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a16zCan the Military Move at Startup Speed? How the Army and Navy Are Rebuilding
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50 min read · 10,307 words- 0:00 – 0:46
Introduction
- JFJustin Fanelli
Only superior military technology can credibly deter war.
- AMAlex Miller
The DoD is a black box. We're trying to fix it.
- JFJustin Fanelli
We have more companies than we've ever seen before who want to work on national security. This is the best alignment that we'll have in our lifetimes.
- AMAlex Miller
Only the soldiers will actually be able to tell you, "Yes, this works at a time of crisis."
- JFJustin Fanelli
This is a period about scaling what actually works.
- AMAlex Miller
It is shocking to me how much stuff we buy for soldiers that no one would accept if I handed it to you in your everyday life. This is not a technology problem. This is a culture and a process problem that we can apply technology to.
- JFJustin Fanelli
We want to overwhelm the system with how much better it can be.
- SSSteph Smith
[upbeat music]
- 0:46 – 3:44
Meet the CTOs: Alex Miller and Justin Fanelli
- SSSteph Smith
You both are CTOs of two very important public institutions. Can we start off with telling us who you are and what you do?
- AMAlex Miller
I'm Alex Miller. I'm the CTO for the Chief of Staff of the Army. Um, and that is a big title because the Army's a big place. Um, and sort of in my day job, it's a lot of education. It's, um, I would say probably sixty/forty talking to people about what technology can do for mission, and then forty percent actually hands-on, like putting my engineering cap back on and actually doing things that move the ball forward. Um, I would say very similarly to a company, what I do as the, the CTO for the chief is think about what the North Star should be for the Army in terms of how we leverage technology, how we employ it, and then what our missions are that can leverage it, and then actually going forward and helping people get there. So while companies have boards of directors and presidents and all these different things, we also have a board of directors, that is Congress. We also have stakeholders that are the American people. Um, however, most companies don't have sixty years of policy and rules that were written generally by, by enthusiasts and, and, and visionaries, but implemented by minimalists. And what I mean by that is risk minimalists. So most of our day job is just actually going through and educating, having a unique understanding of what our job is, what the mission is, and, and having done it to con- make that connection happen.
- SSSteph Smith
And what did you do before you were the CTO?
- AMAlex Miller
Ooh, uh, before I was the CTO, I was the science and technology advisor for the Army G-2, and that is the, uh, the deputy chief of staff that runs intelligence. So I was the guy doing all of the technology for Army military intelligence. So I got to do some pretty cool stuff, work with some really interesting people, and that was where all my, my downrange time was, was as a intelligence professional.
- SSSteph Smith
Justin, how about you?
- JFJustin Fanelli
Justin Fanelli, um, Department of Navy, so Navy and Marine Corps, Chief Technology Officer. Just like Alex said, Navy's a big place. Uh, oceans are two-thirds of the world. We want to cover as much ground as possible. And, uh, the CTO position within government came thirty years after it did private sector, right? And even later than that after defense. This is really a late acknowledgment or a nod that commercial technology can be a disruptive force positively for the government, and that we can go much faster, but we need digital to do that. And so, uh, to Alex's point, finding innovations from, uh, non-traditional partners and at the edge and scaling those much quicker and tying it to some sort of divestment because that money is locked in that three-year period where we're spending on existing tech. We're out there scouting, very similar to how private sector would do. We're working with hundreds of internal organizations, uh, in some cases with different kind of sub-optimized or very specific goals. How do we make that, um, a reconciled space where we can just bring the biggest outcomes to the hardest problems? And so that alignment piece, uh, to bring ultimately outcomes over match
- 3:44 – 4:44
Pathways for Startups in the DoD
- JFJustin Fanelli
is our goal.
- SSSteph Smith
So you both mentioned industry. You both mentioned startups. My colleague Ryan and I actually just wrote a blog post about selling into the DoD because there are these paths that startups can pursue. Uh, we all know about, you know, SBIR, STTR. There are great organizations like DIU and AFWERX that are out there looking to help pave these paths. Uh, but for a lot of startups, working with the Army or the Navy still feels like a black box. Uh, can you walk us through what kind of pathways are evolving and new opportunities for industry to engage with your organizations?
- AMAlex Miller
So startups generally focus on, like, the R&D side, so they're taking a, a concept up through some type of development into that, that golden minimally viable product phase. And the, the P's really important 'cause it's not minimally viable prototype, which I think a lot of DoD thinks about in terms of, like, hey, that sorta looks like it's useful. But what startups are thinking about is, hey, what's that first product that I can productize and get to market? For that phase, the DIUs, the works, whether it's AFWERX
- 4:44 – 8:08
Addressing the Black Box of DoD Processes
- AMAlex Miller
or SOFWERX or Eagle Works, like all of these different organiz- That's exactly where we want them to be. The reason I say that is because the DoD is a black box, and I, I say that meaningfully because we're trying to fix it. That black box was set up on purpose because in the '60s and '70s coming out of the Cold War and all the way up through the '90s, we had all these different things, the Packard Commission for how you think about, um, buying things, the Clinger-Cohen for how you do information technology, Goldwater-Nichols on how you connect, um, mission with how, with buying things, and all of that is still the rules that we live under, and everything since then's been duct tape and bubblegum. What we are trying to do is, is instead of MacGyvering our way through that, which all of us have spent a lot of time doing, we are trying to, like Sword of Damocles, cut through all of it, get rid of all of this extra bureaucracy, work with the Hill so that it's not a black box. And, and it's sort of like the 12-step program. If you can't admit there's a problem, you can't actually solve the problem. So, so that's sort of the left side of the equation. The right side is what the Army's doing is just bringing industry in and saying, "Hey, we know we have a problem. We want to help," whether it's helping us write requirements better so that we know what's available, so we're not trying to divine that from nothing, into, hey, how do we bring consortiums together? I love the new software strategy from the SecDef because it tells us use other transaction authorities. Like, use the things that Congress has given you and do it aggressively. So putting consortiums of teams together with industry To say, "I'm not gonna pretend like I know everything. We used to do... We've done that for 50 years. No more. You tell us what's available, and we'll tell you the mission and how we can apply it to that."
- JFJustin Fanelli
We want more game changers in this space.
- SSSteph Smith
Mm-hmm.
- JFJustin Fanelli
And so when we have barriers, it stops outcomes. And so, in general, like we, we have more companies than we've ever seen before who want to work on national security. There's a, in general, recognition that, uh, this world can be a dangerous place, and the more secure we are, the better we are at this, the more overmatch there is, the more that we can have, uh, peace through strength. And, and this is, in my opinion, the probably the best alignment, uh, that we'll have in our lifetimes. This is potentially a, uh, a, a century anomaly for actually being able to divest. It's very hard to turn things off and then bring new players in and bring new waves of ultimately, like, positive disruption through and through. And so, uh, like that translation piece has been very expensive, and so product market fit is slow, and at times we turn away, uh, people who, uh, or companies that would have brought in breakthroughs. But, um, only superior military technology can credibly deter war. And the fact that we have more people interested in supporting that mission What does the go-to-market strategy look like? And so Alex talked on, hey, we have some of these front doors. We don't want 100 front doors. That's confusing. So how does streamlining that look like? Well, if you're a Horizon three, if you're going to completely break through and change the game and you're selling something that we don't buy right now, um, you're swimming upstream. And so, uh, Anduril has, has made it through and fought that fight, uh, SpaceX has, Palantir has. But, uh, number one, we want that to be, uh, more straightforward. In that particular case, the PEOs are not your first customer.
- SSSteph Smith
Maybe we can just
- 8:08 – 19:32
Navigating DoD Program Offices
- SSSteph Smith
quickly talk about what a DoD program office is, because I think that's another black box challenge for startups. I, I think a lot of companies know that you generally wanna be on that journey.
- JFJustin Fanelli
Right.
- SSSteph Smith
You know, you get some R&D dollars.
- JFJustin Fanelli
Mm-hmm.
- SSSteph Smith
You work with DIU, you get an OTA. But ultimately, startups want to get to a program of record.
- JFJustin Fanelli
Yeah.
- SSSteph Smith
Uh, can you talk about exactly what that is and what that journey looks like?
- JFJustin Fanelli
100%. So, uh, people have heard of program of record if they've worked with, uh, um, DoD or the Defense Department at all. And so we have 75, uh, program executive offices. Uh, they buy, uh, at scale. These PEOs are made up of program management offices. And so, uh, then you're, you have hundreds of those. Navigating that to figure out where to sell is a scale game, and, uh, and it's been too hard. So one thing that we've started to do, uh, within Department of Navy, we have 18 of those 75, is we've said, um, wouldn't it be easier if we made data-driven decisions and started treating these buys not as, uh, the, uh, s-sacred program of record, but let's buy capability per dollar. And so our move towards military Moneyball has been to open up the aperture through converting programs of record and program offices to portfolios.
- SSSteph Smith
Mm-hmm.
- JFJustin Fanelli
And so we've shifted, uh, uh, PEO Digital, and I, I believe that we'll shift even more of those, um, program executive offices across DoD to that. Now, that's for a Horizon one capability. So if something, uh, improves the way that we're doing business, if we already have it budgeted, then you can go directly to them. And there's actually an index online that shows, I think Steve Blank put it out, that says, "Here's what each PEO does. Here's where they are. Here's who you can talk to within them." The goal there, because they have fixed budgets, is finding something, again, to turn off be- 'cause no one has runway to do three years of piloting until you transition something. If you are doing a Horizon two capability, uh, we're working on a breakthrough, but it's existing technology or there is a budget line. We have now more valley of death funds than we used to. We have small business innovative research, but that's more of a door prize. You need to get to that operations and maintenance long tail funding. We have something called, uh, APIT. Some-
- SSSteph Smith
Accelerating Procurement for Innovative Technology.
- JFJustin Fanelli
There you go. It allows some, some-
- SSSteph Smith
Acronym win. [laughs]
- JFJustin Fanelli
Some, uh, like, breakthroughs to get pulled all the way through. There's just not enough of those, right? There's just not enough funding and not enough awards. And so point is, uh, if you can shrink the valley of death, you're doing this in the Horizon two and Horizon one space. For three, you probably have to do still, like, some guerrilla, uh, marketing and advertising, pull in DIU, pull in The Hill, pull in the requirements writers to make sure that you're not doing all the translation yourself.
- AMAlex Miller
So-
- SSSteph Smith
Hmm
- AMAlex Miller
... so what if we didn't do all that? So the, the cool thing is everything that Justin just said is a workaround. It is a workaround to a system that is fundamentally broken. The cool thing is PEOs are not actually in statute anywhere. They don't exist in law. We made them up because the rule is that the SecDef gets to determine what that looks like. So as we think through what the future is, I, I don't wanna have to know. Like that acronym soup, why would we put that on anybody willingly? The only reason it exists is because the process doesn't work. So I wanna just a short story on, on how this works for us. So, so Justin talked about we, we build these requirements, and forever they've been super gold-plated. They, they're this thick. They're every word known to man because people are afraid that if you don't get it into the requirement, you can't move to this program of record.
- JFJustin Fanelli
Thousands of pages.
- AMAlex Miller
What if we just stopped doing that? Because it is not actually what we have to do, and I'll give you an example of that. For, for countering unmanned systems, and there's lots of startups in this, and I know that a lot of your founders are not in the threat headspace that I'm in right now, so think about it. You're at a NFL stadium or, or a soccer stadium, and you see a quadcopter. Like in my world, that's a horrifying prospect because that means that it's intruded into your airspace. You can't do anything about it. It's really hard to bring them down. Now think about thousands of those And that is the real threat that we're under. Well, all of our requirements writers, they're not operations. They're not the guys getting shot at. They're just trying to do the right thing, and you write these sort of black box requirements. I found one the other day as I was going through them that was coming up through the process because it wanted to go to a program where if you took the combination of statistics that they put in there, like your operational availability, your operational accuracy, and your operational reliab- uh, reliability, what you ended up with was a system that only had to work 51% of the time. What person at what company is gonna go, "Yeah, I'm okay with my engineers building something that only works 51% of the time," or if you flip it, "I'm okay with wasting 49% of my resources"? So as we think about what the process should be, and it's real, this is a with our shield or on it type of moment for the Department of Defense, I just wanna blow up all of that. Anything that's below law, we should be able to reshape because there-- No startup should ever have to go, "I wanna be a program of record," because what that really turns into is a 30-year long set where, you know, Microsoft might've been thinking, "Office is gonna be around forever," but inside of them, they still had product managers and program managers who were making sure that Excel was really good. Please don't stop making Excel good. The entire world runs on Excel. Um, but, but, like, they're not thinking, "Oh, if I just get it here, I can slow down. I can take my foot off the pedal," which is what happens in programs of record. As soon as you make it, as soon as you've got that long-term budget, there's a perverse incentive to just maintain and create inertia. So, so my, my, I guess, theory of the case is I'm gonna try to blow up all of that.
- JFJustin Fanelli
The question is, like, how do we increase yield, right? And so, like, we have examples where, um, like every good idea, uh, the government has piloted, DoD has piloted at some point, right? And so in this particular case, on requirements, uh, I, I worked with a 4,000-page requirements document. I'm fairly certain no one read all of it.
- AMAlex Miller
Did you read it?
- JFJustin Fanelli
Uh, n-no one read all of it cover to cover. You, you look at, reference it like the dictionary, but it's a little bit longer. Uh, in this particular case, we said, "Hey, we're gonna use capability need statements because this isn't gonna get us what we want anyway." And so we fast-tracked an 18-month process in three months with a couple pages between CNSs, capability need statements, and top-level requirements. The software acquisition pathway allows us to do that, and so we already have examples where the right thing is working way better than the old thing. It's a K curve. This is a matter of scaling what's working better, and the only way we do that, because there is some risk aversion, is emphasize that the outcomes and the trade-offs are for our war fighter. And so when we have the best software, uh, developers in the world, where we have the best capability coming in, let's not cut it down with 1,000 paper cuts, 10,000 paper cuts. Let's make decisions based on the impact that they're making. We're doing more of that, but it's pockets of excellence.
- SSSteph Smith
So that's huge. So there's sort of this acknowledgement about the black box and then a solution to managing the black box. Sounds like there's also major changes happening when it comes to capabilities and being able to say, "We need to experiment because the pace of technology is so fast." We can't write a requirement for a capability that's gonna be developed three years from now because of the pace of software development, AI, all of these things. It's moving so fast that you need to be more agile.
- JFJustin Fanelli
Especially with horizontal capabilities like artificial intelligence. Like, how would we pull in artificial intelligence across 75 PEOs? Like, we need to name enterprise services. And so Defense Innovation Unit is actually, uh, has a digital on-ramp where they're trying to streamline that so that we can make buys based on impact. The chances that a bunch of horizontal organizations were going to do the same thing was always high. Quick example is, uh, we had, um, edge compute ashore. We had a hyper-converged infrastructure, a small box that was doing, uh, incredible kind of like a, we could divest, uh, a billion-dollar purchase and just move to this in every way more capable solution. And we said, "What, what about that for a float?" And, uh, one of the, um, uh, captains of a ship said, "Let's put it on mine. Let's figure out how this works." We put it there. He deployed to the Red Sea. It's on other ships right now. This is enterprise moving to edge, specifically afloat, in a case that we didn't need to go down two different procurement paths. There was another example actually recently, uh, where we had an electronic warfare solution, and we heard that the Army was going to go out, uh, and do a request for proposal on something that was really similar with the same long requirements document that we had. And we said, um, "Can you just paint this brown and throw it on a Humvee?" And that's exactly what they did. They did it in three months for 300K, and then that went to scaled fielding. And so these things are happening. It's just a matter of like, can you make the best thing the normal thing?
- AMAlex Miller
And Justin said it. It's treating, treating the value as the actual goal. So, um, everyone, everyone has heard this. PMs love off of this, this concept of cost, uh, cost, schedule, and performance, right? They wanna make sure they hit their timelines at the cost that they were given. And performance to me is like, "Hey, it meets my war-fighting needs," but performance is actually what's written in this requirements document, which they might not have actually had any hand in doing, or a soldier might not have had any actual hand in, in informing. What we are trying to do is flip that and say, "No, your value is, your value and time to delivery is your actual need." Now, everyone has permission to do the right thing. So as you think about venture funding all the way up through series X, Y, or Z, where a lot of the companies that we work with actually still live in those spaces, they need to have a front door. But what we're doing in the Army is, is going, "Hey, if you're ready, let's go to the field right now." Um, and, and I say this a little bit parochially. Um, the Army's the service that can do that because- You can move around the edges of some of your ships. The Air Force can move around the edges of some of the aircraft. The capital assets, those are, are, are fixed. What I have the luxury in the Army is, like, we can modify our organizations, we can modify our kit, we can tailor it to mission. So that's what we've been doing with some of our brigades that have been in Europe and in the Pacific and, and frankly, going in and out of the Middle East still. And this is an open invite for, for all of the founders and all of the companies. If you have things that work, we have a front door. We want to try to get you in here. We want you to be able to engage with Army Futures Command. We want you to be able to engage with our units directly, because only the trigger, only the soldiers will actually be able to tell you, "Yes, this works at a time of crisis." So it's, it's-- I'm super excited because I remember during the, the Global War on Terror, we had quick reaction capabilities. And, and as a customer, I could go, "I need this right now." And somebody would go, "Cool, I will get you that." And, and in 30 days, I had kit in Afghanistan that was working for me, which told me it was legal, it was moral, it was ethical, we could do it. But we never actually went back and fixed the system under-- We just sort of moved off to a side chain and, and, like, everything was a side quest. Like no- And then now we're saying, "Hey, we gotta fix the main storyline," and everybody's like, "Oh, we don't know how to do that."
- 19:32 – 20:23
Scaling Effective Solutions
- JFJustin Fanelli
This is a period about scaling what actually works.
- SSSteph Smith
Yeah.
- JFJustin Fanelli
And so I'm excited about what Alex is doing, that transforming in contact, uh, i-in execution is a big deal because it's tech informed. If you read, uh, Origins of Victory, they say, uh, it's not about who necessarily just has the best tech, it's how they're adapting to that tech and using that as advantage. And so the way that we're measuring outcomes is we're now using, uh, outcome-driven metrics to figure out, do you move the needle? Not is this the best tech or how does this fit into our current, uh, you know, operating model. How does this transform us? And so we are more open and listening to and working with and pulling through more of those Horizon III capabilities than we were. But we need outcomes over match. We need it to kick the ass of whatever's there right now so we can show that difference, it's defensible, and we can move off of the
- 20:23 – 27:03
Leveraging Technology for Military Overmatch
- JFJustin Fanelli
old and onto the new.
- SSSteph Smith
You've mentioned overmatch a couple times. Can you double-click into that and share what exactly that means?
- JFJustin Fanelli
Um, it's very hard to make a change for a 15% improvement unless it's something that you're doing a lot. Uh, we want to make the case that there are orders of magnitude leaps, right? Like power law leaps. And so we have 1,000 different identity management solutions. So we've said, uh, Naval Identity Service is the enterprise system. That service is what's moving forward. That opens the door to repurposing some of that money, repurposing some of that attention to harder problems. And so to, to this point, like we are looking for, um, A/B testing that shows that, uh, A is no longer a viable option and there's much more value from B. Uh, like Serana comes in and they said, "Hey, uh, we have tests. We used rescale, we used the cloud, and we show that, uh, based on running this for 100,000 reps that would've taken 10 years, we did it in, uh, high-level compute. We can fast-forward this and, uh..." Like that is proven. It was proven on paper. We didn't have to put that into an exercise. We can now with a lot less risk reduction, but that is an easier A/B decision because they've translated it into our language, which is outcomes.
- AMAlex Miller
I guess I'll give an Army example. Um, so we have this concept of mission command, and I don't wanna go into like Army terms 'cause it gives us this false sense of security like we're doing something unique. Um, we had 17 programs of record in this, this mission command enterprise, and each one did sort of similar things in the fact that each one of them had a map. Humans like pixels. We're really good at seeing pixels. They make us happy. So we looked at maps. Well, each one of those came with its own mapping server and its own way to do tiles and its own way to deliver the maps and its own way to store the maps. And about 2015, '16, everybody went, "Hey, this Google Earth thing is pretty legit. We should probably just try to use that." Um, and it took five years for people to go, "Oh, we can just start sharing KMLs and KMZs with each other and start sharing it." Well, by then you had really, really good software companies that had said, "Cool. We're gonna give you these enterprise services. I don't care what map you use. I don't care who provides it. You just tell it. You point us to it, and we'll serve it to you." And all of us kinda went, "Yeah, I want that." But we couldn't because we had 17 programs of record owned with their own vestigial architecture, and we had to do a bunch of architecture archeology, and we had a bunch of, of people who were protecting their rice bowls in terms of those programs. And it's, it's only just now in 2025 are we actually trying to hack and slash and kill some of these systems to go, "No. If you wanna look at the map, just look at the map. If you've got some weird unique data, um, like we do, we do fires, like we do artillery, like all those unique things that are unique to us as a, as a military, we'll figure out a way to get those on the map. But we, the Department of Defense, are certainly not in 2025 who is building the best maps. We're not building the best data platforms. We're not building the best API gateways. So let's not pretend it. Let's just get all those pieces together and collapse all of these other vestigial organs." That's-- It's been-- I cannot describe how excited I am because this is a real-- Like we're doing it. We're doing it live and, and I love it.
- JFJustin Fanelli
It's a leverage play.
- SSSteph Smith
Yeah.
- JFJustin Fanelli
Like the reuse piece, we're even using some of what the Army's doing and vice versa. Go ahead.
- SSSteph Smith
Well, no, it's interesting 'cause I'd, I'd never thought about it from this angle, but it's not unlike venture capital where, you know, we're, we're making bets on companies. Like, you know, it's not about, you know, can this company move the needle by 10X 'cause to your point, you know, there, there's this switching cost. So we're investing in 100X solutions.
- AMAlex Miller
Yeah.
- SSSteph Smith
And then you all need to be able to validate that this new solution is gonna provide 100X outcome, and you also need to be able to sort of replace and sunset capabilities as well. So it sounds like the-- We're not-- Our organizations are not that dissimilar.
- AMAlex Miller
They're not. And what I appreciate as I, as I've learned What venture looks at and how you grade and how you assess risk is you do not expect every company to be good at everything, and that is a failure that we as a Department of Defense, and really any- and anybody who's done federal acquisition sort of falls into the, the trap of where if, if you came up and you won a program, I expect you to deliver every part of that top to bottom, even the stuff you're not good at. Well, what that does is it creates an amalgamation of things that people aren't good at and, and you can actually multiply those tolerances across lots of systems until you get something that looks like, oh, there's a lot of not good stuff here. Well, what we're trying to do now is just figure out, how do I put... I'm a Lego person. Like, how do you find the right Lego pieces and how do you put them together so that if, if, if Justin Corp is really, really good at serving data, I get him serving data. If Leila Corp is really, really good at UI, you're doing UI. I don't make you do the things you're not good at 'cause frankly, your engineers are hyper-focused and excited on doing the things you're good at, and I can, I can put all these things together, and that's what we expect in our everyday lives. There's-- It is shocking to me how much stuff we buy for soldiers that no one would accept if I handed it to you in your everyday life, and, and that is a mindset that we are changing. And I, I love the secretary is on board, the chief is on board, all of these senior leaders within the Army are just really going, "Hey, common sense. Like, what's the value and what's the opportunity cost of making really dumb decisions, and how do we stop doing that?"
- SSSteph Smith
Yeah.
- JFJustin Fanelli
And one of the unlocks there is, like, they're acknowledging, the Secretary of Defense is acknowledging that the software-defined warfare is here. And if you can use one component that is higher performing than others, um, should we have a fully different, uh, artificial intelligence stack for, um, edge compute for sensor integration than we do, uh, with no leverage as an enterprise use case? No, of course not, right? Uh, like what does the governance look like versus what does the compute look like? We need economies of scale, and so we're working together more with our vendor partners and even, like, signaling, uh, to some of the investors to say, uh, "Here is our hard problem, but can we land the plane on buying them? Can we land the plane in sustainable cost?" Uh, whether it's in a program executive office or not, everyone has to, should have to, uh, sing for their dinner, uh, every year. But the idea of bringing those breakthroughs in and then again Zamboni-ing out the legacy capabilities so we can unplug them for the first time in a long time, uh, these work together within the valley of death. Like, this is actually happening within our budget cycle
- 27:03 – 32:47
Enterprise Solutions: Concerns, Unique Needs, and Data
- JFJustin Fanelli
if we do it well.
- SSSteph Smith
It sounds like you guys are really trying to break down a lot of these silos with the program offices. There are 75 of them. There are all these different programs, and you all are thinking about how can we find some of these horizontal capabilities that are relevant, not just within the Navy or the Army, but across the services to be able to find economies of scale for your organizations and then also make it easier for startups to partner with you all and scale with you? Is that-- Am I hearing that right?
- AMAlex Miller
Yes, and, um, one of the things that I've been really big on is we need the enterprise to do enterprise things and, and get us out of the business of doing things that are common to all. Um, in the intelligence community, um, we had this concept of services of common concern, and what that means is it is something that everyone should be able to use, therefore don't let every individual agency or, or organization do it themselves. Um, that's just, it, it, it's a c- sort of a common sense on the face of it thing. However, in the, the combat side of the department, we've had a really hard time adopting. I'll give a couple examples. So, so the, the CDAO and DIU and some of these other organizations have said, "Hey, we're gonna pull capabilities up and deliver it in a common way for everyone." That's great for things that are, are common so that when Justin and I go back to our offices, if we need to share data, we can do it in a common way. For things that are unique to me or unique to him or unique to the Air Force or unique to the, to the, to the Space Force or the Coast Guard or Marines, whoever, if it's really, really, really unique, like can only be done by them and should only be done by them, that's where we wanna focus on 'cause that's the niche. Um, but I, I will keep, keep hampering on this. Um, there's option for startups and small companies in all of that because some of the... Like I, I-- Palantir was an In-Q-Tel investment. Like, we found them as a very small company and, and now it's driving a lot of the way we do warfare. So even those big companies will go, "I'm not good at this, but that company, that really small company, they're really good at that. I want them on my team." We wanna unlock all of that, and we want to enable it and, and I'm, I'm trying not to be super, super technical just because this is not a technology problem. This is a culture and a process problem that we can apply technology to. Um, I had a chance last week to sit with all of the big LLM providers, and I, I loved the conversation because they were ruthlessly honest with, with me and with each other in that, hey, all of these things are available, whether it's Llama or Claude or ChatGPT or, or even DeepSeek. They're all available. Um, what makes them, what makes them unique and good and competitive are, is the unique data sets that their customers have and the unique ways that they're going to use them. That's us. Like, that's my job to be able to go, "Hey, here's the unique mission for my soldiers, and here's how we're gonna do that." Startups can't solve a fundamental deficiency in us not being able to describe our problems, but they can help us identify where those problems are.
- JFJustin Fanelli
This is why it's really important to be close to the warfighter.
- SSSteph Smith
Mm.
- JFJustin Fanelli
If you are [chuckles] uh, a startup CEO, don't hire salespeople before you understand the ecosystem. Move to San Diego or get clo- like, spend nine months near the, the group that you are trying to positively enable and empower to do their job 10 or 100 times better than they are right now. So that proximity piece is real, especially for, uh, unique or specific problems. And then, uh, more often than not, there's some aspect that should be evaluated as dual use. From a shared services perspective, uh, Alex already said it. We're doing more common- And similar than dissimilar from industry. In some cases, we're just, um, like not making the tough decisions to scale what's working fast enough. And so if we have more shared services at the department level, like how can we do autonomy together as services? How can we make sure that that is well integrated from the ground up, and we're not like looking at this as an integration problem because we made separate decisions three years later? From an artificial intelligence perspective, right now we're leveraging, uh, an Air Force and Army and Navy solution. Can we single up for common enterprise problems in one place, and then in other places, can we have narrow models where we share and all of them feed into some of the more unique problems like command and control? And so we're starting to, uh, architect in that way and make decisions based on what's available, not based on what we've done. Now, one, like kind of an older comment you made was like, um, we have, uh, some things in common with VC. Uh, sure, uh, from a funnel perspective, that would be the ideal state. Um, one of the tricky parts for us, because we are such a big organization, is finding people who think that way-
- AMAlex Miller
Mm-hmm
- JFJustin Fanelli
... and, uh, and fanning the flames and empowering them. And so we-- there-- every organization has latent risk-takers, even if they're conditioned to not take risks. I mean, the acquisition community t-teaches us that lowering risk, reducing risk is the goal. So essentially like playing not to lose. Um, that's, uh, doesn't really keep pace with, in, in a lot of cases, in many, many cases, uh, with, uh, the current trajectory of technological advancement. And so, uh, we have, uh, found, uh, unleashed people, mavericks, who are willing to work against their self-interest to bring breakthrough capabilities through.
- AMAlex Miller
I wanna double-click into that just a little bit. I-- We could s-- I know Justin and I could sit here and talk like really deep tech all day long, and we can go into the nuts and bolts.
- JFJustin Fanelli
We will, and we will.
- AMAlex Miller
Yeah. Don't, yeah, don't-
- JFJustin Fanelli
Paper or no paper.
- SSSteph Smith
Bring it for it. [chuckles]
- AMAlex Miller
Um,
- 32:47 – 37:24
Budget Constraints and Strategic Spending
- AMAlex Miller
the, th-there's two things, the silos, and, and they just sort of put something into my brain. I, I want everyone who listens or see this to understand we haven't missed the signal. Like the department hasn't missed a signal. In 1968, something fundamentally changed the way that we do buying in the government, and it has not stopped changing since then. In 1968, there was a program put directly in the United States budget, and it was the Minuteman III program. That was the first time that a program by name was put into the budget that we had to spend money against. Before that, there were just these big pots of money, like the Army had vehicles and ammunition and soldiers, and all of the money was just, hey, do what you need to do to run the Army.
- JFJustin Fanelli
A portfolio.
- AMAlex Miller
A portfolio, yeah, absolutely.
- SSSteph Smith
Mm-hmm.
- AMAlex Miller
And then, and then in 1968, bam, Minuteman III is in there. And I get it, from a national security perspective, you wanna make sure that money goes into a long-term project, and you wanna make sure that it's successful because w-we were the only people who were gonna do that. We, the government, were the only people who were gonna do that. Now, today, the Army is only twenty-one percent of the defense budget. We are everywhere. We, the Army, are everywhere. And again, this is gonna sound a little parochial, but we're on the border. We're the global response force. We're the immediate response force. We're the homeland defense brigade. We're in Haiti. We're in Africa. We're in CENTCOM. We're in PACOM. We are everywhere. Twenty-one percent of the budget and less than fifty percent of that do we have any flexibility to spend to, to change how we're spending. Even less than that, there are thousands of budget line items that are directed to us in the National Defense Authorization Act everywhere that tell us exactly how we're gonna spend that money. So as Justin were talking about earlier, that three-year spend cycle, what that really means for us is we have to predict the future three to five years out, hope for the best, and then work in the year of execution to move money around the edges to try to do advanced technology. Otherwise, what happens is we give money to our labs, and they try to do the right thing, and they try to pull advanced technology in, and they try to like land this transition, this magical transition, where it goes from, from, you know, something that works in a lab to something that works in the field in one, in one go. And we know that that's not real because technology evolves so fast where you could go from something that is a concept to someone writing it up and doing it in the software space in days to weeks. And our entire system, the entire way we think is predict the future three to five years out, land the perfect shot, get a trick shot, and go, and, and it, it just doesn't work. It, it does not work.
- SSSteph Smith
Mm.
- JFJustin Fanelli
This is all the more reason if someone does have a capability that is so much better than what we have, um, in the field right now, like we, we have stocked up the pipeline, but, um, those actual, the data and the stories associated with that, we want it to be undeniably good so that we can then make the case. When people come to me and they say, "Uh, isn't, uh, zero-touch AI better than how you're doing unified endpoints right now?" Yes, of course it is. But I am trying to, and we are trying to make the case that this will save us money. We need a little bit of CapEx so that we can get the OpEx right, but the total cost of ownership and the impact of this from a mission perspective is best for those who are protecting us, right? Here are ways that we can lower the tail on ineffective things, but we have to, uh, like just aim at the exact solution that we have, even if it's a manual process. And if we can find severable things, we can find enough room until all the workarounds, uh, are turned into scaled solutions that Alex was talking about. We can still pull that through. But if you can make the A to B not close, blow it away, that's what we wanna see. And so we use world-class alignment metrics to show how a divestment is possible through a game-changing investment.
- SSSteph Smith
And that's a really big change.
- JFJustin Fanelli
We want that to be 90% of the portfo-
- SSSteph Smith
Standard.
- JFJustin Fanelli
You know, like, is that really a big percent of the-- Like, it's, uh, they're eaches, right? We still talk about DIU is, like, less than 1% of the budget. Like, these innovation activities are still very small. So it is a good signal that we're doing them. Um, the impact of scaling what's working, uh, again, a once-in-a-lifetime opportunity, and imagine how much more secure, um, that, uh, our, our country and the world would be if we were making, um, the exact, uh, kind of ruthless, highest impact decisions across the board.
- 37:24 – 43:26
Risk Management: Balancing Innovation and Security
- SSSteph Smith
So I wanna double-click into the culture piece, Todd.
- AMAlex Miller
Is that, is that door locked-
- SSSteph Smith
[chuckles]
- AMAlex Miller
To protect us?
- SSSteph Smith
Yes, it is. Um, the, the world I'm in, venture capital, we're in the business of risk.
- AMAlex Miller
Mm-hmm.
- SSSteph Smith
Like, we're all in on risk, and that's how we think about the world. Obviously, with the Pentagon, that's different. You all are making a lot of strides to change that. But I, I'd love your perspective on, like, how do we get closer together between Silicon Valley and Washington and kind of get that risk appetite up a little bit?
- AMAlex Miller
We're assessing risk on different things, and it's, and at, at a necessity. It's-- I'm using big we. There's, there's a lot of folks in the department who actually understand venture, whether or not they came from that, um, or, or they've just been working with the venture ecosystem for a long time. And I mentioned In-Q-Tel earlier. That's like, that's a really good, very public-facing example. Um-
- JFJustin Fanelli
In-Q-Tel's ratio is 25 outside dollars for every, uh, federal dollar spent.
- AMAlex Miller
Government dollar.
- JFJustin Fanelli
Uh, and then dual u-use kind of takes care of the rest of that. And so this is one example where, like, we've proven this model.
- AMAlex Miller
What we have to work through, and, and Justin said it really elegantly earlier, the people who take risk, they th- their job, and I'm, don't wanna disparage anybody 'cause they are hardworking Americans trying to do the right thing, their job is to minimize the risk to the government, and the way that they measure risk is the potential for waste, fraud, or abuse of dollars. So what they're trying to say is, "Hey, f- if I give you a dollar, do I get a dollar of value out of it?" That's a good metric. What they don't do is, "If I give you a dollar, and I take 10 years to spend that dollar, is it still worth a dollar?" So what we are trying to do is figure out, "Hey, I'd rather lose a dollar right now. I'd rather try it on a company and then go, 'Eh, it just didn't work out,' than spend that 10 years," because that, that is also super valuable time that we could be trying to figure out what those, what all of the players in the startup landscape and all of the players in the venture landscape, and frankly, all the-- 'cause once you sell your first product, you're not a startup, you're a business. And all the businesses that are available, how do they get us the best war-winning capabilities right now? And, and, and I know it, it, maybe it sounds cheesy, but I mean it. The risk calculus, we, we, we're not comparing the same things. And what would help is if those venture folks talk to our leadership, continuing to engage, 'cause we're gonna, we're gonna work up. They need to work laterally to go, "Hey, the way you measure risk is fundamentally incoherent with where technology's going."
- SSSteph Smith
Mm.
- JFJustin Fanelli
If a quarterback was measured on not making mistakes versus throwing touchdowns or winning games, the performances would be 100% different, right? And so if your goal is to, um, hedge against anything happening, then you're fighting against inflation as opposed to against disruptive technology. And so we, we used to have something called, uh, Cost as an Independent Variable. Uh, we make anything an acronym, so CAIV. And so this was to say, like, how do you back in and make sure that, um, you're spending the budget, uh, and then optimizing for that? Uh, if we had speed as an independent variable, SAVE, and we measured based on outcomes, then I think that looks pretty different. Like, that looks more like executing. Uh, and, and so people are doing that, right? And so when we, when we say, "Hey, Unleashed folks, what do you have?" They're not bringing 20% better capability. They're saying, um, "Hey, uh, we're doing cross-domain solution right now through a bunch of different program offices. The Army's doing that as a service. Uh, can we jump on cross-domain even if it'll, uh, affect or make some people that created something in-house upset?" Yes. For the sailor and for the Marine, yes. And, uh-
- AMAlex Miller
But, but hold on. And, and I want you to tell your story. I, I just want people to understand who's listening how ridiculous this is, because cross-domain as a service is an API for binary XML between two networks. That's all we're talking about. Now, there's, there's national security implications, but that is a solved problem, and that we are fighting over.
- JFJustin Fanelli
We want to keep solved problems solved.
- SSSteph Smith
Mm.
- JFJustin Fanelli
Right? Get higher up the stack in general. Uh, I, I think it's academically interesting to resolve the same problem. That's for school. And so we have, um, Marine Innovation Unit that, uh, is a way to keep, uh, really talented Marines in the reserves, uh, who have venture jobs a-as their full-time job. We're using them to scout technologies. We have folks, um, over in, uh, in Europe right now s- like, working with some of the startup founders to say, um, "Hey, here is a breakthrough. What would scaling this look like?" Well, it would mess up our program of record plan. Um, that's not what we're optimizing for. Uh, we have contracting officers sometimes say, "Well, I wanna do fewer contracts." Well, I wanna win. So, uh, and so then there are really good contracting officers who get that. And, uh, and, uh, you know, short of, like, changing the way that we, um, kind of fuel incentives, w- measuring how much better, 25 times better, like, get after it, folks are in different organizations, um, that K curve fuels us, and it actually gives us more leverage to do more of this. And so ultimately, send your success stories if you are doing this really well and you're already in and you've made it, because we wanna double down on this flywheel of this can happen. We don't want two successes a month. We want to overwhelm the system with how much better it can be. Uh, if you're not ready when the, uh, the window of opportunity opens, sometimes you're waiting a really long time. And so, uh, we put CAPE, our mobile virtual network operator company startup in Guam, and then we needed them. So, like, "Hey, the pilot was ready for actual use." Here are places where, uh, if we are out Hands-on testing with the best stuff, then we have a, an opportunity to scale, uh, in a significant way, much shorter than any of these timelines you hear about whenever you read about the government.
- 43:26 – 47:48
Future Prospects
- SSSteph Smith
Very optimistic, and this is really exciting. It feels like we're in a lightning-in-the-bottle moment, where there's a lot about to happen. I'd love to just get your quick take on the future, the year ahead, what you both are most excited about.
- JFJustin Fanelli
I'm excited about the idea of, like, we don't have to prove that these things work anymore. So if we scale half of what's working well right now, I mean, the, uh, the, uh, software acquisition pathways, um, we have gotten more permission, like significant permission to do the right thing. Now, how many people do it? And, like, what does that look like, and what wins do we get out of that? And so ultimately, the-- I am excited about, uh, participating in the race to have the best technology solutions and the companies that are offering the best, uh, breakthroughs to be fielded into, um, that operations and maintenance pot and getting that to the production to our war fighters' hands sooner. So, uh, I'm excited about the best chance I've ever seen in the next six to 12 months to get capability that wasn't under government contract into full-scale production.
- AMAlex Miller
Hell yeah. Um, d- I'm, I'm actually really excited about a lot of things. Um, this year, we are going to put the consortium for the Army's next generation command and control, um, into, into its program phase. So right now, it's been in software pathways. Uh, Army Futures Command has been piloting this. We have a consortium, and I keep using that term deliberately, of just great companies who are going, "Here's what technology can bear." And I was in the-- I was at, uh, the National Training Center out in the middle of the Mojave Desert last week, and I crawled into an M1A1, uh, M1A2 SEPV3 tank, the coolest. You know, eight-year-old Alex was very excited 'cause I was in a tank. Um, but that tank commander-
- JFJustin Fanelli
He was wearing the same socks
- AMAlex Miller
... I was wear-
- JFJustin Fanelli
Eight-year-old Alex was wearing the same-
- SSSteph Smith
[laughs]
- AMAlex Miller
This fortunate son, all day long. Um, but I was sitting there with that tank, that tank commander, and he showed me, because we have taken a 20-year-old tablet that's mounted in that Abrams that's really hard to move, and we've given him everything on his tac device, which is an Android app on an Android phone, and now he can command and control his, his tank company. Um, so we're gonna take that next generation, uh, command and control into, you know, get that on contract and start moving forward and, and get that fielded, um, to one of our divisions this year. In Europe, we're doing this thing called Project Fly Trap. I welcome anybody to come, come try it. It's countering unmanned systems. So we are learning from Ukraine and what's happening over there, and we're actually going to, with Fifth Corps and with USAREUR-AF, we're actually going to work on how we, we scale up adding non-conventional sensors, non-conventional compute. How do we do automation so that if you are driving, and it doesn't matter what part of the world you're in, if you're an American war fighter and there is a drone threat, there is a bunch of automated decision, uh, mechanisms that are just going, "Hey, I sense something in the electromagnetic spectrum, spectrum. I hear something in acoustics. Here's what you need to do, and you, you don't have to worry about it." In the IED fight, they taught us something when you're going to, to, to combat right into this. They said, you know, "Down, out, up." You have to look down to make sure you're not stepping on an IED. You have to look out to make sure you're not going to walk into an IED. You have to look up to make sure that you're not getting shot at. Um, now, like, people have to look and make sure that they, they aren't seeing, you know, drones flying, and I wanna automate that. Uh, we are going to put together a consortium for autonomy. So we're gonna take a lot of the vehicles that the Army has and think about, what does an autonomous formation look like? How does that, how does that pair with people so that... And, and this is, you know, true. The US Army should never trade blood for blood in first contract. It should always be blood for an iron, and it should always be, be their blood. And we have to make sure that we can actually get the autonomy pieces together, and it's not one company. It's not Miller Corp that's gonna solve autonomy. It's how do we get the right tool chain in place from SIM all the way through V and V, and then how do we get the right actions and the right libraries, and how do we get ourselves off of this sort of archaic microcontroller-based autonomy kick? Um, th- I mean, that's just off the top of my head, those are three technology thr- things. We-we're going to do is just mass on the problem so all of the policy blockers that have stopped us, uh, like I said, it's a with our shields or on it type of phase. We are going to body block our way through this to do the right thing, 'cause just, just w-we can't not do it.
- SSSteph Smith
Yeah.
- JFJustin Fanelli
Oorah.
- SSSteph Smith
I wanted
- 47:48 – 52:46
Quickfire Questions
- SSSteph Smith
to ask you guys a couple lightning questions. I could talk to you guys all day.
- AMAlex Miller
My body is ready.
- SSSteph Smith
Um, okay, very quickly, red flag, green flag. What do you love startups doing? What do they need to stop doing when they come talk to you?
- JFJustin Fanelli
Red flag, uh, I, I would say at this point, don't work with bad requirements, these long requirements documents. There are enough capability need statements out through soft-software acquisition pathways, uh, and commercial s-solution offerings. Don't bang your head against the wall. Um, find a top-level requirement or something easier to work with and people who get outcomes.
- AMAlex Miller
Uh, green flag, keep building the product that you started on the path to build. Y- Have your North Star and then work with us to figure out how to, to do, you know, roof shots as you're on your way to your moonshot, um, rather than trying to tailor it to us. The DoD, like, we are going to be a better customer. I wholeheartedly believe that. But if you had a vision, like, go after your vision and then get it in the hands of our war fighters to help tailor it.
- SSSteph Smith
Any red flags?
- AMAlex Miller
Stop trying to use the Department of Defense as your only means of revenue. Um, and I mean that because if you get complacent with the Department of Defense, then you are no longer actually on the, the, the, the quest that you were on, and it's just not, it's not good. We want to make sure that we have the best w-war-winning dual use technology, and if we become the only provider to your technology, it's, it's neither dual use nor are, are we gonna actually maintain the, the goal of, of partnering with industry. You are just a part of us at that point.
- JFJustin Fanelli
And, uh, keep imagining a, a safer world. We want the brightest minds to help every aspect of this.
- SSSteph Smith
Mm.
- JFJustin Fanelli
Uh, the goal here is to just be so effective that we are getting, uh, as much return on investment as possible, and that translates to protecting those who are protecting all of us every day. Technology is the advantage, and if we have the best of America's talent working on these types of problems, our hardest problems, like, we've fixed the alignment problem.
- SSSteph Smith
What book should every defense-based founder read?
- JFJustin Fanelli
Hundred Year Marathon by Michael Pillsbury.
- SSSteph Smith
What is the number one misconception about your service that you would want to dispel?
- JFJustin Fanelli
Uh, this is not your granddaddy's, uh, DoD anymore. Uh, we will be more flexible. We will be more open-minded. And if you bring data to us, then we will work our butts off to make sure that if the policy is the problem, then that policy will get accepted. We've gotten 12 exceptions to policy because we brought data and said, "This is hurting us." And so these sub-optimizations that we've always had, um, we can do better than that, and we will.
- AMAlex Miller
I'm proud of the Army. The, the... I, I make a joke all the time. The, the, the Navy and the Army are the only two services in the Constitution. Um, we've been doing this since 17-
- JFJustin Fanelli
And, and at this podcast. [laughs]
- AMAlex Miller
So we're, we, we, we've been doing this since 1775, and everyone knows what the Army brings. I, I say this just unemotionally. When the world dials 911, the phone rings at Fort Bragg. It doesn't ring at, at Naval Station San Diego. It doesn't ring at Anderson Air Force Base. And I love my Navy and Air Force brothers. The phone rings at Fort Bragg, North Carolina, when the world dials 911. So the biggest misconception that I would, I would tell people is we n- we haven't missed this. We're in the fight still. We're in the fight globally, and we're going to transform in contact and continue to transform in contact, 'cause we've been doing this since 1775.
- JFJustin Fanelli
And we are teammates, and we are working together on these problems, and we're going to start using that buying power to make more effective purchases. Because when the president calls for the carriers before they call Bragg, um, the, uh, we need to be fully integrated and teamed. We fight joint every day.
- SSSteph Smith
Love that. And then last one, fun one. Favorite military movie?
- JFJustin Fanelli
Top Gun: Maverick.
- AMAlex Miller
Oh, man.
- JFJustin Fanelli
That happened on CVN 72, which has one of those hyperconverged infrastructure stacks that we talked about.
- SSSteph Smith
It has to.
- JFJustin Fanelli
So we're moving out.
- AMAlex Miller
Is that, is that how they did the post-processing?
- JFJustin Fanelli
[laughs]
- AMAlex Miller
Um, I, I, I am a big fan of, of World War II. I used to watch it with my dad. I... This is gonna sound corny. I, I love Starship Troopers. It just, I know it's a bad adaptation of the book. It is the mobile infantry. It is just people on the ground just getting it done. So in, in, in the, uh, in the spirit of doing things a little differently, I'll go with Starship Troopers.
- SSSteph Smith
Thank you both so much for your time. Uh, so great to know that there are folks like you working, uh, at the highest levels of government to help make some of these changes. [upbeat music]
Episode duration: 52:46
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Transcript of episode YNSXYD4nnw0
