Things to consider before you rush to the shed to find your pickaxe…
Strategic Defence Reviews are often of limited consequence to the UK’s corporate sector. Defence has historically been seen as a closed shop that is dominated by the primes and leaves little margin for anyone else. And besides, since the early 2000s, defence spending has been in steep decline, offering little incentive for new market entrants.
But Trumpian dynamics have forced the aligned world economies to commit to ever-increasing proportions of the public purse to shore up an unsteady world order. And this, along with the proliferation of ingenuity in defence tech powered by the war in Ukraine, the emphasis is shifting towards leaner, agile SMEs providing some of that security. Superficially at least, if you’re a company with a smart, dual-use product that can serve the military as well as it does the civil market, now is your moment to grab a share of the bonanza.
Not all that glitters is gold…
But not so fast. Not all that glitters is gold. While it is a hard fact that defence spending across NATO Europe is up by 40% on the levels that preceded Putin’s invasion of Ukraine (now topping $600bn of annual expenditure), once committed expenditure is removed, the new money available as incremental and contractor-addressable funds is a far smaller sum – estimates put the true figure at between $60 and $100bn.
What’s more is some commentators have cautioned that the prime stranglehold on the lion’s share of this pot is structurally embedded and it will be hard to shift funding to innovative SMEs. The reasons for this are manifold, not least because many executive positions on the boards of the primes are occupied by former military or government procurement personnel and this hand will remain steadfastly in its comfortable glove.
Nevertheless, certain realities point towards a re-balancing of the defence economy. May’s Strategic Defence Review makes repeated references to embracing disrupters and innovators from the UK’s long-established tradition of technical innovation. The government has also set up a new accelerator agency, the UKDI with an annual budget of £400m to consolidate five former organisations responsible for commissioning new technologies, streamlining the access points for businesses.
Defence must overhaul its acquisition processes to improve productivity and create a new partnership with industry… Removing barriers to collaboration, especially for smaller companies
Any remaining speculation will largely be qualified in the UK when the spending detail becomes clear in the coming weeks with the publication of the Defence Investment Plan – this provides the line-by-line budgeting plan that sits behind the Strategic Defence Review.
Don’t want a reputation like Prospector ‘Stinky Pete’?
If you’re a business with potential dual use products, before pitching into defence territory, it will serve you well to give consideration to corporate reputation. Clients of your other business units, investors, staff and other stakeholders may not be as enthusiastic about serving the defence sector. Take soundings, gauge opinion and invest in reputation protection planning as a cost of entry into the sector.
But be reassured, the appearance on the world stage of a black hat in the guise of Vladimir Putin has mitigated this reputational challenge significantly.
In practical terms, acting as a tier supplier to a defence company developing AI solutions or even weapons platforms have a justifiable claim to be defending the rules-based order. But don’t sleep-walk into a situation where your business reputation is at the behest of geopolitics. So plan out a reputational strategy that is sufficiently responsive to the details you can’t control.
Strategic Defense review
Is dynamite a product? No, it’s a capability
The defence industry plays by different rules, so do not expect to bring your commercial playbook along and expect it to work. A simple illustration of this is the sector language. Defence doesn’t deal in ‘products’, it trades in ‘capabilities’. Sales cycles are long, so double the number you first thought of and add this to your forecasts. And traditional channel marketing needs a re-think. You’ll still need to put your proposition in front of a buying committee 21 times before a sale happens, but you’ll be doing less PR and paid LinkedIn, far more trade events and conferences.
Familiarise yourself with the entry points into the supply chain and ensure your value proposition is clear and distinctive. There may be new accreditations your company will need to be able to transact with the MoD and you must come to the market with clarity about the sub-sectors where your technology fits, whether AI, battle management systems or autonomous platforms.
The sector has multiple vendor frameworks that will inform your market preparation. Spend time reviewing the entry points and be sure to bring something distinctive to the market. Yes, there is liquidity in the sector, but the level of due diligence is far higher than in less regulated markets.
Checklists and Tripwires
Audit the risk of market entry in reputational terms and develop a plan to isolate adjacent business units from liabilities
Undertake a full market analysis, technology fit, competitive landscape, accreditations
Develop a specialist marketing plan appropriate for the buying personas you will encounter
Consider specialist advice in two areas – ex-military business development assistance with appropriate networks and specialist marketing
About
Liam Clogger is MD of GroupWhistle, specialist technology communicators serving the defence, automotive and motorsport sectors. Borne from Formula 1, the company provides multi-channel communications to drive sales growth and represents a range of companies in the defence and security industries
If you’d like to know more about marketing in the defence sector, contact Liam for an informal discussion.