Making Room for Risk: Managing Disruptive Technologies

Sidebar: In-Q-Tel: Bringing Next-Generation Technologies to the CIA

Technological innovation is at fever pitch, in information, in electronics, and eventually in the biological sphere. To take advantage, the military must establish mechanisms, as business has, to embrace creative disruptive technologies while safeguarding national security and preserving still useful older systems.

We are awash in a sea of disruptive technology. Each day, it seems, there are dramatic emergent advances trumpeted in various industries: new generation computer chips, smaller communicative and connective devices, genetic enhancements, bioengineering marvels, indestructible polymers and veneers—at times one feels as though tomorrow arrives here newly minted every hour.

The hard part is that most, if not all, of these technologies threaten to disrupt existing products and markets, producing turmoil and requiring difficult decisions by managers and planners across a variety of industries—including the military. Yet, they offer ultimately enormous rewards in terms of what they can deliver. How can we leverage the inherent goodness in such disruptive technologies in a way that maximizes benefits and minimizes confusion and failure?

This is, of course, hardly a new problem. The emergence of such new technologies—which are potentially threatening to embedded legacy systems and procedural norms—is as old as the notion of business cycles itself. In the military context, we have dealt with this in the endless cycle of shifting predominance between offense and defense in combat—from heavily armored ships to bigger caliber guns at sea in the early part of this century, for example. But today, the pace of emergence of disruptive technologies threatens to swamp the military's ability to incorporate and use such advancements. Managing such disruptive technologies is a vast and fundamental early 21st-century challenge.

Another way to say this is that we are reasonably capable of inventing and discovering disruptive technology—the military "has funded the pre-award research of 58 percent of the nation's Nobel prize winners in chemistry and 43 percent of laureates in physics"¹—but not so effective in managing its incorporation. Overall, it appears that business is recognizing and grappling with the management of disruptive technology well ahead of the military. As a result, there are lessons to be learned both from an examination of business case experience and from how the business world is coping.

In Business: Changing How We Communicate, Compute, Copy

Disruptive technologies in the business sense "create major new growth in the industries they penetrate—even when they cause traditionally entrenched firms to fail—by allowing less-skilled and less-affluent people to do things previously done only by expensive specialists in centralized, inconvenient locations."² In the simplest sense, disruptive technologies are things that improve on a current product but initially seem too expensive and too limited in capability to make business sense, which leads businesses to "hold on to the old" rather than move to embrace the new technologies.

A couple of examples will help clarify the idea. Reaching back, an early 20th-century example is the telephone, which threatened to disrupt the well-established telegraph. Initially, telephones could carry a signal only a few miles, and Western Union therefore rejected the idea of pursuing commercial development of the telephone because it could not match the long-distance capability of the embedded telegraph system. "The Bell telephone therefore took root as a local communications service that was simple enough to be used by everyday people. Little by little, the telephone's range improved until it supplanted Western Union and its telegraph operators altogether."³

Another classic disruptive technology is the personal computer. When PCs first appeared on the market, they were no challenge to mainframe computers in power or usefulness. Apple and Atari marketed the first ones, essentially as toys. Many mainframe makers, and even minicomputer manufacturers, missed the emergence of the smaller PCs, preferring to cling to their larger and more powerful legacy systems long after market indicators forecast the leap to the PC.

In the photocopier marketplace, Xerox initially dominated with large, powerful, centralized copiers; yet companies such as Ricoh and Canon gradually have introduced small, inexpensive copiers—essentially disruptive technologies—and dramatically improved their market shares. Other examples abound, from the development of the small, personal camera by George Eastman, which disrupted the market for large, stationary, box cameras, to the introduction of the DVD player, which is disrupting the lucrative VCR market today. Most analysts believe this accelerating trend of disruption increasingly will define the business cycle.⁴

Business has gotten better at dealing with such disruptive technologies over the past several decades, but in the military we are not improving as quickly. Representative Mac Thornberry (R-TX), a leading voice on defense reform, outlines the comparison: "Ford can take a car from concept to customer in less than 24 months, Compaq can change its computer manufacturing requirements in 1 day, and Boeing can develop and field a 777 in less than 5 years. Yet under today's procurement rules, it now takes more than a decade to field a military system. The F-22 is still in development 18 years after it was begun."⁵ We can do better. We must do better.

In the Military: Racing to Apply Technology

In the military context, the cycle of emergent disruptive technology is equally evident. In the early 20th century, primitive radios were developed to communicate between warships at sea. They were bulky, expensive, and prone to failure—and they were rejected in favor of continued use of visual signals. Yet, eventually the benefits became so evident that, after much delay and rejection, the new technology penetrated the fleet.

The classic mid-20th-century naval example is the development of attack carrier air power at sea. The battleships' "big gun club" fought what might have been the longest and most public rear-guard action in the history of military technology, and managed to delay full-out development and production of carrier air for decades.

More recent examples, some still playing out, are cruise missiles, which challenge manned tactical aviation; stealth configurations of maritime and aviation platforms, which challenge more conventional structures; and network-centric warfare, which challenges traditional methods of strike and command and control.

Looking to the future, there are several coming disruptive technologies in the naval "business." Unmanned vehicles, in both the air and the sea, increasingly will challenge manned aircraft, ships, and submarines. Indeed, the same pattern of utilization observed in the introduction of manned aircraft at sea—first for scouting, then distant communication, and eventually, attack—is being replayed in the unmanned vehicle and combat aerial vehicle debate. The Air Force, for example, is looking increasingly at placing weapons and advanced sensor packages on its Predator unmanned aerial vehicle.

Also on the horizon is electric-drive propulsion, which challenges conventional drive solutions for large warships. Planned for incorporation in the Navy's DD-21, electric drive promises eventually to be quieter, cheaper, and more flexible in its distribution of power in ships—but it will have to prove itself in a potentially drawn-out period while older, established gas turbine and steam systems continue to hold center stage.

Information attack systems also are emerging as disruptive technologies with importance to all aspects of potential combat operations. While not technically well understood today, expensive to develop, and subject to significant policy criticism, information attack technologies eventually could challenge a wide variety of alternative means of attack, particularly hard-kill options.

Other, perhaps more distant, disruptive technologies might include biological systems, from performance-enhancing drugs to man-machine interfaces; miniaturization at all levels, to include tiny killer-sensor devices; new polymers and compounds that provide enhanced defensive options; laser and other directed-energy weapons; sensors that optically or thermally penetrate mid-to-deep ocean areas; and hyperefficient fuel cells and microturbines.

There are many others. One recent study mentions, for example, technologies "for distributed, micro-satellite constellations; space-based radars with moving target indicator capabilities; unmanned systems, to include micro-robots and micro-UAVs; performance-enhancing exoskeletons; next-generation stealth, including applications to air mobility aircraft, surface naval vessels and ground combat systems; hypersonic and directed-energy systems; and micro-proximity satellites for space control."⁶

Clearly there is no shortage of candidates; the real challenge is winnowing and harvesting—in a word, managing—such potentially disruptive technologies.

Investing for the Long Sail

How can the military in general—and the sea services in particular—best position itself to take advantage of disruptive technologies? Essentially, we must establish mechanisms, as business has, to embrace creative disruptive technologies in ways that do not place national security at risk or prematurely discard still vital and useful older systems. At the same time, we must ensure that potential opponents are not able to leverage our research-and-development efforts to "coast," skimming the benefits of our expensive revolution in a cheaper "second revolution."

On "our side" of the issue, several general tenets will help us manage disruptive technology effectively:

• Be open to ideas and protective of those who advocate disruptive technologies. We need to work hard to widen the aperture of what is "permitted" in terms of discussion. This applies across the board, from the smallest conferences of mid-grade officers debating programmatic options to the most senior discussions of the sea service leadership, to include resource sponsors and requirements assessors on the Navy, Marine Corps, and Coast Guard staffs. As part of this spirit of openness, we must encourage the mavericks in practical terms—calling attention on fitness reports to innovation, for example. We should consider a "year out" program to send officers into the private sector in lieu of a fellowship or war college—and recognize this in a career perspective as the equivalent of a master's degree.
• Examine how businesses develop and integrate disruptive technologies over the longer term. We should learn how major businesses are doing this in ways that look beyond the immediately practical to decide what to invest in for the long term. We should explore what the Central Intelligence Agency has done with In-Q-Tel, which merges public and private solutions in an acquisition sense (see sidebar, below). We also should look for and encourage micro-economic development units, fondly known as the "bicycle shops." This is where the mantra of "skip a generation" may actually play out. While the services do this to some extent with their Tactical Exploitation of National Capabilities (TENCap) programs, clearly this is an area of potential expansion in the context of finding, nurturing, and introducing disruptive technologies.
• Get strategy and money talking together. This does not happen naturally, as organizations chartered with strategic long-range planning and technological long-range planning are split as separate entities. Business does this far better than we do, and many corporations are creating specifically chartered "idea factories" to merge strategy and technology at the highest corporate levels.

On our opponents' side of the issue, we need to develop mechanisms to protect our sunk costs in research and development from providing direct and rapid benefit to our opponents. Security regimes must be carefully implemented and our prototypes well controlled. In addition, we should consider creating "false trails" to take potential opponents down technological blind alleys. Finally, we need to "red team" our own disruptive technology systems to understand their vulnerability to reverse engineering and low-cost exploitation.

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In-Q-Tel: Bringing Next-Generation Technologies to the CIA

Founded in 1999, In-Q-Tel is an independent, private, nonprofit company chartered by the Central Intelligence Agency (CIA) with one objective: to
identify and deliver the next generation of information technologies to support the CIA's critical intelligence missions. As the agency's "venture catalyst," In-Q-Tel partners with leading innovators to catalyze technologies, bring them quickly to market, and at the same time bring them to bear on the CIA's most pressing IT problems.

In-Q-Tel's CEO and president, Gilman Louie, explains, "Congress and the CIA, under the leadership of George Tenet, recognized that the CIA needed a new way to tackle its critical technology needs. The agency saw that the people who are leading innovation are all around us. They are the entrepreneurs of the knowledge economy. They are the private-sector investors putting billions into information technology development. The CIA's idea was to combine its own talent with these private-sector resources—to put them together to help solve the real problems the agency faces today. In-Q-Tel was created as part of a broader effort initiated by the agency to get ahead of its IT needs."

To do that, In-Q-Tel works with private and public companies in the United States and abroad, as well with universities, established companies, and national and private labs. A hybrid of public- and private-sector models, In-Q-Tel has the flexibility to structure relationships using whatever approaches work best, including equity investments, development project funding, and spin-offs. In-Q-Tel's strategy is to target technologies that provide commercial analogs to the CIA's IT problems. It focuses on such technologies as Internet search and discovery, information security and privacy, enterprise knowledge management, and geospatial applications.

"We've had some early success," notes Mr. Louie. "In 18 months of operations, we've engaged more than 800 companies, three-quarters of which had never done business with the government before. We also have built a network of more than 60 different venture funds that have laid out their portfolios of companies asking to engage us in a dialogue of value. We've partnered with more than 15 companies so far, and we've delivered five technologies into the CIA. It's a good start, but we know there is a lot of work ahead to achieve a real strategic difference for the agency."