To James “Hondo” Geurts, the top weapons buyer for U.S. Special Operations Command, taking risks on fledgling defense companies is sometimes the only way to get the right gear to operators in months instead of years.
Geurts likes to use a Blackjack analogy to explain why he isn’t afraid to take chances on small business rather than playing it safe with defense contracting giants.
“If I can place 100 more bets than you, I don’t have to succeed every time. I may only have to succeed 10 percent of the time, and if you can only place five bets, I’m always going to beat you,” Geurts recently told an audience at the National Defense Industrial Association’s Special Operations/Low-Intensity Conflict Symposium.
“We are not always about taking the lowest-risk approach. There are times when we need to press the envelope.”
This mindset — which attracts defense firms to events such as SO/LIC – is what’s missing in the larger, complex world of Defense Department acquisitions, said Joan P.H. Myers, chief operating officer for Strategic-Link Partners, a consulting firm that represents many small defense contractors.
Myers raised the issue during a question and answer period at a panel discussion to assess new DoD processes and organizations stood up since 9/11 to speed up acquisitions and fielding of new technology.
“In the last couple of years, we have become risk-averse, so we are afraid to fail. And innovation suffers when we are afraid to fail,” Myers told the panel.
It’s a “little deep, dark secret” that hurts startup companies the most, Myers said.
“There are a whole lot of private equity guys … that absolutely will not let their startups work with DoD or the government,” she said. “This is a huge issue because sequestration … caused a huge ripple effect, and so there is an awful lot of really good stuff that we need on that battlefield … but the word is you are not going to touch the government.”
Many innovative small businesses cannot be at these types of discussions, Myers said, because they cannot afford the $895 fee to attend the NDIA event.
“We need them,” Myers said. “Big guys need the teeny guys here.”
Jaymie Durnan, a panel member from the Massachusetts Institute of Technology’s Lincoln Laboratory, had this to say to Myers:
“This risk aversion that we tend to beat ourselves up over is not as bad as I think our friends in the press and Congress and other places would like other people to believe,” he said.
“We have to be careful about how we define risk-aversion
Over the last eight years, Durnan said he has spent a lot of time in the private sector looking at some of the larger U.S. companies that are considered “the big innovators” in the defense industry.
“If you spend any time with them, you will find out they are, in my view, as risk-averse as the Department of Defense,” he said. “Their bottom line is to make money.”
Durnan conceded, though, that the problem does exist.
“It is a problem,” he said. “It is a problem that the Defense Department has been having.”
Panel member Jason Matheny, director of the Intelligence Advanced Research Projects Activity, which falls under the Office of National Intelligence, said his organization accepts that most of the teams it funds are going to fail.
“I think government is doing some exciting things to increase its tolerance to risk,” he said.
Organizations such as the Defense Advanced Research Projects Agency have “a fairly high risk tolerance, understanding that most things are going to fail … so you need to fund multiple things in parallel,” Matheny said.
“You need to reward technical ambition such that you program managers and your research teams are rewarded for going after really hard problems rather than sticking safely to the trunk of the tree.”
Myers seemed unconvinced in an interview following the panel.
“I tell you how to fix it,” she said. “The first thing is you define the problem and you have the courage to admit it. The second thing is you look at the best that is working.
“The special operations community does it the best … and the fact that we cannot replicate that across the board is ridiculous. They are extraordinarily good at quickly going in, finding stuff and getting it out on the battlefield the quickest.”
To Myers, the solution is simple.
“I think the absolute best capability is done in one place. If the leadership realizes that there are models that can work and you adopt that across the board … then you are actually going to move things, but you’ve got to have the will to be able to do it and be able to take the risk to allow it to happen,” she said.