The major themes coming out of the DSEI event, unsurprisingly, revolved around:
A cursory scan of vendors at DSEI will show you the extent to which Unmanned Aerial Vehicles (UAVs) and other forms of robotics, such as nautical drones, have become a part of the modern arsenal.
However, this begs the question: how can allied governments invest in these capabilities in peace time without overcommitting to platforms and systems that, given the pace of innovation, are likely to be out of date in relatively short order.
If you look at the revenue profile of Defence prime suppliers, and indeed western Defence forces, large chunks of spending are dedicated to long-term, exquisite platforms. From tanks, to artillery systems, even aircraft carriers. Recent conflicts and humanitarian missions have shown us that these capabilities are still important for projecting power.
However, we have also seen the heroic efforts of Ukraine; an underdog significantly outmatched in artillery and munition stockpiles and manufacturing capability, but leveraging UAV technology and innovative delivery techniques to take on and win against a bigger adversary.
Out of necessity, Ukraine has used drone technology to great effect in place of conventional artillery and munitions. The decentralisation and agility of the domestic drone industry in Ukraine has allowed it to respond to new and evolving threats at pace. This has meant that the service lifecycle of new battlefield technologies has reduced from seven months in 2022, to just four to six weeks in 2025.
At this rate, if the UK or a western power wanted to stockpile UAVs to deter a future conflict, it is likely that these systems will be obsolete by the time they are needed. Therefore, for future-facing capabilities, we need the ensure we can do the following:
As I considered these priorities, I started noticing parallels in an unlikely place; Formula 1.
The naive defence startup initially dreams of the same massive contracts awarded to large primes, and increasingly, investors are also asking how their portfolio companies can benefit from the apparent splurge of defence spending that seems reserved for these large contracts. However, as we’ve noted above, this model of large commitments to exquisite systems and platforms may not be fit for purpose for the conflicts of the 21st century.
Instead, I suggest looking outward for inspiration. At risk of dramatic oversimplification, the F1 circuit enables some of the most advanced manufacturers in the world to develop and deploy cutting edge technology in a competitive environment, without the expectation that RB19 racecars will be sold at your local dealership. Parking the fact that F1 is a giant marketing engine for diversified automotive manufacturers, the competitive dynamic here is to demonstrate that your solution is the best in a given competitive environment. And teams are financially rewarded for demonstrating this superiority by winning races, with both prize money and marketing value, which incentivises innovation without the need to sell these solutions commercially.
How could we enable a similar type of dynamic for UK and allied ministries of defence, to incentivise this ongoing innovation and the crowding in of private capital, without the need to stockpile?
It strikes me we need to solve for three funding requirements:
Ongoing R&D
One could envisage a world where innovative suppliers are asked to demonstrate a threshold of capability to enter this Competitive Dynamic Framework. Once on the Framework, they would be provided a stipend for R&D, the only strings attached being the ability to maintain base levels of performance for their product range. This allows these companies to keep the lights on and innovate, without requiring a large contract prize or highly dilutive capital, meaning these companies can stay independent for longer periods of time.
Superior Performance and Innovation
A research body, taking learning from conflict zones and planning for future conflicts, would then assess solutions against a range of requirements and scenarios. This body could look at overall performance, as well as the ability for a design to be produced cheaply and at scale. The winner of a given competition would then be awarded prize money. This would create the financial incentive to crowd in risk capital, and provide a return to investors for backing the best ideas, without the need for ministries of defence to make large commitments to systems and platforms.
Manufacturing Capacity
Finally, a funding pool could be set aside to finance manufacturing capacity, which could be built and set aside, ready to be brought online in the future should a conflict require it. Financing options could include public-private partnerships, where private capital must match public capital in order for a company to be eligible.
A final element to this can be the marketing value that such a mechanism could provide, which further increases the Total Addressable Market for companies to play in the Defence and Dual Use space. While not all challenges and use cases should be shared publicly, a competitive dynamic like this could gamify and provide increased interest for advanced capabilities, increasing the ability of these companies to fundraise, as well as making the UK (or whichever country successfully adopts a model like this) to become an epicentre for Defence innovation.
The world has changed considerably since February 2022, and it is clear that European capability and deterrence are now of the utmost importance. It is therefore critical that we figure out a way to mobilise private capital effectively, spend public money sensibly, and make sure that the UK and its allies are as prepared as possible in a less stable world.
I hope that this is a start of a discussion of how we can use contracting and innovative models of cultivating the best ideas and capabilities for our armed forces, and that we continue to learn from other environments where rapid product development and improvement has been successfully achieved.
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