Can the Defence Sector Innovate?

The UK currently faces multiple threats to its national security, threats which appear to have developed quickly and were unforeseen as little as ten years ago.

The threat from nation states like Russia, terrorist organisations like ISIS, cyber-security threats, both state-sponsored and non-state sponsored, pose the greatest challenge to the defence establishment since the end of the Cold War.

Simultaneously, the squeeze on public finances has severely impacted, and will continue to impact, defence procurement. Some programmes have been scaled back or even cancelled, all of which makes defence contractors all the more unwilling to invest in speculative R&D, particularly as the government squeezes the margin that companies are permitted.

However, the defence sector cannot just point the finger at government. Unquestionably, major defence programmes and those contractors who deliver them, need to improve delivery timescales and risk management, whilst wrestling with increasing complexity and shortages in specialist skills.

The way the government, the military and defence contractors respond to these challenges, the external threats and the financial restrictions, will determine our future security and prosperity. Innovative solutions are needed; however, is the defence sector capable of rising to the innovation challenge?

The answer is not a simple yes or no. Many barriers remain in the way of effective defence procurement that are unheard of for other sectors of the economy. At a recent round-table discussion hosted by Holmes Noble, we asked 25 board-level attendees from defence contracting companies for their view on the current challenges facing defence procurement and whether the sector can truly innovate.

The format of the event was Chatham House Rules, which precludes the direct quoting of any individual, the key themes of the evening are clear, namely a desire for more leadership from government; a recognition of the need for more collaboration and the need for a change in mindset amongst defence contractors. Throughout there are verbatim quotes from a number of the attendees plus references to the Boston Consulting Group’s Innovation in Defence White Paper which framed much of the evening’s debate.

It is our pleasure to publish this white paper and hope it will be a thought-provoking addition to the continuing innovation debate within the sector.

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