Hegseth's Memo, What To Do Next

As DOGE’s eye shifts to the Department of Defense and Secretary of Defense Pete Hegseth calls on his defense leaders to accelerate their workforce and recapitalization plans by the end of the week, our national security ecosystem has an unprecedented opportunity to radically restructure and set itself not for yesterday’s wars, but tomorrow’s security.

Great power competitions – be it between nation states or rival companies – are won by those that out-pace their adversaries. Advancing capabilities at a rapid pace leaves adversaries ‘playing catchup,’ trying to understand and then react. Consider Amazon, innovating quickly to stay ahead of large, capable retailers like Walmart who continually scramble to gain online market share.

The post-Cold War era demanded neither sufficient urgency nor flexibility from defense contractors and industrial base. Industry was comfortable and gave the country most of what it needed under cost-plus contracts at congressionally mandated 10 to 12 percent profit margins. Cost overruns and delays were tolerated and helped increase profits.

When budgets stopped expanding, consolidation resulted. The infamous 1993 “Last Supper” dinner meeting held by then Deputy Defense Secretary William Perry encouraged defense contractors to consolidate to maintain profits. They did. And the number of major contractors went from more than fifty to five. Agility, innovation, and responsiveness evaporated in the process.

Less was not more. The 2018 National Defense Strategy (NDS) articulated this point when it envisioned a broader National Security Industrial Base (NSIB) as a “network of knowledge, capabilities, and people—including academia, National Laboratories, and the private sector—that turns ideas into innovations [and] transforms discoveries into successful commercial products.” This articulates the whole-of-nation approach to national security that has always given the U.S. its advantage.

No single company can provide what is needed across all categories of defense. Just as one athlete cannot win gold in every sport. Existing and new participants are needed, including entrepreneurs, boot-strapped independent companies, venture-backed companies, research and academic institutions, and close allied partners. A full-range of on-ramps are also needed for new partners to enter the ecosystem—including the Defense Innovation Unit (DIU), National Security Innovation Capital (NSIC), innovation hubs like SOFWERX and AFWERX, DoD and academic laboratories, and agencies such as the Defense Advanced Research Projects Agency (DARPA) from which so much important innovation has come.

Achieving next-generation overmatch capability isn't merely about more innovation from the commercial sector. In a world where invention quickly becomes commoditized, getting leverage out of new technology to gain competitive advantage requires an investment in the human capital and institutional capacity needed to quickly operationalize and scale these technologies. As the NDS also stated, "Success no longer goes to the country that develops a new technology first, but rather to the one that better integrates it and adapts its way of fighting."  And the flexibility to drive this critical adaptation must be placed firmly in the hands of the Services and Commanders in the field—those directly responsible for navigating the complex and uncertain security environment ahead.

Industry must be measured on how fast they can deliver real-world results, not how well they check the boxes of a static requirements document (which they often help write). The risks of underdelivering and overspending are best mitigated by embracing a minimum viable product (MVP) mindset that focuses on rapidly fielding operating prototypes, and continually improving and adapting them. These are hallmarks of modern software development, but the mindset has a place in even the largest hardware-focused projects as well.

Secretary Hegseth gave until last Friday for defense leaders to submit their recapitalization plans—a date that underscores the urgency of this moment. If speed and agility become the driving forces behind America’s defense strategy, industry collaboration, and acquisition processes, the United States will decisively outpace its adversaries to win tomorrow’s conflicts before they begin. The signal flare has gone up, the opportunity to deliver capabilities faster, cheaper, and more effectively is not only possible—it is imperative. We agree with the Secretary that the time to act is now.

General Tim Ray (USAF, ret.) is the former Commander of Air Force Global Strike Command, who today serves as the President and CEO of Business Executives for National Security (BENS). Jim Smith is President of TheIncLab and member of the BENS Board of Directors.