His feet barely wet after taking over day-to-day leadership defense giant Lockheed Martin [LMT] on June 15, James Taiclet on Tuesday outlined some new paths he and the company plan to forge to enhance its prowess as a technology innovator and help the defense industry overall become more agile at technology innovation.
Taiclet, who became president and CEO of the company on July 1, described a network-centric approach to business that Lockheed Martin, the industry and its customers, can move toward through the adoption of commercial technology innovation models.
One idea mentioned by Taiclet during the company’s second quarter earnings call he calls 5G.mil, referring to fifth-generation wireless technology for use by the military. The telecommunications industry relies on agreed upon global standards that companies build products and provide services to, allowing for the rapid development and deployment of technology, he said.
“That’s how you can get 2, 3, 4, 5G done in a space of 20 years when it takes that long to get one defense program done,” Taiclet said. “So those are the kinds of practices that I think we can migrate over with some of those partners that are working on these things on the commercial side.”
5G is seen as a critical enabler in the commercial sector for the necessary advances and adoption of the internet of things, including autonomous vehicles, particularly cars and unmanned aircraft systems, for widespread everyday use. Taiclet pointed to 5G and computing standards, including storage and data processing, that have been developed and that its these practices that can be migrated to the defense industry. However, this also require changes in customer behavior, he said.
This is an “aspiration” within Lockheed Martin for these types of changes but it will take time, just as it has on the commercial side, Taiclet said.
“It’s going to require cooperation with our customer and their authorizing us to try some of these things, because no one is going to take any risk on the defense industrial base by implementing these technologies in a different way if they’re not sure they’re going to get paid for it,” he said.
Customer buy-in, including changes in paying contractors to incentivize risk taking on their behalf, will help the defense industry bring in commercial partners for the research and development of new technologies and applications, Taiclet said. This way, “companies like ours and others can take risks, and we can bring in partners that are willing to take risks at least knowing they have a path to compensation at the end of the day, then we’re going to be able to accelerate our growth.”
Taiclet has been a board member of Lockheed Martin’s for two years and, before becoming its new chief, led American Tower Corp. [AMT], which provides tower infrastructure for wireless communications worldwide. It was at American Tower that Taiclet was able to work with the telecommunications industry in wireless standards and applications.
Adopting new business models will also allow the defense industry to bring in companies developing and making technologies in the high-tech portions of the commercial sector, he said.
At American Tower, the company was able to convince telephone providers to shift from having costly transmission towers to a model where his company owned the towers and then sold or leased real estate back to the telecommunications providers. This approach “turned those assets into performing assets for commercial companies like ours that were able to create value for shareholders over the long arc of time.”
For the telephone companies, it meant they “could deploy their networks faster, get capital from us to do it, and also to have a lower total cost of ownership to the site over time,” Taiclet said. This changed the industry in the U.S. and globally, he said.
While it will take time, “I would argue in a way better position than we ever were back in the tower and digital infrastructure industry 15, 20 years ago,” he said.
Asked by one analyst what impact he can have on Lockheed Martin below the corporate level, Taiclet responded that it will be in cross-cutting initiatives aimed at helping its customers get to where they want.
Lockheed Martin, which had a record backlog of more than $150 billion at the end of June, is strong with its “product-centric” business, which is typical of the defense industrial base, he said. This backlog, which will support the company whether defense spending goes up, or down, in the next few years, gives Lockheed Martin the room it needs as “we try to also move the industry toward a network centric way of doing business,” he said.
Lockheed Martin’s business areas (BAs) don’t need Taiclet’s help doing what they’re already expert at, such as designing missiles. Instead, “I think my value added might be is cross-cutting those BAs in a way that hadn’t been done before here or anywhere else and then linking them with a customer to do what the customer’s literally asking us for, which is how do we connect equipment, systems, communications and networks across what they call domains. So, how can I have a satellite get a signal from an F-35 that then goes back to a ground-based missile defense system to hit an incoming threat to one of our installations. That’s what they really want.”
In January, Lockheed Martin hired Steven Walker, the former director of the Defense Advanced Research Projects Agency, as its chief technology officer. Walker is looking at what capabilities Lockheed Martin’s operating segments have and how can work better “horizontally,” that is between the areas, to meet the “missions that the DoD and our allies need to do,” Taiclet said.
Lockheed Martin’s vertical integration overall is fine but commercial technology partners can help it better achieve horizontal integration, he said. 5G, artificial intelligence, distributed computing and other emerging technology capabilities all play into this, he said.
After the earnings call, Lockheed Martin provided a statement summing up Taiclet’s basic blueprint for 5G.mil.
“As Jim shared on our Q2 earnings call, we see an opportunity for 5G technologies to bring greater connectivity, faster and more reliable networks, and new data capabilities to support our customers’ multi-domain and autonomous operations on 21st century battlefields. In partnership with our customers, we believe Lockheed Martin is uniquely positioned, leveraging commercial best practices and the expertise of our leadership, to bring 5G connectivity and capabilities to the defense industry rapidly and affordably. We look forward to working with the U.S. government to execute this concept.”