Background

“A strategic suggestion to organizations if they are experiencing disintermediation is to aggressively self-cannibalize, with ecosystems and platforms as the new value creation and capture architectures of a new business model (or – to start – a standalone, but scalable business unit).”

As we continue to track and make sense of the A New Wave of Investment in National Security and American Competitiveness, a subtopic of our research is based on the following hypothesis:

Exponential Organizations’ (ExOs), platforms, ecosystems, and sources of new value creation are based on the disintermediation (innovation that undermines established or incumbent structures) of a market, organization, or industry sector.  Case studies include:

• Streaming platforms and the disintermediation of TV and Film;
• By the time Napster and Apple Music did their business, the music industry was 50% of its headcount with revenues down 50%. An unintended consequence:  Vinyl is back;
• Amazon and the disintermediation of anything it can get its hands on, including Amazon Prime contributing to the global disruption of TV and film content delivery;
• Cell phones and smartphones disintermediated telecom;
• Phone apps and XaaS further disintermediated the consumer off-the-shelf (COTS)software market and the enterprise software licensing model to a cloud-based XaaS subscription model;
• The Commercial Space Sector, SpaceX, Blue Origin, Virgin Galactic, and the disintermediation of The National Aeronautics and Space Administration (NASA); and
• The current disintermediation is grabbing headlines: the role of crypto assets, digital currency, and blockchain in the disintermediation of financial markets, monetary systems, and the future of money (of course, as we all know the jury is still very much out on this one).

There is also an argument that some of the information-enabled kinetic technologies, intelligence operations, and cyber warfare activities in Europe signify the disintermediation of war (i.e. the role of commercial drones in the war in Ukraine, the democratization of access to open-source intelligence tools typically only available to intelligence agencies or the powerful cyber war weapons available to non-nation-state actors).

A strategic suggestion to organizations, if they are experiencing the disintermediation of their industry and/or marketplace, is to aggressively self-cannibalize (early and assertively) – with ecosystems and platforms as the new value creation and capture architectures of a new business model (or – to start – a standalone, but scalable business unit).

Based on direct experience and history, we know for a quantifiable fact that most stakeholders in traditional industries and markets have shown a strong cognitive bias against disintermediation as a “thing” and the idea that self-cannibalization is actually a “thing” as well – and even necessary.  Call it market or company hubris or the result of “The Worst-Case Scenario is the Least Probable and Other Cognitive Biases.”

Or see the market casualties from the case studies mentioned above.

Or consider the following:  Xerox, Kodak, Blockbuster…

The Future of the U.S. Defense Industrial Base

The Defense Industrial Base Sector is defined as “the worldwide industrial complex that enables research and development, as well as design, production, delivery, and maintenance of military weapons systems, subsystems, and components or parts, to meet U.S. military requirements. The Defense Industrial Base partnership consists of Department of Defense components, more than 100,000 Defense Industrial Base companies and their subcontractors who perform under contract to the Department of Defense, companies providing incidental materials and services to the Department of Defense, and government-owned/contractor-operated and government-owned/government-operated facilities. Defense Industrial Base companies include domestic and foreign entities, with production assets located in many countries. The sector provides products and services that are essential to mobilize, deploy, and sustain military operations. The Defense Industrial Base Sector does not include the commercial infrastructure of providers of services such as power, communications, transportation, or utilities that the Department of Defense uses to meet military operational requirements. These commercial infrastructure assets are addressed by other Sector Risk Management Agencies.” (1)

Our research questions include the following:

• Is the Global Defense Industrial Base experiencing disintermediation?
• Is this disintermediation a Gray Rhino or a Black Swan narrative? Or does it have more traction than we are aware of amongst mission-critical stakeholders and incumbent organizations?
• If so, is the disintermediation of the Defense Industrial Base merely a symptom of the larger themes we framed in the OODA Almanac 2023 – Jagged Transitions all meant to invoke the challenges inherent in the adoption of disruptive technologies while still entrenched in low-entropy old systems and in the face of systemic global community threats and the risks of personal displacement?
• Do the Department of Defense and the Prime Contractors need to make a conscious, formal effort to aggressively disintermediate themselves in a strategic effort to become Exponential Organizations (ExO) – with the architecture and capabilities to respond to the exponential disruption of emerging technologies?
• If so (and please excuse the evocative phrase), what does the self-cannibalization of the Defense Industrial Base even look like?  And are there signs that it is already happening and are clear concerted efforts already underway?

Broader research questions include:

• Is the United States Government, in general, experiencing disintermediation across many departments and agencies? 
• Globally, is the nation-state on the brink of disintermediation?

OODA Loop Research 2023

Clearly, we have some provocative strategic questions.  For now, our short-term research tracking efforts, strategic conversations, and case studies will be much more tangible, operational, and of tactical interest to organizations who are trying to sort this all out and make innovation happen now, with an eye toward:

• Our usual risk, threat, and opportunity assessments;
• Opportunities for advantage;
• Current mental models and cognitive biases;
• Decision intelligence;
• Quantifiable metrics;
• Whole-of-government and interagency agreements initiatives; and
• USG and DoD procurement innovation efforts.

Research efforts already underway here at OODA Loop include:

Designing, Quantifying, and Measuring Exponential Innovation:  Based on the strength of the insights garnered over the course of 2022 from the research theme of Exponential Disruption, our new OODA Loop Series,  Exponential Innovation, will pivot and “drill down” on the technical, organizational, and market-driven structures driving these disruptions – with a focus on emerging technologies, deep-tech, tough-tech, and advanced technologies. This research is all in the context of this year’s overall theme  – Jagged Transitions  -which is meant to invoke the challenges inherent in the adoption of disruptive technologies while still entrenched in low-entropy old systems and in the face of systemic global community threats and the risks of personal displacement.

The wisdom and institutional knowledge of OODA Network members and OODA Loop contributors:  Articles from OODA Network Members and Experts that lead to actionable recommendations for continuing the focus on the speed and scale of adoption of new technologies, including how to improve risk management issues from a USG perspective, and identifying strategies that can be implemented now, by those with the authority and will to do so.

Our first series of posts for 2023 in this vein was penned by OODA Network Expert Maz Schindler on the topic of Accelerating Technology For Use In Government (links to the series can be found below).

OODA Loop Q and A conversations: Be on the lookout for our inaugural conversation on these topics with OODA LLC Strategic Advisor, OODA Network Member, and OODA Loop contributor Chris Ward and OODA Network Member and QWERX COO Randall Fort.

How is DoD-sponsored rapid prototyping and experimentation administratively enabled and made possible within the legacy procurement process? Some items are already bubbling up to the top and our ripe for further research, including the implications of certain already existing programs, research efforts, and recent headlines such as:

• Trends in Department of Defense Other Transaction Authority Usage;
• The Army’s Abbreviated Capability Development Document (A-CDD):
• Army to develop ‘high-priority’ AI capabilities with non-traditional partners in new SBIR program:  “Beyond open-topic solicitations like this, the Army SBIR Program has a number of other efforts aimed at ‘removing some of the inherent challenges of working in government research and development…'” (1);
• ‘Decision superiority’: Air Force picks 5 companies to develop ABMS digital infrastructure: “The purpose behind this is really to lay in the digital infrastructure to improve decision making and accelerate kill chains, kill webs…against a near-peer threat,” said Vinnie DiFronzo, SAIC’s senior vice president of operations. “So it really comes down to decision superiority as an initial objective.” (4)
• Cyber Command, DARPA ink agreement to transition innovative technologies for operational use: The new agreement is meant to bridge the valley of death and get more cyber capabilities into operational use. (2); and
• An open call to the visionaries in government to change DoD culture;
• The Defense Innovation Unit aims to build upon last year’s ‘history-making’ deliveries in 2023:  “The Defense Innovation Unit transitioned a record 17 prototypes to fully fielded military capabilities in fiscal 2022 according to a new annual report that broadly spotlights…the Pentagon’s adoption of commercial technologies.” (3)

Our baseline research to date on these topics can be found below for your review.

About the OODA Loop Exponential Innovation Series

https://oodaloop.com/archive/2023/02/06/designing-quantifying-and-measuring-exponential-innovation/

Exponential Innovation and The Disintermediation of the Defense Industrial Base

https://oodaloop.com/archive/2023/02/14/the-current-debate-on-forging-the-defense-industrial-base-for-the-digital-age/

https://oodaloop.com/archive/2022/12/07/accelerating-technology-for-use-in-governments-what-can-be-done-now/

https://oodaloop.com/archive/2023/01/18/accelerating-technology-for-use-in-governments-from-theory-to-execution/

https://oodaloop.com/archive/2022/09/20/speculative-design-u-s-army-experimental-cubesats-miniaturized-satellites/

 

https://oodaloop.com/archive/2022/02/23/the-worlds-largest-digital-twin-modeling-and-simulation-project/

https://oodaloop.com/archive/2022/01/26/the-air-force-need-for-speed-the-end-of-the-requirements-up-front-model-software-factories-and-digital-transformation/

The OODA Loop Explained: The real story about the ultimate model for decision-making in competitive environments

https://oodaloop.com/archive/2022/03/04/chris-butler-on-the-value-of-adversarial-thinking-in-product-design-and-management/

https://oodaloop.com/archive/2021/06/23/potential-future-opportunities-risks-and-mitigation-strategies-in-the-age-of-continuous-crisis/

https://oodaloop.com/archive/2021/02/19/oodacast-michele-wucker-on-identifying-and-confronting-the-obvious-risks-of-gray-rhinos/