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At their Chicago summit, NATO leaders adopted a political declaration that anchors Smart Defense at the heart of how the alliance will think about capabilities in the future. Industry is an important stakeholder in this initiative.
The shadow of past attempts at international procurement cooperation, however, leads industry to think about cooperation mostly in terms of delays and market-distorting principles. With this backward-looking mindset, industry risks missing a crucial growth potential, a market that will only exist because of Smart Defense.
Across the Atlantic, industry should seize this opportunity as eagerly as it would any good business development prospect. Simply put, the Smart Defense framework will offer a way to sell products that would not otherwise be sold.
Smart Defense aims to make NATO forces more effective and efficient in times of budget pressures through international cooperation, prioritization and specialization. But Smart Defense is not just about addressing the tight fiscal climate; it is about using these conditions to change the way we do business.
Smart Defense will not blow over and go away as earlier capability initiatives have. The initiative is only the beginning of a new way of thinking about how NATO does defense, including procurement. While earlier doctrinal revolutions have been about creating joint and combined forces, Smart Defense adds a third essential leg: internationalization.
Smart Defense in this way would represent a breakthrough in defense planning. Policy developers across the alliance would be conditioned to think in international terms first when they embark on new projects. With which allied partners of strategic proximity — allies that share levels of ambition and have a similar strategic outlook — might we cooperate on a new project? This would be the first question asked before considering a purely national solution.
The principle can be understood as 2+. Each new capability development project will from the outset be designed with at least one allied nation.
Right now, the economic crisis limits spending on new capability developments. The Chicago summit will result in political promises to develop Smart Defense projects in a general sense. But governments can use a hand to make good on their words, especially when it comes to new ideas for internationalization. Falling budgets will not in themselves make industry look for international solutions. So far, the dialogue between the defense industry and NATO has been slow to catch on to the business potential of Smart Defense.
But the Smart Defense initiative should make industry see its markets in a new way. New spending is more likely — in some cases only likely — to get green-lighted if it is international. One example of such a plus-sum game is missile defense.
Smaller nations’ navies are unlikely to be able to participate unless they share, for example, a set of the coming SM-3Bs among their respective frigates. These can then take turns serving as parts of the missile defense and otherwise be available for national or allied missions.
Industry should focus strategic marketing efforts on developing products and projects that take this into account. This means concei-ving and proposing concrete capability projects that include partners from two or more allied nations.
Through the 2+ principle, industry can open a market that would otherwise not exist. Industry can in this way, driven by the desire to make good business decisions, have an impact at the political level. Bureaucracies will receive such development projects with great interest, as they need to balance current expenditures with future ambitions.
They need, moreover, creative suggestions as to how to internationalize their capability development. For industry as a whole, such new markets may also be more cost-effective, as fewer projects mean fewer nationally specialized products.
To facilitate this engagement with industry, allied governments need to face openly the challenges related to industrial questions in our shared capability development. As noted by Sven Biscop of the Egmont Institute in Brussels, Smart Defense could run the risk of being seen by smaller nations as “pooling and charging.” If more shared approaches lead to fewer products, industry in the larger countries would benefit at the expense of smaller ones.
From this perspective, Smart Defense risks being seen as a vehicle for selling defense solutions by either U.S. or larger European arm-aments companies. Nations, therefore, need to openly discuss Smart Defense’s industrial ramifications.
For industry, Smart Defense is not only an opportunity, but might represent risks as well. Companies that are not able to contribute with 2+ capability development especially risk losing market share.
Industry can shape Smart Defense by engaging governments. Smart Defense is only the beginning of a process in which governments, industry and academia need to be involved to identify impediments and develop new ideas.
The Chicago summit has created an opportunity for defense companies to make new ideas and make money from Smart Defense, and for governments to begin the necessary dialogue about Smart Defense with industry. Moving forward on the Smart Defense agenda makes good business sense.
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Henrik Breitenbauch, is a senior researcher at the Center for Military Studies, University of Copenhagen, and Bastian Giegerich, is a consulting senior fellow for European security, International Institute for Strategic Studies.
