PODCAST: Brave new world – the ever-evolving defence technology sector

Together, the duo also discuss how DMTC has evolved beyond a one-time military contract into a burgeoning business, how they balance meeting the needs of the industry with providing more opportunities for local businesses, as well as what projects DMTC will work on next to further develop the technological capabilities of the Australian defence industry.

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The Defence Connect team.

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Listen to previous episodes of the Defence Connect podcast:

Episode 510: CONTESTED GROUND: Iran’s collapsing sphere of influence
Episode 509: DEFENCE PROPERTY PODCAST: Understanding the ever-changing landscape of regional property investment
Episode 508: PODCAST: A proud history of providing debate and connecting sailors, with Mark Schweikert, federal president, Navy League of Australia
Episode 507: SPOTLIGHT: GWEO – protecting Australian sovereignty, with Lockheed Martin Missiles and Fire Control’s James Heading
Episode 506: CONTESTED GROUND: Ukraine’s freedom of manoeuvre in the information domain
Episode 505: SPOTLIGHT: AUKUS Pillar II – how technology sharing is strengthening our national security, with FAS Stephen Moore and Dr Nigel McGinty
Episode 504: PODCAST: Unleashing Australian know-how to grow military power fast, with John Storey, Institute of Public Affairs
Episode 503: CONTESTED GROUND: The intersection of national security and Australia’s declining economic performance
Episode 502: SPOTLIGHT: Developing risk frameworks for Defence, with Atturra’s Andrew Balmaks
Episode 501: CONTESTED GROUND: Maritime competition drives need for an Australian Coast Guard, with Jennifer Parker

Full transcript

Phil Tarrant: G’day everyone, it's Phil Tarrant here. I'm the host of the Defence Connect Podcast. Thanks for joining us today. We're going to have a good chat with someone within defence industry who I've wanted to get on the show for quite some time – Mark Hodge, who is the CEO of DMTC. Mark, how are you going, man?

Mark Hodge: I'm very well, thanks for having me on.

Phil Tarrant: It's good. We've had a pretty good chat off-air and you've done a good job, I think, in helping to inform me a little bit more about DMTC so I can actually construct a good conversation with you. It's been an interesting story, you've been in this job since 2008, you kicked off, so you're coming up to a 10-year tenure at this point in time.

Mark Hodge: Correct.

Phil Tarrant: The evolving defence space, the way the world's changing, both from a security/military perspective, but also technology and how it's fundamentally changing the shape that war is fought. Can you tell us a little bit about your 8-9 years with DMTC and how that evolution has changed over time?

Mark Hodge: Sure. DMTC, as you say, has been around for a while now. We were formed as an independent company to deliver on a specific contract for defence. That contract is now long gone and we have just rolled on and evolved into an ongoing business. We're a not-for-profit and there's some critical elements about why that's important to our model. But the reason we were set up was to deliver on that contract. So, if we ever lost our relationship with defence, there'd probably be not much of a reason for us to exist so we continue to focus very strongly on what the Defence Department wanted us to do in the first place, and that's to connect with defence industry and make sure the defence industry has access to technology insert and technology that can support increase capability that is available to defence through the normal procurement channels.

When I first started in the role, it was to effectively stand up an organisation from thin air and, to be honest, looking back on it now, it was project managing the delivery of a range of predetermined technology programmes. What's happened over the journey is that we've now created a much closer link to the customer in terms of the defence customer and understanding the evolving needs of technology, how that can impact on industrial capability and how that can in turn impact on defence capability.

The way that we were established was for a contract of activities that ran for seven years and with the best will in the world, I think, it'd be pretty hard to understand exactly what technology you're going to need three, four, five, six and certainly seven years out. And so the evolution of the model has really been around bringing the customer closer into that technology development discussion upfront to understand how that technology need might evolve to solve the short-term problems medium-term but also in a broader strategic context so that you can develop your programmes with a longer lifetime.

Phil Tarrant: So if you were standing in front of someone who was not from a defence background or worked within defence industry, and a lot of the language that you sound very familiar with and I sort of get what you do, but how would you explain in a sentence to a man on the street who understands that Australia has a defence need, a defence capabilities? What role do you play? How would you explain that, and very simply, to that person?

Mark Hodge: I guess what I would say is that Australia as part of its defence posture buys a lot of equipment and has to maintain a lot of equipment that by its very nature is cutting edge technologically, and it has to remain cutting edge. If it falls away from the pack in terms of its cutting edge capability then somebody else will have something that's better and, for obvious reasons, in defence that's not a great idea. There's a particular challenge in developing that. Australia often buys very similar equipment to our allies around the world but we use it very differently.

Our concept of operations is often quite different. Our needs and sustainment practices are often quite different. And so there's an Australianisation component to that that very often needs to be delivered through Australian industry, and I think you're seeing that a lot in how the new defence industry policy statement is being framed to make sure that our local industry who is here in Australia and close to the customer has the skills and opportunity to be able to deliver that capability into the defence customer.

So what I would say to the man on the street, or the lady on the street, would be our role really is to engage with the industry partners who might be delivering that service into defence, make sure they've got access to Australia's best technology in the areas in which we work, but working in a defence context so that we're close to what the defence customer needs to see happening and we're not off developing something that sounds about right but actually isn't fit for purpose with the defence customer.

Phil Tarrant: So it must be an interesting position to come from because you're dealing with the customer, government, and their needs and why they would need particular equipment to do what they need to do, all the way through to really smart, savvy, SME's who are probably doing groundbreaking research, or groundbreaking technology, that these people might not know about. So that perspective, how do you keep abreast of all that? How do you stay connected with all the different stakeholders so you can actually provide that role or provide that vision to connect and engage this stuff together?

Mark Hodge: It's an excellent question, and it's probably one of the ways in which we've evolved. When we were established, as I said, we were established as part of a competitive process to win some grant funding from defence. We said, "This is what we'll do for that", and there was seven years’ worth of activities laid out. What was missing from that was that ongoing connectivity with the defence customer to say, "Well, we thought we needed this but actually our needs have changed." Or, "We thought we needed this, now we really know that we need it and we would like you to put more focus on it."

So we, in a lot of ways, had to build up our own structures in the organisation to understand what the defence customer needed to understand what the industry sector was able to deliver and where they wanted to go commercially so that we could align our activities with that. But also, the continual challenges to understand where the research capability is in the Australian research networks through the universities, through DSTG, through ANSTO, and through CSIRO.

What we've seen more recently with the advent of the defence industry policy statement is that defence has taken a much more integrated view and brought defence innovation into the strategic centre of defence through the construction of the Defence Innovation Hub. And a lot of that thinking and a lot of that fore-sighting and planning has been done at a very high level, a very sophisticated level, bringing in things like Force Design and these sorts of groups who are creating an innovation pipeline.

And so a lot of that now informs our decision-making and informs our positioning as an organisation. Whereas in previous years we've had to engage in various ways with the defence organisation, with industry organisation, by the establishment of advisory panels and advisory groups, which were very, very useful and very effective but the change with the defence policy statement has brought that into, as I say, the strategic centre of defence and so it's been a really positive development.

Phil Tarrant: So your take then on these developments, so the industry policy statement, the Innovation Hub, you'd be thumbs up from your end, then?

Mark Hodge: Yeah, very much so. And I think my guess is, is if you ask most people around the industry they would say the same thing. It's been a really impressive effort to go and pull what was a fairly disparate programme, and there was some really effective elements of it. And that's probably been the most impressive things is that they've picked up what was working and that has been maintained and continued through. But it's been pulled in under a more coordinated umbrella, if you will. I mean, the defence industry policy statement was really well received.

The question marks, if there were any, were on how it was going to be implemented. And I think the policy itself said all of the right things. All of our stakeholders and we ourselves thought it was a terrific document. The hard work starts in how you stand up a team to deliver that. That's happened. The Innovation Hub and the Centre for Defence Industry Capability obviously launched last year and are up and going and underway. We're seeing things with the next generation technologies fund that's being delivered under DST Group. I understand that that will be released in very short time as well. So there's a fairly clear mechanism of engagement now and it's well understood. Certainly in terms of the processes I think it'll be much clearer, and a much more logical pathway for industry and research sector to engage with the defence customer as we go forward.

Phil Tarrant: So my observations around, I guess, the government attitude as it sits right now with engagement with defence, it's fundamentally changed. And that's changed probably only the last ... There's always been intent, but the last year or so you've actually seen some true action happening with that engagement. So look, the last decade and the time that you've been in your role it's probably quite stop/start and probably changes every couple of months, and sometimes it's great, sometimes it's worse times, people get frustrated. What do you think that one watershed thing was that changed government mindset to greater relationships, or greater connectivity, with defence industry to deliver these capabilities?

Mark Hodge: That's a really hard question. My guess is if you look at ... And I'm no economist and there's a lot of reasons why that's a good idea. But I think if you look at the tapering off of the resources boom and those sorts of things, if you then look at the acquisition programme and the billions and billions of dollars that are going on it doesn't take much imagination to see that government might have looked and thought, "Here is a chance to continue the growth." We've had a miraculous economy over the last couple of decades, no recessions and so on, and there's an opportunity to continue that growth and to tool our industry up by using that procurement policy.

There's probably a bit of a mindset change too in terms of how defence procurement was done. There's been a lot of success stories over the journey about how Australian industry can engage positively and can deliver really high-quality, high capability services and products into the defence customer without really breaking the bank from a risk perspective. And I think what you've seen, certainly if you go back to the early days of the Joint Strike Fighter programme, it showed that Australian industry can participate really actively in some of those programmes where you've got to have a demonstrated globally competitive position, and not just something you say you can do but something you demonstrate that you can actually do. And I think that probably showed that it can be done as long as you prepare and as long as you put in place programmes and support structures that can help industry develop along a reasonable pathway.

Phil Tarrant: Just while we're on the Joint Strike Fighter, how much work do you think we should expect to be done here in Australia versus delivered elsewhere? What's your sentiment towards that?

Mark Hodge: It's a very hard thing and I wouldn't say I'd be that comfortable trying to put a number on it. I can tell you what we'll do if we don't continue to push, and that will be the work that our industry has won to date, which has been very hard won, that share will shrink. There is very clearly opportunities for the industry participants who've won work, the Marand's, the Farrah’s, back to the days of GKN, but of course Quickstep and others who've done extraordinarily well, there's an opportunity for those organisations to continue to win work and to grow their share. There's always an opportunity to win work away from other companies, from other countries rather, in the global supply chain. That will probably be a harder activity because you're, again, out-competing, trying to win work away from other countries.

But as we introduce the platform into service there'll clearly be some opportunities for Australian industry to play a role there. It's not exactly clear how that will work because there'll be a lot of ITAR [International Traffic in Arms Regulations] technologies and a lot of complexities that I think are still being worked through. But I think, again going back, we have shown that our industry can understand and can perform extraordinarily well in a global context. And I think those lessons are being picked up in some of the maritime programmes and so on. So I would be reasonably bullish about the amount of work that our industry could expect to get out of JSF, but it won't come our way unless we're prepared to continue to invest and continue to drive ourselves up that capability curve.

Phil Tarrant: So where do you think the greatest opportunities are for technology advancement alongside this greater spending in defence? Obviously, shipbuilding is one area where a lot can be done. But what's your views on that?

Mark Hodge: I think there's a very clear and obvious example with all of the shipbuilding, all the maritime construction that's going on, we saw ship the building plant coming out in the last few days. Obviously, the relationship that Australia is developing with France for DCNS is going to be critically important. There is opportunity there, unquestionably, for Australian industry to play. But, again, it won't be handed out on a silver platter. They will have to be able to demonstrate that they can compete and provide best-of-breed technologies.

I know the industry players, the DCNS's of the world, obviously BAE, Fincantieri and Navanti for the future frigate are in the process of preparing their strategies on how they're going to be working with Australian industry. We're seeing that that engagement is genuine and that they really are prepared to work with the sector. But it's not on the basis of "You're here in Australia so you get the work." They have trusted relationships with their partners back in their home countries and they'll need to be able to understand that we can deliver just as well, if not better.

Phil Tarrant: Would you be willing to make a call on who you think is most advanced out of those three in terms of connecting with Australia?

Mark Hodge: Well, I'm not doing very well in my company's footy tipping contest at the moment so I think I'd better leave the tips to others.

Phil Tarrant: I've got to ask. Yeah, it's a pretty-

Mark Hodge: And I wouldn't like to pretend that I have any inside knowledge, because I just don't.

Phil Tarrant: No, look, it'd be remiss of me not ask. This is what we do as journalists.

Mark Hodge: It'll be one of the three.

Phil Tarrant: It'll be one of the three. How do you feel about, and this is something we've covered quite a lot on the Defence Connect Podcast, just commercialization of research or the commercialization of entrepreneurship or great ideas within SME's? Now, you've been in this role for nearing a decade, how has that changed over that period of time? Is it the same as it's always been, or is it a lot faster these days?

Mark Hodge: That's a very good question. And it's impossible to answer as a blanket statement. There's always technologies that lend themselves really nicely to rapid pick up and rapid adoption. There are other areas, that for a whole range of reasons ... And those reasons might be, for example in the maritime sector, the customer's just not ready to think about picking up a new technology yet. So that's part of what DMTC does, I suppose, is to try to anticipate when is the right time to have those conversations with the customers who will be utilising the technology. There's no point having it ready to go the day after the ship sails. There's no point having it ready to go six years before they're even ready to start thinking about.

Commercialisation is not something Australia has traditionally done that well. We are getting better at it, and that's really something I've spent my career doing and I have seen some really positive developments in that regard. There are different models for commercialisation; it's really easy to get very quickly into an academic discussion about how that happens. But I think the where you have an end user involved in the development and conceptualization of the technology you're really setting yourself up for success. Where you don't have the end user involved and where you don't have an understanding of the market and of the requirements for introducing the technology onto a platform or into a system I think you're up against it. And I think that's one of the key lessons that I've seen really starting to sink in across the sector over the last few years.

Phil Tarrant: Well, DMTC's been quite active over the last few months with new programmes, announcements, and calls for proposals. Really quite interested in what you're working on right now. We've covered a lot of those in defenceconnect.com.au over the last couple months but most of our listeners will be like, "What's next? Where's the opportunities?"

Mark Hodge: At the moment we're in the middle of a couple of developments. As you noted your organisation has picked that up, and we're grateful for your helping us to get that word out. There are two that are ... Actually, they are three, probably, big ones that we're currently really quite heavily involved in at the moment. One that I've mentioned is the Joint Strike Fighter activity. So we're working with Air Vice-Marshal Gordon and his team to pull together a range of activities that will help, as I said, our industry partners consolidate and protect the positions that they have in that global supply chain now, because they won't be able to do that unless they continue to innovate.

But also to look at sustainment technologies and how do we start to transfer some of that technology out of the university and research organisation labs into an industrial capability where it can be delivered into the defence customer. So we're in the middle of working up some proposed activities there. We've had a great engagement DST Group in that regard, and with Air Vice-Marshal Gordon's team. So that I would anticipate rolling out in the new financial year in a reasonably big way.

We have another programme that we've been involved in developing medical countermeasure technologies, and that's DMTC really hosting that activity on behalf of CSIRO and DST Group. It's not a technology area that we had a traditional strength in, but we've been able to bring in really strong technical expertise from those partner organisations. That program's been up and going for about a year. We're now in the process of going out for round two solicitations to the industry and the research sector on what we might do there and they'll have some announcements on the next round of programmes and projects to come out of that one.

And the third one, which is a new area, is in some miniaturisation of sensors and high altitude multi-spectral sensor technologies. And that's, again, partnering with CSIRO and DST Group and the industry sector. We've had a call for proposals out there for a while and we're just in the process now of going back to shortlist and to ask some of those consortia who've bid into that programme to give us some more information and to really round out some of the questions on the stakeholder group we have set up to help us assess those to come back to us and say, "Yeah, this is how we would deliver that." And then we'll be looking to operationalize that programme probably over the next three to five months as well.

Phil Tarrant: So obviously, Mark, the option for SME's are considerable considering, let's take for example, the investment in shipbuilding. I know you guys have been doing some work around industrial capability development, can you give me a bit of insight on what you're doing there for SME's?

Mark Hodge: Yeah, sure. We've got a programme that's been running for some time. It actually started in the JSF supply chain. Essentially what we do is take the view that we don't know who's going to be successful in that C5000 programme, for example. We don't know what the design will be, but there's a lot we do know already. We know, for example, that it'll be made out of a maritime grade steel.

So in order to help our industry partners or our industry sector line themselves up and give them the best chance at being a credible supply chain partner one of the things we've been doing, and this is a programme that's been going for some time, we've got activities throughout Victoria, New South Wales, Queensland, starting up in Tasmania soon, and South Australia, is working with companies, for example, in the welding space who might have been involved in the Latrobe Valley region in Victoria in offshore oil and gas. Up in the Mackay region in Queensland they've been involved in the mining area and these types of things. And saying, "What are the skills, the basic skills and capabilities, that your organisation has and how can we help you to just tweak that and move that into a skills and capabilities area that will be of most use to a prime contractor?"

So looking at things like what are the welding qualifications, what are the standards you have to be up to, are there new technologies that have been developed in the research sector that we can help transfer in to those groups of SME's? We just recently signed an MOU with the Welding Technology Institute of Australia, they'll be pulling together the certification and training activities elements of what we're doing. The Centre for Defence Industry Capability's been really helpful in helping us scope some of those activities.

We think that this is the type of activity that can be very, very useful in pulling together a network of capable SME's across the country who have a credible pathway to being able to bid in to work some of these prime contractors. And it'll be based on data, verified productivity data, understanding where they sit in regards to where they need to sit from a capability benchmarking perspective. And so that's something that you'll see really ramping up in the DMTC world over the next year or two.

Phil Tarrant: So for those businesses, SME's, and some of the larger players who want to participate in this type of work often, and historically, there's been some pretty big the barriers between academics and research and the commercialization and that, which we've touched on. But for these organisations who have bright ideas or bright people who can deliver an enhanced capability what are those things that need to sit between the really smart, call them boffins or whoever, who sit and have the ideas into actually getting it into a commercialised process? What are those handful of people you need to make that transition over, or do you think it's a largely impossible thing to get right?

Mark Hodge: No, it's not impossible at all. And I would modestly say that that's what we've been developing a capability in. And I will also say that the DMTC model isn't a one size fits all for every technology or every field, there are some technology areas where our model sits very well and there are some where it probably wouldn't work that well. But to answer the question, I think it's understanding that you have different groups in that process, in that value chain, as you progress a technology readiness level from a concept through to a mature commercial proposition. At different stages of that process the stakeholder groups all have different needs, different success definitions, and they come at it from a different perspective.

And so, as I said before, I think having the industry partner or the end user involved in the conceptualisation of the technology from very early on is absolutely crucial. They can help guide some of the critical path decisions that get made through the project management process as you develop that technology through to maturity. But conversely the researchers need to have that capability to understand that there is a commercial need, or there is a commercial goal for the technology. And one of the things that I'm proudest of with DMTC is that we've been able to demonstrate on a number of occasions that it is possible to do commercially relevant research that will find its way into a product or a service that is supporting defence capability and still do excellent research.

Our organisation was lucky enough to win a Eureka prize, for example. We find that our researchers are able to get their work published in the best journals around the world. And so we understand that if we don't offer them the opportunity to do excellent research we won't get the best researchers working on our programmes. That's something we have to do, is to balance the needs of those different stakeholder groups at all stages and all times.

Phil Tarrant: From your experience, when you look at the SME's or defence businesses who have done it the best in terms of steering that talent within their organisations into commercial opportunities, is that leadership typically the CEO being very hands-on or is it someone else in the organisation who project manages it through? What's the DNA of that person look like?

Mark Hodge: It can be the CEO or it can be the chief engineer, but it needs to be somebody in the organisation that has accountability for delivering something to the organisation and that has the seniority, if you like, to be able to make those decisions. We've had a number of cases, particularly early on in the piece, where you would have engagement at the lower level of the organisation. They would understand, "Yeah, this would be great if we could do this research with you", but they weren't able to sell that through to the senior level. So you do have to have engagement all through the organisation.

And I think an organisation like the Centre for Defence Industry Capability and its precursor, which was the DIIC, the Defence Industry Innovation Centre, had a lot to do with changing the culture in the defence sector as well, and defence industrial sector, by understanding the benefits of continuous improvement, the benefits of benchmarking against global performance, requirements and these types of things. And technology and research is one of the components that can support that, and I think that had a lot to do with it.

Phil Tarrant: What's the future then for DMTC? You've got some great pedigree and some good runs on the board over the last decade or so. What can we expect to see in the future, considering this rapid investment in defence spending and the rapid rise of, and the speed to which, technology has taken the market?

Mark Hodge: Well, obviously, we hope the future is bright, and we think there is cause to think that it is. But we are part of the Defence Innovation Hub and we need to do whatever we can to make the new defence innovation system successful. And really, that just means playing our roll in that. I've got a pithy line, is that DMTC has no future as soon as defence runs out of technical problems to solve. Now, we know that defence will always have technical problems to solve, but we also know that no organisation is guaranteed a future. So for us to make sure that we continue along a trajectory that we've been on in the past and we think we're on at the moment we just have to make sure that we're being responsive and that we deliver to all of our stakeholder groups, and so does the defence customer, it's the industry sector, and it's the research sector as well.

So we've got to find, not new ways, but we've got to continually reinvent and make sure that we remain a fit for purpose organisation in those areas of defence industry where our model is most useful. And if we do that I'm confident that the rest will take care of itself. Because, as you say, if you look at those macro settings there is a lot of in the space, there's a lot of investment going into the space, all of the policy settings are there and it's really up to us and organisations like us to do our part and play a role in supporting the growth of that industrial capability throughout.

Phil Tarrant: And if any of our listeners want to know more about you guys or would like to connect or engage you what's the best way to do that?

Mark Hodge: The old story I suppose, we have a website, dmtc.com.au. That's probably the best place to engage. There's a range of phone numbers and a bit more information about how we do business there. So we'd be very, very pleased to hear from organisations, defence organisations, defence industry or research sector organisations. If you want to give us a call and have a chat we'd be very, very happy to have that discussion.

Phil Tarrant: Nice one. Mark, I really enjoyed the chat. Thanks for coming in. And let's catch up again at some point soon once some of these other proposals which you're putting out right now come to fruition.

Mark Hodge: Be happy to do that. Thanks for having me on.

Phil Tarrant: Nice one. Remember to check out defenceconnect.com.au. You can follow us on all the social channels, Facebook, Twitter, LinkedIn. You can follow me if you like on twitter, @PhillipTarrant. Any questions for us, for myself, for any of our podcast, or for Mark, you can contact the team editor at defenceconnect.com.au. We'll be back again next week, we'll see you then. Thanks for tuning in. Bye-bye.