing is, how do we leverage the capability side of this to bring asymmetric capabilities to bear faster and get them transitioned and into production.”

Implementation plan

In classified sessions that will last through January, Pentagon officials are speaking with firms on how to implement the strategy. Anduril will participate in those, just as it did in the earlier round of engagement while defense officials wrote the document.

Brose said his firm wants to see two things. The first is more investment in the types of drones Anduril makes, cheaper and more expendable compared to traditional weapons. The second is a set of incentives that rewards new, innovative companies, which are in some cases still learning to do business with the Pentagon.

In an interview with Defense News, the acting deputy of Pentagon industrial base policy, Halimah Najieb-Locke, said such incentives are a priority.

“The growth of innovative technologies in the commercial world has created a growth of opportunity space in the defense world,” she said.

Using that opportunity, she said, will require a different set of assumptions from the Pentagon, some of which are mentioned directly in the strategy. The Defense Department spent most of the 20th century holding major sway over its suppliers, whose only customer was often the government.

At least in regard to new technology, this is largely no longer true. Innovation often now comes from the private sector, and the Pentagon is only one of many customers for the businesses in that market.

“We still work on some of those assumptions as we’re driving the competition,” Najieb-Locke said.

With these markets, over which the Pentagon has less control, its role will likely be as a guide. In addition to issuing contracts, Najieb-Locke said, the department can help avoid risks in the supply chain.

Among its nearly two dozen recommendations, the new strategy says the Defense Department should “prioritize off-the-shelf acquisition where applicable and reasonable.” Doing so, it says, will help provide cheaper and faster equipment and increase the supplier base.

That being said, the incentives to accomplish this goal aren’t yet in place, said Doug Philippone, co-founder of the VC firm Snowpoint Ventures and head of global defense at Palantir.

“It’s not where it should be,” he said of the Pentagon’s demand for innovation. “It’s way too much of a fight,” he added.

One fundamental reason the department struggles to integrate new technology is that acquisition programs are siloed. Jade Baranski, CEO of data analytics and AI firm Mobilize, said program offices often duplicate efforts because they weren’t aware that another team had already solved a particular problem.

Mobilize has launched a data platform called Vision, a system designed to give program managers and other decisionmakers to see and track the various innovation projects being developed and implemented across an organization.

Baranski was glad to see similar goals of connection and transparency outlined in the new strategy.

“There’s plenty of tech in the space,” they said. “There’s plenty of great companies ready to execute. But how do you actually connect the dots?”

Cost of entry

Connecting the dots looks different across the innovation market, which has larger companies like Anduril and Palantir, along with a churn of new entrants.

A priority for smaller firms is making sure the Pentagon understands how hard of a customer it can be. Josh Marino, vice president of operations at solid rocket motor company Evolution Space, said the Pentagon’s strict security requirements can price companies out of the market.

Marino said he was glad to see the strategy mention these “cybersecurity costs of entry” and other programs that would make it easier for small businesses to work with the department.

Pentagon officials have said a classified plan to implement the strategy will be finished in March. As the department moves forward with that plan, Marino said he’s looking for signs of reassurance.

“Seeing dollars move around and being reprioritized . . . those are strong, near-term indicators that this strategy we’re trying to apply as a country is actually being implemented,” he said.

Courtney Albon is C4ISRNET’s space and emerging technology reporter. She has covered the U.S. military since 2012, with a focus on the Air Force and Space Force. She has reported on some of the Defense Department’s most significant acquisition, budget and policy challenges.

Noah Robertson is the Pentagon reporter at Defense News. He previously covered national security for the Christian Science Monitor. He holds a bachelor’s degree in English and government from the College of William & Mary in his hometown of Williamsburg, Virginia.

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