Building the right relationships
Key stakeholders in defense for enduring contracts
Last week, we explored how companies can expand from being defense-focused to more broadly commercialized.
But many companies that I talk to aren’t looking to do that—at least not yet.
Maybe the company is an early stage defense-tech company looking to grow beyond a single Phase I SBIR, or it’s established commercial opportunities looking to expand into defense.
Maybe you’re a founder trying to grow and expand. Maybe you’re a VC looking to help give an edge to your portfolio companies. Maybe you work in the defense modernization space and are still trying to figure out how the sausage is made. Regardless, if you’re reading this, you’re likely interested in knowing about how to do business with the government / Defense Department.
In this edition, we’ll explore three key stakeholders (end-users, Congress, and military decision makers) that a company must address to succeed in doing business with the DoD.
Wait, how did we get here?
I think it’s important to remember that we’ve seen massive shifts in how the DoD does business in the past thirty years.
For most of our country’s history, the government led research and development into novel technologies. After the end of the Cold War and with the explosion in technological development that came during the Information Age, we’ve seen a shift from government-led tech development to private sector-led tech development.
So now, the government and Defense Department are increasingly reliant on the private sector to develop new tools, equipment, softwares, and more. Further, the Defense Department has always relied on the private sector to turn the technological advancements into mass-produced equipment.
To achieve the massive procurements necessary to keep the military machine moving, the bureaucratic machine developed processes to protect the government from fraud, waste, and abuse (these processes are incredibly slow). As such, major purchases have to be programmed in advance in the Futures Years Defense Program (FYDP). Having a program of record in the FYDP is really a critical step towards long-term viability for defense-focused and dual-use companies, because it provides long-term predictability of recurring revenues.
And, for a company to succeed in winning a program of record, they must first win over three key stakeholders.
First Stakeholder: The End User
The first stakeholder that a company must win over is the End User.
It does no good for a company to produce a product that no one will use—there’s literally no product-market fit. Not even problem-solution fit, at that point.
Take for example, the Integrated Visual Augmentation System (IVAS). The Pentagon awarded Microsoft a contract with a total contract value of up to $22 billion, to create an augmented reality headset to make soldiers more lethal on the battlefield. But the goggles make soldiers physically ill and have proven ineffective. The end user doesn’t want the IVAS (at least in its current incarnation), and this threatens the entire contract.
There’s really two ways of winning over the end user.
The first is to anticipate what the end user will need before the end user even knows it. This is what Steve Jobs and Apple have famously done. In Jobs’ own words
‘I’ve always found that you’ve got to start with the customer experience and work backwards for the technology. You can’t start with the technology and try to figure out where you’re going to try to sell it.
And as we have tried to come up with a strategy and a vision for Apple, it started with: What incredible benefits can we give to the customer? Where can we take the customer? Not starting with, Let’s sit down with the engineers and figure out what awesome technology we have and then how are we going to market that?’
Jobs channeled Henry Ford in choosing to not ask customers what they want. Ford famously declared that “if I’d done what my customers wanted, then I would have built a faster horse.”
The other way of winning over the end user finds fault with Ford’s statement and chooses to involve the end user from the start. The idea and usefulness of incorporating end users into product development isn’t new and it’s a powerful way of collaboratively building a product that the customer definitely wants.
If a company chooses the Jobs strategy, they need to have sufficient funding to iterate based on feedback after product launch. If a company chooses the alternate strategy, they need to keep in mind that sometimes customers won’t realize the true potential of emerging technology and will choose what’s familiar and comfortable to them, requiring nudges to keep them moving.
How can a company elicit feedback and end user participation in product development? The best way is a rather direct approach. Find soldiers, sailors, airmen, marines, space guardians, and coast guardsmen and get early prototypes in their hands and ask them for feedback. This can be done at expos and conferences (e.g., Air Force Association Warfare Symposium). It can be done through tests and demonstrations (e.g., the Army Expeditionary Warfighters Experiment). It can be done by a business development team wandering around bases and knocking on doors. Regardless, it’s an investment and companies should expect to provide use of systems and products and watch on as warfighters play with, test, and break the product.
It will provide invaluable insight for adjustment and also initiate demand signals that will pass up through the chains of command. This work will ensure that the first stakeholder is on board with the product and the company.
Second Stakeholder: Congress
The second stakeholder that a company must win over is Congress.
There’s a very simple reason for this. Congress controls the purse strings.
They appropriate funds to the the Department of Defense for use against the FYDP.
In other words, Congress can absolutely kill a program of record, if they don’t like it or your company. Or they can force a program that doesn’t make sense.
Take for example the purported fight over the creation of the Space Launch System. According to former NASA Deputy Administrator Lori Garver, the administration opposed the creation of SLS and the awarding of its contracts to United Launch Alliance, et al as it was overpriced and would take too long. Garver claims that several congressional leaders pushed the program forward to support traditional aerospace companies like Lockheed Martin and Boeing.
The simple reality is that Congress can determine the fate of programs. The Defense Primes have robust government affairs teams with deep ties to Capital Hill and these teams spend tons of time working to articulate the value of their programs over others.
At some point, defense-focused companies must hire or retain someone that is familiar with—and liked within—the corridors of power.
Part of Anduril’s winning formula undoubtedly has been snapping up Christian Brose—a veteran staffer (9 years!) on the Senate’s Armed Services Committee. Along with other attributes, Brose brings a wealth of knowledge of defense legislation and critically valuable relationships to the company.
Third Stakeholder: Military Decision Makers
The third stakeholder that a defense-focused company must win over are senior military leaders that determines the programs that are added to the FYDP.
Unfortunately, this isn’t just one individual but includes a group of action officers, staffers, General and Flag Officers, and civilian leaders.
The military runs a requirements definition process, governed by the Joint Capability Integration & Development System (JCIDS). JCIDS represents the identification of needed capabilities upon which acquisition programs are built.
The next leg of the acquisition process is the PPBE, or plan, prepare, budget and execute which ultimately places programs into the FYDP that we’ve already discussed. Once a service or the joint force defines a requirement and capability, a program needs to be built around that requirement.
The final leg of the acquisition process is the actual acquisition or buying of the material solution.
Companies need to be familiar with these three legs of the acquisition process and work with advocates and decision makers in each leg to ensure a program is formed and budgeted for.
Conclusion
Building for Defense is incredible difficult.
It’s slow, ponderous, filled with pitfalls, and often opaque.
A company can greatly increase its odds of success by understanding and engaging the three key stakeholders in defense:
The End User
Congress
Key decision makers in the defense acquisition triad
And whatever comes, don’t be discouraged. There are plenty of companies that have navigated through this tricky terrain. And there are plenty of individuals and organizations that exist to help you build a strategy to engage these stakeholders and get the most important solutions to our warfighters!
Keep building,
Andrew