ISPI : 5 Jul 2023 Andrea Gilli Beyond Vilnius: NATO Dealing with New Technologies

 5 Jul 2023

Andrea Gilli 

Beyond Vilnius: NATO Dealing with New Technologies

New technologies are a key part of NATO's agenda. However, properly addressing this issue is neither easy, nor quick, nor cheap.

COMMENTARY TRANSATLANTIC RELATIONS

One year after the Madrid Summit, NATO Heads of States and Governments are meeting in Vilnius to discuss the present and future of the Atlantic Alliance and continue the implementation of the 2022 Strategic Concept. Innovation as well as so-called emerging and disruptive technologies (EDTs) are among the most salient issues on NATO’s agenda. In order to understand what NATO is doing and where it is going, it may be useful to break down the issue into challenges, problems, solutions and constraints.

Challenges

NATO is focusing on innovation as well as on EDTs for two main reasons. On the one hand, innovation and new technologies have historically represented the backbone of NATO’s military superiority. This is not going to change and actually, the attention NATO is increasingly paying to Multi-Domain Operations (MDOs) is going to raise further the importance of these issues. Without fast communications, artificial intelligence and advanced computing, among others, NATO will simply not be able to conduct its future deterrence and defense missions. On the other hand, however, in contrast to the recent past, the bulk of innovation is nowadays significantly driven by commercial companies. Such paradigm shift challenges the traditional defense business model based on government-led investments in military technology and large defense contractors. Such paradigm shift is also forcing NATO and its Allies to understand, interact and cooperate with non-traditional defense companies.

Problems

First, innovation is difficult. Were it not this way, countries all around the world would not work relentlessly to promote innovation in their economies, defense industrial bases and armed forces. Second, promoting innovation in the defense world is even more daunting. The risk-prone culture that innovation requires is in fact at odds with the logic of security which dominates the defense and security world. Similarly, start-ups and technology companies differ dramatically from traditional defense contractors: their timelines are faster, their processes are more horizontal and often less linear, and they are characterized by more and freer flows of information. Third, and related, NATO Europe has so far struggled with the recent wave of innovation: of the first 50 biggest technology companies in the world by market capitalization, only two are Europeans, although Europe is the largest economic area of the planet. Similarly, Europe’s innovation ecosystem largely fails to generate and sustain start-ups. Over the past couple of decades, 650 US-based start-ups have reached a market valuation of at least $1bn (thus gaining the label of “unicorn”). In Europe, less than 100 companies have reached this milestone and combined, their market value is significantly smaller than their US counterparts. 

Solutions

NATO has historically paid attention to and promoted innovation. This has not changed with the end of the Cold War. In 2003, NATO created Allied Command Transformation (ACT) precisely to enable the Allies to exploit, among others, digital technologies. In 2012, ACT created the NATO Innovation Hub to promote defense innovation and exploit new technologies. In 2019, NATO HQ created an Innovation Unit to further help and coordinate Allies’ efforts towards EDTs. Over the past year, NATO has reached two other important achievements: by the Vilnius Summit, both NATO Innovation Fund and DIANA (Defence Innovation Accelerator for the North Atlantic) will in fact be up and running. NATO Innovation Fund, the world’s first multi-sovereign venture capital fund, will provide financial backing to start-ups and innovative companies which, in turn, will be mentored and trained by DIANA, a Silicon Valley-like incubator. The speed of this twin achievement signals the sense of urgency shared among Allies. However, this twin achievement represents the beginning of a journey not an end in itself.

Constraints

As the late US Secretary of Defense Donald Rumsfeld used to say, “transformation is a process, not an outcome.” The goal of these (and past) initiatives is in fact to make NATO, its Allies, their armed forces and the supporting industrial and technological ecosystems agile, flexible, resilient and innovative. NATO Innovation Fund and DIANA will play an important role, but it is necessary to highlight that the challenges NATO faces are broader than these two organizations’ missions.

First, innovation is not just about creating new technologies: it is about developing technologies to back up concepts, turning concepts into prototypes, evolving prototypes into products and then selling such products to some customers. DIANA and NATO Innovation Fund can help start-ups in this process either through mentoring or financial backing. However, neither DIANA nor the NATO Innovation Fund can, by themselves, solve two critical barriers. On the one hand, any start-up needs, at a certain point, the support of a wider pool of investors. Europe’s venture capital ecosystem is weaker than in the U.S. (or China). To put in perspective, in some NATO countries, defense start-ups even struggle to open a bank account as banks are hesitant to work in the field of defense: we can then speculate how easier it is going to be to obtain the financial support from venture capital or the finance industry. On the other, and related, NATO Innovation Fund and DIANA operate on the supply-side. Defense is, however, a defense-driven business. Without defense procurement reforms enabling start-ups and technology companies to sell (quickly and easily) to Ministries of Defense and Armed Forces, their business cannot thrive and in turn, investors will hesitate to be involved. It will be on NATO Allies to act on these two areas, ideally in coordination, so to create a Europe-wide or even better a Transatlantic defense market for EDTs. However, this will take time also because the procurement regulations are not there by accident: they aim to ensure safety, security as well as cost-effectiveness.

Second, and related, start-ups and technology companies face a fundamental challenge related to talent management: they must have access to as well as have the organizational and financial capabilities to acquire and retain talent. This is a whole-of-government issue which touches upon education, research and technology investments as well as societal dynamics and incentives. Demographic decline, cultural and ideological opposition to defense issues as well as failure to generate a capable Science Technology Engineering and Mathematics (STEM) workforce, make it difficult for start-ups and technology company to grow, excel and lead. NATO cannot solve these problems. NATO Allies should. Do they want and can they? This is another issue.

Finally, innovation and new technologies are means, not ends. NATO, DIANA and the Innovation Fund will succeed if the technologies they develop will enhance the Alliance’ security. For this to happen, armed forces will play a crucial role. However, armed forces will also have to adapt, change and transform as well. They may have to recruit more technology-savvy officers and non-commissioned officers to exploit these new technologies. They may have to revisit their procedures, moving from experience-based to data-driven decision-making. And they may have to move towards a more experimentational culture.

Altogether, this is not easy, quick or cheap. This is the bad side of the story. The positive note is that NATO and its Allies, in their 74 year-long joint path, have already faced similar challenges and they have always managed to overcome them together. In contrast to the past, however, for the first time in the last 500 years, the geoeconomics and technological center of the world is moving away from the Atlantic towards the Pacific. NATO and its Allies will have to confront this new reality.