Eric Lofgren: [00:00:36] Joining me today are two former Acquisition Talk guests who need little introduction, Steve Blank of Stanford and Pete Newell of BMNT. Steve, Pete, thanks for joining me on Acquisition Talk. So it’s been five years since you guys have launched the Hacking for Defense® course at Stanford.
And today we want to dive into some of that history, what you guys have been seeing and going forward as well. So can you talk a little bit about the origin story there and your own personal reasons for starting this class? Pete, let’s start with you.
Peter Newell: [00:01:07]
Steve and I met at the pilot event we were holding that led to this. BMNT in its early days was asked by a government client to demonstrate the means by which people in the Pentagon could have a healthy and honest conversation about something meaningful to the Pentagon with folks in Silicon Valley.
This was in the middle of the NSA leaks and a bunch of other things. But if you listened to people in the Pentagon, they thought Silicon Valley was anti defense. If you understand the history of Silicon Valley and you’ve ever set foot on the Stanford campus, you realize that’s not true, but because the business model in Silicon Valley is so different from the government’s they just don’t see eye to eye.
We used the idea of taking government problems that were in difficult-to-decipher government language and translate them into something that sounded like English to everybody else. And then use that to recruit people in the Valley to further translate the problem into something that was exciting to the Valley, which meant that it was really a dual-use problem — solving something in the military that had a twin to the problem out in the commercial space.
We recruited a bunch of Stanford students during spring break to do it and a student who was taking Steve’s Lean LaunchPad class suggested Steve and I should meet.
So in the middle of running this exercise, Steve Blank showed up at BMNT’s office. And what started as a 20-minute, get-to-know-each-other coffee lasted three hours. In the midst of this, Steve started sketching out the Lean methodology on a big dry erase board.
And I started sketching out problem curation and the process by which I built things for the Rapid Equipping Force in Afghanistan, and what we realized at the end was the hieroglyphics that we drew were almost identical. We used completely different language to talk about it, though.
To Steve’s credit, he walked out the door that day saying,, “We’re going to take everything I’ve done for Lean and all the IP, and we’re going to use this stuff to help the defense department actually make progress.”
Now the exercise we were doing went really well. The exit for this was the teams of students had to pitch their restated dual-use problem to one of the heads of the venture capital firms on Sand Hill.
The guy or girl snatched it out of their hand and said, let me email this to my portfolio company. The got an A. Everyone got an A and really great feedback. We were outbriefing former Secretary of Defense Bill Perry and some other luminaries of the government client at the end of it, and had to acknowledge that although it went really well, we had misappropriated Stanford students during spring break to do this. And quite frankly, that’s not scalable because during the school year they’ve got all these classes and it’s just too much stuff to get in the way.
We were ready to say, great idea, not scalable when one of the students in the back of the room, who had never touched the military said, “If this had been a class at Stanford, I would have taken it.” And the rest of the story starts with Steve saying, “Great. We’re going to teach a class to Stanford.”
Eric Lofgren: [00:04:27] So Steve, did you want to jump in there? How about your own personal views and reasons for starting this?
Steve Blank: [00:04:32] The version of my story was simply, as Pete said, I had this student who said, you got to meet this ex-army Colonel. The thing that stuck in my mind was Pete describing his methodology for deploying things rapidly to the battlefield.
He still probably holds the record in both the commercial and government worlds for deploying more things to the battlefield than anybody else, period — over 300 things. And when I heard him describe his methodology for what the Rapid Equipping Force did in Iraq and Afghanistan, I realized Pete had built the Lean methodology from first principles.
But he had an interesting front end to it, which I didn’t appreciate, which was, spending time truly trying to understand, is this really a problem? And is this an important enough problem to spend money, time and effort on? The combination of the two actually helped me further refine the Lean process.
Pete was right. What we both thought was a 10-minute meet-and-greet literally turned into hours of whiteboard discussion on these methodologies that had been derived from completely different points but ended up looking the same.
Just for some background: I co-created something called the Lean Startup methodology with Eric Ries and Alexander Osterwalder. We won’t go into that here, but the interesting part is I taught a class based on it, which was the first time that, instead of how to write a business plan, it was how to build new ventures from first principles using Lean.
That class at Stanford got adopted by the National Science Foundation. It’s now called I Corps. To get a SBIR grant from the NSF or parts of the NIH, you have to take this class, which is now taught in a hundred universities across the U.S. and around the world. So that was the table stakes of walking into Pete’s office.
And we started talking about the need for the DoD to have some way to teach what Pete had learned at REF and what I had been seeing in training the country’s top scientists, engineers and students at all these research universities. And it dawned on me that we could use this entire Lean LaunchPad / I Corps class, which was already successful.
But this time, instead of having people come in with their own ideas or own technology, let’s go out to the DoD and Intelligence Community, get their problems, and see if we can get students in research universities to work on them. And so Pete and I, and one of Pete’s co-founders, Joe Felter, started thinking about, could we make this a national program at the same size and scale of I Corps?
The big ideas were 1) how can we serve the country? 2) how we could use the existing framework. And 3) could we build something that was bigger than just one class? And now five years later, I think we’re pretty proud that this is part of the NDAA, run by DIU and in 50 universities being taught all over the place and with an amazing output.
That’s my memory of the background; the rest was just a bunch of hard work.
My personal motivation for this: I just served a short period of time — Pete and Joe Felter gave decades to the country — but I had a long belief in service, not just paying taxes or voting, but actual service that at some point in your life, you need to serve others, whether it’s God, country, community, or family.
I did four years in the military in Vietnam, and I did six and a half years as a public official in California, and now a couple of decades as an educator. But it was pretty clear to me looking back that our country was a lot more cohesive when all of us had to work together. share space together and work on things that made the country safer and secure. And this to me was going to be another small but important contribution to getting students who would never consider any form of national service into the game.
And if we could do it at scale, then we would get people who would never have worked with branches of the DoD or the Intelligence Community to show up. The result has been pretty unexpected. The attach rate at Stanford and at other universities is close to 40% — pretty amazing –where a good number of them, rather than going to work at Facebook or Google or whatever the hottest startup is, are choosing service.
Peter Newell: [00:09:18] For a long career in the military, my time on the Rapid Equipping Force was the first time someone just completely took the doors off the barn and said, “Go do as much as you can, as fast as you can with no limits.” I had to work hard to get to where I was, but I became addicted to finding problems and solving them.
And the reason I retired from the military is because they told me they weren’t going to let me do it anymore. I decided to retire and build an organization that would do this so I can continue feeding my addiction.
Now it’s just grown and grown. But I think I’m a little bit like Steve in that I’m truly addicted to solving our country’s problems and then building a wave of people that’ll do that. The nature of the relationship between Steve and I some days is I have great ideas and Steve will look at me and say that’s fine, but if you wanted to have a big idea, here’s what it would look like.
And it just feeds off itself.
Eric Lofgren: [00:10:26] I’m glad to hear where you guys are taking it in terms of, feeding that next generation and your own itch. I was just bemoaning yesterday the long tenures we used to see in defense acquisition fields, like the Red Rayborns of the ballistic missile system, the Hyman Rickovers, the Bernard Schrievers.
And it seems like a lot of those incentives aren’t there today. But, in my view of the history, it’s not just the tenure problem. These matters of public procurement, of how weapon systems are developed and the policy around that, they used to have this big place in universities and journals in the fifties and sixties. But then it seems like since the seventies there was this kind of like academic exodus from the field, and that had some of these knock-on effects of students, not being exposed and that lack of exposure might have them not be willing to do business with the government or be in the government as much.
Did you guys have a comment on that point of view?
Peter Newell: [00:11:25] I would double down on it. And I’m going to relay a conversation we had with the commandant of the Eisenhower School several years ago because there were officers at the Eisenhower School who really wanted to launch a Hacking for Defense class at NDU.
And they are really supportive of the concept and the people are getting involved, but the idea of teaching Lean methodology as a part of an innovation doctrine, inside a professional military education program is still not baked in to the professional, civil and military education system.
I remember in the seventies, my dad was an instructor at the Command and General Staff College at Fort Leavenworth for the Army. And that was the primo assignment. That’s where everybody tried to get, but today, there’s consolidation of military education into – I hate to call them this — echo chambers of excellence wrapped around operational or military strategies that has further separated the military from the rest of the population. So there’s less and less academic cross-fertilization.
That’s very different than, for instance, in the UK. The Hacking for the Ministry of Defense program in the UK is sponsored by the people in the Ministry of Defense, and taught at King’s College London as a part of a master’s degree program in defense, innovation and entrepreneurship.
The capstone course is Hacking for the Ministry of Defense, but it’s taught where civilian and military officers at fairly senior levels are able to get in a room and mix it up together. And to me, that’s the right ideal.
Steve Blank: [00:13:11] I think if your question is what happens, it’s probably worth a couple minutes talking a bit about history.
World War II was the first time that the federal government ever gave money to research universities or any universities, period. That’s a big idea. We take for granted for the last 75 years that universities get funding from NSF or NIH or DOD for both applied and basic research, etc.
That was a sea change that happened when one guy, who was the president of the Carnegie Institute named Vannevar Bush went to Roosevelt and said, “Look, the services know how to make guns and ships and tanks, but World War II will be a technology war and the Army and Navy are just not equipped to do that.”
And of course the Army and Navy said, “Of course we are, we need to own that. We have great weapons labs. Look at all our guns.” In any case Roosevelt kind of split the baby in half and said advanced technology will be made by civilians, and the weapons lab and the weapons foundries will make B 24s and 29s and tanks and Shermans and whatever else.
And we set up something called the OS R and D. It was basically 19 divisions of advanced research for everything from radar to electronic warfare to a physics group called the Manhattan Project that had the result over Hiroshima and Nagasaki that actually spun out because it was too big to even be inside of OS R and D.
Post-World War II, the country decided it was still a pretty good idea for the federal government to fund research, both basic and applied and in universities. And that continued from 1945 to about 1950 on a fairly low level until the Korean War broke out. And then all of a sudden, the DoD doubled down on funding back to universities.
And basically every research university in the United States from about 1950 to circa 1968, had a military weapons lab inside their engineering department or their math department or something else that was working on not running factories but doing basic and maybe prototypes for applied research — cryptography or radar electronic warfare or something else — whether it was Stanford or MIT or University of Michigan or whatever.
Every university in the United States was engaged technically in the Cold War. And then the Vietnam War happened. Up till then helping your country defeat the Soviet Union was a patriotic endeavor for both faculty and students. I remember how vociferously the country and the opposition was to that war because there was skin in the game for all citizens, there was a draft, and it became a pretty unpopular war — so unpopular that there were riots on campus to force military activities off the campus. For example, at Stanford in 1968 or ’69, they threw all classified work off of campus, banned ROTC –we still see some residue of that — and basically demonized military research on campuses.
It wasn’t just Stanford or MIT or Harvard. It happened to all across the United States. And so for the next 30 years, there was this big disconnect between federal research FFRDCs and university research, which used to power the advanced research. It moved off campus and basically drove innovation clusters like Silicon Valley and things around Boston for commercial activities.
When 9/11 happened some universities got back in the game. But when the Snowden revelations came out, the DoD decided to put their head in the ground and pretend it didn’t happen and let other people manage the agenda.
So the long answer is there’s a long history of university collaboration with the Department of Defense. We kind of lost that thread. And to be honest, the DoD couldn’t have done worse if they had tried to re-establish that trust and relationships over the last 50 years or so.
I remember when we started Hacking for Defense, we were a little leery about whether this would be accepted on the campus, both ours and others. And as Pete said, we’ve been pleasantly surprised to find out that my instinct and Pete’s instinct was right. The noisy folks, the folks that people spend their lives defending their right to have a different opinion, stood up and objected. But most of the rest of the students and faculty think it’s a great idea that we should do service to support our country.
Understanding some of this history gives some context that this is not a program or project at a point in time. This is a continuum of what’s occurred in universities and its relationship to the DOD and IC for the last 75 years.
Eric Lofgren: [00:18:24] Now we’re entering this new era of great power competition and that’s going to probably be one of the defining things of this next generation. So do you see this Hacking for Defense program, great power competition, renewed interest in public service and these kinds of systemic problems facing the nation, especially with the pandemic that just came, what’s your views there on how Hacking for Defense aligns with those national initiatives and getting the workforce really up to snuff?
Steve Blank: [00:19:02] When I started Hacking for Defense with Pete, I also started Hacking for Diplomacy with the professor, Jeremy Weinstein at Stanford.
And we were thinking that in the Clinton administration, that would scale with the State Department. Because that’s who started it. And of course, when we had a different outcome, there was no State Department or at least no one there who was interested in scaling that program. But in the meantime other versions of Hacking for X, whether it was Diplomacy, which is still occurring in some places; or energy; or the environment; or for oceans; have sprung up using the exact same framework of using this Lean/I Corps frame and going out to sponsors to work on national or international.
Peter Newell: [00:19:53] If you go to the basic premise of the “Hacking for anything” platform, whether it’s defense, homeland security, diplomacy, energy, oceans, sustainability, or national health service, it promises students the opportunity to learn about the problems of their generation. They are the case study. What appeals to this generation is not necessarily an historical analysis of things that were done in the seventies, eighties and nineties as much as “I want to work on stuff that matters today, that’s going to matter to me for the next 20 years while also building the skills I need to function in this new age workforce,” which sorts of sounds a lot like, really experienced entrepreneurs.
So it’s been highly attractive to students for that. And then, as we started looking for a more diverse set of students and instructors and people, we started getting diplomacy and policy problems, and then somebody came to us and said, Hey, will you run a Hacking for Oceans class? Now the State Department is funding the Hacking for Diplomacy course– two classes next year.
We found that the more we have opened up the window of the types and the agency supporting the problems, the more attractive the platform has become to more people.
We run a platform that connects all the instructors from the Hacking for Defense, oceans, diplomacy, I Corps, Lean LaunchPad classes internationally.
We do something with them every quarter. The last time we did this, we got 600 instructors from 65 universities together on the same forum, talking about using Lean and entrepreneurship as a means of going after the problems of the time, but also getting better at teaching students to give them the skills they’ll use to go out finding, curating, and prioritizing new problems and tackling them to then make a difference in the world. The students are showing up in droves, particularly because that’s something they can do while they’re in school that gives them a skillset.
The folks hiring people afterwards will say that’s the type of people we need the hierarchy.
Eric Lofgren: [00:22:29] I’ve got a couple of stats here, roughly 50 universities, more than 2000 students have gone through the program. 450 national security and intelligence problems have been addressed and 14 startups have been formed.
So just to give our listeners a little flavor, do you each have an example of a team that’s really made an impact on government operations and, maybe give us a little indication of how those students got matched with problems or technologies and iterate their way to those to those solutions.
Peter Newell: [00:23:09] We’ll start with Capella space, which was a team in the first cohort at Stanford.
It was a group of students who had an idea for using synthetic aperture radar on low orbit satellites to enhance the gene pool of satellite imagery. Several years ago, if you wanted synthetic aperture radar imagery, that could see through the clouds and find things, the only way you were going to get it was off a multi-billion dollar, very large platform built by a defense prime run by a defense agency.
The idea of democratizing the ability to gather more data and increase the refresh rate with cube sets was huge. The problem that we set them up with was finding a way to counter the effects of illegal commercial fishing in the South China Sea.
And if you want to talk about great power competitions, talk about fishing competition for food in the South China Sea.That’s what people go to war over. It turns out that large commercial fishing operations that work illegally do so at night and in crappy weather, when you can’t see their boats. It just so happens to be the exact same tactics the North Koreans use to move their mobile missile launch trips.
So when you think about the problem here, without actually focusing students on planning missile, launchers, we’re focusing on a problem that is also equally as important, but the side effect of that problem and what they came up with was huge.
They suddenly realized that they weren’t building a satellite company, but they’re really building a data company. They closed a $200,000 seed round the day after the class, another $1.5 million seed round three months later and signed a $10 million contract with the NRO three months after that. By the next year, had raised another $45 million.
They’re flying a bunch of satellites now. Think about it: They went from a group of students to a $70 million or $80 million funded satellite data company in 15 months. All because they realized what the problems were that they were best suited to solve and how to use what they learned to build a company.
Last night we had a former student talking to the H4D class about what she had learned. Her team was working on countering deep fake technologies, essentially fake videos, fake voice and all those things, and the problem sponsor was In-Q-Tel.
The sponsor got on and talked about what happened after the class. Two years later, In-Q-Tel labs was asked to solve a problem and the solution they delivered was largely built on the model the students had built two years ago. So part of the answer to the question is that the impact of the course is yes, you build companies. Yes, we built a large cadre of students spread out across the country who are still working with one another and the government. But we’re also building a pile of potential solutions that may not be acted on for another year or two years or three years.
All that collateral is out there to be used.
Steve Blank: [00:27:00] I want to give your listeners a sense of what the students go through. We had in one of the first classes, students who were working on an underwater navigation problem for Navy Seals. The current Seal delivery vehicle needed to be much closer to the surface to get a GPS lock.
These were students who didn’t even know who the Seals were when they came in. In week four of the class, they all qualified as divers. And by week six they were using CNC machines on campus and 3D printers to mockup buoys that could be deployed with CO2 cartridges for much deeper.
And they were prototyping them in the Stanford swimming pool. By the end of the class, they had a minimum viable product that was being tested on a Seal delivery vehicle and by week 10 they deeply understood the problem and were prototyping with the Seals.
There was another nontechnical problem, which was maybe equally illustrative: Looking to enhance how instructors evaluated Seal training candidates going through BUD/S training down in San Diego.
If you read the problem, it sounds like, “Let me write some code and I’ll sit in my office and, or in my dorm room and see if we could solve the problem.” Not when you take the class from Pete and I. We made the students go through a couple of days of BUD/S training with the teams, and we have some great photos of them coming out of the water, exhausted.
This was an agreement with the Navy and the instructors to have the students deeply understand problems, and this is the magic combination between Pete’s methodology and mine.
My whole shtick about Lean is there are no facts inside the building, so get the hell, and before you jump into a solution, make sure you understand the problem. The magic happens when you become the customer or the problem, etc.
We had another example of a team working on transferring all the EOD explosive ordinance disposal knowledge that we had learned to our Iraqi and Afghani counterparts as we pulled out.
I remember week two, the team was going, blah, blah, blah. EOD team. I said, what the heck do you guys know about an EOD team? How are we supposed to find out? By week three they were wearing EOD garments and taking the FBI course in Oakland.
And there’s a video of them trying to walk downstairs fully garbed and trying to manipulate an object. After that, they had a much better understanding of EOD disposal and how to transmit that knowledge to another practitioner.
This gives you a sense of how immersive and rapid this process is. It explains why these teams are continually engaged past the class of, we want to know more. We want to work more. Boy, these are important problems. Boy, these are smart people and dedicated folks on the other end who are giving us these problems.
And as Pete said, some of them end up being dual-use companies, or some of them end up as students embedded into the organizations that gave them and sponsored the problems.
Eric Lofgren: [00:30:56] When I hear you talk, it’s, it just sounds so natural. Like how you guys think about it, the rapid way that they get immersed and then, iterate through and find solutions that fit with the missions. And, when I think about how defense acquisition actually works it sounds quite a bit different. Can you guys just talk a little bit about, what lessons are there for defense acquisition professionals and what can they learn from like this H4D process
Steve Blank: [00:31:24]
Number one is if you’re writing a requirement and you haven’t gotten out and lived the problem, then you’re actually working for our adversaries, not for our country. That’s my biggest learning. The requirements, and budgeting process, the PB and joint capabilities process, let alone the acquisition process all made sense when we could predict the trajectory of technology, and we could predict our adversaries and we were planning for 30-year life cycles.
The other thing coming from Silicon Valley is, no technology lead lasts more than three years now. And yet we have that longtail MLPs, which is baked into our entire requirements and acquisition system. Some things still deserve that, but we don’t have this notion of disposable and attributable systems that says you know what, screw the theory. Let’s just get stuff out there and the concepts will emerge from them. Sometimes you need the doctrine. Sometimes you just need the tech. It’s like physics. Sometimes you need the theory first and then you build the practice. But sometimes you go, wow, we’ve developed electric motors and we really don’t quite know how they work; the theory will follow that.
Eric Lofgren: [00:32:48] You said students live what the mission is. And so that helps them inform the requirement.
But it also seems like there’s this dynamic where they’re not only doing that with the requirements and experiencing the mission, but then they’re also like the acquisition people. And then they’re also like the technologist coming up with the solution. They’re like an integrated thing rather than one hands-off to another, in a linear way that hands off to another.
Steve Blank: [00:33:20].
Remember their problems are given to them by sponsors who said, “Hey, we have this problem we want to work on because I’m absolutely sure this is the problem.” And of course, as the students are learning, the sponsors are also getting schooled that maybe the problem is given to them, or the problem they thought is a problem is only a symptom of a problem.
Pete, what’s the percentage of teams that actually end up working on the same problem at the end as when they started?
Peter Newell: [00:33:48] I think out of 450 we’ve seen two. That’s one of the biggest problems. We waste an incredible amount of our precious assets in terms of the time and money perfectly solving the wrong problems.
And that’s impossible to recover from in an era of great power competition because if you waste any time working on the wrong thing you are falling further and further behind. There is no catching up. You just don’t recover from that. That’s been the rule in the business world forever. And we’re now starting to face that in the defense world.
I would extend what Steve would say, particularly to the acquisition professionals, because in terms of the students becoming really good generalists, one of the things I’ve learned in Silicon Valley is that most founders, the people who know the tech, that have the idea, are horrible business builders are not entrepreneurs. Most entrepreneurs while they have deep technical understanding, they understand the technology, how to make a business model, finance, IP, go-to-market strategies, feedback strategies. They become practitioners of so many things that they’re able to build a team to actually deliver something.
So many times in the military, we slap somebody with an MOS or a skill code and say, you can’t do this unless you’ve been certified to do X, Y, and Z, and that’s bullshit. Nobody in the entrepreneurial world would ever say, “you can’t do it because you’re not qualified.”
They would say, “go ahead and try it. We’ll see how you do it and over time you’ll learn something.”
The students also deliver to the sponsor some pushback. To use the example of the EOD thing, after the students finished running the obstacle course in the bomb suits, they started really digging into how that organization delivered solutions to partners and other things.
The students came in with this organizational map that wasn’t the org diagram. It was the influence diagram of how the organization actually functions. And you could hear the gasps in the back of the room because people were convinced it was a classified doc, but the students simply put this together in open source from what they’d learned.
And they went back to the problem owner and said, “Listen, it doesn’t matter what technological solution we give you. You can’t deploy it. And here’s why your system is breaking down and why you can’t function. That organization spent the next year rebuilding its processes to fix that problem. The challenge for acquisition people is they get caught up in tolerating the misinterpretation of policy that’s been handed down to them over and over again, and not pushing back on it saying, “That’s not right. I realize that’s a lawyer’s interpretation of a policy, but that’s not right. That’s not what the law says. It could be interpreted differently.”
Or they don’t spend the money to fix the problem. From my time at REF, we took the CRO system off the automatic, 50 caliber system and put them in guard towers. And somebody said, “Hey, we want to extend the control system from the guard tower to the base defense operation center, and the power cable is not long enough.” So we were going to use fiber optic cable to do that. We took it to a test range where we’re going to do the final evaluation of does this work, and an engineer looked at it and said, “yeah, it’ll work, but you’re not allowed to do it.” Ge proceeded to pull out a 1965 Air Force regulation that required a copper wire connection between a trigger and a weapons system. Most people would have quit at that point. I spent $1.8 million and six months proving that it was safe to use fiber optic wire to do it, to get an exception to that rule.
So the very idea of what I did is the mantra we give these students: Don’t let the bureaucracy get in your way. Right is right. Raise the problems, find the people you need to solve the problem, get their attention, do whatever you have to do to get the exception to policy, to keep moving at the pace you need to. We’ll clean up the damage and everything else behind you.
If the acquisition community needs something it’s a little more of that — less of “here are the litany of regulations and other things you’ve got to follow in order not to have a contract violated and not violate a rule.”
Eric Lofgren: [00:38:38] Iit seems that can be really hard for people to do, but that’s just a pretty amazing story of breaking down barriers. We’re going to move on to a couple of actually related efforts that sprang off of the Hacking for Defense effort.
Steve, I want to start with you. You just launched a great Modern War class at Stanford last year. Can you just talk about that experience and your plan for it going forward?
Steve Blank: [00:39:10] Sure. With Joe Felter, who was one of Pete’s co-founders at BMNT; and Raj Shah, who was the first head of DIU, we put together a class to answer some questions that were bothering me.
The name of the class is Technology, Innovation and Modern War. I you want to see the class, I blogged every week on Steveblank.com. There’s a category on the left called Technology, Innovation and Modern War. Just click on it and you’ll get all those blog posts.
Basically it was the observation that for the last 75 years, the DoD owned all the core technologies it needed to prosecute a war. We had the most advanced tech, whether it was drones or cyber etc. And we just woke up to discover that most of that stuff now is being driven outside of our research, FFRDCS and military labs, etc,
It’s not that we’re not doing that stuff, but commerce is pushing that much faster, whether it’s 5G or AI or autonomy or drones or robotics or even commercial access to space has passed our ability. Space X now has 1400 satellites of their own up there. It’s the biggest constellation space.
The point is that all this changed the calculus because half of those things are now being driven by China and China commercial interests. So now our adversaries have access to the same technology. Maybe hypersonic is the only thing that’s yet to be commercialized at scale.
But the DoD is still focused on requirements and acquisition and the whole planning process that says well, you’ve got two or three years to plan and budget and require before we even write an acquisition contract. Startups are born, ship a hundred million things, then die in that amount of time.
The technology cycle has way exceeded our current DoD structures. So the purpose of the class was to get a handle from both the technology side and the people inside the DoD who are trying to manage that stuff. So for space, we had Gen. Raymond talk to us about where the space force was going for the Navy.
We had Admiral Selby give us his view of, are we still building more physical stuff or are we going to be building attritable things with different life cycles that are distributed and much harder to find and hidden, etc., with the same throw weight or whatever.
And so what were the views of DoD and other place leadership on how this technology is affecting the DoD? And we even had Ellen Lord give us a talk about the new adaptive acquisition framework, which I think is a great start, but still doesn’t address the speed issue. We’re still in the McNamara era of trying to recover from the fifties, where we’re building how many bombers, we did B 36 and 47s and 52 in 10 years and a couple of generations of carriers and, century series of fighters. The whole system we built was to cost control on the life cycle, but it was pretty obvious from this class that at least for acquisition folks, it’s now out of your control.
The world is being driven by technology outside your purview, and you don’t have a system yet designed to capture and adapt as fast as it’s moving. It’s not that anybody’s doing anything stupid and it’s not that we need to tear up the whole system, but the first thing we all need to do is acknowledge what’s happened outside of the DoD control. And how do we get it back? That was the purpose of the class.
Eric Lofgren: [00:42:58] It was a great class. You had a lot of heavy hitters that came and spoke to the class and those videos are up on your blog as well as excellent write-ups for each class and they’re also on your podcast. So I would definitely recommend our listeners, go over to Steve Blank’s a website and blog and check those out. Pete, you launched H4XLabs over at BMNT, an early-stage accelerator. Can you talk a little bit about your vision for that?
And, what’s the potential for dua- use companies here going forward?
Peter Newell: [00:43:29] We launched because we failed at something. Remember Capella Space, how much money they raised and what they did? About four months after the class, Payam, the founder, sat down in my office. They were doing all the post-mortem on what had happened after the class. He said, “One of my frustrations is that I came to this class that had all the structure and brutally honest feedback from really gifted people who were connected in a network of people that were focused on helping them. Then at the end of the class, the class was over, and I had nothing. I had to go now take everything I learned about the military application and go repeat it for the commercial application. He said, “You guys suck, you left me hanging on the edge of a cliff. There was nobody better in the world suited for helping a company through that transition period.”
And I’ve come to learn since that what early-stage teams need most is access to unfettered, direct, qualified feedback. The hardest thing for a founder to get is honest feedback.
We have a vast network of people who speak a common language; and understand the impact of that type of feedback and the impetus to provide help, to solve issues that extend to hundreds, if not thousands, of entrepreneurship educators around the country. Thousands of problem owners in the defense industry.
Not just in the DoD, but within the entire industry, not to mention the venture capital community and other folks. We have this really cool stable of mentors and advisors that are available, who have been part of the courses, or have been part of the other work that BMNT has done, who are like Steve Blank, who just want to keep giving and do things that are impactful.
The personification of H4XLabs is to harness all that goodwill and all that movement and focus it on helping nascent teams coming out of a program that aren’t quite a company yet turn into an investable entity.
And the more we did it, the more we found that there were lots of people building accelerators — Y Combinator or TechStars or whatever else – that are focused on, “You’ve got a company in a soundbite and there’s money and you’ve got to go someplace.” But there wasn’t anybody sitting in that space that said, “I’m interested in the technology readiness level. I’m interested in the capability of the team that is going to deliver and scale that technology. And I’m interested in the adoption pathway you’re going to use to get from your idea or prototype all the way to deployment. That I’m going to grade you on those three things, but I’m going to bring the people in to help you advance all three of those things to the point where somebody is going to look at you, say you’re worth writing a check to from the government standpoint or from the commercial standpoint.” Under the leadership of Steve Weinstein and now Ellen Chang and Mark Peterson I don’t know how many thousand companies we looked at this year, but we brought 50 through H4XLabs. Those 50 companies earned about $50 million in government contracts. And I’m not just saying a contract, I’m talking, they got contract dollars to the company and another hundred million of private capital.
And that was just this year. The vision right now is that we’re going to double it this year. There’s already that much demand on it. We’re also finding that outside DoD. For instance, we’re talking to a large mining company. We’re seeing more and more interest from the medical community of how to get, and they have certain ideas to move faster. So you’ll see H4XLabs will vastly expand the work it does for the government, but also start looking beyond the government defense problems for all the large corporations that have internal teams that are trying to do this, but just can’t seem to get across the goal line, and we’ll find them a better, more disciplined pathway to do that.
Eric Lofgren: [00:47:39] Excited to see the companies and efforts coming out of that. So as we wrap up here if you guys were creating an acquisition professional reading list, what book or article would be at the top of that list for you?
Peter Newell: [00:47:52] Steve Blank’s blog, start to finish.
Eric Lofgren: [00:47:57] Steve how about you?
Besides of course also our readers should always take a look through the Secret History of Silicon Valley, tons of amazing stuff there. And Steve had several books out as well, but any recommendations from you, Steve?
Steve Blank: [00:48:10] If your listeners haven’t found your reading list page Eric, that’s the place I started.
And also, you have a link to the things that I thought were incredibly interesting, which for the defense acquisition histories at least the Cliffs notes of those should be required reading. The other thing that it’s not directly related to acquisition, but it’s how major change got made, and that was the book called the Victory on the Potomac, which was basically how we got the Goldwater Nichols Act. I was surprised because it didn’t start fully formed. It started with maybe we should just reform the joint chiefs and then ended up coming up with something much bigger and certainly different, better than what we had. And that gets to the question in this whole podcast series, what we need to do to adapt and adopt new technologies and deal with the changing face of the world with our current system. So I would start with your reading list and then Victory on the Potomac.
Eric Lofgren: [00:49:16] Awesome. Pete Newell, Steve Blank. Thanks for joining me on the acquisition talk pocket.
Steve Blank: [00:49:21] Thanks for having us.
Peter Newell: [00:49:22] We’ll see you.
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