M.A. and George Lund Fellow for Emerging Defense Challenges Steven Grundman writes for Breaking Defense on how the defense-industrial base will evolve over the next decade:

After three years of the “age of austerity” in Western military spending, investors’ imperatives and corporate strategies show one indication of how the defense-industrial base will evolve over the next decade. Investors want public companies that demonstrate an attractive risk-adjusted total return, not just M&A-fueled arbitrage plays. In response, companies are husbanding or harvesting their financial strength by making cautious choices about the strategic direction and capital deployments of their companies.

But the customers — the Defense Department and Intelligence Community — want offerings that reflect more commercial-styled innovation, not just simple cost-reduction. In response, key segments of the market are witnessing the entry of competitors who differentiate by a “better-quicker-cheaper” proposition that is taking share from incumbents still indulging the mantra “higher-faster-farther”. Notable bellwethers of this trend are in evidence at the leading edge and trailing ends of the product-lifecycle S-curve.

Read the full article here.

Related Experts: Steven Grundman