war on the rocks

Beyond the Power of the Coin: The Three Currencies of Military Innovation

July 14, 2016

Innovation is more important now than ever.  In a world of fast-paced technological change, America’s international standing is a factor of its ability to adopt new technology and apply it on the battlefield.  As authors at War on The Rocks have noted before, emerging capabilities are becoming more accessible to potential enemies as the civilian economy drives down the cost of things like data analytics, cyber technology, and robotics. More states (and non-states) have advanced innovations within their reach.

In the classic 1971 film, Fiddler on the Roof’s Tevye day-dreamed of what he would do were he a rich man.  In addition to being a “biddy biddy bum” and building stairways to nowhere “just for show,” he imagined being a problem solver, settling issues so difficult they would “cross a rabbi’s eyes.”  Townspeople would seek his counsel, “and it won’t make one bit of difference if I answer right or wrong… When you’re rich, they think you really know.”  Tevye’s problem-solving would be the direct result of all his riches.

What does a famous Broadway show have to do with military innovation? Tevye’s problem-solving strategy, a form of innovation, offers a fraction of a lesson to would-be military innovators.  He accurately perceived the link between wealth and innovation — money drives solutions — but his definition of wealth was too narrow.  The money he had in mind is just one form of “currency.”  This may have worked in Fiddler on the Roof, but in a large bureaucracy like the Department of Defense (DoD), potential innovations have costs that go beyond the pocket book, and innovators must deal in three distinct currencies, or forms of capital: budgetary, political, and ideas. Tevye sought “budgetary capital” when he dreamed about money.  In the Pentagon, this is the budgetary and manpower capital appropriated by Congress.  “Political capital” is the formal power of rank and the informal respect of others.  It’s marked by the esteem an individual is accorded by others. In the Department of Defense political capital manifests in the ability to influence decisions through rank or persuasion. “Ideas capital” is a vision for the future and the know-how to produce it.  Ideas capital can take the form of new technology, new operating concepts, or new management practices.  Each form of capital is necessary to transform an idea into a useful innovation.

To keep pace, defense innovators need to understand when budgetary, political, and ideas capital are in tension with each other. They need to learn to leverage all three to build a military prepared for tomorrow.

The Balance Among Cash, Esteem, and Ideas

Budgetary currency moves people to action, focusing attention and directing effort.  “Money talks.”  It dominates staff meetings, news cycles, and the military’s relations with Congress.  The size of the defense budget shapes future weapon system development, especially with expensive programs like the next generation bomber in the Air Force and Ford-class carriers in the Navy.

Yet, money is not the only thing that focuses attention and directs effort. Since the ancient Greeks, man has been described as political, naturally led to seek the esteem of others.  Those we esteem naturally grab our attention, and with this attention comes influence. Influence can be formal or informal — based on organizational rank or interpersonal relationships.  Political capital is a rough measure of this influence. We trade in it by asking “Who do you work for?” or “Who do you know?”

Budgetary capital and political capital are closely tied and often reinforcing.  A large budget implies bureaucratic power, and those with high political capital can grow their budgets. This relationship maintains a stable bureaucracy, but it also creates resistance to many types of innovation.  Perceived failure can diminish political capital, leading to less budget power.  Bureaucracies with large balances of money and political capital guard these resources closely.  Threats to that balance are inherently suspect. This debate over the bureaucracy of innovation led the House Armed Services Chairman, Congressman Thornberry to proposed legislation to alter the status quo and remark, “If there isn’t some opposition, you probably aren’t changing very much.”

The third currency, the capital of ideas, destabilizes the relationship between money and power.  Nowhere is this relationship more apparent than in Silicon Valley, the current epicenter of the ideas economy.  In Silicon Valley, what empowers innovators is not money in a bank account but an original idea plus the practical sense to carry it out.  Money does not drive innovation, rather innovation attracts money.  Before making an investment, Peter Thiel, co-founder of PayPal and the first outside investor in Facebook, asks prospective entrepreneurs “What do you believe that no one else does?”  Original ideas guide his investment decisions.  Outside of Silicon Valley, ideas are often the determining factor in both acquiring and spreading monetary capital. They have supplanted political capital in determining a person’s esteem from both peers and superiors.

This currency of ideas is harder to grasp than money, which can be counted, and political capital, which can be measured by rank or proximity to power.  A revolutionary idea to an insider like Peter Thiel may look like a speculative bet to an outsider — little-known Facebook in the noughties is an example.  And, in some ways, a revolutionary idea is often a speculative bet — there are no guarantees of success in the business world, just like in the defense world. In the defense context, the technical aspects of new ideas can be intimidating — deep neural imaging, big data analytics, bio-engineering, and the potential defense application of these ideas — is beyond the current level of comprehension for most people.  Understood or not, however, these ideas are prevalent in the commercial world and critical to future military innovation.

Leveraging the Three Currencies

For traditional military innovations, monetary capital and political capital are the driving force behind upgrading a weapons system or building the next generation of a weapon.  These incremental improvements on existing weapons systems are known as “sustaining innovations.”  They require constant political maneuvering and a steady supply of money and manpower.  Sustaining innovations take into account new ideas, but these ideas make the existing systems more effective without challenging the status quo structure of the Department of Defense.  Unfortunately, sustaining innovations are not enough to ensure that the U.S. military maintains an advantage over its peer competitors.  Technologies that leverage commercial space capabilities, expand the cyber domain, or make use of robotic, autonomous weapons systems will require a wholesale change in how the Department of Defense recruits, trains, and organizes its personnel. It will require a change in technology and organizational design, what Rebecca Henderson of Harvard Business School dubs an “architectural innovation.” Such innovations result from ideas for new technology, but also new ideas for recruiting, training, and employment.

In the Department of Defense, architectural innovations, the truly disruptive ideas, must overcome the imbalance between ideas capital and traditional monetary and political capital.  The traditional currencies are most often viewed as zero-sum: an increase in one organization’s budget and political power leads to a decrease in another’s.  A new idea that makes a major system obsolete is met with immediate resistance from the bureaucracy that senses a threat to its existence.  This fear of disruptive change mobilizes the bureaucracy to rise and defeat many innovators, yet, some survive.  Learning how these innovators do so is becoming more important as the world changes at an increasing pace.

An interesting case study of architectural innovation is the Predator program in the Air Force.  The Unmanned Aerial Vehicle (UAV) has (somewhat) shifted the Air Force’s focus from training pilots for manned aircraft to training teams of UAV operators. More importantly, it has made intelligence collection and analysis a core task within the Air Force, one that is more often than not independent of manned aircraft missions. This is a drastic change from just 20 years ago.  The story of UAV’s development was built on small-scale successes by innovators such as “Snake” Clark in the 1990s, and became a tool for widespread use after 2001.  The GNAT 750, a rapid deployment program funded by the CIA, showed in Bosnia in 1993 that low-flying drones could be used to collect intelligence.  The Air Force soon followed with a test of its Predator UAV in a stateside exercise in 1995.  Success during the exercise — it gathered intel and did not run into manned aircraft — led to deployment of the Predator over the Balkans that same year.  The number of flights in Bosnia was exceedingly modest relative to manned flights, but seeing them in action changed how the Air Force thought about the Predator.  The Air Force Chief of Staff at the time, General Fogleman, began insisting that the Air Force become the “lead service” for Predator.  This transition, exceedingly fast by most standards, built off small “experiments” that posed little risk to the Air Force’s budget and political power.

What made the program successful was a combination of “disguising innovation,” small-scale experiments, and “top cover.”  Disguising innovation means outsourcing idea production from the bureaucratic structure, or isolating a small innovative element from the rest of the organization.  Disguise is helpful for architectural innovations in particular because it’s less likely to signal a threat to the underlying organization. The second technique — relying on small-scale experiments — makes innovations easier to execute with minimal resistance in a risk-averse bureaucracy.  The third technique requires the identification of a powerful sponsor to provide ”top-cover,” quietly pairing the currency of ideas and the currency of political capital.  Each of these techniques was used to great success in the Predator program, and all three techniques can be used by other military innovators.

However, while disguise and top-cover can work for isolated programs, the methods are not scalable to create the necessary range of architectural innovations for the Pentagon to keep pace in a rapidly changing world.  To keep up, the Department of Defense should frame ideal capital as non-zero sum. As the Predator program, and the follow-on Reaper program showed, in the long-term the net value of political capital can grow as a result of positive mission accomplishment.  Similar to the “lump of labor fallacy” in economics, which erroneously holds that there is “only so much work to do,” there is a political capital fallacy.  New ideas generate new problems to be solved, which means new opportunities for budgetary and political capital. In this sense architectural innovations do not distort old bureaucratic structures, rather they repurpose and improve them.  The Strategic Capabilities Office (SCO) has made a living by taking existing programs and repurposing them — tools like the Navy’s SM-6 Standard Missile went from a weapon of defense to a weapon of offense.  Everyone involved with the weapon saw their political capital increase as the Navy became more effective.

A military innovator’s job today is to understand how to leverage the three currencies of innovation to continue to do the right thing and move the Defense Department forward.  Balancing the three currencies through disguise or top-cover will be necessary unless the underlying military culture changes, allowing idea capital to exert influence similar to monetary or political capital. The key to a future Pentagon that is more open to innovation lies in linking esteem to the production of new ideas. This cultural change will take time, requiring changes in military education and promotion systems that incentivize innovation and risk taking.  Until then, the tension between the currencies is not “solvable,” but rather something to be continuously studied and managed.

 

Brad DeWees is a U.S. Air Force Captain and a PhD Candidate in Public Policy at Harvard University.  He is an Air Liaison Officer (ALO) by career training, and can be followed on twitter @b_dewees. Enrique Oti is a Lieutenant Colonel in the U.S. Air Force, and an affiliate at the Center for International Security and Cooperation at Stanford University.  He is a cyber operations officer that focuses on defense innovation methodologies.  He can be followed on twitter @enrique_oti. The views and opinions expressed here do not represent those of the U.S. Air Force, the Department of Defense, or the U.S. government.

Image: Stock-Free.org, CC