WASHINGTON—One of the first major moves announced by Secretary of Defense Ash Carter was the creation of the Defense Innovation Unit Experimental (DIUx), a Silicon Valley outpost for the Pentagon. But while the office was launched with much fanfare, little came out of it in its first year, leading Carter to relaunch "DIUx 2.0" under the guidance of Raj Shah, a former F-16 pilot and entrepreneur. Six months later, Shah sat down at the Federal Times/Defense News CyberCon event to discuss the present state of and future plans for his office.

It's been about six months since you took over. What are the key lessons learned so far?

I think one is relationships. Having a team of folks that have been in the innovation community, that understand the challenges that a nontraditional company or vendor has been working with, and having those relationships where there are technology companies that may not be viewing the Defense Department as their primary customer but we want to access their technology. So there's that.

The second piece is having the resources and authorities to move very quickly; so how do we move at the speed of business with these companies and help them navigate through to the speed of the Pentagon? Thirdly and finally is a focus on problem sets rather than requirements, particularly for software and more novel solutions. The nontraditional companies are not appropriate to help us build the next aircraft carrier, but for certain types of software, particularly in cybersecurity, if we come with a capability gap rather than all the requirements, we can work well with markets.

We always hear the Pentagon moves too slowly for commercial firms. How do you close that gap?

I think that's a very important [point]. The agility piece of it is it's what makes us and this approach different. It's not appropriate for everything. If the useful life of something that we're going to acquire is 50 years, we should work very, very carefully and be sure that what we acquire exactly fits our needs and our plans, but if the half-life of the technology that we're buying is shorter than the time it takes to acquire it, we're always catching up, always behind the curve and so the speed aspect of being able to reach out and find these companies and bring them in is critical.

So what we've done at DIUx to help with that, help with these young companies is help pilot something called the Commercial Solutions Opening. It's something that was in the '16 NDAA and it's an [other transaction authority], so a non-[Federal Acquisition Regulation]based procurement authority. It's not unique to DIUx, it is departmentwide, we just had the opportunity and the support to be able to get it initiated and get it going. The key element of it is that we can evaluate and procure technology products more similar to what a commercial entity would do. The way we work is we partner with our customers. So our customers are the services—Army, Air Force, the combat command—and we spend time with them and help understand what their capability gaps are, what their needs are. We decide to work on a project together—we put resources, they put resources, both financial and human, and then we go.

How's that worked out?

We've done 12 projects so far. The average time, after meeting the slew of companies, [to sign] the first contract has been 60 days, 59 to be exact, and that's the sort of pace of business that we are able to work at that now attracts, I think, a new set of folks to think about DoD problems that expand the industrial base.

Secretary Carter has said there are a number of projects coming down the pipeline. Can you give us a sense of what those are?

With our great partnerships that we've had across all the services we have a slew of different projects that are currently underway. Contracts will be let in the next coming weeks and months. There are five key technology areas that we at DIUx are focused on, ones that we think that the commercial sector, because of their own investment and their own focus on going after the big $25 trillion consumer market [is] putting tons of an investment—all of that we can benefit.

So those five are autonomy, robots of all flavors, from drones to boats and submarines; machine learning/artificial intelligence, the big data piece, again across the means including cybersecurity; networking and cyber, in particular, defense of tools; commercial space, there has been really heavy investment in space from launch to the small payloads to the sensors, and the most importantly what do you do with the data [and results from] the analytics ... and then finally biotechnology. So I think you'll see our next few projects will be mapped across those and we continue to move forward.

DIUx 2.0 was made a direct report to Secretary Carter. What's been the benefit?

I think what's critical is that whenever you're doing something new, particularly in a very, very large organization, it creates disruptions and challenges for lots of folks. Having the freedom of maneuver to try new things, take new approaches, has been critical to our success. So I would encourage the next administration to continue to enable not just us. We are just one of several innovation efforts that the department has done, and across those encouraging that level of new thinking is valuable for all of us.

So that's a model that has worked well?

I believe so, yes.

Do you need more DIUx offices set up?

Innovation is not only in those two or three regions. It is a nationwide effort. There are amazing companies across the country, we've had folks apply from 32 different states now, so it's certainly not limited to that. We're a relatively small office, so we can't have offices everywhere, but the way we're addressing that challenge and one of the things—the key untapped resource we have as a nation and a department—is our reserve forces. We have reservists working in technology companies from all sizes, all maturity, across the nation, and they have a really deep desire to continue to serve. And what better way than to be able to have them serve with us in the department in a capacity that [is] similar to their day job right [now].

So that's going to be our approach to try to expand across the nation. We're setting up a new reserve unit across services, including the National Guard where we will be able to help build that team that gives us access to new tech. And I think there's a longer term strategic value here. [Relationships] are going to be even more and more critical. If we're under a major cyberattack, God forbid, in a few years down the road, having relationships at the working level between folks involved in national security and the commercial side is so critical. We know 80 percent of our traffic is over private companies that own the infrastructure, the software, and if we're under major attack some of those companies may be conflicted in that they have very large amounts of international revenue and will be limited, maybe, in what they can say and do. But if you have those relationships at the working level, a reservist that has worked with his civilian peers, that familiarity will allow us to respond quickly, respond with levels of trust, and so I think there's a very long strategic [plan] in the reserve team particularly in cybersecurity.