How the Defense Innovation Unit Is Helping America Reach for the Stars
Located in Silicon Valley, this fast-moving DoD organization contracts with commercial companies to solve national security problems and foster technology innovation for the 21st century. We’re joined by Brigadier General Steven Butow to discuss his role in building collaborative partnerships between the Department of Defense and private sector companies to meet the demands of America’s future goals in space.
Steven, welcome! Let me start by thanking you for your career of extraordinary service, and by asking you to tell us a bit about what the Defense Innovation Unit is, and what led you personally to a leadership role in it as the DIU Director of the Space Portfolio on behalf of the Air Force?
The Defense Innovation Unit was created five years ago to increase the military’s access to new and emerging commercial technology while growing what we call the National Security Innovation Base, which is the commercial & economic system that contributes to the defense of our nation and allies.
We’re the only Department of Defense organization that is focused exclusively on fielding and scaling commercial technology across the US military to help solve critical national security problems. We partner with organizations across DoD including the armed services, combatant commands, defense agencies, and others to deliver and scale cutting-edge commercial solutions that can have all kinds of impacts from saving lives to reducing costs and increasing efficiencies.
As for my involvement, I’ve been in a reserve component of the Air Force through the Air National Guard for almost 30 years. I’ve deployed all over the world, including four years in the Middle East and many other places.
Looking back, it’s interesting to remember all those times we’d find a problem and end up frustrated that it was so difficult to solve within the military. Many of those we’d find commercial solutions that could solve those problems, but it wasn’t scalable, and there was no formal effort to do it.
So, when the opportunity arrived to become part of the DIU, I jumped at the chance! It was a great way to do something that benefits the people who volunteer to do extraordinary things to protect our country, and it’s very rewarding to be able to make that contribution.
The DIU has offices in Silicon Valley, Boston, and Austin, and works to connect DoD partners with leading technology companies across the country. Based on those locations, it seems like you have focused representation near Silicon Valley, MIT, and the emerging Texas tech scene. Can you tell me a bit about that?
The cool thing about DIU is that we’re not at the Pentagon, and we’re not located on a military base. We’re positioned to be readily accessible to the innovators, entrepreneurs, and investors who enable them.
If you consider the venture capital investment every year by metropolitan region, in 2019 there was $46 billion of investments in Silicon Valley. It’s the largest concentration of private investment in startups and new emerging technology across the nation. The next largest is Boston with $8 billion. Those are impressive numbers.
Innovation happens everywhere, though, and there are many centers of economic activity across the country. You can think of us like the Girl Scouts selling cookies outside of the grocery store — we are well-positioned to see everybody who comes into places like Silicon Valley to raise capital, but we work with companies all over. We don’t have to be everywhere to be effective, just at the critical nodes to facilitate the kind of engagements we want.
So, as of the end of last year, we’ve processed proposals from over 1,400 companies across 45 States, and we’ve awarded prototype agreements to nearly 150 companies now today from 23 States. We’ve also awarded companies in the UK, Canada, France, and Israel who are doing innovative things — so we can work with US companies, but we can work with foreign companies as well.
Now, the DIU is focused on fielding and scaling commercial technology across the U.S. military at commercial speeds. How is that different from the conventional military procurement process, and how difficult has it been to implement new processes to keep pace with private sector development?
I’ve been at the Defense Innovation Unit since its beginning, and we were built for speed. In other words, if you and I had a great idea and decided to form a company together, it’s safe to say that we could effectively raise capital for it in three to six months if it’s a great idea and meets all the measures of merit.
In comparison, the government has the Rapid Innovation Fund where you apply for funding and then wait for a year until they make awards. More so, it’s a once-a-year process, and that’s by design, because they have to take all these ideas in and process them, and it’s not anybody’s primary job.
So, the environment that we were born into is one where even the rapid processes within DoD were slow. We structured DIU with a target goal of awarding a contract within 60 days of closing each new solicitation, which is very aggressive. During those sixty days, we may go from not knowing a company at all to knowing everything about them and taking calculated risks based on that.
Our risk tolerance is another thing that makes us different. We were built for speed, but we also recognize that some of our objectives require a little higher risk level than most people in the government would take. When we assess technical feasibility and commercial viability, sometimes there’s more risk on one side than the other, but we make multiple awards to distribute that risk across different commercial solutions.
We come from an environment where failing is learning, but failure is quitting — and speaking philosophically if we’re not failing, are we trying hard enough to go for those bold ideas at the bleeding edge of technology? That’s something that we try to keep in mind during the selection process.
This is an opportune moment to work with the private sector in space — there’s currently a boom in satellite & communications technologies, along with private spaceflight from companies like SpaceX & Blue Origin. Are these the type of companies you work primarily with and are there any success stories from your group you can share with us?
This a fun area to work in, and I have a few favorites — both from the space portfolio as well as DIU in general. One really transformative project began when we visited the AFCENT Air Operations Center in Al Udeid, which is the headquarters for the Air Force in the Middle East. I’ve worked there many times over the years on various deployments.
Eric Schmidt, the former CEO of Google who leads our Defense Innovation Board, was touring through this operation center and saw four rated officers working diligently on a tanker plan for refueling hundreds of airplanes using a system of whiteboards and sticky notes. This is how they did it every day, and it took several hours.
When Eric saw this, he was just flabbergasted, and asked, “why is this not being done with software?” They replied, “well, the software is over there. We have a machine that doesn’t work and doesn’t give us the product we want.”
He was so offended by this that he turned to our boss and said, “you have to fix this!”. He was irate — but that was good because we ended up getting a world-class software company to enable the Air Force to write the software itself.
In terms of space we’ve had a couple worth mentioning: we issued a DOD contract to Rocket Lab before they’d launched anything — and since then they’ve taken off and done very well. Capella Space is a personal favorite because I was the military advisor to some of the Stanford students who founded it back when they were participating in a Hacking For Defense class. Now they’ve got a hundred employees, an operational satellite in orbit, and a future that looks quite promising.
We don’t just work with startups — we work with innovators, no matter where they are. For instance, Northrop Grumman recently did a very exciting mission where they rendezvoused with a legacy satellite in geo-synchronous orbit for servicing, which is transformative. They have a subsidiary called Space Logistics that’s looking at more projects like that. On-orbit servicing, assembly, manufacturing and logistics will significantly change the way we launch, sustain and scale space systems into the future.
We have a lot of flexibility with our contracting mechanism, so we can form partnerships and get companies from different sectors to come together and solve a problem, which is great for our national defense and economic growth.
Now I’d like to touch on a report you recently published, called “The State of the Space Industrial Base 2020”. You worked on this with co-authors from AFRL and the Space Force, and one of the key takeaways was the need for increased cooperation between the government and the private sector. Can you give me a bit of an overview of the report & your findings?
Sure. At the very highest level, we took a look at the vulnerabilities in the space industrial base, and we exposed a lot of legal but nefarious activity from foreign competitors that was being very disruptive to the sector.
An example of this from a different part of the ecosystem is autonomy, especially in the small drone market. All of that technology was started here, with Silicon Valley companies and US investors. Everything was going well until the Chinese company DJI drone entered the scene — and DJI now has seventy percent of the market share in the United States. DJI undercut our domestic drone manufacturers, which devastated the rest of the market. That’s a concern for us because we compete on a level playing field, and foreign companies need to play by the rules too.
It’s a complex issue because DJI makes awesome equipment, and frankly, if I was going to buy a drone, I’d probably buy one from DJI — but this is still a good example of a trend that’s very concerning for us, especially in terms of the space industrial base. What’s happening is a lot of emulation in space, which means that for every US space company, there’s a competing Chinese space company that is state-backed.
Regardless of country, we know that the young innovators and technologists at these companies aspire to be pioneers in space, just like Elon Musk. That’s great, and we should be fostering that, but we need to make sure they don’t destroy our free market economy or displace the companies within it.
So, at a very high level, let me give you a rundown of the recommendations that we put out for the government and industry:
The first one is everybody’s favorite, which is that we need to promulgate a whole of government, top-level North star vision & strategy for space industrial development that speaks to our future needs in space.
Space is not a military domain, and it’s not just a commercial domain. You know, if you look at what we’re doing on the ISS with international partners and what we intend to do on the moon, those are diplomatic efforts between participating governments. So, we want a unified, whole of government vision that ties things together and helps things work in concert with each other, which also helps reduce costs. For instance, we deal with a lot of commercial vendors, and NASA does too — so by promulgating a unifying North star vision it helps focus everyone’s efforts and sustains them over the long term as well.
We recommended that DoD develop a plan to protect and support commerce in space just like the Navy protects commerce in international waters. It’s too easy for a bad or irresponsible actor with the right financial resources & motivation to put something dangerous in orbit. We want to ensure that doesn’t happen, and we want to create a deterrence to piracy and crime as well.
We want to economically stimulate the industry, and so a great way to do that is to buy and use commercial products. You know, the Air Force recently awarded their national security launch contracts and SpaceX was a recipient of that. Not too long ago, SpaceX was suing the government to do business with them. Within just a few short years, we’re already seeing a shift towards the private sector, and NASA alone estimates they’ll save billions of dollars by using private commercial launch services.
We wanted to help our friends & allies abroad participate in the creation of wealth in space because they share our norms and values, which also establishes the legal precedent of freedom and openness in space. We don’t want the Spratly Islands on the moon — we want space to be a cooperative endeavor.
More altruistically, we want to promote the idea of 10,000 more science, technology, engineering & math (STEM) jobs domestically, which is getting kids excited. We want them to stay with math & science and see that as a gateway to an exciting future in space.
Lastly, we want to foster a sustained partnership between government and industry, that supports commerce and engages the commercial sector in helping to solve the tough national security problems that we’re dealing with. Conversely, we want industry to recognize that we’re open for business and they should be aggressively pursuing government partnerships that enhance our civil, commercial, and defense sectors.
Now on another note, as you know our trade relations with China have been in a downturn lately, which creates potential risk in the Space Industrial Base and the technology economy in general due to our high reliance on Chinese technology components. How great is the risk to our military and civilian supply chains in your estimation?
You know, this problem stems from many different things, but one of them is the cultural perspective that we believe in individual rights, one of those being property rights — but not everybody globally believes that. In some cultures, it may be the ultimate show of flattery use one’s technology without permission, but that’s not consistent with the way that our international laws work.
I don’t necessarily see an adversarial conflict as much as I see a difference of ideas. There’s an opportunity for us to create an environment so that China can participate in the global economy the way the other nations do. They’re already doing that, but we have to be careful, because they’ve got a well-defined agenda in place to achieve the stature & capabilities they want.
Now in terms of space competition, you’ve written about “contested leadership” for the Moon, with China announcing future goals in cislunar space such as space-based power and a moon base. As I understand things, this is part of a larger ambition by China to become a leading superpower by 2049. How does this competitive environment affect our space goals, timetable, and spending priorities?
China has a grand strategy to do some great things. They’re going to the moon, building space stations, and doing all kinds of things. However, they also seek to displace the US as a leading superpower by 2049, both economically and militarily, and that’s not so great.
The year 2049 is interesting because it’s the hundredth anniversary of the communist state. So, this isn’t a Chinese thing, this is a communist thing, and that’s an important distinction. The people of China are just like us — they’re excited about space, technology, and the future. We don’t want to suppress that enthusiasm, we want to work with them cooperatively.
Our primary issue isn’t with China’s goals, it’s with their “great powers competition” approach to it. The Belt and Road Initiative is one aspect of their strategy, and since we tend to have more of a near term focus, Belt and Road is a big issue that we’re dealing with. Our approach tends to ebb and flow every four years depending on administration changes, but it’s certainly worth examining their approach to better understand their long term strategy.
This doesn’t have to be an us versus them situation. It’s wonderful to have international partnerships with allies who have aspirational goals, but we also have core values that we don’t want to deviate from. It all comes down to structuring relationships in a way that’s cooperative but remains competitive.
As for the 2049 vision, I would not want to live in a world where China dictated all the rules and drives the world markets. That idea is a little scary, and I’d also say a little reckless on their part because they have a lot of challenges to solve domestically before looking abroad.
Where is Russia in all of this? We’re partners with them on the International Space Station, and for 11 years NASA was bumming rides from Roscomos out of Baikonur Cosmodrome. They have just as much to gain or lose in space as we do, and they’re in the precarious position of trying to maintain relations between the US & China. Where are they now, and where do you think they’ll end up?
Well, here we go again, right? The Russian people are very excited about space, but the Russian government has a bit of a Jekyll and Hyde aspect to it that creates uncertainty.
I don’t know if you remember Apollo-Soyuz, but it took place back in 1975. We’ve been doing cooperative things in space with the Russians for 45 years, and that’s a giant achievement. However, the Russian government and their leadership are also doing some very dangerous things in terms of military capabilities, which is troublesome.
About a year ago, the US pulled out of the INF treaty because Russia is violating it. It’s an awkward challenge, and also really sad because that treaty was a crowning achievement of policy during the Reagan/Gorbachev era.
This is an interesting time for Russia because the rise of China puts them between a rock and a hard place. I think that it serves their long-term interests better to be allied with the West, and I’m sure that being next-door neighbors with China creates its own set of concerns for them.
As for the United States, I believe that we should continue to cooperate with Russia — not just in space, but across the whole scope of government & civil society to continue breaking down barriers as we have for the last 30 years.
Now, in terms of the long-term goals that you’ve mentioned, is America on-track to develop the kind of industrial base required to achieve our vision for space? Where are we succeeding, and where are we falling short?
Well, if I had to use this one word to describe our space efforts, from the US standpoint I’d say we’ve been kind of dyslexic. We’ve had a lot of starts and stops over the years.
I grew up during the Apollo era, and if you’d asked me back then what I’d be doing in my 50’s, I would have been talking about moon bases, people on Mars, and mining asteroids. Well, here we are, and we don’t have any of that — but what we do have are a lot of frustrated people who went to school and bet their careers on the exploration and commercialization of space.
Things are changing, though, and the level of commercial investment in space over just the last 5 years has been transformative. What it took were a couple of space-junkie billionaires who finally said, “we’re going to make this happen”, and then they pushed forward to make it a reality.
Now, we have SpaceX, Blue Origin and other companies that can land rockets — that’s pretty cool technology. It might seem like something out of a cheesy black & white sci-fi movie from the 1950s, but it’s a big deal in terms of bringing the cost of space access down. The commercial folks recognize that there’s no business case for a multi-million dollar rocket system that ends up at the bottom of the ocean because of a single-use design.
On the downside of things, the economic hiccup from COVID-19 has been scary because a lot of private space startups are heavily financed by early-stage venture capital, and as the capital markets contracted it was tough to get that investment money. Rocket and satellite companies have a high burn rate and need periodic investment to make their milestones, so we were scared that a lot of these companies would be decimated in a short period of time because of the freeze of capital.
However, at least so far we’ve seen that the commercial space sector is doing much better than some other industries, but we still need more resiliency and diversity in these investments. The government needs to play a role in making sure that we don’t lose our emerging capabilities because of an unforeseen crisis like the current pandemic.
Let me close by asking if the DIU offers resources to companies to match your needs and if you have a wishlist of technologies or types of companies that you’re looking for. I guess what I’m really asking is how companies can better work with you & meet your needs and requirements for the space infrastructure.
One of the things that’s very distinctive about the Defense Innovation Unit is we do not participate in “requirements based acquisition”. In other words, if the army needs a tank, they’ll create a specification for it, put it out to bid, and somebody builds a tank to meet that specification. We don’t do that.
Our approach is to identify the overall problem we’re trying to solve — and then we just put the problem out there. If you want to get a crowd of people to follow you in places like Silicon Valley, don’t give them specifications — give them interesting problems. So, that’s what our job is: we give them interesting problems.
What’s wonderful about our approach is that we get all kinds of really amazing solutions, and they may be all totally different. Some are high risk, others are low risk, but you wouldn’t get any of them if you just put out a blueprint and said, “this is what I want”.
So, part of this is us coming to terms with the fact that we don’t always have the best solution to everything. In the case of rockets that land themselves, where was the requirement for that? It didn’t exist — but that doesn’t mean it’s not the right thing to do in terms of improving our access to space and reducing costs.
Our goal is to create an open-door policy. We want industry to come to us with the best ideas for everything — not just in space, but also artificial intelligence, health, autonomy, energy, advanced materials, and more.
If you walk in our door with a breakthrough quantum technology that works, meets our levels of technical feasibility, and there’s a commercial market for it — we’re all over that. That’s the kind of work that we want to be fostering, but it has to have commercial applications — we can’t just be the sole interested party in it.
We already have a defense industrial base, which is focused on just making the things that we need for defense applications, like our weapon systems on the F-35. You can’t go to Google and ask them to build you an F-35, right? What’s important is we don’t treat every company like it was a defense industrial base partner. In other words, we want companies that have a primary line of business, and their secondary line of businesses is selling their technology and capabilities to the Department of Defense.
That works well because we’re really good early adopters. If we get in during the formative stages of a new technology, we can help to protect intellectual property. We have teams that give our partners help at no cost, which is great. They’re taxpayers and they deserve it. Then, if there’s a business case that allows us to use this technology, that’s awesome. We’re open to all kinds of different ideas, which is truly wonderful.
About Our Guest
Brigadier General Steven Butow is the Space Portfolio Director for the Defense Innovation Unit (DIU) of the Office of the Undersecretary of Defense for Research & Engineering, located in Silicon Valley.
Prior to joining DIU, he was the Vice Chief of the Joint Staff, California Military Department, and a former Commander of the 129th Rescue Wing at Moffett Federal Airfield, CA. General Butow has additionally served as the Deputy Director of the Joint Search and Rescue Center for U.S. Central Command in 2005, and as Chief of Personnel Recovery for U.S. Air Forces Central in 2007 supporting Operations IRAQI and ENDURING FREEDOM.
Butow has a B.A. in Physics & Astronomy from San Jose State University and an M.S. in Management from the University of Maryland, and has completed executive courses at Harvard’s John F. Kennedy School of Government. Learn more about General Butow at: https://www.diu.mil/team/Steven-Butow
