In the 30 years since the Cold War ended, the United States has lost much of the technological edge it once enjoyed over countries like Russia and China in military technology. Although commercial innovation in the U.S. is progressing rapidly on many fronts, the Department of Defense has been slow to assimilate new ideas and turn them into usable tools for warfighters.
The lagging adoption of cutting-edge technologies has created a sense of crisis in Washington, where national strategy increasingly is focused on the danger posed by near-peer adversaries, especially China. Now, one of the nation’s biggest military contractors has fashioned a way of bypassing the traditional military innovation system, creating a vehicle for greatly accelerating the transition of new technology from laboratories to advanced development.
BAE Systems, Inc., the U.S. arm of Britain’s biggest aerospace and defense conglomerate, has created an organization within its Electronic Systems unit called FAST Labs that combines funding from federal research centers with venture capital and commercial technology incubators to greatly accelerate the velocity of innovation. Rather than being owned by the company’s operating units, FAST Labs is an independent profit and loss business within the enterprise dedicated solely to rapid innovation.
FAST Labs is not like other legendary innovators in the defense sector, such as Lockheed Martin’s Skunk Works of Boeing’s Phantom Works. It does not prototype new weapons or engage in advanced development of systems. Its 850 scientists and engineers are dedicated to fostering commercial innovations with potential military or intelligence applications through the ecosystem of commercial startups and technology accelerators. BAE Systems is the only major defense contractor to co-sponsor such accelerators in places like Austin and Boston, providing entrepreneurs with mentoring, resources and market opportunities that make them more attractive to venture capital and angel investors.
The ultimate goal is to find cutting-edge solutions to security challenges faced by the company’s major operating units and by federal sponsors such as the Defense Advanced Research Projects Agency(DARPA), but the way FAST Labs goes about doing that is to bypass the traditional military system for advancing new technologies. That system is widely viewed as too slow to reestablish the generational lead over near-peer adversaries that the joint force once enjoyed in warfighting technologies. In effect, FAST Labs is seeking to tap into the dynamism and agility of the market-driven innovation model by giving promising companies a leg up in the competition for capital and talent.
Although FAST Labs works with all of BAE’s business units, its areas of emphasis heavily favor electronic and information technologies. The company’s Electronic Systems unit developed the electronic warfare system for the stealthy F-35 fighter and dozens of other military aircraft. FAST Labs focuses on innovations applicable to advanced electronic hardware, autonomous vehicles, electronic warfare, sensors, signal processing and cyber resilience. It also has an ongoing interest in the use of artificial intelligence for diverse military missions.
Other big defense companies have similar interests, but none has gone as far as BAE Systems in establishing collaborative relationships with commercial startups, venture capital firms and major research universities. FAST Labs managers do not conceal the fact that they are seeking disruptive technologies that can deliver big gains to America’s military at record speed, and also confer competitive advantages on the company’s business units. I know about all this mainly because I count BAE Systems among my consulting clients and it also contributes to my think tank.
In order to facilitate the creation of trusted partnerships with startups, FAST Labs has in the last year set up two internal organizations aimed at refining its search for relevant technologies. The first is a portfolio strategy team that defines the direction in which innovation needs to move to meet the needs of government customers and company operating units; among other things, this strategy group will undertake make-or-buy decisions to determine whether BAE should eventually bring innovations in-house or simply purchase them from outside.
The second internal organization is a scouting team that seeks out disruptive technologies emerging from universities, small businesses and nascent startups that deserve backing because of their potential. The sources of these disruptive innovations are typically commercial in nature, but the technology must be dual-use in the sense of having relevance to military needs. Occasionally BAE will come across a new technology of use to its commercial businesses, however the dominant thrust of FAST Labs is innovation in support of national security—as befits an organization that depends heavily for funding on sources like DARPA and the Air Force Research Lab.
It is no coincidence that FAST Labs is so different from the R&D arms of other big military contractors. When it was being established, BAE Systems executives used as benchmarks such powerhouses of commercial innovation as Thomas Edison’s Menlo Park facility and the old Bell Labs. The emphasis was on fashioning an agile, energetic research enterprise that was not tied to particular product lines or preconceived solutions. As one company executive puts it, “We make physics equations into reality.” In other words, FAST Labs is all about deep research that can be put in the service of national security by leveraging a market-based approach to innovation. FAST Labs helps the process along, but tries not to interfere with the dynamic processes driving innovation.
Because FAST Labs sits at the nexus between commercial innovation and military needs, its business model has relevance beyond the defense arena. By supporting local innovation ecosystems, BAE Systems seeks to simultaneously stimulate economic growth and bolster national security. In the past some have seen these goals as unrelated, or even contradictory. FAST Labs is proving they can be complementary and interdependent.