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Revitalizing Defense Innovation: Countering the Valley of Death

Let’s stop funding the Valley of Death.

The readiness crisis is so deeply entrenched that it has taken hold of our maintenance culture. PPBE reform cannot come soon enough. Faced with a contracting industrial base (25% in the past 10 years…5% in 2021 alone), we cannot afford to wait on systemic change.

We hear the phrase every week, “the Valley of Death.” It represents that period of time between some initial seed funding of a technology until it is more appropriately funded in the regular budget. It’s a period of time where many companies feel first the joy of a government contract, followed by the twisting uncertainty of continuing funding.

Most technology companies are familiar with the term. Some weather the journey better than others. Research repeatedly confirms that small business is where innovation takes place. Small businesses feel pressure to partner with or be acquired by a larger company flusher with the cash the journey through the Valley of Death requires.

Small business set asides exist precisely because the availability of capital can be such a challenge for small businesses of particular socio-economic categories: women-owned, service-disabled veteran-owned, HUB zone, and 8(a). By law, 25% of opportunities must be awarded within these categories. That target is now met at the macro level even if some agencies fall short. Approximately 61,000 companies per year receive set-aside contracts.

The Planning Programming Budgeting and Execution (PPBE) process is the archaic post-World War II-era budgeting tool we presently live with that causes the conditions creating the Valley of Death. Managing vast sums of taxpayer dollars requires some system of planning, deciding, and accountability. Over time, the PPBE monster has outgrown its original purpose and proves no longer capable of managing in an environment that demands agility. The first, and most critical roadblock is “the requirement.”

Congress established a PPBE Reform Commission to bring experts together to find ways to improve this multi-year budgeting process. The commission recently produced an interim report and will likely submit a final report by the end of the year. Unfortunately, the committee is entirely made up of insiders. None would be identifiable as transformational leaders or changemakers if evaluated on their prior service. Well-intended as the members of the commission may be, and well-intended as the reform effort itself may be, we are years from serious change to PPBE.

In the interim, additional programs continue to crop up.

  • The Office of Strategic Capital. Established in early 2023, its purpose is to identify technologies and offer “patient capital” for investors and interested companies. The details of the program are evolving, but the concept funds technologies through the Valley of Death.
  • Accelerate the Procurement and Fielding of Innovative Technologies (APFIT) is a pilot program established in fiscal 2022 to “expeditiously transition technologies” from small businesses and nontraditional defense contractors. It is a relatively small program at $100 million in its first year and slightly more in its second year. To date, roughly 20 companies benefit.
  • Establishment of The Defense Management Institute was announced in February 2023. Its stated purpose is examining how decisions are made in the Pentagon across the board, from acquisition to human resources. This could take a while!
  • Defense Innovation Unit (DIU) was established under the direction of then-SecDef Ash Carter. Its purpose is to speed commercial technologies to the warfighter embracing the Silicon Valley mindset of moving and failing fast en route to big breakthroughs.
  • The Defensewerx concept has grown to its own ecosystem. Stemming from SOFWERX, the OG of Werx, there are now myriad entry points throughout the country to tap into Werx programs.

The sheer number of companies moving through these programs confirms that the programs are only capturing the tip of the iceberg. They address symptoms rather than the root cause. They effectively fund the journey through The Valley of Death for the relative few.

We need an HOV lane for new technology that connects capability with need, without waiting on the cumbersome requirements process to agree two years later. Nimble companies that understand how funding flows recognize there are ways to short-circuit the PPBE process. Think of a jumper wire that can speed an acquisition along by as much as two years. But that requires insider knowledge of the process.

Do you have a jumper wire? My clients do.

SAVE THE DATE

Too many companies miss critical windows of opportunity because they go on summer vacation and miss this prime opportunity to lock down a year-end push for funding. Register now for my free interactive Zoom session where I will break down the opportunities,  clarify the tactics and provide examples of the messaging that best positions your capability. Register for my How to Finish the Fiscal Year Strong! zoom session here.

JULY 12TH WEBINAR UPDATED

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ZIPLINING THROUGH THE VALLEY OF DEATH

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