Transformation two-step: Challenges for government and industry

There seems to be little debate about the need to aggressively transform government so that it can take advantage of the vast array of new capabilities that comprise the so-called “digital age.”

Indeed, there is little doubt that doing so will help drive out unnecessary costs, dramatically improve performance, and inure to the benefit of all those served by the government.

So what’s taking so long? And what do government contractors need to do to play a meaningful role in that transformation?

On the former question, the answers are fairly well established:

• Misalignment between mission needs and contracting strategy
• Vanilla RFPs
• Poor articulation of meaningful differentiators by offerors
• Continued risk aversion
• A broken acquisition system that lacks the necessary velocity and in which a focus on price versus value often makes it nearly impossible to hire and deploy the best people.

As such, even as the government’s embrace of new and emerging capabilities, including blockchain, machine learning/artificial intelligence, additive manufacturing and data analytics grows, the ecosystem remains far from the dynamic environment it can and should be.

It is also notable that the bulk of innovation continues to take place outside of traditional processes. There have now been hundreds of procurement challenges and contests, the latest being HHS’s code-a-thon to support the battle against the opioid crisis. And there is a growing use of alternative acquisition methods, particularly Other Transactions Authorities.

In the defense department alone there is the Defense Innovation Unit Experimental, the Rapid Capabilities Office, Special Operations Command’s “SOFWERX,” soon to be joined by “AFWERX” in the Air Force. There is Homeland Security’s Procurement Innovation Lab, a similar entity within USAID, and so on.

All of these entities exist to drive transformation through access to new capabilities that enhance mission performance. And all largely function outside of both the traditional requirements and acquisition processes. Clearly, agency leaders have determined that those existing processes and structures do not generate the results they need.

So, why are we not normalizing these “new” structures and processes? Does anyone really think that the creation of parallel markets will really drive change?

Some would argue that yes, this is the way to go. Indeed, in too many quarters the belief that traditional (i.e., existing) government contractors are not a source of innovation remains palpable. It is no accident that the operating models for many of these alternatives, and/or the acquisition strategies they employ, explicitly or implicitly prohibit the participation of existing government contractors.

In other words, there is too little recognition of the enormous investments many companies have made in talent and technical capabilities, including agile software development, human centered design and machine learning—none of which are uniquely the purview of any market cohort.

This misperception ignores as well the reality that taking innovation to scale, particularly in an environment as complex as the government, requires deep domain and process knowledge. In an agile environment the role of an integrator clearly changes. But that does not mean the need no longer exists.

This creates a real dilemma for government contractors who have to determine which customers are genuinely open to and will reward real innovation, and how and where to invest in new capabilities and at what pace.

At the same time, companies also face important internal questions, prominently including a continual evaluation of whether their traditional business models align well with the direction and dynamics of a changing marketplace.

Here, there may well be lessons to be learned from successful emerging tech companies of the type the government is so actively seeking to attract. Just about all of the ones we have worked or talked with, share at least one common characteristic: Their offerings are geared to solving a single, definable problem and their business strategies generally do not include expansion into ancillary or adjacent spaces. There is little interest in building a professional services business beyond that required for implementation of their individual capability

 Indeed, they see their role as simplifying existing processes while empowering their customers (individuals or institutions) to make faster and smarter decisions. To the extent customers might need help optimizing their use of the capability (generally software), or could benefit even more from expanded data analytics, they are by and large more than happy to let others do that.

From a customer perspective, this singularity and simplicity of focus is often both appealing and reassuring—let alone appearing to be less costly.

This is, of course, markedly different from more traditional business models, including those that largely characterize the government marketplace, where both horizontal and vertical growth and expansion is a central theme. But if the government customer is, in fact, moving toward a more agile (in its broadest sense) mindset and inclined to attack problems one piece at a time, it is not difficult to understand how there might also be concern that traditional vendor business models could be out of alignment with that strategy.

The dilemmas facing today’s market are not simple; indeed, they have multiple facets and complexities. And among the many challenges companies face today are those that require a constant re-evaluation of longstanding business models coupled with a similar re-evaluation of how they communicate with and educate their customers.

The best of companies are able to do just that; to continually pivot and adjust, to recognize and respond. And as the government transforms, at whatever pace, the biggest winners will be those with the clearest-eyed assessment of how and where they too must transform.

Darwin was right: It's all about the species that best adapts to change..