Building sovereign capability demands a break from ‘business as usual’ for both Defence and industry

Opinion: Australia must urgently shift to a whole-of-nation approach that prioritises trust, collaboration and action to build a sovereign Defence industry capable of meeting today’s growing security threats, argue Kendy Hau, Anthony Allen and Allan Dundas.

The Defence and national security challenges facing Australia today demand more than incremental reform. They require a paradigm shift in how sovereign capabilities are conceived, built and sustained.

For decades, Australia’s security has rested on assumptions: trust in global systems, that alliances will always deliver, and that we could afford to be a buyer rather than a builder of capability.

That era is ending. The modern threat landscape, characterised by hybrid warfare, disruptive technologies, and strategic alliances, demands a more proactive and collaborative approach.

But what does industry really think and what are senior leaders calling for? To explore this, The United Services Institute ACT, DEWC Services and Elysium EPL, in conjunction with NCS Australia, hosted the first in a series of thought leadership roundtables with senior Defence and industry executives in late 2024. Held under Chatham House Rule, the event enabled an open and frank exchange of ideas with discussion focused on critical partnership models for building sovereign Defence capability.

The outcomes of this discussion reflect issues we can no longer ignore. Three key priorities emerged:

1.       A whole-of-nation approach where trust is reciprocated would reduce red tape and deliver capability outcomes more efficiently.

2.       Industry to industry partnerships must be incentivised to foster collaboration, bolster sovereign supply chains, and reduce the internal cannibalisation that currently weakens the Defence industrial base. We cannot afford the current model where SMEs compete for survival instead of collaborating for scale.

3.       Defence must improve how it signals key problem statements to industry. If industry knows what problem it is meant to solve, it will mobilise faster and accelerate innovation

A critical component of this paradigm shift lies in developing deeper partnerships between Defence and industry, between large tech firms and SMEs, between global leaders and local experts. The rapid pace of technological advancement, driven by the R&D of companies like Google, Microsoft and AWS, demands a new approach to Defence capability development.

Australia has world-class and agile SMES. Australia must not rely on fragmented, isolated efforts. We need to scale capability at an industrial level by leveraging both local talent and global innovation.

Collaboration across the ecosystem is essential. Just as the U.S. partnered with companies like Ford Motors during WWII to build its industrial base during wartime, today’s Defence ecosystem must integrate diverse stakeholders to achieve the scale and speed necessary to stay ahead of adversaries.

More recently, the war in Ukraine demonstrated the value of integrated partnerships: global firms, local SMEs, and national armed forces rapidly developing real-time solutions in AI, cyber, robotics and ISR. Australia should take note.

Yet one of the most sobering takeaways from the roundtable was the recognition that we cannot afford the current model where SMEs compete for survival instead of collaborating for scale. Internal competition is hurting the industry. For the last 20 years, the scale and structure of Defence industry funding has bred competition, not collaboration. With no meaningful incentives to share or co-develop capability, SMEs remain fragmented and under-resourced while Defence continues to struggle to engage at the speed required.

There is a way forward if we’re bold enough to take it.

Defence must provide access to the real problems it is trying to solve by providing transparent problem statements, operational data and clear measures of success. Without this, the inefficiencies will persist.

Equally, trust must be offered, not just earned over decades. It must be mutual and it must start from the outset. Trust is the key to speeding up innovation and enabling the 'at speed' capability required to prepare for contest and conflict in today’s strategic environment. The pace of innovation and capability development will only match our strategic needs if we start with trust, not end with it.

Participants also emphasised the importance for increased industry-to-industry partnerships to enable scalable development. A new partnership model must prioritise lean governance, transparent information sharing, joint wargaming, shared risk and clearly defined roles across Defence, government, industry and academia. Joint exercises must not only test technologies but also build trust, strengthen relationships, and refine strategy.

By building strong industry to industry partnerships, empowering multidisciplinary teams, ensuring the right people are in the room when decisions are made, and enabling flexibility to adapt to emerging challenges, Australia can build a Defence industrial base capable of meeting both current and future threats.

Lean governance and risk management would streamline decision-making and ensure resources are allocated effectively, which is crucial in a rapidly evolving threat landscape. But collaboration cannot be limited to organisational silos.

Social cohesion in Australia is also under attack from malign forces. To strengthen our national resilience, we must share more and share better across agencies, across industry, and with the public. This means finding ways to overcome barriers like IP protection and commercial advantage and actively fostering trust and unity. We cannot afford to let internal fragmentation be our weakness when adversaries are unified in purpose.

And let’s be honest. Strategy paralysis is real. Since the Defence Strategic Review, eight new strategies have been released with little visible implementation. When in doubt, we write another plan. What we need now is action, not new strategies.

Ultimately, Australia’s future Defence strategy must embrace a whole-of-nation approach. Sovereignty is not isolationism. It’s about resilience, having the skills, infrastructure and industrial base to withstand strategic shocks.

If we are to build a credible, self-reliant industrial base, workforce challenges must be addressed now. This includes talent retention, skills development and fostering cross-pollination between Defence, industry and academia.

It’s not just about being prepared. It’s about being resilient, scalable and trusted. That will require Australia to stop treating collaboration as a buzzword and start treating it as a national imperative.

If we get this right, if we align the right people in the right rooms with the right authority, and the right data, we can build a sovereign Defence industry that not only keeps pace with the threat environment but defines how we respond to it.

General Douglas MacArthur once said, “The history of failure in war can almost always be summed up in two words: too late.” Are we too late in comprehending the deadly purpose of a potential enemy? Too late in realising the mortal danger? Too late in preparedness? Too late in uniting all possible forces for resistance?

These are the questions leaders across government, Defence and industry must ask themselves honestly and urgently. Because the window to act is narrowing and the time for business as usual is over.