The United States exists in an unstable geopolitical climate. Each day the nation finds itself under threat of nuclear war, terrorism, cyber attack, and even social propaganda that affect how Americans live, work, travel, vote, and how we uphold our freedoms and democratic values. Our allies depend on a credible guarantee of American security forces. Perhaps more than ever before, those who lead U.S. national defense need to accelerate the pace of technology innovation, maintain a global technological lead, and keep ahead of our adversaries, who have shown they will stop at nothing to further their interests at the expense of ours.
Over the past century the United States has earned and maintained its status as the world’s leader in technology innovation. This status has been earned through the undertaking of a variety of endeavors: from massive public works such as the Hoover Dam, to cutting-edge physics developing nuclear energy, to the Apollo program, which put people on the moon, and more recently to the tremendous innovation surrounding the internet and digital devices. For over a century the United States has led the way.
The United States’ lead in global technology innovation and, more specifically, its lead in secure technology innovation is linked directly to the defense of the nation. Research in fields such as physics, mathematics, computer science, aeronautics and astronautics, machine learning, and other engineering subjects lays the foundation and basis for military transformation. Breakthroughs in technology—such as in radar, lasers, optics, nanomaterials, and microelectronics—continue to play a critical role in establishing and maintaining U.S. military superiority. A robust research portfolio surrounded by supportive U.S. government policies and regulations is a necessary part of a national security strategy that relies on the forward-looking knowledge that can anticipate threats and accelerate technology innovation breakthroughs to mitigate, foil, and outmaneuver our adversaries and keep the United States safe in a dangerous world. Therefore it is imperative that government organizations leverage the most advantageous technology innovation strategies for such programs (see fig. 1).
By successfully applying technology innovation strategies—and in particular open technology innovation strategies because of their demonstrated success—the U.S. government can enable, accelerate, and enhance the return on its investment in innovation. As the previous chapters have shown, however, the competing values that are endemic in secure U.S. government environments continue to create constraints and raise two fundamental challenges: the secrecy challenge and the participation challenge. The regulatory regimes governing these environments wield enormous influence on the adoption and execution of innovation. They simultaneously serve other values and interests that are in tension with innovation to varying degrees. Until these pervasive challenges are addressed, the U.S. government cannot optimize the application of open technology innovation strategies. Because these challenges are widespread across the defense system, they must be addressed through changes at the highest levels.
Surmounting the first challenge—secrecy—requires concerted action by Congress and the president. They are the only actors with the legal authority to address the secrecy challenge in a sustainable manner. Together the president and Congress must act to reform the regulatory regime governing secrecy and classification authority to ensure that government agencies tasked with bringing forth critical technology innovation are also empowered to do so in a way that thoughtfully balances the competing national security interests of innovation and secrecy.
It is a combination of legal and policy changes that will create the opportunities for sustainable improvement. The regulatory regimes must ensure adequate incentives for potential innovators to participate in the innovation process. That is the only way the government can ensure access to the most critical new technologies that support national security. Such access will require a thoughtfully constructed system of incentives, both monetary and non-monetary, combined with an appropriate internalization of the cost of innovating into the government acquisition process. Absent these reforms, short-term national security interests will continue to jeopardize long-term national security interests—even if unintentionally.
Such system-level change to the regulatory regimes governing secure U.S. government R&D is necessary to ensure sustainable improvement in the government’s ability to transition R&D investment into technology innovation effectively. In fact establishing structures that support the optimization of technology innovation strategies into the regulatory regimes is itself a source of national competitiveness that supports national security.
It cannot be overstated: the U.S. government will not be able to leverage open technology innovation strategies optimally to bring forth the most critical innovations to support national security without changing the regulatory environment. The task is not easy, but it is important. Indeed it is urgent. Let’s review how to get there.
Traditionally R&D investment is the primary driver of innovation, and it in turn supports technological superiority and national security. But in an increasingly multilateral world the United States cannot distinguish itself simply by outspending its competitors in R&D. Technology innovation strategies will become the differentiators that enable the United States to maintain technological superiority and national security by increasing the return on investment in innovation.
Open technology innovation strategies that have been applied successfully in the U.S. commercial sector could be potentially beneficial in secure U.S. government R&D environments. But the open innovation community has yet to make significant progress in adapting its strategies to these environments. The challenge is made greater by the fact that open innovation itself is not yet well defined as a strategy—as the innovation community acknowledges—and certainly not well defined in a secure government context. Adapting open innovation to the secure U.S. government environment will succeed only with the deepest possible understanding not only of the issues, but also of the very concept. For instance, as the analysis in this book shows, the term “open innovation” may be a misnomer because “open” strategies can be and are applied in “closed” environments as well—such as with classified innovator networks like NeedipeDIA. Because private-sector companies provide innovation in traditional government R&D through contracting, these processes are already “open” in a sense. However, traditional U.S. government R&D contracting has been locked into a single open innovation approach for many years—one quite different from the open innovation strategies demonstrating breakthrough success in the commercial sector.
It is worth briefly revisiting four endemic constraints this book identified before summarizing the key recommendations for ensuring that the U.S. government has access to the innovation needed for national security going forward. Each of these constraints is a direct result of current regulatory regimes.
The first endemic constraint is the pace and difficulty of maneuvering the bureaucracy. The U.S. government R&D contracting bureaucracy has a negative impact on technology innovation. In serving competing values, the regulatory regime inadvertently constrains innovation through extremely complex and cumbersome regulation. Such constraints affect both large defense contractors and small businesses, albeit in different ways. Large defense contractors find themselves needing to make major investments in specific training and intellectual property attorneys just to navigate the FAR and DFARS codes. For small businesses, the regulatory regimes stand as significant barriers to entry. In one example it took more than three years from the time a determination was made by the agency that a start-up’s technology met an urgent and critical national security need to the time that agency was able to establish the start-up on a government contract and pay for the critical technology—a time frame that was not unusual. In other words, the bureaucracy sets a pace that is at odds with the pace of start-up entrepreneurial activity, even when a need has been defined as urgent.
Further, the contracting mechanism is identical across a wide variety of government R&D contracts. That is, the bureaucracy required for contracts less than $1 million is similar, both in terms of the legal negotiations required and the actual contract template, to multi-billion contracts lasting decades. The vast set of clauses and legal provisions required for large contracts appears to be unnecessarily complicating the negotiation of contracts with small businesses, for which many of those provisions are irrelevant. Thus even if the barrier to entry is surmounted, the productivity and success of the small companies is called into question even before any actual contracted work begins.
The second endemic constraint is the favoring of established players. It is not uncommon in any contracting environment that established players that have previously obtained contracts have the advantage of ingrained relationships and ongoing work from those prior engagements. Such advantage subverts one of the key purposes of open innovation: to diversify participants in the innovation process. Policies that value experience in U.S. government contracting over the inclusion of diverse participants in the innovation process create lasting negative effects.
Beyond that, even when a smaller company might be allowed to participate, empirical evidence shows that U.S. government agencies favor and sometimes implicitly require that contracting companies have an agreement with a large prime contractor as a condition for award—thus further entrenching established players. In fact prime defense contractors are often intermediaries in the relationship between the U.S. government and small businesses. This role as intermediaries exists not by happenstance but rather as the result of policies. These policies can have a significantly detrimental effect on acquiring technology innovation for national security because they may, and often do, unintentionally exclude small businesses from the innovation process.
“SBIR shops” are another type of established player favored by the current regulatory regime. Although the SBIR program seeks to involve new participants, such as start-ups, a disproportional number of SBIR awards go to a handful of companies that have mastered the defense contracting game, detrimentally affecting the diversity of participants and the commercialization of SBIR-funded technology.
The perceived tension between national security and open innovation is actually a tension between secrecy and open innovation because of the assumption that national security and secrecy are inseparable. This is the third endemic constraint: the secrecy challenge. A rigid commitment to secrecy often precludes full and open competition, as well as information sharing—two factors important to the very innovation desired to serve national security interests. It is imperative that there be a genuine discussion about whether such secrecy truly serves the underlying national security interests. Without that discussion the commitment to secrecy at all costs will continue to limit participation and will keep secure U.S. government R&D projects siloed.
Finally, there is the participation challenge. This fourth endemic constraint is buttressed by the complexities introduced by having prime defense contractors as intermediaries in the relationship between the government and the inventor, and it contributes to the U.S. government’s often being unable to incentivize innovators directly. Authorization and Consent, detailed in chapter 6, only makes this situation worse, as it adds to the lack of incentives the fact that the government is empowered to take patented technology without a license and use it for national security reasons, with limited liability. Such empowerment significantly reduces the incentives to participate in innovation important to national security. Further, Authorization and Consent contributes to the fact that certain defense contractors choose not to participate in the process and instead pursue workarounds—such as classifying innovations as trade secrets, thus protecting them from government “taking” and essentially defeating the government’s own objective of having ready access to key national security technology.
Two general principles emerge to overcome the secrecy challenge: do not overclassify and (if necessary) selectively declassify, and do not reduce competition unless necessary. These principles speak to the issue of disentangling national security and secrecy, and they are key to sustainable solutions. But U.S. government agencies that implement R&D programs are not sufficiently empowered with the authority to make these kinds of decisions; the president and Congress retain that authority but have not provided a solution. This needs to change.
With respect to overcoming the participation challenge, it is necessary to provide adequate incentives to ensure participation by potential innovators. Incentives are critical to having an innovation pipeline that supports national security. But it is not a matter of incentives, especially monetary ones, in a vacuum. The entire system needs to be reconfigured to mitigate the aspects that favor established players and erect barriers to entry for small businesses.
Specific recommendations include actions to be taken across the government in all three branches. The executive branch—including Cabinet departments, agencies, and even the Office of the President—needs to identify opportunities to simplify FAR and DFARS. The length and complexity of FAR and DFARS often fail to serve equal opportunity, non-discrimination, and other constitutional principles. They create barriers to participation. Further, there needs to be a new level of awareness that requirements in RFPs and contracts may help entrench the positions of established players, an outcome that runs counter to the diverse participation desired for open innovation. Moreover, it is time to recognize the importance of both monetary and non-monetary incentives. Congress should amend Authorization and Consent to include the provision of non-monetary incentives and a new kind of oversight—perhaps similar to the oversight established for the FISA process. Also related to the participation challenge, the new prize competition laws should be amended to require that the IP policy be disclosed to participants in a clear and reasonable manner, and it should be broadened to allow for the use of other open innovation strategies. In addition, it will be up to Congress to consider legislation that corrects the inconsistencies around secrecy classification policy. These are all necessary if changes are to be sustainable.
These recommendations will go a long way toward revamping how the U.S. government handles innovation in secure R&D environments and will thus ensure that the country maintains its ability to both secure its national interests and play its needed role in the world. The stakes are extraordinarily high, and the need for changes such as these cannot be overstated. The consequences of maintaining the status quo would be dire.
As noted at the beginning of this chapter, the United States exists within an unstable geopolitical scene. To navigate in this world, advance national interests, assure our allies, and play a role as a force for peace and stability, the U.S. government has historically used a combination of soft power and hard power—the proverbial “carrot and stick.” For decades the United States has enjoyed an innovative edge in technology development. But as the rest of the world advances, that edge is diminishing. The simple reality is that losing our edge translates into a loss of hard power, which in turn translates into a loss of soft power, which in turn translates into an inability to influence matters that affect U.S. national security and interests. If American values are to be deployed to influence peace around the world, nuclear non-proliferation, climate change, humanitarian crises, and democratic rights—all tremendously difficult problems now—imagine how much more difficult they will be if the edge is lost.
That is the situation the U.S. government faces. There is a gap between the remarkable successes enjoyed in the high-tech commercial world because of how that world gets innovation done and how the government does it. And the gap is increasing. The situation creates an opportunity for other powers to fill the gap. We already see Russia deploying technology to expand its sphere of influence. China is showing a growing willingness to employ both soft and hard power globally, and the Chinese are rapidly building their innovation capabilities. Other countries will act in their own interests, not those of the American people. And if they become leaders in technological innovation, they will attract other countries through alliances that offer benefits, including protection and strength.
Failure to solve the innovation challenge the U.S. government faces will change who sets the world’s agenda. The topics the United States wants at the top of the list for the United Nations, the G8, and other important international bodies will be replaced by those from whichever countries fill the leadership gap.
What happens when securing U.S. interests requires a specific technology we do not have and we cannot create quickly enough? We become reliant on others who are able to innovate and compete. The stakes go well beyond security and technological leadership and the power of military confrontation. If other countries fill the void, it could make for a world where American interests, culture, and values take a back seat. Today other countries rely on the United States to provide the technology to solve problems, such as determining whether a chemical or biological weapon has been deployed, finding a ship lost at sea, disarming pirates who have taken hostages, and so on. Many countries rely specifically on the U.S. military for defense and protection. When the need arises, they call the United States; in the future, they may not. If they do not, it may be because they can no longer rely on U.S. government innovation to develop the most advanced technology—and it may then be too late.
The case for change is compelling. The United States has taken dramatic steps to spur innovation before. When our national security, values, and way of life are threatened, we rise to the challenge—as the Apollo story illustrates. We put a man on the Moon. If we can recognize the crossroads we face, we will rise to the challenge again.