Category: Business

Source: The Conversation – France – By Sihem BenMahmoud-Jouini, Associate Professor, HEC Paris Business School

In the face of US President Donald Trump’s wavering commitments and Russian President Vladimir Putin’s inscrutable ambitions, the talk in European capitals is all about rearmament.

To that end, the European Commission has put forward an €800 billion spending scheme designed to “quickly and significantly increase expenditures in defence capabilities”, in the words of Commission President Ursula von der Leyen.

But funding is only the first of many challenges involved when pursuing military innovation. Ramping up capabilities “quickly and significantly” will prove difficult for a sector that must keep pace with rapid technological change.

Of course, defence firms don’t have to do it alone: they can select from a wide variety of potential collaborators, ranging from small and medium-sized enterprises (SMEs) to agile start-ups. Innovative partnerships, however, require trust and a willingness to share vital information, qualities that appear incompatible with the need for military secrecy.

That is why rearming Europe requires a new approach to secrecy.

A paper I co-authored with Jonathan Langlois of HEC and Romaric Servajean-Hilst of KEDGE Business School examines the strategies used by one leading defence firm (which we, for our own secrecy-related reasons, renamed “Globaldef”) to balance open innovation with information security. The 43 professionals we interviewed – including R&D managers, start-up CEOs and innovation managers – were not consciously working from a common playbook. However, their nuanced and dynamic approaches could serve as a cohesive role model for Europe’s defence sector as it races to adapt to a changing world.

How flexible secrecy enables innovation

Our research took place between 2018 and 2020. At the time, defence firms looked toward open innovation to compensate for the withdrawal of key support. There was a marked decrease in government spending on military R&D across the OECD countries. However, even though the current situation involves more funding, the need for external innovation remains prevalent to speed up access to knowledge.

When collaborating to innovate, firms face what open innovation scholars have termed “the paradox of openness”, wherein the value to be gained by collaborating must be weighed against the possible costs of information sharing. In the defence sector – unlike, say, in consumer products – being too liberal with information could not only lead to business losses but to grave security risks for entire nations, and even prosecution for the executives involved.

Although secrecy was a constant concern, Globaldef’s managers often found themselves in what one of our interviewees called a “blurred zone” where some material could be interpreted as secret, but sharing it was not strictly off-limits. In cases like these, opting for the standard mode in the defence industry – erring on the side of caution and remaining tight-lipped – would make open innovation impossible.

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Practices that make collaboration work

Studying transcripts of more than 40 interviews along with a rich pool of complementary data (emails, PowerPoint presentations, crowdsourcing activity, etc.), we discerned that players at Globaldef had developed fine-grained practices for maintaining and modulating secrecy, even while actively collaborating with civilian companies.

Our research identifies these practices as either cognitive or relational. Cognitive practices acted as strategic screens, masking the most sensitive aspects of Globaldef’s knowledge without throttling information flow to the point of preventing collaboration.

Depending on the type of project, cognitive practices might consist of one or more of the following:

• Encryption: relabelling knowledge components to hide their nature and purpose.

• Obfuscation: selectively blurring project specifics to preserve secrecy while recruiting partners.

• Simplification: blurring project parameters to test the suitability of a partner without revealing true constraints.

• Transposition: transferring the context of a problem from a military to a civilian one.

Relational practices involved reframing the partnership itself, by selectively controlling the width of the aperture through which external parties could view Globaldef’s aims and project characteristics. These practices might include redirecting the focus of a collaboration away from core technologies, or introducing confidentiality agreements to expand information-sharing within the partnership while prohibiting communication to third parties.

When to shift strategy in defence projects

Using both cognitive and relational practices enabled Globaldef to skirt the pitfalls of its paradox. For example, in the early stages of open innovation, when the firm was scouting and testing potential partners, managers could widen the aperture (relational) while imposing strict limits on knowledge-sharing (cognitive). They could thereby freely engage with the crowd without violating Globaldef’s internal rules regarding secrecy.

As partnerships ripened and trust grew, Globaldef could gradually lift cognitive protections, giving partners access to more detailed and specific data. This could be counterbalanced by a tightening on the relational side, eg requiring paperwork and protocols designed to plug potential leaks.

As we retraced the firm’s careful steps through six real-life open innovation partnerships, we saw that the key to this approach was in knowing when to transition from one mode to the other. Each project had its own rhythm.

For one crowdsourcing project, the shift from low to high cognitive depth, and high to low relational width, was quite sudden, occurring as soon as the partnership was formalised. This was due to the fact that Globaldef’s partner needed accurate details and project parameters in order to solve the problem in question. Therefore, near-total openness and concomitant confidentiality had to be established at the outset.

In another case, Globaldef retained the cognitive blinders throughout the early phase of a partnership with a start-up. To test the start-up’s technological capacities, the firm presented its partner with a cognitively reframed problem. Only after the partner passed its initial trial was collaboration initiated on a fully transparent footing, driven by the need for the start-up to obtain defence clearance prior to co-developing technology with Globaldef.

How firms can lead with adaptive secrecy

Since we completed and published our research, much has changed geopolitically. But the high-stakes paradox of openness is still a pressing issue inside Europe’s defence firms. Managers and executives are no doubt grappling with the evident necessity for open innovation on the one hand and secrecy on the other.

Our research suggests that, like Globaldef, other actors in Europe’s defence sector can deftly navigate this paradox. Doing so, however, will require employing a more subtle, flexible and dynamic definition of secrecy rather than the absolutist, static one that normally prevails in the industry. The defence sector’s conception of secrecy must also progress from a primarily legal to a largely strategic framework.

Sihem BenMahmoud-Jouini ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d’une organisation qui pourrait tirer profit de cet article, et n’a déclaré aucune autre affiliation que son organisme de recherche.

– ref. Defence firms must adopt a ‘flexible secrecy’ to innovate for European rearmament – https://theconversation.com/defence-firms-must-adopt-a-flexible-secrecy-to-innovate-for-european-rearmament-258302