war on the rocks

A Business Approach to America’s Warfighting Model

It is 2020. North Korea crosses the Rubicon. With intelligence estimates indicating the imminent launch of missiles against South Korea, Japan, and possibly the United States, Korean and allied officials opt to launch a limited spoiling attack. Special operations forces attack high-value targets and sabotage critical lines of communication, using a network of quadcopters for intelligence, attack missions, and secure communication. Manned-unmanned teams of Apache attack helicopters and Gray Eagle drones attack artillery, command and control, and air defenses on the forward edge of the battlefield, freeing up artillery units, including long-range missiles, and fifth-generation aircraft for deep interdiction missions.  An artificial intelligence-enabled command network helps staff prioritize missions and anticipate resupply issues. Missile defense and cyber protection teams protect assembly areas. Civil Affairs teams use biometric kits and big data platforms to register refugees, coordinate humanitarian relief, and map the human terrain.

Initial operations disable North Korean nuclear weapons. However, savage North Korean conventional strikes against civilian populations in South Korea galvanize the U.S. and South Korean publics — the mission becomes regime change. Rugged North Korean units tie into complex terrain and create a defense-in-depth that stalls allied advances. China mobilizes along the border but remains neutral. Russia declares the United States has manufactured a false pretext for unification by force. Kremlin leaders refuse to intervene directly but openly lend the North Koreans weapons and war materials. The campaign descends into a protracted struggle.

The U.S.-led coalition also faces critical supply shortages. Ammunition expenditure rates turn out to be much higher than anticipated. Unattributed cyber-attacks against the U.S. industrial base slow production of critical replacements. The coalition runs low on missile defense assets and precision missiles, limiting military options. A 21st century trench line forms on the Korean peninsula.

How should defense strategists approach building a force to deter conflict on the Korean peninsula and beyond? Historically, the Army has focused on doctrine and forces designed to, in the words of General William Depuy, “win the first battle of the next war” against peer and near-peer competitors. The Army’s vision of these wars has focused on integrating new capabilities to enable a smaller force to fight outnumbered and win. This logic of competition through offsets (i.e., differentiating the United States’ capabilities from those of its enemies) continues to drive defense debates.

Yet offsets that differentiate military forces are only one approach to long-term competition. With the global proliferation of technology and gradual leveling of economic power, it is time for U.S. strategists to reexamine the assumptions underpinning those models. What are sustainable advantages for the United States relative to the most capable adversaries? In which areas of wartime competition should Washington compete by differentiating, and in which areas should it compete by imposing costs on rivals?

The Army should explore the full range of competitive models that can help it sustain its position of advantage. Specifically, a review of business literature and historical military cases suggests long-term competitive advantage can also arise from cost leadership and differentiation in the form of an expansible industrial base, experimenting with prototypes and sustaining an alliance network.     

Competitive Advantage in Business: Cost and Differentiation  

The economic language of advantage emerged in U.S. defense circles during the Cold War, aided by ideas ranging from Albert Wohlstetter’s delicate balance of terror to Andrew Marshall’s vision of long-term peacetime competition.

Michael Porter popularized the concept of competitive advantage in business circles. He defined competitive advantage, according to The Economist, as: “You win either by being cheaper or by being different (which means being perceived by the customer as better or more relevant). There are no other ways.” Firms win market competitions by designing business models around their sustainable advantages — the assets or characteristics that (a) allow them to be either better or cheaper and that (b) their competitors cannot nullify or replicate. Similarly, countries posture themselves to win wartime competitions by designing their warfighting models around sustainable advantages — they either do what the enemy cannot do (differentiation) or do what the enemy cannot sustain (cost).

We will focus on competitive strategies as they relate to landpower, because there is a dearth of strategic theory discussing long-term competitive advantages for unified land operations. Most studies focus on strategic assets, including nuclear weapons and coercive cyber assets, or operational-level air and maritime assets as they relate to the Western Pacific. We apply concepts from business literature and strategic theory to suggest what kinds of Army modernization actions could increase America’s global competitive advantage over the long term.

A disclaimer is in order. War and business are not the same thing. They are unique domains with different objectives, stakes, and logic. But the basic logic of strategic thought applies across areas of competitive human interaction, and the sample size of business competitions is vast. Today there are more than 43,000 companies listed on global stock exchanges, practically all of which are in competition with one or several others at all times. Accounting for those not listed on exchanges, the number of companies of all types exceeds at least one hundred million. There are more business competitions underway on any given day than there have been organized military competitions in all of recorded history, and much intellectual capital has been invested in the study of that competition. Thus, for those whose understanding of war makes them competent to discern which concepts have application and which do not, business literature is a particularly rich source of analytic insight.

Compete by Cost: Imposition and Exchange

There are two ways to compete based on costs: cost imposition and winning the cost exchange. With respect to cost imposition, Andrew Marshall pioneered the idea of leading an adversary into sub-optimal investments and self-defeating behavior. For example, throughout the Cold War, the United States decided to continue purchasing strategic bombers, not just intercontinental ballistic missiles. Buying long-range bombers forced the Soviets to invest more of their limited resources in air defenses.

Another form of cost imposition is denial — establishing defensive capabilities sufficient to deter an adversary by elevating their expected cost of successful attack. After the American Revolution, early American strategists made extensive use of economical forts and coastal defense networks that made it prohibitively expensive for Great Britain to seize U.S. ports. In other words, they pursued a cost-imposing approach relative to the dominant maritime power. The same strategy can work against rival states in the 21st century. Arguably, ground-based fires threatening enemy aircraft and ships impose costs by forcing the enemy to shift limited intelligence resources to finding these platforms.

Militaries can also compete on the basis of cost exchanges. Whereas cost imposition increased the rivals’ costs, cost exchanges or cost leadership focuses on lowering your own costs by, among other things, leveraging economies of scale and experience curves. Put simply, you build so many widgets that the price point drops and labor-force productivity increases. This usually results in an S curve — firms move from slow starts to explosive growth until they find the optimal output.

The U.S. military should similarly invest in concepts that create favorable cost exchanges. In a long war, shooting down million-dollar missiles with hundred million-dollar interceptors is sustainable only if your economic and industrial overmatch of the enemy is so great that he can’t produce million-dollar missiles at the rate you can produce hundred million-dollar interceptors. If a hundred-thousand dollar enemy anti-tank missile can defeat a four-million dollar U.S. tank, planners may need to rethink how they use mobile protected firepower. Similarly, at 70,000 dollars each, U.S. precision artillery rounds will not offer favorable cost exchange for every target type, especially if the value of those targets is less than 70,000 dollars.

In war, both production capacity and price point matter. For a given asset, production capacity governs the rate at which we can produce an effect, from maneuver to fires to force protection. For that same asset, the price point determines the resource tradeoffs the military must make, or opportunity costs it must accept, to produce the effect.

The U.S. military can pursue cost leadership along two vectors: going cheap with unmanned systems and investing in the defense industrial base. First, the United States can shift cost curves by using cheap robots, not expensive and exquisite ones. In unmanned combat, quantity may have a quality all of its own. The Army can also enable a culture of experimentation that tests candidates for disruptive advantage. These candidates should come predominantly from efforts such as the Strategic Capabilities Office and U.S. Army Rapid Capabilities initiative, both of which seek to adapt commercial off-the-shelf and legacy equipment. America should enter the era of the prototype. Furthermore, servies should ensure that all systems are scalable, reliable, and easy to use. By making equipment more usable, you increase the number of users who quickly master systems and make them more likely to discover creative ways to combine them. Whereas differentiation involves creating new systems, these cheap, easy-to-use systems provide a source of competitive advantage consistent with winning based on lower costs.

Second, a shrinking defense industrial base limits cost-reducing experience curves and creates bottlenecks and scalability challenges. To pursue a cost leadership theory of victory, the United States should invest in spare industrial capacity for key military inputs such as computer chips, commercial drones, and precision ordnance. Spare industrial capacity is arguably a more important strategic reserve than manpower in the 21st century. Sending a million reservists to the Korean battlefield without precision artillery, Hellfire missiles, or unmanned systems would be a tragedy on par with Task Force Smith in 1950. Large armies require equipment, and modern equipment is expensive and difficult to produce at scale with a small industrial base. In wartime, having more units or comparative effects than the enemy increases the probability of favorable force-ratios in any engagement. In peacetime, the U.S. industrial base can be the “fleet in being” that makes it too risky for adversaries to challenge the status quo. Investing in this capacity lowers costs and enables the United States to produce comparatively more than a country that has to create industrial capacity from scratch.

Compete by Differentiation: Technological Hedges and Alliances

The second form of competitive advantage in the business literature is differentiation. Differentiation strategies refer to producing a unique product or service that, even if it costs more relative to alternatives, competitors find difficult to replicate. Intellectual property, technical expertise, and even brand recognition allow a firm to differentiate itself and capture market share.

This model is one the U.S. military is more familiar with, as the oft-employed defense concept of offsets fits this logic. Citing the first offset, nuclear weapons, and the second, precision strike, during President Barack Obama’s second term a chorus of defense officials and analysts called for a modernization program to usher in a third offset. The idea is that fielding new technology, such as advances in robotics, will differentiate the United States from major rivals, while sustaining military dominance and conventional deterrence. New technology produces returns beyond the cost to produce it.

Yet material investments that differentiate military hardware from the competition are insufficient on their own. Arguably, all technological offsets have institutional antecedents and permissive cultures of innovation. New equipment requires new unit structures and doctrine that allow soldiers to realize the full potential of the offset. In early modern Europe, states required drill techniques and new tactics to take full advantage of volley fire from early guns. Harder still is creating a culture of trust and experimentation that allows soldiers to find novel ways of using available capabilities. In 1939, blitzkrieg was possible not only because of the combination of technologies — the tank, the radio, and the airplane — that matured during the interwar period, but also because German military culture already lent itself to their fullest exploitation.

Business literature tells us the United States can compete based on differentiation in two ways: experimenting with technological hedges and sustaining its alliance network. First, businesses do not engage in mass production without first testing a market. Firms may introduce new products for a limited time or in selected markets, to gauge market responses and reveal friction early (production issues, distribution challenges, etc.). The U.S. military can allow experimentation in many arenas — in training, in its own ongoing operations, and in the ongoing operations of partners already receiving U.S. advice and assistance, such as in the counter-ISIS campaign. Furthermore, while one strategy for winning a future war is to enter that conflict having anticipated and prefabricated warfighting solutions, another is to acknowledge the unknowable and hedge. That is, deliberately enter with many different solutions on hand and then expand upon what works. Fielding and fighting prototypes increases flexibility and options for scaling up — a logic on display in the naval innovation of the interwar years, when the U.S. Navy fielded not one, but multiple classes of aircraft carriers.

Second, in both business literature and strategic theory, alliances are a source of competitive advantage. In business, the ability to plug into a larger network is an advantage that cannot be easily replicated. As new business literature and organizational sociology studies suggest, alliances build on social networks, prior relationships, and trust. A globalized market creates advantage through ecosystems in which firms may collaborate either to lower costs or to differentiate. Global supply chains reflect these ecosystems.

Alliance networks, in this reading, help states share costs and pool risk, whether as burden-sharing arrangements or collaborative innovation networks. Take, for instance, the famous “Arsenal for Democracy” speech of 1940, in which President Franklin D. Roosevelt promised to supply allied nations with critical military equipment even though the United States was not at war. Aligning foreign policy with industrial base policy, Roosevelt helped Britain and the Soviet Union field forces to fight the Nazis. Similarly, the United States today should strive to supply its allies with critical capabilities, from cheap sensors and command networks to precision weapons that increase their combat power. Sending the right equipment is often as important as sending your own units. As Roosevelt showed, sustaining competitive advantage by providing allies with an arsenal of democracy requires investing in the defense industrial base.

Alliances also foster innovation — consider how technology-sharing between the Americans and the British generated Allied technological advantages during World War II. Furthermore, networks provide access. Having access to bases in key areas enables U.S. power projection.

Choosing a Competitive Model for the Next War

Since 1945, America has been postured for the defense of distant frontiers, against powerful adversaries — a particularly disconcerting problem for a military that remembers itself for losing first battles. U.S. technological prowess and the political will for significant peacetime defense expenditures contributed to a warfighting model designed around a differentiation-focused competitive advantage: producing higher-quality forces and more advanced technologies that adversaries cannot replicate. As the environment changes along with actors’  relative strengths and weaknesses, the U.S. military should re-evaluate that competitive model. It need not choose between competing on cost and competing on differentiation — different approaches may make sense in different parts of a wartime competition. But the models for each competitive interaction should be based on a careful consideration of American sources of advantage. At the highest strategic level, if the United States optimizes only for the first battle, it may lack a credible long-war deterrent. Furthermore, if adversaries start to believe that they can, in fact, win the first battle, their aggression will only be deterred by the certainty of the United States prevailing in a protracted contest.

 

Benjamin Jensen, Ph.D. holds a dual appointment at Marine Corps University and American University, School of International Service.  He is the author of Forging the Sword: Doctrinal Change in the U.S. Army, 1975-2010.

Neil Hollenbeck is a major in the U.S. Army currently serving in the Army Future Studies Group. He is an infantry officer with previous assignments in the 82nd Airborne and 3rd Infantry Divisions and on the faculty at West Point. He holds an MBA from Duke University.

Arnel David is a lieutenant colonel in the U.S. Army currently serving in the Army Future Studies Group as the Chief of Staff. He is a civil affairs officer who recently returned from a deployment as the Commander’s Initiative Group Chief for Special Operations Joint Task Force – Afghanistan.

The opinions, conclusions and recommendations expressed or implied above are those of the authors and do not reflect the views of their organizations or any entity of the U.S. government.