Digital Economy Dispatch #116 -- In Defence of AI

Digital Economy Dispatch #116 -- In Defence of AI29th January 2023

Advanced technologies have always been important in the defence sector. Throughout human history, innovation has been at the forefront of efforts to improve defence capabilities and create a more effective fighting force. Consequently, directions in new technology and their use have often been heavily influenced by the needs of this sector.

The scale of investment in defence is worth noting. The defence sector is a critical aspect of UK infrastructure and a major part of the UK economy. In 2020/21 the UK government spent over £40 Billion on defence, including over £1 Billion on research activities. In addition, the UK defence industry turnover was approximately £25 Billion with over £10 Billion in exports. When combined with associated industries such as aerospace, the defence sector contribution to the UK is very significant and highly influential.

Yet, beyond this critical role, the defence sector has another important contribution in addition to its direct effect on all our lives: Ideas being pursued across many industries have significant roots in areas of the defence sector. The technologies, strategies, tactics, and organizational approaches adopted in this sector have offered key insights into how to operate a large, multi-faceted organization to be effective under extreme circumstances of volatility, uncertainty, complexity, and ambiguity (VUCA). This is particularly relevant as digital disruption transforms all aspects of business and society.

In Pursuit of AI

Given this context, it is no surprise to see that Artificial Intelligence (AI) feature highly in the UK’s future defence plans. Released in July 2022, the UK Defence AI Strategy offers an important insight into the opportunities and challenges of AI. These were elaborated in a policy statement released with this strategy in which the UK MoD outlined a number of principles on which the use and adoption of AI would take place in this sector.

Fundamental to its approach, the UK MoD highlighted the challenges of realizing the benefits of AI across its domain. In particular, it emphasized that it saw the digital transformation of the UK defence capability to be one of the most critical strategic challenges of our time. The goal, according to the policy statement, is “to adopt and exploit AI at pace and scale, transforming Defence into an ‘AI ready’ organisation and delivering cutting-edge capability”.

The challenge, it recognized, is how to achieve this goal in a diverse, complex organization involved in a wide range of intense activities across the world. Furthermore, it is a challenge made even more difficult with the disruptive nature of AI and the consequence of its use in decision making where lives and livelihoods are at stake. A difficulty that was clearly identified in the policy statement:

…the issue may not lie in ‘what’ the capability is designed to do, but ‘how’ it does it, and how we ensure that AI is used effectively and appropriately.

How to Succeed in AI

One way we can understand more about why adoption of AI represents such a complex challenge in the defence sector is to turn to leaders in organizations delivering defence solutions. Key facets of the adoption of AI across the defence sector can be explored by examining a recent survey of digital transformation leaders in the defence domain.

In 2021, IBM Institute for Business Value produced a comprehensive report on challenges to AI adoption in defence organizations based on a survey of 250 digital leaders across the defence sector worldwide. Broadly, the report confirmed many of the points raised in the MoD policy documents regarding the strategies and aspirations for organizations in this sector. It noted that initial adoption of AI technology is currently widespread across defence organizations globally. Furthermore, all the surveyed organizations confirmed that they are at least considering its use. Almost half of those organizations have already implemented AI solutions, and another quarter have pilot projects underway. The rest remain in the planning and evaluation phases of AI adoption.

These survey results emphasize what is being seen in other areas. Widescale interest and excitement in AI adoption is seeing many organizations in the early stages of its introduction. While some of those organizations have introduced changes, many see organizational barriers to wider adoption and remain at relatively low levels of maturity in understanding its impact. In addition, further expansion of its use is limited due to significant skills shortages.

However, the IBM survey also highlights four additional areas of note. These are less often brought to the fore and worthy of additional comment.

The first is with regard to the marked differences in how different functional areas are preparing for adoption of AI:

Organizations with combat and fighting arms missions report the greatest levels of formal strategy and planning for AI, process automation, and digital transformation. Nearly 90% of combat and fighting arms leaders say their organizations have a formal AI strategy, compared to 59% from combat support and just 44% from combat service support organizations.

The public sector, including defence, is perhaps an extreme example of the noticeable challenge that must be addressed to align all aspects of an organization. In Large Established Organizations (LEOs), the heart of change is often the supporting functions that glue together day-to-day operational functions with the cut-and-thrust of the mission-critical activities directly effecting stakeholders. Too easily dismissed as “back office vs front office”, these areas of supporting activity are the heart of the organization’s ability to align, scale, and evolve in a managed and controlled way. The highlighted disparity across these areas provides an opportunity to increase an organization’s effectiveness and to align AI impact for everyone in the organization.

Second, the survey brings a focus to where and how technology investments are being directed. In digitizing current operations, foundational technologies are being applied to improve efficiency. However, more disruptive digital transformation efforts are being hampered by challenges in understanding their impact and its effects:

A majority of organizations are investing in foundational technologies such as mobile, Internet of Things (IoT), and automation solutions. Far fewer report investments in cloud computing, blockchain, and other exponential technologies. The most significant investments and adoption efforts in exponential technologies focus on robotics and AI. However, when it comes to strategic value from these investments, leaders report the greatest impact from AI.

The split between foundational and exponential technologies is an interesting one. First, this division implies certain capabilities are aimed at supporting the organization for particular reasons and to achieve prescribed effects. This has major implications on where and how technologies are rolled out across the organizations. It impacts areas critical for their success such as incentive alignment and training budgets.

Hence, when a technology such as AI is seen as exponential rather than fundamental, the tendency is to focus almost exclusively on mission-critical impacts rather than those supporting functions such HR, learning and development, contracts management, and financial controls. Yet, these are arguably areas where rapid impact can be achieved to improve performance. Furthermore, this introduction can have an important role in driving change across the whole organization.

Third, and perhaps somewhat paradoxically, the focus for AI initiatives in these defence sector organizations is seen to be mission based rather than organizationally based. In effect, AI is seen to be outside of the current day-to-day operational activities. This is limiting its immediate impact:

While AI and automation capabilities are often associated with personnel and staffing efficiencies, this does not appear to be the case for most defense organizations. When asked to rank the relative importance of various value drivers, fewer than 1 in 5 prioritized either headcount reduction or redeployment over improved mission effectiveness and improved decision making. Yet the value AI can provide in extending personnel capabilities is being realized nearly everywhere. Leaders also appear less concerned about deploying AI capabilities for cost reduction. In head-to-head tradeoffs between mission effectiveness and both operational and capital cost reduction, a majority of leaders prioritized mission effectiveness. Similarly, most leaders also prioritized improved decision making over cost-reduction objectives.

This survey highlights the key observation that many still struggle to understand what AI is for. Perhaps unsurprisingly, leaders in this sector focus heavily on advances that improve the effectiveness of the mission rather than seeking efficiencies in operational elements of the task. A distinction is made between mission-focused digital transformation needs and operationally-focused needs delegated to IT and service contractors. However, when defence organizations are viewed as LEOs, it is clear that effectively managing and running complex organizations at scale is critical to their success. AI adoption can be just as critical to these less eye-catching operation areas.

Fourth, the survey again highlights a lack of AI adoption in the defence sector in key organizational support areas such as HR, finance, contracts management, and so on:

But defense leaders surveyed did not necessarily see eye-to-eye on the potential value of AI for defense organizations in some functional areas. Despite successful implementations by other industries in critical areas such as human resources (HR) and maintenance, very few leaders identified them as potential areas of value for defense organizations.

Much of the insight from organizational change management points to the difficulties of maintaining the vitality of organizations as they grow, scale, and mature. Often, over time supporting functions such as HR, contracts management, policy management and auditing begin to expand to become a larger part of the team. While a critical part of the organization, they must find ways to carry out their risk management roles without unnecessarily standing in the way of the agile changes needed to drive the organization forward. Unfortunately, they are often seen to be moving too slowly.

In this regard, adoption of digital technology is a particular area of concern. While some see rapid deployment of technologies such as AI as critical, others worry about their impact in managing organizational risks. This creates a growing tension between different parts of an organization. Those pushing to move forward feel increasingly held back by the rest of the organization and its inability to evolve.

Alignment of AI adoption across different parts of the organization is now a critical concern. For example, the impact of AI in HR is now seen in many industry sectors to be a very important component of every AI strategy. Without it, those in operational positions can feel undermined, sidestepped, or at risk from the vanguard teams leaping ahead without looking behind to make sure the rest of the organization is able to keep up.

Towards AI

There is growing emphasis on adoption of AI in the defence sector. In this domain, technology advances are being introduced to drive new ways of operating and increase effectiveness. A review of the strategies and approaches for AI adoption in this sector reveals a great deal about where we will see rapid changes in capabilities and their likely effects. It also highlights the challenges that all large established organizations must overcome to accelerate AI adoption.