In a recent ASPI report, Robert Clark and Peter Jennings ^[1] argued for the establishment of an Australian version of the US Defense Advanced Research Projects Agency (DARPA). Conceptually, it’s a very good suggestion. However, we need to think deeper about how to take advantage of Australia’s pools of private capital, which are among the largest in the world due to compulsory superannuation. The problem isn’t just about overcoming current budget allocation issues in universities. We need to industrialise innovation and marry it to our strategic purposes.

The need for a new approach to domestic innovation was also raised in a Strategist post ^[2] by Charley Feros that posed a very relevant question: ‘Why is it so hard for Australia’s innovators to win acceptance by Defence?’

The same question has been asked by innovative Australian companies over decades. To answer it simply, the Department of Defence sees local innovations as carrying a higher risk than those coming from traditional providers overseas. The DARPA proposal advanced by Clark and Jennings is unlikely to overcome this dynamic. Nothing turns the private capital tap off faster than when the pathway of technology development and commercialisation is obscured by opaque and uncertain bureaucracy.

The 2016 defence industry policy statement ^[3] recognised the problem highlighted by Feros, promising that ‘Defence will change its culture and business processes to systematically remove barriers to innovation’. But not much has changed. In fact, no substantive improvements have occurred since the Howard government’s 1998 strategic policy statement with its claim that ‘Defence and industry will create a culture of one team—Team Australia.’

The strategic environment, however, has changed, and it is becoming increasingly less forgiving. In the past we could promote technological superiority over potential regional adversaries to offset our obvious lack of numbers, but now we are likely to have neither qualitative nor quantitative advantages.

So, we have two significant challenges in addressing this innovation problem. The first is the Defence Department’s culture. The proposal to form an Australian DARPA is correct, but to house it within the Defence Science and Technology Group, with its department-oriented organisational structure and reporting lines, is unlikely to produce the outcomes that the nation needs.

The other challenge is developing asymmetric capabilities to help balance the operational equation, for which we need rapidity and risk-taking. Hans Ohff and Jon Stanford ^[4]have also highlighted the need for asymmetric capability development.

The answer to both challenges is to establish an Australian DARPA, but to bypass Defence’s culture and bureaucracy. We need an organisation that fosters innovation through constructive risk-taking that addresses the highest potential payoff and develops the most forward-looking technology, not just research. This means a focus on technology readiness levels 4–7 ^[5].

It also means bringing in people from industry who understand risk in an organisational structure that is agile and not burdened with process-oriented bureaucracy. At the very least, such an organisation would have to have independence from Defence, with its own budget and its own staffing arrangements outside of the Australian public service. It would need to be free to set its own goals and it should have direct reporting lines to the defence minister or an appropriate junior minister. Everything will flow from getting the right people in place.

An Australian DARPA could also take advantage of the immense pools of private investment capital in Australia to augment public funding. Public funding can still provide the backbone of the activity, but private investment could be sought on a case-by-case basis to increase the capital available, or to potentially accelerate the process. Private investors typically have a considerably greater propensity for risk-taking than public-sector organisations, and private investor funding would conceivably be available if innovation projects were likely to result in commercial returns in commercially attractive timeframes.

A public–private partnership approach is therefore necessary, with clear terms and a framework that recognises that it won’t be the usual master–servant relationship, but a partnership with mutual recognition of each other’s needs. Agreements would need to be reached about how and for how long private capital would be tied up, and what the rights for use would be on conclusion.

This type of Australian DARPA could be tasked specifically to investigate and develop asymmetric technologies within a sovereign construct so that we have maximum flexibility to address a rapidly changing strategic environment. Given the strategic nature of sought-after ends, potential developmental projects that could provide asymmetric effects could be regularly sought from academic institutions, research organisations and the private sector.

Collaboration with alliance partners would need to be judiciously assessed. In this increasingly dynamic regional environment, we want to avoid being restricted in what we can do by the US International Traffic in Arms Regulations and US policy more generally.

The benefits of a DARPA-esque organisation in Australia during this time of increasing regional tension would be immense. We would be able to identify projects and technologies that would provide asymmetric effects of direct relevance to our force structure and our modus operandi. We would be better placed to take control of our own destiny rather than relying upon external parties. The Australian Defence Force would directly benefit from being in an improved operational position.

We could use these projects to build the nation’s industrial capability and capacity, not only in the defence industry but in our wider industrial base.

In addition, we could harness the largely untapped funds of private investors for the national good and the development of national capability. And we could potentially contribute to the efforts of our allies by being a source of innovation rather than just a consumer.