Events over the past year have sent shock waves across the globe as national defence sectors are forced into a period of self-reflection amidst international unrest. The overall learning from 2022 has been that the invasion of Ukraine proves we cannot be complacent when it comes to funding our defence sectors, and continued investment in this area will be crucial in helping to fill the widening skills gap that’s currently dominating the headlines.

It’s evident that a globalised economy does not mean that everyone will play by the same set of rules and that peace and harmony will endure. To move forwards, we first need to understand the defence sector’s digital challenges. From there, it’s time to identify latent talent and up-skill the existing workforce, whilst working to source digital talent from among veterans and other under-represented groups to help fill some of defence’s workforce gaps.

First things first, the issue of money. It has long been known that countries are only as secure as they pay to be, but that there’s a constant political battle around defence spending.

Budgets have been increased, or at least political undertakings have taken place to do so. But only time will tell how much NATO governments will really increase spending and what this will mean in practice against static or falling GDP and soaring inflation.

In this context, there are encouraging indications that investors are now more inclined towards defence, in some cases because they care about national security, in others purely because it looks like a growth area with money to be made.

NATO recently announced the launch of a new €1bn fund and accelerator, Defence Innovation Accelerator for the North Atlantic, catchily abbreviated DIANA, to attract venture capital (VC) funds. The aspiration is for DIANA to spend €70m annually for the next 15 years investing in early-stage tech start-ups. All good so far. However, the fund won’t be operational until 2023 given the bureaucracy involved in co-ordinating member states. Indeed, some nations, including the US, have opted out of the fund altogether.

Time will tell what DIANA will amount to in practice, but it points to a shift in how defence is seen among investors. Historically, many were loath to invest in defence companies, some claiming that it ran against their ESG principles. Of course, they only enjoyed the freedom to espouse such principles because others were guaranteeing their safety and security, but no matter. Many now see the value in committing funds to companies that will help keep our way of life safe and we should applaud and encourage this.

Recent figures reported by PitchBook indicate that $7bn had been invested in the first 10 months of this year in VC-backed US aerospace and defence companies. This should see 2022 exceed last year’s record value of $7.6bn. At one level this may not seem surprising given global security threats, but it runs counter to the wider trend of reduced investment in most other sectors brought about by the economic downturn. Companies that offer dual-use capability, not solely selling into defence, are inevitably the most attractive to investors as commercial buyers secure initial revenue ahead of slower defence procurement.

Much of this spend will be directed towards digital technologies where tech start-ups have the potential to bring real competitive edge against our adversaries. This begs the question about how ready the UK Ministry of Defence (and those of our keys partners) is to exploit these opportunities. The National Audit Office’s (NAO) October report on the initial implementation of the Ministry of Defence’s (MoD) April 2021 Digital Strategy helps answer that question.

The strategy set out how the MoD plans to transform digitally out to 2025 and the report points to some encouraging signs, but not surprisingly also to some areas of concern.

The scale of the challenge facing UK defence is vast: the MoD by its own admission isn’t structured to implement digital technology at speed and at scale; it is fixed by myriad legacy systems; they hold vast amounts of data which is not readily accessible; the department’s organisational processes are not well-suited to delivering digital technology; and critically they have a significant deficiency in digital skills. The MoD is not alone in facing these challenges and a similar story exists in other government departments.

The Digital Strategy sets out the challenge effectively, but diagnosing the problem is the easy part. Developing a full plan to deliver change is rather harder. Not only does the MoD not yet have this overall plan, the NAO judges that they also do not have the mechanisms to secure a complete and confident picture of progress.

The NAO also highlight the MoD’s dearth of skilled and experienced digital staff, although they are hardly alone in this. There is a desperate shortage across all sectors, both in the UK and across the globe. Most organisations are struggling to secure and retain digital talent, but the MoD challenges are particularly acute. Like the rest of the public sector, they cannot offer competitive wages, but just as importantly their deserved reputation as being overly bureaucratic is a major disincentive to dynamic, young talent.

The call to action to close the digital skills gap has been heard across most industries and nations, but it doesn’t come without challenges.

The uptake of new talent cannot match the speed at which the sector is growing. As it currently stands, the Ministry of Defence will be limited in making those all-important decisions as there simply aren’t enough people to fuel the fire.

Not only does the sector need to identify their latent talent and up-skill their existing workforce, but it must also source digital talent from among veterans and other under-represented groups to help fill some of defence’s workforce gaps. By adopting recruitment processes that specifically target these under-represented groups, the defence sector will tap into an overlooked talent source.

The 2025 objectives are ambitious to say the least, but the resources needed to push them over the line are there, ready and waiting. It’s just a matter of knowing where to look.

// Main image: The UK Ministry of Defence is seeking to implement a digital strategy aimed at transforming its ability to utilise and connect with the digitally fluent workforce. Credit: UK MoD/Crown copyright