Agile Revolution in the Defense Industry

The Ukrainian defense against the Russian invasion has revealed one thing: the undeniable advent of the drone era. These striking innovations, which look like toys, are the facade of a profound shift in the industrial paradigm based on speed of change, open-source, decentralization, and composability. These innovative agile practices are a departure from the Taylorist traditions of the defense industry, which is grappling with continuous inflation and delays, impacting national security and human lives.

However, not all is lost. Like the manufacturer of the JAS 39E Saab Gripen fighter, a handful of players are relying on Scrum to radically improve their economic competitiveness. My years of experience in the field allow me to say that the results are there, and they are impressive.

How can Scrum principles be applied in the defense industry? What lessons can be learned from these industrial successes, and what pitfalls should be avoided to maximize the achievement of business objectives? In the following sections, we will unveil revolutionary cases, proven strategies, and share practical advice for navigating this exponential age. 
 

REDUCE THE COST OF CHANGE

In a predictive world, lowering costs through industrialization worked. Each new piece cost proportionally less than the previous one. The problem? Our world is becoming more unpredictable every day. Changing a traditional production tool is long and difficult, generating high costs, hindering innovation, and causing loss of economic opportunities. What matters in the long term for an organization's survival is the pace of innovation. To innovate, the cost of change must tend toward zero. It's a model breakthrough, and some have understood it well.
 

• On average, there are 27 hardware and software changes per day on a Tesla Model S production line. That's more than 5,000 a year, while a traditional manufacturer makes at best two to four a year.
   
• Ukrainians continuously print and assemble defense equipment - including drones - meeting the changing needs of forces on the front line.
   

This just-in-time adaptation to market needs is possible if we shift our historical focus from the cost of manufacturing to eliminating the cost of change. Let's explore some concrete ways to achieve this.

Composability

Composability is the ability to combine, swap, or associate standard components to form a product. It allows a physical part or piece of code to be easily reused elsewhere in the product (or in another product). The use of open-source or standard components facilitates this approach. Composability strengthens quality and security, while reducing the cost of change. New production units can thus be smaller, more modular, deployable, and equipped with low cycle time manufacturing capabilities, such as 3D printing. Composability makes decentralization possible and strengthens the resilience of mass production.

• Convinced of the benefits of composability, Jeff Bezos imposed it on Amazon teams through five rules. The launch of AWS (Amazon Web Services) is one of many examples of new products directly resulting from composability applied to teams.
   
• Used by SpaceX for the construction of its rockets, the Idiot Index is the ratio between the total cost of a product divided by the cost of its elementary components. The higher the index, the more inefficient the design. It is an effective way to identify a product's lack of composability.
   
• Firehawk Aerospace 3D prints rockets and a solid form of fuel to launch them. The company uses only common chemical components. The high composability of the fuel makes it possible to 3D print it when needed in highly strategic locations.

Which components or processes could benefit from composability? What impact would increasing the number of open-source or standard elements have on the quality, cost, maintainability, and delivery frequency of your products?

Stable Interfaces

Products and their components are interconnected. Modifying a component impacts the performance and quality of other interconnected components. Any change forces teams to wait for each other, while generating risks on the overall product quality. The case where interfaces belong to third parties adds another layer of risk to product quality.

Conversely, the formal contractualization of interfaces linking the elements of a product offers great freedom of innovation on either side of the interface. It also strengthens the overall resilience of the product. Experience shows that stable interfaces unleash innovation over time and help teams work asynchronously. We reduce bureaucracy and allow for the competition of solutions, which creates more value.

The stability of interfaces significantly reduces the cost of change.

• Volvo has created a formal common interface for most of its vehicles - the Volvo Scalable Product Architecture (SPA). The manufacturer claims that these stable interfaces have allowed it to improve safety and innovation in its vehicles.
   
• We may not realize it, but a car is three kilometers of cables and other proprietary connectors. This inflates design and maintenance costs, and also power losses. For the Cybertruck, Tesla has implemented a stable and common interface for all electrical systems. From speakers to air conditioning, to charging your computer, the serial wiring offers 48V and gigabit ethernet. The great capacity of the interface makes it stable over time. The vehicle's design is simplified, reliability is improved, and the semi-rigid structure of this connectivity allows it to be easily installed by robots.
   
• For its first stealth fighter prototype, Lockheed reused the onboard computer of the F16, the propulsion of an F-5, the navigation system of the B-52, and the visualization of the F-18. The engineers literally hacked the interfaces to take control and stabilize them. The cost of the prototype was lower than announced, and it allowed the launch of new programs.
   

In your field, which components or systems would benefit the most from stable interfaces? Which modules would you like to challenge?

Control over the Value Chain

Not all work contributes in the same way to an organization's pace of innovation. For example, if accounting doesn’t, outsourcing can be considered. On the contrary, complex work at the heart of the product value chain will benefit from being internal to the organization. Giving up one's capacity for innovation to third parties (subcontractors) whose interests are divergent has consequences: interdependence, technical debt, lack of innovation, suboptimal delivery frequency, quality issues, and loss of sovereignty over key skills.

If the massive subcontracting known to the defense industry made sense a few decades ago, it is now a brake on the pace of innovation. It makes the cost of change prohibitive, and hinders the continuous adaptation of this industry to challenges of an exponential nature.

There are solutions to realign subcontractors and clients. Agile contracts are effective but still constitute an additional layer of complexity that is generally best avoided. They require a certain level of agile maturity from both the requesting teams and the purchasing, legal, and subcontracting teams, which is not so common.

This increase in control over the value chain (also called fullstack) is employed by many organizations wishing to reshape an economic sector through innovation. Sovereignty over the value chain is a competitive advantage. We outsource what is highly controllable, and take back control over what is complex, technological, experiential, and key to achieving our objectives.
 

• Ukrainian defense units have applications to directly order what they need (depending on availability). It arrives in a few days. In this case, logistics is critical as part of the value chain. Having control over it is key. Moreover, whether it is on the defense side or the Russian side, everyone uses services such as Amazon or AliExpress. This decentralization brings resilience to the field.
   
• When Apple designs the machines for its data centers, 64-bit ARM processors, or Apple Stores, it controls its value chain. When Decathlon designs and distributes its own innovative products, it does the same thing. When Airbnb goes so far as to automatically manage the collection and payment of tourist taxes for each city, it is also a control strategy over the value chain.
   
• 3Dirigo and the US Navy 3D can print a boat hull in less than three days. This ability brings innovation to where it’s needed and reduces logistical challenges. Designing drones or a response fleet is within a click's reach. The yacht industry has also started printing boats with aerospace thermoplastics, or boats with more sustainable plastics, such as for the Paris 2024 Olympics (Roboat and Holland Shipyards Group).
   

To conclude, composability, stable interfaces, and control over the value chain give the defense industry technological superiority, but also the capacity to produce massively.

2023 has shown us, notably with the limitless options for drone models, that the Internet phenomenon of the long tail is now a new reality for the defense industry.

Another underlying trend is the participation of individuals, civilians, and other associations in the financing and participatory design of products. The three strategies we’ve explored can generate leverage in this area.
 

SUPPORT A CULTURAL EVOLUTION

In a world where the rules of the game are changing at a vertiginous speed, how can your organization adapt and thrive, especially in the demanding defense sector? Remote work, artificial intelligence, security constraints, and co-manufacturing are now unavoidable realities - but did you know that most technological transformations fail due to cultural resistance?

Traditional managerial methods, effective in a predictive world, are now barriers to innovation and economic agility.

The processes within organizations reflect the shared culture of the teams. A culture of mistrust, for example, generates bureaucracy and administrative burdens. However, this culture is not inevitable; it is the cumulative result of our past decisions and actions. To unlock innovation and economic performance, a cultural evolution is necessary.

The sections that follow propose three innovative and unique approaches to meet these challenges, specifically adapted to the challenges of agility in the defense industry. By discovering them, you will learn how to transform the culture of your organization to accelerate innovation, improve collaboration, and maximize long-term success.

Overcoming Limiting Beliefs

Only the laws of physics constrain us. The rest is a matter of belief. One may firmly believe that it is not possible to manufacture such and such a part in 24 hours, while elsewhere, others do it without even knowing it would be "impossible."

Limiting thoughts can be internalized in the culture of organizations: "Here, it's not possible." Overcoming these beliefs is a liberating project. It strengthens the capacity to learn and succeed. Overcoming these beliefs opens the way to innovation and maximizes the chances of achieving economic objectives.

Allowing teams to access professional coaching, be inspired by ambitious objectives, and supported by a framework favoring short-term experimentation helps considerably.

• With one client, we faced the challenge of manufacturing a defense hardware product. Its realization was perceived by the teams as an intimidating mountain. The iterative and incremental approach of Scrum was of great support. It helped overcome limiting thoughts and thus accelerated the frequency of deliveries, collaboration, and return on investment. Strangely, what surprised me the most was the power of the teams' sense of pride. Delivering usable product increments in the client context in the short-term generates deep satisfaction. It's fuel for self-confidence, creativity, and collaboration.
   
• When teams have created a process, a procedure, or a product, they are attached to it. This ownership bias, called the Ikea effect, tends to overvalue the value of what we do ourselves. This psychological effect can hinder the ability to improve because the ego of the team is associated with the justification of this past work. However, what we were doing at one time is probably not what is optimal today. We have a psychological need to feel competent, and questioning a technology or way of working can generate discomfort. That's why with Scrum, we work to strengthen an environment of psychological safety, in which exploration and frequent delivery are encouraged.
   

In your organization, what limiting beliefs hinder innovation? Identify a limiting belief within your team and consider an experiment to overcome it during the next sprint.

Focus on What Matters

Many of our organizations are built on a post-World War II model, based on Taylorism and waterfall projects. The company vision or its business objectives are often cosmetic. Yet in the exponential era, a common, inspiring, and concrete vision for all is necessary - a magnetic north. This alignment is built and nourished both bottom-up and top-down. It's a discussion that crystallizes with shared inspiration. This common goal frees up self-management and innovation for teams, while supporting a reduction in the amount of waste.

When we know where we are going:
1. We already have a better chance of getting there
2. We no longer need to take everything with us
3. We make better use of opportunities along the way

This common focus also allows for progress. A clear vision for the future helps recruit better talent.

Sometimes, it’s not so clear whether shared objectives have been achieved or not. Also, when a metric becomes an objective, it often ceases to be a good metric. Evidence-Based Management (EBM) can be of great help in these cases - whether it's about market or organizational performances.
 

• For most of the organizations I’ve worked with, the first focus was to nourish a deep discussion among leaders on what success looks like in one to five years. But also, “who we are” - that is, what behaviors or values define us. There is never a definitive answer to these questions, but the more that consensus emerges, the more the organization maximizes its chances of success. What is counterintuitive with this approach is that at first glance, it appears unnecessary, while it generates millions and millions in waste reduction.
   
• In his 1962 speech, J.F. Kennedy said: "We choose to go to the moon". He gathers around a common inspiring objective in which everyone can identify. The bet was more than uncertain given the technology available at the time, and the estimated costs. Yet, seven years later, Neil Armstrong became the first man to set foot on the moon.

Thinking about your organization, what are the objectives and values that, in your opinion, should guide your company in the next decade? How do you wish to contribute to creating a shared and inspiring vision?

When an organization has found its north, everything becomes possible. Let's explore how to support teams with a managerial transformation.

A Managerial Transformation

In the exponential era, organizations have the opportunity to move beyond distrust and control of individuals. Embodying an inspiring and tangible vision of the future, supporting teams in their growth towards common objectives, and removing obstacles between teams and their results, is the true role of leadership in a complex market. On the contrary, management is the control of the compliance of individuals' behaviors and actions.

We need both. But not at the same time, nor facing the same challenges.

• For very predictive and immutable challenges, like pouring a concrete slab or ordering standardized supplies, management is preferable. Whereas, for challenges requiring continuous innovation, leadership is preferable. Leaders continuously nourish a discussion in the organization about the common direction, ensuring that everyone can contribute and understand where the organization is going. This skill requires courage, openness, and focus - three Scrum values. Leaders know that when faced with complex challenges, a self-managed team is more efficient than a sum of individuals. They assess the agile teams’ maturity and adapt their stance to maximize growth and results.
   
• A signal which I am particularly attentive to when I work with an industrial company is the desire of the teams to evolve. We live in an era of technological and societal ruptures such that obtaining a x5, x10, or x50 through innovation is within the reach of any organization. That's the good news. The less good news is that the volatility associated with this growth requires having the stomach to go with it. Enduring a -80% temporary performance drop is psychologically difficult without leadership support. The organization's desire for change is key.

A phenomenon that I frequently observe in the field is the inability of teams to imagine another way of collaborating - a temporary obstacle that is perfectly overcome with a little support. Depending on each organization's unique reality, there are several ways to overcome this sticking point. Here’s one possible recipe:

1. Identify a critical issue for the organization's future in five years. A major, sometimes even taboo, subject.

2. Next, recruit a team of ninjas. Give them the best in terms of training and coaching, and ensure that no bureaucratic obstacles affect their work.

3. Support and challenge them through any potential performance drops until they reach success.

4. Other teams will draw inspiration from them and envision themselves in that place.

The above approach maximizes the Return On Investment (ROI), and generates a lot of pride and engagement among teams.

What is the biggest challenge that your organization must overcome to survive the next five years? 

Conclusion

• Simple aerial drones ordered on AliExpress for a few thousand dollars can destroy armored tanks worth millions of dollars.
   
• Maritime drones for a few hundred thousand dollars can destroy ships worth hundreds of millions of dollars.
   

New technology is a hundred or thousand times more efficient; it’s a historic opportunity.

IT experienced this radical transformation with the emergence of cloud computing in the early 2000s - it's the defense industry's turn to live it.

Like in IT, some players may surpass themselves, like Apple and Microsoft - while others will be outpaced.

The strategies we’ve covered in this article provide a solid foundation to leverage these opportunities.

The iterative and incremental approach of Scrum allows for risk control and fosters the emergence of innovation.

Imagine a future where your organization generates a positive and significant impact in the world, turning challenges into opportunities. This future is within our reach if we choose to start with a first step today.

What first step would you like to take today?
 

Sources:
https://en.defence-ua.com/industries/mass_production_of_fpv_drones_is_apparently_takes_place_in_russia_and_its_a_bad_sign-6904.html
https://fullycharged.show/blog/the-tesla-principle-speed-and-agility-in-the-automotive-industry/
https://x.com/TrungTPhan/status/1702517675963072570?s=20
https://en.wikipedia.org/wiki/Volvo_Scalable_Product_Architecture_platform
https://a16z.com/how-the-u-s-can-rewire-the-pentagon-for-a-new-era
https://en.wikipedia.org/wiki/Lockheed_Have_Blue#:~:text=Lockheed%20Have%20Blue%20was%20the,tested%20at%20Groom%20Lake%2C%20Nevada
https://www.ibinews.com/france-to-use-sustainable-3d-printed-boats-for-2024-olympics/45742.article

Article originally published on March 16, 2024 on François Fort's blog