Four Things to Know Before Entering the Defence Market

Below are the four things I would say to any company looking to enter the Defence market, or any company that currently feels stuck in their market entry. I made these points yesterday at Oxford Tech Week - Defence Focus with Mishcon de Reya. Thank you to Toby McCrindle and the Defence Tech Practice at Mishcon team for putting this event together. They convened a great mix of investors, start-ups, scientists, and government representatives that resulted in new connections, both in Oxford and further afield.

1. The Valley of Death is Not a Structural Problem, It is a Sequencing Problem. I have long thought the “Valley of Death” is a weak argument. Not because real issues do not exist in transitioning from experimentation to scaled adoption, but because, I argue, it is one of the most consequential tools the government has to weed out average and bad technologies, products, and companies. The Valley of Death just does not work as well as it should, or happen early enough in the decision making process of matching problems to capabilities, alongside funding and programme owners. Leaving it too late, once companies and their customers have invested a considerable amount of effort and resources into scaling a capability from testing / experimentation / or demonstration,results in a high level of entropy where assurance, commercial teams and finance, solution owners, end users converge in a gradual decline to disorder. Frustration on the supplier side compounds and companies must manage the inevitable commercial stasis, and the government customer becomes helpless. Thousands of repetitions of this are now what we call the “Valley of Death.”

2. You are Not Selling Technology (or even a capability) You are Selling a Theory of Winning. In winning government contracts over the last seven years, and now working alongside companies to support their go-to-market strategy into the UK, I have learned the moment your government customer starts a commercial process with you they have increased their workload exponentially to acquire your capability. Whether this is right or wrong, your job as a supplier is to do their job for them. You will need to:

• Demonstrate early on how you will scale from pilot to enterprise adoption. This allows them to calculate and manage risk, as well as build the narrative they will need to bring everyone onboard and is critical for a business case and technical assurance.

• Demonstrate how you are the better option, and better value, than other options. While the MoD tends to use Most Economically Advantageous Tenders (MEAT), colloquially referred to as “a race to the bottom”, we also see them buying sophisticated technologies that are not the cheapest cost-wise, but deliver greater value in effect. While explaining the value of your own capability is straightforward, it is the demonstration of value in comparison to what they currently use as well as other capabilities out there that matters most. I’ve seen a lot of companies fail to deeply understand the users’ experience across multiple platforms and clearly state their own value proposition in comparison.

• Know what they have to say “no” to in order to say “yes” to you. We in industry often underestimate the complexity of acquisition on the customer side, and often default to platitudes to out-explain the limits of our experience on the inside. Your customer will most likely have to stop using something, or stop using it in their current way, to adopt your capability. Understanding what they have to stop using is one of the most valuable threads of customer discovery you can conduct. Without this knowledge you not only will hit the “Valley of Death”, you become its creator.

3. Don’t Blame Procurement. If You Want to Win, Master the (broken) System. We know significant change is underway in the MoD with Defence Reform, the formation of the NAD Group (NADG), the Office for Small Business Growth, the consolidation of innovation under UKDI and the steadfastness of key enablers such as CommercialX. We also know these things take time, that talent does not always match the brief, and that key institutional factors, such as risk appetite, will take awhile to shift. If you want to win a contract with the MoD, do not waste time complaining about how broken the system is, master it. That is what your competitors are doing, and it is working.

   • One of the biggest time wasters is spending time with the right people in the wrong order, or the wrong people for the whole time. If you have not been operating in this space for a long time, or ever, it is very difficult to know who is wasting your time. My recommendation is to find someone who understands how money works. End users are everywhere as are retired three-star Generals. Unless they have ever bought something, they are the right people at the wrong time. Follow the money, always.

   • As I’ve written about before, you are selling to around five people at all times. I call this your “Customer Cluster”. They are: the end user, the senior leader, the technical assurer, the policy person, and the commercial officer. In a sales cycle of 12 months, up to three of those people will turn over. At least one of their replacements will have zero interest in what you are selling. What about your narrative is enduring? This requires you to solve for a real problem, not an individual annoyance. I see a lot of people on both the industry and government side put tremendous effort into solving annoyances.

4. Customer Discovery is the Most Underrated, High Yield Activity for a Startup. You all know I love Steve Blank, the “Godfather” of Lean Startup, and the originator of Customer Development. In the last 18 months my company has talked to around 150 companies all wanting an edge on entering or navigating the UK Defence market. Out of those 150, I’ve seen two world-class companies. What makes them world-class comes down to two things:

   • First, they understand Customer Development as a strategic enabler in their go-to-market strategy. This does not just mean they understand the end-user, they deeply understand the system in which all of their customer cluster operates and develop credible pathways for adoption alongside their cluster.

   • Second, they have no ego around their product. Their customer is their greatest teacher and co-problem solver. They do not confuse conviction in their product with superiority over their customer. This seems like a no-brainer. You would be surprised how much friction companies create for themselves with ego.

After seven years of winning in this market and watching hundreds of companies try, the pattern is consistent: the companies that succeed treat the complexity as the product, not the obstacle. They go deeper on customer understanding, earlier, than anyone else in the room. That is not a hack or an advantage, it is the baseline.