With December’s release of a new Statement of Intent it seems as though the UK defence sector will be leading the charge on how each of Invest 2035’s eight growth driving sectors can deliver in practice. This only increases the importance of getting it right so other sectors can learn from it as they evaluate their priorities for the next decade. This will be the first of a series of articles tackling 5 of the 6 priorities laid out in the statement of intent (while the RDS holds a breadth of expertise, the future of nuclear deterrence is better addressed by the more military minded).
We begin with Prioritising UK Businesses. The UK defence industry continues to maintain a strong position; however, global export shares have seen both existing and new players approach and surpass UK exports in the sector. Italy, Türkiye and South Korea amongst others are becoming major players in the supply of munitions, drones & artillery platforms. For the UK to engage in this market of increasingly diverse players it must choose its focus carefully and allocate appropriate amounts of support, both financial and political.
As we have covered before, the Triple Chasm Model provides a holistic methodology that ensures all the critical aspects of commercialisation are considered. The 12-Vector model provides a framework to assess the priorities of any commercial product and when combined with an assessment of its commercialisation readiness level (CRL) allows a far more integrated understanding of the challenges facing a company than the conventional metrics.
Existing frameworks continue to limit the scope and support provided by interventions across the UK economy. The Defence and Security Accelerator can serve as a useful example of one of these issues. Like most accelerators it makes use of Technology Readiness Levels to measure the progress of firms on its programmes. However, its strict adherence to this limits it to providing support only up to CRL 5, offloading the ventures before they hit the most dangerous failure point at Chasm II. It also faces the unique challenge of competing priorities as the government tries to balance strengthening UK defence capability and commercial returns. Here our approach to sustainability may be adjusted and reapplied to account for these different set of trade-offs. The government have already shown some consideration of this in its purchase of one of the last semiconductor factories in the UK. A risky commercial gamble given our comparative weaknesses in semiconductor fabrication but perhaps a necessary play to ensure future supply in an increasingly uncertain geopolitical environment. Decisions like this must be made for a many key technologies and we may need to rely on our partners for some so we can supply the investment needed for others.
Throughout this series we hope to articulate the implementation of the Triple Chasm Framework so it can be better understood and successfully applied by others wishing to better understand the challenges and opportunities faced by their venture. To do so we will use the drone industry as an illustrative example. The variety of aerial, marine & ground platforms emerge from the intersection of several of the chosen growth driving sectors and as new developments in artificial intelligence, energy storage technologies and platform networking. It is a sector that has changed drastically in recent years and is expected to do so more in both civilian and military spaces.
To initiate our analysis, we must first develop a comprehensive understanding of the broader market space and the various value adding elements. This culminates in the development of a market space-centric value chain to illustrate the key elements and how they interact with each other. However, while conventional value chains focus on a specific firm, our own flips Porter’s work on its head, taking an external perspective. Doing so avoids limiting the processes and roles to existing paradigms and provides greater insight into the reshaping of relationships with existing & new players.
The system boundaries defined seek to include elements from early-stage research up to and including the deployment of the products themselves. Its worth noting that the visualisation below can be applied to both the military and civilian sectors. Many of these elements have existed to some extent for some time, but as technologies become more widely available new viable positions emerge within the value chain. Network management technologies for example have long been present within a variety of industries, deployed by air traffic controllers and military command centres alike. However, as the cost of UAVs have dropped, individual firms and even well-funded individuals now have the capability to deploy drone swarms whether for light shows or crop monitoring. We can observe similar shifts in the availability of custom software and payload packages. While once the procurement of high-end military technology was confined to government bodies, we have since observed individual units purchasing, modifying or sometimes even manufacturing their own equipment through both formal and informal networks.
Proposed Market Space-centric Value Chain for Drone Industry
This chart is unlikely to remain the same as the structure of the market continues to develop. Even over the coming months in the runup to the release of the Defence Industrial Strategy White Paper, we will be iteratively improving it. However, it should be a suitable base for us to develop our analysis further as we begin to tackle the other 11 vectors. Please join us later this week when we will be discussing partners, competitors and positioning.