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1、February 2023 By Matthew Schlueter,Marc Giesener,and Lauren MayerThe Defense Innovation Readiness Gap Is Widening The Defense Innovation Readiness Gap SeriesSecurityInnovation BoardBoston Consulting Group partners with leaders in business and society to tackle their most important challenges and cap
2、ture their greatest opportunities.BCG was the pioneer in business strategy when it was founded in 1963.Today,we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow,build sustainable competitive advantage,and drive posi
3、tive societal impact.Our diverse,global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change.BCG delivers solutions through leading-edge management consulting,technology and design,and corporate and digital ventures.We work in a
4、 uniquely collaborative model across the firm and throughout all levels of the client organization,fueled by the goal of helping our clients thrive and enabling them to make the world a better place.Uciam volora ditatur?Axim voloreribus moluptati autet hario qui a nust faciis reperro vitatia dipsand
5、elia sit laborum,quassitio.Itas volutem es nulles ut faccus perchiliati doluptatur.Estiunt.Et eium inum et dolum et et eos ex eum harchic teceserrum natem in ra nis quia disimi,omnia veror molorer ionsed quia ese veliquiatius sundae poreium et et illesci atibeatur aut que consequia autas sum fugit q
6、ui aut excepudit,omnia voloratur?Explige ndeliaectur magnam,que expedignist ex et voluptaquam,offici bernam atqui dem vel ius nus.Nem faccaborest hillamendia doluptae conseruptate inim volesequid molum quam,conseque consedipit hillabo.Imaio evelenditium haribus,con reictur autemost,vendam am ellania
7、 estrundem corepuda derrore mporrumquat.SecurityInnovation BoardBoston Consulting Group partners with leaders in business,the public sector,and society to tackle their most important challenges and capture their greatest opportunities.BCG was the pioneer in business strategy when it was founded in 1
8、963.Today,we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering public and private organizations to grow,build sustainable competitive advantage,and drive positive societal impact.Our diverse,global teams bring deep industry and functional
9、 expertise and a range of perspectives that question the status quo and spark change.BCG delivers solutions through leading-edge management consulting,technology and design,and corporate,public,and digital ventures.We work in a uniquely collaborative model across the firm and throughout all levels o
10、f the client organization,fueled by the goal of helping our clients thrive and enabling them to make the world a better place.The Munich Security Conference(MSC)is the worlds leading forum for debating international security policy.In addition to its annual flagship conference,the MSC regularly conv
11、enes high-profile events around the world,publishes the annual Munich Security Report,and engages in manifold other activities to draw attention to pressing security challenges and possible solutions.MSCs Security Innovation Board is tasked to connect the worlds of technological innovation and polit
12、ical decision-making in order to recognize the chances and challenges related to technological progress and come up with clear policy priorities earlier and in a more coordinated manner.2 SecurityInnovation BoardCONTENTS04.IntroductionAction 5 Benefit from the Increasing Investments in Climate and S
13、ustainability Innovations18.07.Action 1 Rebalance the Innovation Portfolio with a Greater Focus on Operational Outcomes and Fielding Fast11.Action 2 Access Untapped Value and De-risk Programs Through Superior Insight into Supplier EconomicsAction 3 Expand the Definition of Interoperability Beyond th
14、e Development of New Technologies to Include Acquisition,Operations,and Sustainment of Legacy Products14.Action 4 Reinforce Cyber Defenses Across the Entire Innovation Ecosystem16.Appendix Survey methodology21.Conclusion21.About the Authors22.3SecurityInnovation Board4 In 2021,the Munich Security Co
15、nference(MSC)Innovation Board and Boston Consulting Group(BCG)conducted a comprehensive review of defense ministries innovation activities across 59 countries.Our results,published in 2022,quantified for the first time the innovation readiness gap-the gap between ministries aspirations for innovatio
16、n and their ability to generate such results.This inaugural research also enabled us to identify five overarching actions that each of these ministries of defense(MoD)could take to create a step change in innovation and close the readiness gap.In late 2022,we conducted a second comprehensive review.
17、The MSC-BCG study team sent a survey to the same group of 59 ministries of defense,the European Union,and NATO to assess innovation readiness across 11 dimensions,enabling MoDs to compare their current innovation readiness to their previous years performance,and to that of their private-sector count
18、erparts.(See Exhibit 1.)The results show that the defense innovation readiness gap significantly widened in the year since our first study.(See Exhibit 2.)Across 10 of 11 dimensions of readiness,MoDs fell below last years results,by an average of 8 percentage points.(See the appendix,“Survey Methodo
19、logy.”)4 The Defense Innovation Readiness Gap Is Widening Introduction 5The 11 Dimensions of Innovation ReadinessExhibit 1Sources:BCG Most Innovative Companies Survey,2022;BCG analysis.SystemPracticesInnovation ambition Overall aspiration with quantitative and qualitative goals for innovationInnovat
20、ion domains Strategic focus areas(e.g.,end user or technology oriented)to prioritizeInnovation governance System of decision bodies,mechanisms,and processes for allocating resourcesPerformance management Decision-making methodology to establish an innovation portfolio and measure performanceOrganiza
21、tions and ecosystems Organizational setup of innovation units;clarity of the position in a wider ecosystemTalent and culture Ability to attract and retain talent with the right skills and build an innovative cultureIdea to impact Capabilities to ideate,validate,incubate,launch,and scale ideas to imp
22、actSustainability Assurance that innovation is environmentally conscious and resource efficientProjects Adherence to leading project and product management best practices Funnel Shape of the innovation project funnel;quality and balance in decision makingPortfolio Portfolio ambition and consistency
23、and uniqueness of portfolio strategySystemPracticesMinistries of Defense Report a Widening Innovation Readiness Gap Exhibit 2Sources:BCG Defense Innovation Survey,2022,2023;BCG Most Innovative Companies Survey,2023;BCG analysis.Note:The BCG i2i benchmark reveals an organizations relative strength on
24、 a 100-point scale that reflects best-practice maturity.Organizations that earn a score 80 or above are deemed ready to realize their innovation aspirations.611+55Readiness gapBCG i2i score(0-100)023 MoD average score2022 MoD average scoreTop-quartile commercial innovatorsReady
25、 to innovatePracticesSystemInnovation ambitionInnovation domainsInnovation governancePerformance managementOrganizations and ecosystemsTalent and cultureIdea toimpactSustainabilityProjectsFunnelPortfolio Sustainability Idea to Talent and Organizations Performance Innovation Innovation Innovation imp
26、act culture and ecosystems management governance domains ambition6 Interviews with more than two dozen leading public and private sector defense leaders worldwide validate these findings and highlight the role that several seismic shocksparticularly the war in Ukraine,supply chain vulnerabilities,in
27、creasing cyber threats,and major climate eventshave played during the past year in shifting innovation priorities and exposing new cracks in innovation capabilities,contributing to a decreased level of readiness to innovate.These events not only exacerbated challenges identified in the previous year
28、s report(such as difficulty in recruiting,training,and retaining talent)but also revealed additional stresses with regard to how ministries seek to innovate,reinforcing our earlier call to action.In addition to implementing the recommendations that we made in last years report,MoDs should take five
29、tangible actions to reverse the widening of the innovation readiness gap:In the remainder of this report,each of these five actions is considered in detail,and a series of more granular recommendations associated with each is identified.Rebalance the innovation portfolio with a greater focus on oper
30、ational outcomes and fielding fast.1Expand the definition of interoperability beyond the development of new technologies to include acquisition,operations,and sustainment of legacy products.3Access untapped value and de-risk programs through superior insight into supplier economics.2Reinforce cyber
31、defenses across the entire innovation ecosystem.4Benefit from the increasing investments in climate and sustainability innovations.5 7Rebalance the Innovation Portfolio with a Greater Focus on Operational Outcomes and Fielding FastAction 1The capabilities to develop new technology and to field solut
32、ions quickly are key enablers of force readiness,yet survey results show that MoDs still face challenges in these areas.Among respondents,56%report that their organization lacks the capability to scale innovations to the field,and 65%say that their acquisition policies do not enable fast fielding an
33、d deployment of new technologya 21%decline in average score from the previous year.(See Exhibit 3.)Further,78%of respondents report that their current pace of innovation is not sufficient to meet their goals and ambitions.Other research has reached similar conclusions;a review of major defense progr
34、ams found that they were delivered up to 14 years later than originally planned.In addition,survey respondents point to a decreasing focus on the outcomes of new capabilities.Only 45%of respondents agree that their organizations projects proactively incorporate end-user inputa 14%decline in average
35、score from the previous yearand only 33%agree that their organization incorporates the total cost of ownership into acquisition decisions.(See Exhibit 4.)Only 29%of respondent report that their organization uses specific investment guardrails and performance metrics to steer innovation project decis
36、ions across their entire portfolio,which suggests a widespread lack of comprehensive strategy.Meanwhile,68%of respondents report that their organization does not clearly define value criteria when determining which innovation projects to invest in,and 73%report lacking metrics or KPIs to evaluate th
37、e success of projects29%below the private sector average.(See Exhibit 5.)7 7MoDs Report Deficiencies in Fielding and Speed of FieldingExhibit 356%report that their organization cannot scale innovations to the field65%report that their MoD acquisition policies,processes,and mechanisms are not defined
38、 to enable fast and agile fielding/deployment78%report that their pace of innovation is not sufficient(or more than sufficient)3.302022 MoD average2023 MoD average3.223.512022 MoD average2023 MoD average2.762.612022 MoD average2023 MoD average2.38Sources:BCG Defense Innovation Survey,2022,2023;BCG a
39、nalysis.Note:“MoD average”is the average score for the specific question in that years survey.56%65%78%-2%-21%-9%8 MoDs Report Low Incorporation of End-User Feedback and TCOExhibit 445%agree that their organization proactively and directly incorporates end-user feedback into idea validation33%report
40、 that their organization considers TCO in idea validation45%33%3.522022 MoD average2023 MoD average3.02Sources:BCG Defense Innovation Survey,2022,2023;BCG analysis.Note:“MoD average”is the average score for the specific question in that years survey.TCO=total cost of ownership.-14%-6%3.592022 MoD av
41、erage2023 MoD average3.07-14%MoDs Report Deficiencies in Defining and Measuring Project ValueExhibit 529%agree that specific investment guiderails and/or performance metrics steer innovation project decisions29%68%73%68%report that their organization does not clearly define and/or measure value crit
42、eria 73%report that metrics and/or KPIs for innovation projects are not clear and well defined3.11-17%3.282022 MoD average2023 MoD average2023 private sector average2.713.58-13%3.252022 MoD average2023 MoD average2023 private sector average2.82-11%2.852022 MoD average2023 MoD average2023 private sec
43、tor average2.553.58Sources:BCG Defense Innovation Survey,2022,2023;BCG Most Innovative Companies Survey,2023;BCG analysis.Note:“MoD average”is the average score for the specific question in that years survey.-13%-21%-29%9Recommendation 1ABalance the organizations innovation portfolio to field techno
44、logy faster.Ensure that innovation efforts balance long-term,breakthrough research and development,immediate operational needs,and sustainment activities,such as munitions.(See“Commercial Technology Is Changing the Landscape.”)Align the innovation portfolio with the organizations overall strategic d
45、irection to leverage its comparative advantage.(See“Five Innovation Models.”)Recommendation 1BEvaluate acquisition performance based on outcomes.Move beyond existing primary measures of project success compliance,timely delivery,and acquisition cost to include measures of operational impact such as
46、end-user satisfaction,speed to the field,impact on force readiness,total life-cycle cost(encompassing not just the initial acquisition but also maintenance,sustainment,and upgrades),and economic useful life.Consider the long-term ROI to avoid artificial constraints of near-term budget cycles that mi
47、ght otherwise exclude game-changing innovations.Regularly review investments after development to ensure continued ROI and implementation in the field.Recommendation 1CCreate an innovative culture that embraces risk and failure.Ensure that the acquisition workforce has both the ability and the power
48、 to deliver.Many of the processes necessary to rapidly acquire and field technology already exist but are not leveraged by those on the ground.Create a culture that embraces risk through an explicit expectation that some projects will fail.Set processes in place to learn quickly from failures,includ
49、ing questioning and testing ideas early to identify and learn from any issues that arise.Ensure that performance reviews,promotions,and other incentives reward innovative behavior with an expectation and a bias for risk taking.(See“A Culture of Strategic Risk Taking.”)The following steps should be t
50、aken in support of the first action:Commercial Technology Is Changing the Landscape Using cell phones built-in GPS and Starlink satellite access to enable remote connectivity,military forces have transformed these devices into a surprising source of innovation for communications.By leveraging a civi
51、lian-conceived program and working with existing technology,forces have been able to create an operational advantage without a massive investment in research and development.A Culture of Strategic Risk Taking IBM strives to“fail early,fail often,and fail cheap”by creating a culture that embraces ris
52、k,eliminates the stigma associated with failure,and learns from failures.The company trains managers to encourage and recognize people for well-executed risks by evaluating employees on their execution of an entire portfolio of projects,from conception through completionnot just on the outcome of a
53、single project.9SecurityInnovation Board10 Five Innovation Models In our 2022 analysis,innovation practices of MoDs were classified across 40 key indicators and then grouped into five innovation models,drawing from BCG research into private sector innovation and applying the models that are most rel
54、evant for the defense context.(See the exhibit below.)Each innovation model has corresponding resources and practices that an MoD can leverage to support its innovation strategy,along with informing acquisition strategies.(See the exhibit below.)Innovation Models Demonstrate a Range of MoD Strategie
55、sCreators and expandersChina,Russia,USSpecialistsArgentina,Estonia,Israel,Lithuania,PortugalSolution buildersAustralia,Austria,Canada,France,South Africa,South Korea,UAE,UK MultipleDenmark,Egypt,Japan,Pakistan,SwitzerlandFast adoptersBrazil,Czech Republic,Finland,India,Malaysia,Saudi Arabia,Spain,Sw
56、eden,Turkey UndefinedBelgium,Germany,Hungary,Italy,Luxembourg,Netherlands,Norway,Singapore,Slovenia,UkraineDeployersAlbania,Bulgaria,Croatia,Georgia,Greece,Indonesia,Kenya,Latvia,Montenegro,Mexico,Nigeria,North Macedonia,Philippines,Poland,Qatar,Romania,Slovakia,Thailand,VietnamNot surveyedAll other
57、 countriesSources:Fact base of 40 publicly available key indicators;BCG analysis.Innovation Models Shape MoDs Fielding StrategyEnhanced capabilities in disruptive technologySignificant private and public capitalPatents and perceived leadership in selected areasSuperior insight into a few domainsHigh
58、 satisfaction scores and adoption rates by end usersSuperior end user insightSpeed of adoption and number of continuous improvement initiativesRapid learning and agility Technologies and equipment imported,purchased,and fieldedProcurement and nation partnershipFocus on“big bet”efforts to create new
59、capabilities Develop a specialized focus in key technology domainsBase innovation on end user needs and feedbackRapidly tailor and scale others innovation practicesMaximize value from other nations via procurementCreators and expanders Specialists Solution buildersFast adoptersDeployersMeasurable ou
60、tcomes for acquisitionComparative Advantage10 SecurityInnovation Board 11Access Untapped Value and De-risk Programs Through Superior Insight into Supplier EconomicsAction 2MoDs often lack insight into suppliers incentives,priorities,business models,production capacity,and other factors that drive th
61、e true cost of new technologies.Even in peacetime,the defense industry is particularly vulnerable to unstable supply chains because they rely on subtier suppliers,leading to an opaque view of all members of the supply chain,vulnerabilities,and areas for consolidation or investment.In many cases,the
62、incentives of one participant in the supply chain conflict with those of another.The lack of transparency forecloses some innovation opportunities and creates vulnerabilities due to shortages of critical supplies.Overall,79%of survey respondents expect that moderate to severe supply chain issues wil
63、l impact their organizations acquisition goals in the next year.These conditions have worsened as a result of recent disruptionsmost notably the war in Ukraine.(See“Vulnerable Supply Chains.”)Suppliers production rates have not been able to meet MoDs needs during systemic conflict.At current lead ti
64、mes,suppliers would need two to three years to replenish the donations to Ukraine since early 2022,let alone supply new,innovative technologies.At the same time,MoDs are struggling to broaden their network to include nontraditional suppliers and thus gain access to groundbreaking technology,a goal c
65、ited by 72%of survey respondents.(See Exhibit 6.)MoDs have fallen short in this effort because their acquisition processes tend to be inflexible and difficult for nontraditional suppliers to understand.Fully 72%of survey respondents have acquisition timelines that exceed 18 months(well beyond startu
66、p funding cycles),and 68%say that their proposal processes are complex and require significant time and effort.Moreover,69%do not provide feedback to suppliers on proposals,so vendors unfamiliar with the defense acquisition process often have no insight into why they lost a contract or what they cou
67、ld change to win the next one.(See Exhibit 7.)These issues opaque supplier costs,potential vulnerabilities due to shortages faced by suppliers,and the need for better partnershipsshare a common root cause.MoDs lack insight into the suppliers economics and incentives,which leaves them unable to fully
68、 unlock value and de-risk programs.Vulnerable Supply ChainsVolatility risk in raw materials,caused either by seismic shocks or by supply-and-demand forces,is occurring across a variety of materials with impacts on defense.For example,a combination of historic underinvestment in production capabiliti
69、es and demand spiking from technological advances is straining the global semiconductor supply chain.Geographic consolidation of chip fabricators has created single points of failure that are vulnerable to natural disasters,infrastructure failures,cyberattacks,or geopolitical friction.Supply chains
70、that have historically remained stable show signs of potential volatility as well.For example,domestic steel production in Europe and North America has begun to shrink and will probably further contract as a result of competition from China,which can produce steel at 10%to 15%lower costs.This econom
71、ic pressure will increase the likelihood of future dependency.11SecurityInnovation Board12 MoDs Report Gaps Between Actual and Desired Levels of Partnerships,Especially with Innovation Accelerators and StartupsExhibit 6Almost alwaysTypically 75%Significantly more partnerships neededMore partnerships
72、 neededRating of current involvementRating of desired future involvement80604020011 Current and desired level of involvement with partners(%)532222Innovation accelerators Nontraditional private sector companies(e.g.,startups)Other government age
73、nciesGovernment-funded research institutesAllied governments Academics/universitiesGovernment-owned enterprisesTraditional private sector companiesSources:BCG Defense Innovation Survey,2023;BCG analysis.+59%+52%+38%+34%+33%+19%+18%10%Exhibit 7Opportunities Exist for MoDs to Improve Their Acquisition
74、 Processes72%68%report that their proposal processes are complex and require significant time and effort68%69%report that feedback is not provided as part of the acquisition/proposal process69%Source:BCG Defense Innovation Survey,2023.72%report that their acquisition timelines exceed 18 months 13Inn
75、ovative Terms and Conditions MoDs try to incentivize superior supplier performance through various innovative terms and conditions,including the following:Condition acceptance,which may entail withholding or eliminating final payment pending full resolution of quality issues Adjustment of interim pa
76、yment schedules on the basis of quality performance measures;for example,automatically revising payment terms to decelerate payments and worsen the cash flow position of the supplier under the contract if quality issues arise Automatic warranty extensions to deal with poor-quality products or materi
77、al Establishment of past performance reporting requirements to discourage and correct poor quality through its impact on the awarding of future contracts Objective performance incentives;for example,technical objectives such as“reach”capabilities that exceed threshold performance requirements Adopti
78、on of cost performance“share lines”to incentivize partnering on continuous cost reduction efforts Recommendation 2B Identify and eliminate single points of failure in supply chains.Establish new reporting requirements that identify all suppliers for a given program(including those at lower tiers),in
79、 order to spot potential choke-point vulnerabilities and areas for consolidation.In partnership with suppliers,invest in capabilities to identify hidden vulnerabilities that the partner supplier may not be able to find on its own.Look for areas to strategically invest in and build up newly identifie
80、d supply chain players.Adopt a segmented approach to intellectual property(IP),with stricter policies to prevent the most advanced domestic IP from being exported and replicated and with more lenient policies to promote open trade and foster investment for more mature technology.Recommendation 2A Un
81、derstand the economic priorities and imperatives of suppliers.Assess supplier economics to correct asymmetries of information.Set contractual reporting requirements that create transparency throughout all parts of the defense supply chain,including subtier costs(such as standardized,easy-to-complete
82、 cost templates).On the basis of these insights,manage relationships with suppliers by aligning incentives with overarching mission/program objectives,and establish KPIs that track the true impact on readiness.Tailor incentives to each suppliers profit pools and behaviors.Use innovative terms and co
83、nditions to support enforcement of incentives(for example,shifting a greater portion of contract payment to post-delivery to help ensure that suppliers meet quality standards).(See“Innovative Terms and Conditions.”)Recommendation 2C Create faster,more flexible acquisition processes to attract nontra
84、ditional suppliers.Streamline contracting to establish awards within 18 months(or less),to support startups typical 18-month funding cycles.(See“Australia Streamlines Contracting Processes to Attract SMEs.”)Create clear,simplified proposal processes including moving beyond paper-based submissions to
85、 incorporate such other models as model-based systems engineering,digital submissions,oral working sessions,and multiple rounds.Provide feedback before and throughout the proposal process to encourage additional submissions even by those not awarded contracts.Australia Streamlines Contracting Proces
86、ses to Attract SMEsThe Australian government set a target of sourcing at least 20%of its procurement from small and medium-size enterprises(SMEs),beginning in 2022.To incentivize SMEs to participate in proposals,Australia simplified its regulations for proposals under$200,000 with its Commonwealth C
87、ontracting Suite and introduced a pay-on-time policy for contracts of up to AU$1 million.In the 2021 fiscal year,the government paid 96%of all Australian Defence Force(ADF)invoices up to$1 million within 20 days.That same fiscal year,ADF surpassed its procurement target,with$11.5 billion of its appr
88、oximately$46 billion in defense spending going to SMEs.13SecurityInnovation BoardThe following steps should be taken in support of the second action:14 Expand the Definition of Interoperability Beyond the Development of New Technologies to Include Acquisition,Operations,and Sustainment of Legacy Pro
89、ductsAction 3MoDs recognize the value of interoperabilitythe ability to interchange parts,components,and systems across platforms,services,and partnersto make programs more affordable,reduce duplicative efforts,and enhance capabilities.Interoperability also stimulates competition and attracts new su
90、ppliers by sending a clear demand signal to the market.Almost all survey respondents(98%)agree that interoperability has clear operational,financial,and schedule benefits.Despite that consensus view,44%of respondents report low interoperability across technology(including platforms and capabilities)
91、,and 39%report low interoperability with key partners and allies.(See Exhibit 8.)One persistent force inhibiting widespread interoperability is“customization creep”the growing customization of technology,which renders interoperability between key partners and allies more difficult.A case in point is
92、 the NH-90 helicopter,which was designed in the 1990s for NATO forces,with one main variant for naval operations and a second for transport.MoDs procuring their own versions of the NH90 expanded the requirements significantly,and as a result there are an estimated 47 variants in existence today.Beca
93、use the program became so complex(with variants specifying different cockpits,cargo holds,and even engines),maintenance costs have risen,and production delays have become more frequent,leading Australia,Norway,and Sweden to cancel orders.Exhibit 8MoDs Report a Gap Between the Perceived Benefits of I
94、nteroperability and Their Implementation of ItSource:BCG Defense Innovation Survey,2023.98%98%report that interoperability has clear operational,financial,and scheduling benefits44%report low interoperability across technology platforms and capabilities44%39%report low interoperability with technolo
95、gy of key partners/allies39%14 SecurityInnovation Board 15The concept of interoperability must go beyond the traditional emphasis on highly technical standards for new products and include practical steps that span legacy products,operations,and sustainment.Common parts and standardized munitions ca
96、n create a force advantage by making shared maintenance depots and stockpiles feasible.Setting interoperability standards across the entire product life cycle can also reinforce shared capabilities among forces.There is a massive opportunity across MoDs to implement open systems and standards across
97、 platforms to increase readiness.(See“Potential for a New Wave of Interoperability.”)The following steps should be taken in support of the third action:Recommendation 3AExpand the definition of interoperability.Look beyond interoperability in innovations and apply the concept to legacy platforms sti
98、ll in operation.All aspects should be in scope,including components(such as the modular avionics components on next-generation fighters),operational exercises(such as establishing common fuel standards and standard munitions for weapons platforms),and product sustainment(such as common parts to enab
99、le shared depots in strategic locations).Recommendation 3B Quantify and prioritize a long list of interoperability opportunities.Assess the organizations ability to leverage the existing standards of partners and key allies.Prioritize opportunities on the basis of their value(such as cost reduction
100、and increased capabilities),feasibility,and timing for both MoDs and industry partners.Potential for a New Wave of Interoperability The UK,Japan,and Italy are collaborating on a sixth-generation fighter jet,the Global Combat Air Programme,with an opportunity to set shared standards with other fighte
101、r jet programs,including Airbuss Future Combat Air System and various US programs.Similarly,France and Germany are collaborating on a European Main Battle Tank that uses components from currently deployed tanks(the chassis and hull of the German Leopard 2A7 and the turret of the French Leclerc).By a
102、dopting these common features,the countries may be able to establish rapid maintenance,repair,and operations hubs across Europe for all three tanks.Latvia and Estonia publicly stated their need for air defense capabilities.Recognizing the time,cost,and scale challenges involved in developing individ
103、ual solutions,the countries issued a joint letter of intent to procure medium-range air defense systems.The two Baltic countries MoDs expect to be able to share parts,train together,and invite other countries into the program in later stages.Recommendation 3C Incorporate proven implementation steps
104、from successful,interoperable systems.Establish a multidisciplinary governance structure for implementationenabled with an enterprise remitthat includes technical standards,industry engagement,financial management,and operational changes.Define a segmented business case for industry by determining t
105、he market for new,interoperable solutions,and openly communicate both the intention and the business case for interoperability to industry.Test requirements and establish a set of common standards across the new,open system.After testing requirements,identify roles in the innovation ecosystem and ac
106、quire the new system through partners via innovative contractsfor example,incentives that spur suppliers to adopt the new approach,along with protections for any critical IP.Progressively implement industry standards in close collaboration with partners,consistently update and manage standards,and e
107、nsure that new standards emerge through an empowered central governance structure enabled by a designated liaison to each program or platform.Industry adoption can make or break an interoperability initiative.(See“Interoperability in the Automotive Industry.”)Interoperability in the Automotive Indus
108、try In the automotive industry,an open architecture system for some key parts and components initially met with low supplier adoption and minimal interoperability of hardware and software.As recognition of the standards spread,supplier adoption broadened,leading to increased savings through competit
109、ion among suppliers and through significant price transparency to automotive OEMs,driving accelerated upgrade cycles as suppliers incentives to spur innovation increased.15SecurityInnovation BoardReinforce Cyber Defenses Across the Entire Innovation EcosystemAction 4Cybersecurity is fundamental to i
110、nnovation,but threats are growing more frequent and more severe.In 2022,14 of the 59 MoDs surveyed were publicly impacted by cyber attacks,and defense contractors have been targeted,too.Hackers linked to a criminal organization in Cuba targeted government institutions in Montenegro,including the min
111、istry of defense,and demanded a ransom of$10 million to restore access.Another cyber attack forced the Slovenian MoDs Incident Reporting System for Protection and Rescue to go offline for several days.The surface area for potential cyber attacks is expanding exponentially through increased uptake of
112、 software-based innovations.Partnerships with nontraditional suppliers that typically have less experience in mitigating threats have also increased cyber vulnerabilities throughout the innovation ecosystem.Even when ministries have existing cybersecurity programs,practices,and innovations,they may
113、not adequately or consistently apply or implement them.Partnership,new innovative technologies,and a proactive posture are essential to secure data,technology,and innovation.16 17Recommendation 4CInstitute a continuous improvement process that elicits best practices from all partners,and disseminate
114、 them across the ecosystem.Go beyond baseline compliance by systematically rolling out lessons and best practices across all partners.(See“Proactive Deterrence of Cyber Attacks.”)Prepare for inevitable cross-ecosystem incidents by running realistic scenarios to identify risks across the entire defen
115、se innovation ecosystem.(See“NATOs Cybersecurity Scenario-Planning Exercise.”)Proactive Deterrence of Cyber Attacks MoDs can resort to three methods to deter future cyber attacks:the threat of punishment or retaliation,protection of critical cyber resources,or investment in resilience and recovery.M
116、any hospitals invest in deterrence through resilience and recovery by creating multiple standby sites with preloaded electronic medical record(EMR)software.In the event of an attack on an EMR record system,a backup system immediately becomes available,minimizing disruptions to hospital operations an
117、d thus undercutting the attractiveness of such assaults to potential attackers.NATOs Cybersecurity Scenario-Planning ExerciseNATO regularly conducts cybersecurity exercises and supports cyber scenario planning and training through a massive cyber incident simulation known as Locked Shield.The simula
118、tion immerses experts in a scenario in which they must defend approximately 5,500 virtualized IT,military,and critical infrastructure systems in the face of more than 8,000 attacks.In 2022,32 nations participated in the exercise.Recommendation 4AUse a three-tiered maturity model to assess traditiona
119、l and nontraditional partners cyber capabilities.Segment suppliers across the entire ecosystem according to their cybersecurity level,using the following three-tiered maturity model:minimum(suppliers meet existing standards and requirements,but do not tailor their approach to their organizations uni
120、que needs,leading to low to moderate coverage of existing threats);intermediate(suppliers address all known and common threats,enabling full coverage of documented threats);and advanced(suppliers holistically apply best practices to prepare for emerging cyber needs,predicting threat trends and poten
121、tial security issues).Segmentation will enable a more tailored approach to improve cybersecurity for each supplier,yielding greater efficiency than a one-size-fits-all approach can achieve.Recommendation 4B Communicate expectations to partners,and look for opportunities to invest.After using the mat
122、urity model to assess suppliers,communicate the standards that partners need to meet.Help partners at lower maturity levelsespecially nontraditional suppliersmeet higher organizational standards and requirements by providing coaching,establishing KPIs,and setting contract incentives for improved per
123、formance.17SecurityInnovation BoardThe following steps should be taken in support of the fourth action:18 Benefit from the Increasing Investments in Climate and Sustainability InnovationsAction 5Although some defense leaders consider climate change a near-term threat to their forces,many others stil
124、l view climate change as a long-term issue that doesnt yet impact force readiness or require immediate action.Recent global conflicts have pushed climate issues farther down the list of priorities and,in some cases,reversed recent progress.Rising natural gas prices caused by the war in Ukraine have
125、led Germany to begin burning coal again,backtracking from earlier commitments to reduce emissions.Among survey respondents,only 35%report that their organizations innovation investments are linked to climate and sustainability(C&S)considerations(a 15%decline in average score from the previous year),
126、and only 28%of projects focus on near-term priorities.(See Exhibit 9.)When MoDs do invest in C&S initiatives,most(69%)say that these projects do not improve military capabilities,resiliency,or readiness,and 68%report not having adequate resources to achieve their C&S goals.(See Exhibit 10.)MoDs Repo
127、rt Deficiencies in Sustainability Investments Exhibit 935%report that investments are linked to sustainability/climate change priorities 28%report that climate and sustainability projects are focused on near-term priorities 35%28%3.152022 MoD average2023 MoD average2.67Sources:BCG Defense Innovation
128、 Survey,2022,2023;BCG analysis.Note:“MoD average”is the average score for the specific question in that years survey.-15%MoDs Report That Sustainability Projects Lack Real-World Military Impact and Have Insufficient Resources Dedicated to Them Exhibit 1069%report that climate and sustainability goal
129、s do not improve military capabilities,resiliency,and/or readiness68%report not having the resources(financial,personnel,etc.)to prioritize sustainability and climate goals68%Source:BCG Defense Innovation Survey,2023.69%18 SecurityInnovation Board 19Failing to realize the impact of C&S on military f
130、orce readiness,as well as failing to leverage the benefits that are emerging from potential dual-use C&S-military innovations,is a mistake.It is imperative that MoDs include C&S initiatives as part of their broader set of innovation activitiesnot only to improve their innovation readiness,but also t
131、o address the growing impact of climate change on force readiness.The climate crisis already directly affects military force readiness,through impacts due to energy and resource scarcity,landmass changes and rising sea levels,increasingly frequent extreme weather events,and water and food scarcity:E
132、xtreme weather events affect MoD operations and increase the burden of disaster response obligations.In the UK,an unprecedented heat wave in July 2022 caused runways to melt,requiring the UK Royal Air Force to reroute flights for two days.In 2017,members of Switzerlands armed forces had to support r
133、ecovery operations for more than two months after severe landslides and floods,reducing their operational readiness.The US Energy Information Administration projects that prices for fossil fuels and rare-earth minerals will roughly double by 2050 as a result of unstable supply chains and diminishing
134、 finite resources,threatening MoDs ability to procure necessary technology and equipment.Rising sea levels will reduce landmass and increase the extent of annual flooding,threatening MoD installations,property,and logistics.In the US,six of the nations 22 most strategic seaports,collectively respons
135、ible for deploying approximately 90%of its military equipment and supplies,are at risk of significant annual flooding by 2050,according to projections from NASA.UN Water projects that water scarcity will double by 2050,and agricultural productivity is declining worldwide,leading to increased migrati
136、on and conflict.Militaries have a unique opportunity to test and coinvest in climate innovations that could solve national security issues.To date,MoDs have not approached these innovation issues systematically and have not capitalized on the opportunity to leverage the many potential dual-use techn
137、ologies that the private sector has developed.Among survey respondents,66%report a lack of partnerships with key mission partners to jointly reduce emissions.To prevent a future decline in innovation readiness as environmental threats grow,MoDs need recognize climate change as a force readiness issu
138、e and take more proactive measures,including leveraging the private sectors large,preexisting climate change community.The following steps should be taken in support of the fifth action:Recommendation 5ALeverage existing research and investments in climate change innovations by adopting dual-use tec
139、hnology to improve innovation readiness.MoDs today can leverage significant developments in renewable energy and other innovations,which can benefit from the militaries unique test beds.More direct collaboration could deliver a range of benefits and enable MoDs to make faster progress.Try to leverag
140、e the climate communitys progress through direct acquisition of dual-use technologies,demand signaling to industry to spur new investments,and direct partnerships with organizations working on breakthrough technologies such as carbon capture technology,fusion,and related advances.(See“Investments in
141、 Climate and Sustainability.”)Investments in Climate and Sustainability In the past year alone,ten top climate tech investors have invested more than$7 billion in climate and sustainability technology.Many of these technologies have potential military applications,including the following:Sustainable
142、 fuel for air vehicles Sustainable solar and wind power Sustainable batteries Innovative grid technologies Decarbonized industrial heat Green hydrogen production Green hydrogen transport and storage Green chemicals Long-duration energy storage 19SecurityInnovation Board20 Recommendation 5B Prioritiz
143、e initiatives to address both environmental impact and force readiness impacts.Consider military capabilities,environmental threats,productivity and efficiency,and environmental impact in determining where to focus efforts.(See Exhibit 11.)Ensure that efforts focus on the largest drivers of climate
144、change and threats to national security.(See“The UKs Sustainability Strategy.”)Recommendation 5C Remove organizational roadblocks.Identify and eliminate any processes within the MoD that may inhibit or otherwise adversely impact the prioritized initiatives and strategy.For example,ensure that acquis
145、ition metrics either include an assessment of long-term environmental effects or set the timeframe for value-for-money calculations to truly determine value,including negative externalities.The UKs Sustainability Strategy The UK Ministry of Defence has recognized environmental concerns as an urgent
146、priority and developed a sustainable support strategy to deliver on climate change mitigation measures and develop a more resilient force.The ministrys supply chain strategy is shifting from a focus on cost reduction and efficiency toward a more balanced approach that factors in cost,service,reliabi
147、lity,and environmental sustainability.This approach has allowed the UK to prioritize innovations that may have been overlooked in the past because they were assessed only in terms of their potential effect on sustainability or only with regard to their impact on force readiness,rather than on the ba
148、sis of both factors together.Structuring Climate and Sustainability Initiatives to Focus on Readiness and Environmental Impacts Exhibit 11Reduce environmental impact(CO2 emissions,fossil fuels,etc.)to achieve broader MoD or countrys emission goals Increase comparative advantage through mitigation an
149、d reduction of current and future environmental threats(e.g.,rising sea levels)Increase operational advantage through increased military capabilities(readiness,resiliency,etc.)Reduce one-time and life-cycle costs through increased productivity and efficiencySources:UK Sustainable Support Strategy 20
150、22;BCG analysis.Environmental impactENVIRONMENTAL IMPACTEnvironmental threatMILITARYCAPABILITYMilitary capabilityENVIRONMENTAL THREATSustainability impact framework Productivity and efficiency PRODUCTIVITYANDEFFICIENCYConclusionAs highlighted in last years report,efforts to close the innovation read
151、iness gap cannot succeed unless MoDs implement them at every level of the organization.Too often,the people implementing day-to-day processes do not take up leadership strategy and end-user priorities,which results in strategic goals being set by bureaucracy instead of leadership.Working groups,long
152、-term studies,and directives without an implementation roadmap will not deliver the behavior changes needed across the entire organization to improve innovation outcomes.To implement the five recommendations discussed in this report,MoD leaders must ruthlessly prioritize implementation and ensure th
153、at everyonefrom leadership to day-to-day program executors has direction and a role to play in achieving these strategic objectives.Leaders can avoid past difficulties in implementing innovation actions by communicating and creating a culture of innovation through education,training,and incentives f
154、or all employees.The measures discussed above provide a playbook for how to improve innovation capabilities.The stakes are rising,and MoDs must act now before the innovation readiness gap widens further.MSC and BCG developed these recommendations from the results of an in-depth survey and analysis o
155、f 59 ministries of defense(MoDs),with participating countries on every continent except Antarctica.We also analyzed the defense activity of the European Union and NATO in this context.Survey respondents included senior ministry leader;members of innovation units;and representatives of user and opera
156、tor groups,testing groups,and acquisition communities within the ministries.We asked respondents to assess their ministrys readiness to innovate by filling out a BCG benchmarking instrument,the Innovation-to-Impact Readiness Assessment(i2i).The i2i assessment consists of about 40 questions that illu
157、minate aspects of the 11 dimensions of innovation readiness.In total,these 11 dimensions describe two broad categories of each ministrys approach to defense innovation:elements of the innovation system(that is,how a ministry is organized and governed to support innovation at scale);and innovation pr
158、actices(that is,the daily work of navigating processes and systems within the ministry to achieve innovation outputs).Scoring is based on a 100-point scale that reflects best-practice maturity;a score of 80 or higher indicates that an organization is ready to realize its innovation aspirations.(See
159、Exhibit 1.)Analysis of the survey responses enabled us to gauge the progress of each ministry along the overall path of innovation readiness.We averaged those results to develop our view of the overall readiness of ministries in aggregate and of the size of the innovation gap.We then compared the de
160、fense results from the new survey to the results from the previous year in order to assess the progress of MoDs innovation readiness over the past year,comparing average scores for each survey response in each year on a five-point scale.We also compared the results to private sector benchmarks from
161、the current year,to see how far behind(or ahead of)the private sector the MoDs were.These benchmarksthis year gathered across 19 industries representing 2,249 private sector respondentshave been part of BCGs“most innovative companies”research for more than 15 years.We next interviewed more than two
162、dozen leading public and private sector leaders worldwide to validate these findings and to assess the leading innovation issues facing MoDs and the progress they have made over the past year.Future studies will continue to track MoDs along their path to innovation readiness.Appendix:Survey Methodol
163、ogy 21SecurityInnovation Board22 About the Authors Matthew Schlueter is a managing director and partner in the firms Washington DC office.He is also BCGs global defense and security lead.You may contact him by email at Schlueter.M.Marc Giesener is a managing director and partner in the firms Chicago
164、 office.You may contact him by email at Giesener.M.Lauren Mayer is a consultant in the firms Washington DC office.You may contact her by email at Mayer.L.Contributors:Laura Key Erin Capasso Justin ManlyJohann HarnossUlrike Strauss Ann-Kathrin KnackeNardine LucaEditorial Board:Ambassador Dr.Christoph
165、 HeusgenAmbassador Boris Ruge Dr.Benedikt Franke Acknowledgments:The authors also wish to acknowledge the following individuals for their valuable support:Jad Bitar,Genevive Bonin,Jon Campos,Hannah Coatsolonia,Will Cornock,Fabio Dal Pan,Faisal Faraz,Jeff Garigliano,Benjamin Grosch,Esben Hegnsholt,Ro
166、bert Hjorth,Kjetil Holgeid,Janice Horne,Peter Jonathan Jameson,Matthew Leybold,Lars Littig,Mike Lyons,Zach Oliver,Edmond Rhy Jones,Cameron Scott,Daisuke Sohta,Troy Thomas,Louis Watt,Mark Watters,Annika Zawadzki,and Tina Zuzek.Finally,the authors thank the public and private sector leaders who partic
167、ipated in confidential interviews,and everyone who responded to the survey.23For information or permission to reprint,please contact BCG at .To find the latest BCG content and register to receive e-alerts on this topic or others,please visit .Follow Boston Consulting Group on Facebook and Twitter.Boston Consulting Group 2023.All rights reserved.02/23SecurityInnovation Board