Australia’s defence industry is being exposed to the operational and technological needs of high-technology defence forces and the global prime contractors in a way they’ve never experienced before. To survive, and to flourish, Australian defence companies must understand and master the innovation process—they need to become innovators.

Australia’s defence industry is awaiting the release of two key government documents: the defence industry capability plan, which is expected next year, and the defence export strategy, which is expected by the end of this year. They’ll complement the ground-breaking Defence White Paper, Defence Industry Policy Statement and Defence Integrated Investment Program, which were released in February 2016.

Those three documents have had a profound effect: they represent the most significant change in Australia’s defence industry policy for a generation or more. They point to a destination of international industry competitiveness and prosperity, with about $1.5 billions’ worth of assistance in getting there, thanks to the Centre for Defence Industry Capability, Defence Innovation Hub and Next Generation Technology Fund.

One of the vehicles that will help Australia’s defence industry reach that destination is innovation. Why the focus on innovation? Because, as I pointed out previously ^[1], a small country trying to equip, deploy and sustain a small, high-tech defence force won’t derive either an operational advantage or an economic advantage from trying to do the same thing as everybody else, only cheaper. Innovation—in equipment, organisation and process—is the difference between being ordinary, vulnerable and irrelevant, on the one hand, and effective, strong and resilient, on the other.

However, after decades on what has often been a starvation diet, many parts of the defence industry need to get into condition to start the journey and engage fruitfully with more forward-leaning defence customers, both domestically and overseas. In a global market that leaves Australia wide open to players from around the world, Australian defence companies are being asked to compete globally, both for direct sales and for the opportunity to become supply-chain partners. To do either, they need to deliver value, to be resilient, reliable, well-run businesses.

The Advanced Manufacturing Growth Centre’s recent report ^[2] highlights the fundamental importance of innovation as a component of industry capability, enabling Australian manufacturing firms (which includes most of the defence industry) to compete on value and not simply on cost. To be fair, some Australian defence companies have always understood that and behaved accordingly; the rest of the industry is having to catch up.

Innovation is something new and slightly scary for defence companies reared on a diet of ‘build to print’ and tiny portions of genuine opportunity. The word itself engenders suspicion: is it a ‘buzz word’? A fashionable preoccupation? It’s certainly not universally understood within the defence industry.

For anybody who thinks the defence industry is special, by the way, I have bad news: it’s not. The defence market is special and unique, but the defence industry is like any other high-tech industrial market for capital goods and services. The good news is that the factors that make a non-defence company a successful innovator apply also to defence companies, so there’s plenty of supporting literature and no black magic involved. Of course, every project is different (some subtly, some quite significantly), but generally speaking there are common preconditions for innovation success. They reside in the intrinsic attributes and routine behaviours of the companies involved.

Once you understand that the defence industry isn’t that different, the processes, procedures and practices set out by a swag of authors who’ve studied innovation success in other sectors make sense.

A defence innovator needs technological mastery, but that’s not enough in itself. It also needs business mastery if it is to be sustainable, reliable and resilient, and therefore a trusted supplier and partner (or competitor). It needs access to the ‘smarts’ developed by others because no company, however big, can possibly be an expert in everything that it does—that means partnering with research establishments, universities and other companies (something Australian industry and academia are famously poor at doing). And it needs to engage closely with Defence—the ADF, the bureaucracy and the Defence Science and Technology Group.

Boiled down to their essentials, the preconditions for innovation success are surprisingly simple: be a technical and subject-matter expert in what you do; appoint a leader who actually wants to innovate; break down silos and allow multidisciplinary teams to flourish; invest in R&D and prototyping capabilities; look for partners whose expertise complements (or even completes) your own; and, above all, understand your market and customer intimately. (The full list is here ^[3].)

There are some defence companies that get it: not surprisingly, a few are represented on bodies like the CDIC Advisory Board. But they are far ahead of the rest of the industry on this journey. The defence industry capability plan and export strategy may provide better directions—and if they do, it’s a sign that Defence is getting it also. But industry must complete the journey itself and probably won’t make it without embracing the challenges of the innovation process.