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What Transformation Means for the Defense Industry
The ongoing transition to high-tech warfare combines enhancements to existing weapons (for example, adding circuitry to make munitions more accurate) and a drive to network all the components—combatants, decision makers, hardware, and software—so they can react more quickly to threats. But transforming the military is tougher than upgrading commercial enterprises. The defense industry's economic model relies on relationships between contractors and individual branches, not on systemwide standards. What's more, contractors typically make their best profits on big hardware, not on the software systems that are becoming increasingly important.
The take-away: While the vision of a transformed military that costs less and achieves its objectives with fewer casualties is compelling, achieving that goal will be messy and uncertain. Defense contractors can play an important leadership role through their technological objectivity, their ability to innovate, and their independence from politicians and bureaucrats.
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© 1992-2003 McKinsey & Company, Inc
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