We need to mobilise innovation – there is a template

The deteriorating security environment in the world and our region is now plain to see and garnering a level of urgency worthy of its time. So when does Australia plan to take it seriously with deeds more than words ?

Large government procurement of capital items such as fighters and submarines seem to get all the news, given their cost that is understandable. Keeping these things company in the media seems to be an unending story of defence procurement gone bad – Multi Role, Armed Reconnaissance and Seasprite helicopters, Hunter class frigates and more.?

Some of the problem seems to be our desire to Frankenstein a platform used elsewhere for our specific needs. We seem to endlessly toil to modify these systems until they cost far more and take much longer, then as a result our troops have far less of them. We took on the venerable SLR and it served for 32 years unaltered, the Leopard tank and Chieftain before it were used without ‘Australianisation’ other than its camouflage pattern and radios, Oberon submarines were operated to great effect. There may be some sanity breaking through with the recent acquisition of the Abrams tank and the upcoming purchase of Apache and re-introduction of the Blackhawk, we can only hope.

Potentially a lot can be learned about what really matters from Ukraine, those brave soldiers are being sent everything from modern rockets and missiles to Vietnam era armoured personnel carriers to augment their cold war era Soviet amour and aircraft. They have every brand and type of military equipment that donors have surplus of (or want tested), They also seem quite capable of integrating and using this wide variety and vintage of equipment to great effect, noted though they have no eye to a multi-decade of sustainment of the platforms as they are more existentially focused.

But what is it that matters more, the ultra-modern $4M M777 howitzer or the $2000 drone adjusting the fall of shot ? They both matter but it takes a decade (for a country with deep experience) to design, build, test and field a new howitzer – it takes a few short quarters to do the same with a drone (if done by the private sector). Then all of a sudden the howitzer no longer needs the precision guided $100,000 round to hit a target but can produce a similar effects on the ground with far more common (cheaper) ordnance. Modern tech led solutions augment platforms and weapons that would otherwise languish in warehouses.

But we need to get the right high-tech solutions at the right cost and time frame to our forces. The big problem is we do not know what those solutions are, we know yesterday’s solutions but are unaware of tomorrow’s problems. But we do know the people who will create tomorrow’s solutions – they are young, well educated and incentivised engineers and entrepreneurs who will apply their minds to solve these problems. How do we get them to take this role on ??We need to borrow from the venture fuelled boom of the last 10 plus years in software.?

We need a framework that allows lots of new things to be thought up, built, tested and deployed whilst along the way acknowledging that many of these will be consigned to the dustbin. And that is OK, but how does government do that without the barking of uninformed journalists or the opposition about a waste of tax payers money ? By approaching the right segment of this market you get to back more earlier stage projects with less capital per project until the winners begin to take shape, instead of betting too much on too few projects and hoping one works – there is less fiscal risk in this approach, even more so when private capital helps.

We need to enable the private sector to take on more of the funding of these things. It has worked in the last decade with tech startups, whilst there have been some government grants the amount of private risk capital in this space has been eye watering. This has been in part enabled by the tax schemes (ESIC and ESVCLP that see tax benefits for investors) as well as a general positive macro investing environment.

We need that venture fervour in the sovereign defence technology sector.

We need to see success breed success, we need the entrepreneurs of this sector recycle back to doing it again and then becoming the future investors backing more early companies to spin this flywheel of progress ever faster. We need the arms of government to get real and back their words:

• Defence – assist with more trials that are not gated through organisations designed to rate limit and provide only what defence they think they need. Each unit should have to sponsor one project per year, call it 20% time for the unit dedicated to innovation application (defence may be surprised the positive impact this has on retention as well);
• Government – continue the work of ESIC and ESVCLP. If you want risk capital deployed into this space give investors a reason to do so, expand these programs to bring more capital in to fund risky things; and????
• Education – retain the priority funding of university courses that make sense to Australia. If we want more onshore manufacture then we need more engineers, mechanics and more. This is regardless of defence based investment or not, use the government purse to make STEM an easier choice for more.

There are amazing programs in defence for some of this from Army Robotics, Quantum and Innovation days through to the Air Force and Plan Jericho, these are all worthwhile and run by dedicated people who care for the outcomes they know are possible. If we are to look at the last 10 years in tech startups though we saw:

• hundreds, maybe thousands of active angel investors seeding opportunities;
• dozens of accelerators alongside rich community engagement or co-working spaces, meetups, conferences and more;
• scores of well capitalised funds deploying capital regularly; and
• heartening positive sentiment about the leaders in this sector, they were people to be respected.

We need this for defence innovation. We need to do more - we need to mobilise innovation, investors and entrepreneurs if words are to become deeds.

Stephen Baxter

Founding Investor at BeatenZone Venture Partners (sovereign lethal and near lethal defence investing), cofounder and executive Chairman at TEN13.

https://www.dhirubhai.net/company/beaten-zone-venture-partners/