December 8, 2014

At a point, customer closeness becomes “the worst thing possible" for a 21st-century defense business.


At what point does acting and thinking like your customer pass the point of marginal value in defense contracting? Hiring those bobble-head retired flag officers as marketing representatives is clearly a widely valued strategy. In recent essay on "Assimilating Disruption, or Offboarding Innovation,” I wrote that
     As Peter Dombrowksi and Eugene Gholz observe in Buying Military Transformation, defense is not so much an industry but a common set of customers, and some of the value created by the Boeings of the world springs from their deep understanding of military customers, from the administrative processes of all procurement bureaucracies to the battlefield needs of end-users. If resistance to the military-industrial complex is futile, mergers and acquisitions will be the economically efficient course—for both entrepreneurs and systems integrators.

     What if the paradigm shift we are in is the change in the value of this knowledge going from positive to negative? Could it be that being like your customer is the very worst thing that can happen to you in the 21st-century defense business? Then we would be talking about a more advanced understanding of how to successfully prevail in conflict or war. It’s a big supposition that a company could know that better than a government organization—except it’s not, if you consider the notion that not all war is the same, and industry can perhaps understand certain kinds of conflict better than the customer it sells to, and develop capabilities and effects accordingly.
When has this happened in the past? More than a few times. R.V. Jones didn’t move the Air Ministry in the 1940s towards electronic warfare by telling his clients what they wanted to hear. General Atomics hasn't ruled the big drone business for the past two decades except by threatening its top customer, the US Air Force, with an end-run straight to the US Congress. Companies from Textron to iRobot have done quite well by bucking that focus on a single class of end customer, and instead keeping more than a foot in the commercial world, to show those customers the art of the possible.
Perhaps more to the point, if all that administrative and bureaucratic process is a self-inflected wound, why should those customers even want that kind of marketing acumen from their suppliers? Naiveté is not always appreciated, but there comes a point at which thinking different leads to exactly the straight talk the customer needs.
James Hasík is a senior fellow at the Brent Scowcroft Center on International Security.