One can argue that a key difference between legacy automotive and defense industries is primes' advantage of built-in moats via programmed/expected sustainment. Some of Tesla's allure is how they capture revenue beyond initial sale - software and feature upgrades, insurance, etc. Similarly, when GDLS sells a Stryker...they know they're in a good position to win future modification and upgrade contracts. When Ford sells an F150 off the lot, it's effectively a one-and-done transaction.
How else can we de-risk investment to make hardware margins palatable to startups/investors? A true acquisition magic trick would be to optimize outcomes for the warfighter, costs for the FYDP, jobs for the legislators, all while protecting new entrants's ability to attract capital and talent.
Great point, Arie! Maybe that's the beauty of the Anduril model: use hardware to get the software hook, and then get recurring revenues through SaaS models, interoperability, and updates.
Interestingly, I think the disruption of a HW-dominated market by SW-enabled HW is a similarity between the two. We just haven't seen much of it in Defense (with a few notable exceptions, one of which I just mentioned).
The programmed sustainment produced moats that you mentioned stifle innovation. That's why we still use systems that are WAY overpriced and past EULs.
On your last point, I'd love to hear thoughts on how to go about it. One of the things I've seen recommended is building the product with the warfighter ("soldier touch points" are critical), while simultaneously building out a robust gov't relations team that can work the halls of power in Crystal City and the Hill to ensure it meets the "requirements" needs, has support for FYDP, and appropriations. Definitely easier said than done!
One can argue that a key difference between legacy automotive and defense industries is primes' advantage of built-in moats via programmed/expected sustainment. Some of Tesla's allure is how they capture revenue beyond initial sale - software and feature upgrades, insurance, etc. Similarly, when GDLS sells a Stryker...they know they're in a good position to win future modification and upgrade contracts. When Ford sells an F150 off the lot, it's effectively a one-and-done transaction.
How else can we de-risk investment to make hardware margins palatable to startups/investors? A true acquisition magic trick would be to optimize outcomes for the warfighter, costs for the FYDP, jobs for the legislators, all while protecting new entrants's ability to attract capital and talent.
Great point, Arie! Maybe that's the beauty of the Anduril model: use hardware to get the software hook, and then get recurring revenues through SaaS models, interoperability, and updates.
Interestingly, I think the disruption of a HW-dominated market by SW-enabled HW is a similarity between the two. We just haven't seen much of it in Defense (with a few notable exceptions, one of which I just mentioned).
The programmed sustainment produced moats that you mentioned stifle innovation. That's why we still use systems that are WAY overpriced and past EULs.
On your last point, I'd love to hear thoughts on how to go about it. One of the things I've seen recommended is building the product with the warfighter ("soldier touch points" are critical), while simultaneously building out a robust gov't relations team that can work the halls of power in Crystal City and the Hill to ensure it meets the "requirements" needs, has support for FYDP, and appropriations. Definitely easier said than done!