2025-11-11 22:00:12
Last week the Department of War finally killed the last vestiges of Robert McNamara’s 1962 Planning, Programming, and Budgeting System (PPBS).
The DoW has pivoted from optimizing cost and performance to delivering advanced weapons at speed. Taking decades to deliver weapons is no longer an option. The DoW has joined the 21st century and adopted Lean Methodology.
Two organizations ought to be very concerned – China and the defense prime contractors.
Secretary of War Pete Hegseth unveiled the biggest changes in 60 years of how the Department of War (DoW) plans for and buys weapons and services. These changes aren’t a minor attempt at reform. It’s a top-to-bottom transformation of how the DoW plans and buys weapons, moving from contracts that prioritize how much a weapon costs to how fast it can be delivered.
Instead of buying custom-designed weapons, the DoW will prioritize buying off-the-shelf things that already exist, and using fast-track acquisition processes, rather than the cumbersome existing Federal Acquisition Regulations. To manage all of this, they are reorganizing the entire Acquisition ecosystem across the Services. These changes implement every piece of good advice the DoD had gotten in the last decade and had previously ignored.
The DoW is being redesigned to now operate at the speed of Silicon Valley, delivering more, better, and faster. Our warfighters will benefit from the innovation and lower cost of commercial technology, and the nation will once again get a military second to none.
It’s big, bold and brave and long overdue.
Background
In 1962 Robert McNamara, the then-Secretary of Defense (and ex CFO of Ford), discovered he had inherited a Defense Department whose spending was out of control. During the 1950s the Air Force built five different types of fighter planes, three generations of bombers, and three generations of ICBMs. The Navy had created a fleet of nuclear-powered attack and ballistic missile submarines and aircraft carriers. The Army bought three generations of its own nuclear-capable missile systems. Many of these systems duplicated capabilities of other services. But most importantly, the Services, in their rush to buy new technology, hadn’t adequately budgeted for the cost of operating, training, maintaining, and sustaining what they had bought.
In response, Secretary McNamara imposed the discipline of a Chief Financial Officer. He put in place a formal system of Planning (capability gaps, risks, scenarios, threats assumptions), Programming (5-year plans, affordability, quantities, phasing, unit fielding plans) and Budgeting that has lasted 60+ years. An entire defense university was created to train tens of thousands of contracting officers how to follow the detailed rules. Large contractors (the Primes) learned to work with this paperwork-heavy Defense acquisition system and lived with the very long time it took the DoD to buy.
The Problem
This unwieldy and lethargic acquisition system was adequate for over half a century when our adversary was the Soviet Union who had an equally complex acquisition system, or ISIS and Al Qaida who had none.
However, in the last decade it became painfully obvious that our acquisition system was broken and no longer worked for the world we lived in. Our existing defense industrial base suffers from schedule overruns and huge backlogs; cost increases have become the norm. We’ve been outpaced by adversaries. China, for example, implemented a much more agile system that delivered weapons in a fraction of the time it took us.
We needed a defense industrial base we could count on to scale in a crisis rather than one that will wait for money before taking action.
The war in Ukraine showed that even a small country could produce millions of drones a year while continually iterating on their design to match changes on the battlefield. (Something we couldn’t do.) Meanwhile, commercial technology from startups and scaleups (fueled by an immense pool of private capital) has created off-the-shelf products, many unmatched by our federal research development centers or primes, that can be delivered at a fraction of the cost/time. But the DoW acquisition system was impenetrable to startups.
Our Acquisition system was paralyzed by our own impossible risk thresholds, its focus on process not outcomes, and became risk averse and immoveable.
We needed an acquisition system that could deliver needed things faster.
Reminder: What Did Our Acquisition System Look Like Until Last Week?
The Army, Navy, Air Force, Marines and Space Force train soldiers, sailors and airmen, and specify and buy the weapons for their Service. (It’s the Combatant Commands, e.g. INDOPACOM, CENTCOM, etc., who fight the wars.)
One of the confusing things about Acquisition in the DoW is that it is more than just the buyers of equipment. In the DoW Acquisition with capital “A”, includes the entire end-to-end process – from concept, requirements, prototyping, testing, buying it, to using it and maintaining it.
In each of the Services, the current Acquisition system started with a group that forecast what the Service would need in the future and wrote requirements for future weapons/services/software. This process could take a year or more. Next, Service laboratories developed the technology, tested prototypes and concepts. This could take 3 to 6 years. Next, a vendor was selected and began to prototype and refine the systems. This added another 3 to 4 years. Finally, the system was ready to be built and delivered. It could take 1 to 2 years to deliver weapons in low rate production, or 5 to 10 years for something complex (e.g. aircraft, ships, spacecraft). In the system we’re replacing the time from when a need was turned into a requirement to delivery of a weapon would take 8 to 16 years. As you can imagine, given the rate of change of current technology and new warfighting concepts our own Acquisition process was an obstacle to building a modern War Department.
As an example, the Army’s current Acquisition system has 32,000 civilians and military (program managers, contracting officers, etc.) If you include the long tail of sustainment that’s another 165,000+ people. The Acquisition system in the Army (representative of the other services) looks like this:
What Was Wrong With this Process?
Why Is The Warfighting Acquisition System A Big Deal?
While previous administrations tried to go around the process, this new system confronts it head on. It is a revolutionary transformation in the Department of War. It was clearly designed by people who have worked in industry and understand commercial Lean Processes. This transformation will solve the DoW critical Acquisition problems by:
The New Warfighting Acquisition Organization – The Portfolio Acquisition Executive
To cut through the individual acquisition silos, the services are creating Portfolio Acquisition Executives (PAEs).
Each Portfolio Acquisition Executive (PAE) is responsible for the entire end-to-process of the different Acquisition functions: Capability Gaps/Requirements, System Centers, Programming, Acquisition, Testing, Contracting and Sustainment. PAEs are empowered to take calculated risks in pursuit of rapidly delivering innovative solutions.
PAE Offices Are Matrix Organizations
Portfolio Acquisition Executives (PAEs) are organized as a matrix organization – using people from existing organizations – requirements, PEOs, sustainment, contracting etc. The PAEs themselves will have a small staff for coordination.
Portfolios Around Common Problems
In the past, Acquisition was organized by weapon systems and managed by Program Executive Offices. Portfolios will organize instead around common Warfighting Concepts, technologies, or operational integration needs.
Multiple Portfolios In Each Service
Each of the services are consolidating and reorganizing the functions of what were their Program Executive Offices into Portfolios. Program Executive Offices/Officers (PEOs) will become Capability Program Executives (CPEs), and act as a Portfolios’ acquisition arm.
(The examples below are from the Army. Other Services will have equivalent organizational designs for their Portfolios.)
The acquisition chain of authority runs directly from Capability Program Manager to PAE to the Service Acquisition Executive (SAE), with no intermediate offices or approval layers. (The Service Acquisition Executive for the Army is the Assistant Secretary for Acquisition, Logistics & Technology. For the Navy/Marines, the Assistant Secretary for Research, Development & Acquisition. For the Air Force/Space Force the Assistant Secretary for Acquisition, Technology & Logistics.)
The Army Has 6 Portfolio Acquisition Executives
For example, the Army will likely reorganize its 12 existing PEO offices to become part of 6 portfolios aligned with Army Warfighting Concepts and functions. Each of the 6 portfolios headed by a PAEs will be commanded by a Major General.
The likely 6 Army Portfolios are: 1) Maneuver, 2) Maneuver Air, 3) Fires, 4) C2/CC2, 5) Agile Sustainment and Ammo, and 6) Layered Protection and CBRN. One additional portfolio, called the PIT, will likely include the Army’s Innovation at the Edge activities.
Army PAE Maneuver will likely combine elements of PEO Soldier, PEO Ground Combat Systems, Future Capabilities Division and Maneuver Divisions, Test and Evaluation Integrator, Strategic Contracting Office, and others. This portfolio will likely have the Abrams tank, XM30 Mechanized Infantry Combat Vehicle (replacing the M2 Bradley), the ISV (Infantry Squad Vehicle), Soldier Borne Mission Command program (SBMC), Next Generation Squad Weapon (NGSW), Soldier Borne Sensor (SBS) program, and Organization Clothing and Individual Equipment (OCIE).
Authority to Make Trade-offs
PAEs now have the authority to make trade-offs between cost, schedule and performance and apply flexible funding between weapons systems to rapidly deliver capabilities to the warfighter. This means focusing on fielding “good enough” technology instead of waiting for a product that meets every single requirement.
Army PAE Maneuver Air will likely combine elements of Program Executive Office Aviation, Aviation and Missile Command, Futures Command Future Vertical Lift team DEVCOM Aviation & Missile, and others. It will likely include the Long-Range Assault Aircraft (FLRAA) the Bell V-280 Valor (to replace the UH-60 Black Hawk), Uncrewed Aircraft Systems (UAS), Rotary and Fixed Wing, and Autonomy.
Program Executive Officers (PEOs) are Now Capability Program Executives (CPEs)
Inside each portfolio is a Capability Program Executive (CPE), typically a Brigadier General or a civilian SES. Capability Program Executives have similar roles and responsibilities as today’s PEOs. They are the Acquisition leader responsible for cradle-to-grave management of their programs within their portfolio.
Streamlined Layers of Bureaucracy
97 Army acquisition programs may be reassigned to align with the Army PAE reorganization. 46 organizations that were writing requirements likely will be consolidated into 9 Future Capability Directorates.
Army PAE Fires will likely combine elements from Program Executive Office Missiles and Space, Enterprise Information Systems, the Rapid Capabilities and Critical Technologies Office, Fires System Center, and others. It will likely include the Integrated Battle Command System (IBCS), Patriot/PAC-3, Precision Strike Missile (PrSM), Long-Range Hypersonic Weapon – Dark Eagle (LRHW), Common Autonomous Multi-Domain Launcher (CAML), Guam Defense and Golden Dome.
DoW Will Buy Commercial First
One of the biggest changes is the mandate for PAEs to buy Commercial Off the Shelf (COTS) products, modify them if necessary and only buy bespoke products as a last resort. This change by itself is going to send shockwaves through the existing Prime contractors.
It’s telling everyone that the playing field is now open to everyone. Forget who has more lobbyists on K-Street. Speed, mission impact, and innovation is what will be rewarded. What this means for startups is that if you can execute and deliver (not just PowerPoints) you can become a supplier to the DoW.
Incentive Compensation to PAEs and Program Managers
PAEs will be judged on whether they deliver systems to the warfighter on time and on schedule. PAEs and Program Managers will have “incentive compensation” tied to “capability delivery time, competition, and mission outcomes. (How they’ll pay that kind of compensation for a member of the military remains to be seen.)
Incentives and Scorecards for Contractors
They’ll be managing their contractors with “time-indexed incentives” to make sure contractors deliver on time and on budget, using “scorecards” to keep tabs on how each portfolio is doing.
Army PAE C2/CC2 (Command and Control/Counter Command and Control) will likely combine elements of PEO Command, Control, Communications and Network.. And include NGC2, TITAN, TENCAP, Next Generation Constructive, STE
Non-Traditional Entry Points
Companies selling to the DoW previously had to comply with the impenetrable DFAR and FAR – the Defense and Federal Acquisition Regulations – with over 5,000 pages of complex rules. It was designed for buying Aircraft Carriers, not startup technology.
Now the DoW is telling PAEs to toss those and use Non-FAR regulations like OTAs (Other Transaction Authorities). OTAs are not subject to the extensive, rigid rules and regulations of the DFAR. They allow for greater flexibility, speed, and allow the DoW to work with a broader range of innovative commercial companies. For startups this means massively reduced documentation, shorter timelines, and fewer barriers to working with the DoW.
PAEs Will Use Lean Methodology
Rather than fixed requirements and using waterfall development processes, the services are now insisting that vendors use Lean Methodology to set incremental and iterative delivery targets. That means they can field “good enough technology” that can be incrementally updated in the field and improved on a more frequent cadence.
The only requirement for each increment is that they need to target 1) an initial fielding date,
2) set a maximum cost of each unit and 3) meet the minimum standards for mission effectiveness. Other than that, PAEs have the authority that other attributes of the weapons/software can remain tradable throughout development to allow incremental enhancements and rapid delivery of subsequent increments. This includes the ability to waive technical standards and environmental and other compliance requirements, unless they are mandated by statute or safety.
One other interesting Lean mandate is that each PAE will set up lean technical advisory processes to inform accelerated decision-making, ensuring technical rigor without sacrificing speed.
Weapons Will Be Able to Talk to Each Other – By Design
The new PAEs are also tasked with insisting that all weapons across their programs use Modular Open System Architectures, including by asserting government purpose rights over critical software interfaces — a move that allows the Pentagon to retain the data rights needed to avoid “vendor lock” (weapon systems that can only be modified and/or repaired by the company that designed it).
Army PAE Agile Sustainment will likely combine elements of PEO Combat Support and Combat Service Support, PEO Solider and PEO Joint Program Office Armaments and Ammunition. It will likely include next generation Common Tactical Truck (CTT,) Family of Medium Tactical Vehicles (FMTV), 155mm, 6.8mm ammunition.
Two Vendors Through Initial Production
The DoW has painfully learned that having only one vendor selected leads to cost overruns and late projects. A new idea is that each critical acquisition program will have at least two qualified sources through initial production. While this will cost more upfront, it gives government leverage when it is strongest and enables them to re-compete modular components and find alternative suppliers if needed.
Design For Rapid Scale In a Crisis
PAEs have been told to establish acquisition strategies that decouple design from production to allow additional third-party suppliers to surge and rapidly scale manufacturing capacity in a crisis. They are to put in place guidelines for wartime consumption rates through manufacturing and supply chain partnerships and alternative sources.
Army PAE Layered Protection and CBRN (Chemical, Biological, Radiological, and Nuclear) will likely combine elements of PEO JPEO-CBRND. It will likely include Joint Chemical Agent Detector, UIPE, Decontamination Family of Systems, Biometrics
PAE Officers Now Have More Time To Learn On the Job
A complaint from past acquisition program managers is that they would only be there for two or three years, and then off to their next assignment. Two years was not enough time to see a program through. Now PAEs will have 4-year tours, extendible for another 2 years.
PAEs Top to Bottom
Every military service has 60 days to tell the Secretary of War a list of portfolios it is proposing to be initially stood up. A full implementation plan is due in 90 days. All major acquisition activities across all Services are going to be transitioned to PAE portfolios within two years.
Army PIT is the Army’s innovation initiatives at the edge. It’s the front door for startups wanting to partner with the Army.
- The PIT includes the Joint Innovation Outpost, the Global Tactical Edge Acquisition Directorate (G-TEAD) Marketplace, the FUZE program, and Disruptive Technologies.
- The G-TEAD Marketplace merges Prize Challenge events (e.g., Army xTech Program) and DEP submissions through open call announcements.
- FUZE brings together the Army SBIR/STTR seed funding, MANTECH (Army Manufacturing Technology program), TMI (Tech Maturation Initiative) and XTech the Army’s scouting program.
Reeducation Camp – Warfighting Acquisition University
To retrain/reeducate contracting and acquisition officers, the “Defense Acquisition University” will become the “Warfighting Acquisition University.” They have been ordered to stop compliance-focused training operations and in six months transform into a competency-based education institution.
The university will pivot to offer experiential team-based programs that work on real DoW challenges (does that ever sound like a description of Hacking for Defense.) And they’re going to have their students get out of the building and take part in industry-government exchanges. In the next six months they’re going to prioritize education and rotation programs to get their students exposure to commercial industry practices, manufacturing and operational expertise, and real-world problem-solving. All to develop Acquisition executives critical thinking and agile and rapid decision-making skills. (Note to DAU: we’ve been building these programs for a decade at the Stanford Gordian Knot Center for National Security Innovation. Our national security classes are in 60+ universities and we’re happy to help.)
The Joint Staff – Coordinating the Needs of All the Services
While each of the Services generated their own weapons requirements, plans and budgets, they all had to be approved by the Joint Staff (which reports to the Secretary of War) through a process called the JCIDS (Joint Capabilities Integration & Development System). In theory this was to coordinate each of the Service’s needs so they weren’t duplicating each other, to ensure that they were interoperable, and to give the Combatant Command a voice; and tie all the requirements to joint concepts – all of this needing to be done before Service weapons programs got funded and built.
The problem was that JCIDS moved at the speed of paperwork, not war, so the Secretary of War eliminated it earlier this year. (They kept part of it called the Joint Requirements Oversight Council but reoriented it from validating documents to identifying joint operational problems, which will drive the priorities for the entire department of War.)
In JCIDS’ place the Secretary of War created three new organizations:
It’s interesting to note that none of these changes at the Joint Staff have seemed to (at least publicly) filter down to the charter of the Services Portfolio Acquisition Executives (PAEs). The achilles heel of the Services Acquisition process appears that they are still planning to put the Requirements and Capability gap analysis up front. Here’s why that’s a problem and how to fix it.
Foreign military sales
One other tangential decision in this redesign was not in acquisition but in sales. The DoW wants a greater emphasis on selling our weapons to our Allies. They’ve moved two agencies responsible for those functions – the Defense Technology Security Administration DTSA and the Defense Security Cooperation Agency (DSCA) – from OSD Policy to OSD Acquisition and Sustainment.
This move is about selling more of our equipment, but makes no mention of buying any equipment from our allies.
Inferred But Not Mentioned
Pretty interesting that in this reorg no one has noticed that Elbridge Colby – Under Secretary for Policy – had three organizations taken away from him.
All three organizations were handed to Michael Duffey the Under Secretary for Acquisition & Sustainment. Regardless of the public statements the optics are not a vote of confidence.
Bigger and Better?
It appears that the Office of Strategic Capital may have been swallowed up by the Economic Defense Unit run by George Kolitdes. From all appearances the Economic Defense Unit is tasked to decouple our economy from China, using private and public capital. That means considering how to on-shore the critical components like minerals, chips, batteries, motors, PNT, etc.) The Acquisition announcement was how to buy things. This Economic Defense Unit is how do we ensure the things we buy are made with parts we know we can have an assured supply of?
Summary
- Startups and the DoW are now speaking the same language – Lean, feedback from the field, pivots, iterative and incremental product design, speed to delivery.
- The DoW mandate to first buy commercial-off-the-shelf products is a once-in-a-lifetime opportunity for every startup and scaleup.
- But you have to deliver. Don’t hand wave with PowerPoints.
- DoW will be ruthless in shutting down and freezing out non-performers.
- The use of Non-Federal Acquisition Regulations will eliminate huge amounts of paperwork.
- It eliminates one of the reasons to subcontract with a prime or other company
- DoW needs to be ruthless in reforming the compliance culture
- Who to talk to in each service and how will they do business will be unclear for at least the next six months
- Reorganizations will create uncertainty of who is the front door for startups, how the new rules apply, and who can commit to contracts.
- The Army appears to be further along than the other services in putting a PAE organization in place.
- In theory this is a knife to the heart of the Primes’ business model.
- They will flood Congress and the Executive Branch with infinite capital to change these rules.
- It’s a race between private capital and public company lobbying money
- Let’s hope these changes stick
Thanks to Pete Newell of BMNT for the feedback and insight.
2025-10-30 21:00:42
I’ve always thought of myself as a practitioner. In the startups I was part of, the only “strategy” were my marketing tactics on how to make the VP of Sales the richest person in the company. After I retired, I created Customer Development and co-created the Lean Startup as a simple methodology which codified founders best practices – in a language and process that was easy to understand and implement. All from a practitioner’s point of view.
So you can imagine my surprise when I received the annual “Strategy Leadership Impact” Award from the Strategic Management Society (SMS). The SMS is the strategy field’s main professional society with over 3,100 members. They publish three academic journals; the Strategic Management Journal, Strategic Entrepreneurship Journal, and Global Strategy Journal.
The award said, [Steve Blank] as the Father of Modern Entrepreneurship, changed how startups are built, how entrepreneurship is taught, how science is commercialized, and how companies and government innovate.
Here’s my acceptance speech.
Thank you for the Strategy Leadership Impact Award. As a practitioner standing in front of a room full of strategists, I’m humbled and honored.
George Bernard Shaw reminded us that Americans and British are “one people separated by a common language.” I’ve often felt the same way about the gap between practitioners and strategists.
The best analogy I can offer, is the time after a long plane flight to Sydney, I jumped into a taxi and as the taxi driver started talking I started panicking – wondering what language he was speaking, and how I was going to be able to communicate to him.
It took me almost till we got to the hotel to realize he was speaking in English.
That’s sometimes how it feels between those who do strategy and those who study it.
So today, I’d like to share with you how this practitioner accidently became a strategist and how that journey led to what we now call the Lean Startup.
It’s a story that begins, perhaps surprisingly with what I call the Secret History of Silicon Valley.
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Silicon Valley’s roots lie in solving urgent, high-uncertainty national-security problems during World War II and the Cold War with the Soviet Union.
During WW II, the United States mastered scale and exploitation—mass-producing ships, aircraft, and tanks through centralized coordination. Ford, GM, Dupont, GE and others became the “arsenals of democracy.” In less than 4 years the U.S. built 300,000 aircraft, 124,000 of all types of ships, 86,000 tanks.
But simultaneously we created something radically different, something no other nation did – we created the Office of Science and Research and Development – OSR&D. This was a decentralized network of university labs that worked on military problems that involved electronics, chemistry and physics. These labs solved problems where outcomes were unknown and time horizons uncertain—exactly the conditions that later came to define innovation under uncertainty.
These labs delivered radar, rockets, proximity fuses, penicillin, sulfa drugs, and for the first two years ran the U.S. nuclear weapons program.
In hindsight, way before we had the language, the U.S. was practicing dynamic capabilities: the capacity to sense, seize, and transform under extreme uncertainty. It was also an early case of organizational ambidexterity—balancing mass production with rapid exploration.
One branch of this Office of Science and Research and Development – focused on electronic warfare—became the true genesis of the Valley’s innovation model.
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In 1943, U.S. bombers over Europe faced catastrophic losses—4–5% of planes were shot down every mission. The German’s had built a deadly effective radar-based air defense system. The U.S. responded by creating the Harvard Radio Research Lab, led by Stanford’s Fred Terman. The lab had nothing to do with Harvard, Radio or Research.
Its goal was to rapidly develop countermeasures: jammers, receivers, and radar intelligence.
In the span of three years, Terman’s lab created an entire electronic ecosystem to defeat the German air defense systems. By war’s end U.S. factories were running 24/7 mass producing tens of thousands of the most complicated electronics and microwave systems that went on every bomber over Europe and Japan.
These teams were interdisciplinary, field-connected, and operating in continuous learning cycles:
But what does this have to do with Silicon Valley?
When the war ended Terman came back to Stanford and became Dean of Engineering and institutionalized this model. He embedded government research into the university, recruited his wartime engineers as faculty, and redefined Stanford as an outward-facing institution.
While most universities pursued knowledge exploitation – publishing, teaching, and extending established disciplines, Terman at Stanford did something that few universities in the 1950’s, 60’s or 70’s were doing – he pursued knowledge exploration and recombination. Turning Stanford into an outward facing university – with a focus on commercializing their inventions.
Terman’s policies as now Provost effectively turned Stanford into an early platform for innovation ecosystems—decades before the term existed.
The technology spinouts from Stanford and small business springing up nearby were by their very nature managing uncertainty, complexity, and unpredictability. These early Valley entrepreneurs weren’t “lone inventors”; they were learning organizations, long before that term existed. They were continuously testing, learning, and iterating based on real operational data and customer feedback rather than long static plans.
However, at the time there was no risk capital to guide them. They were undercapitalized small businesses chasing orders and trying to stay in business.
It wasn’t until the mid 1970’s when the “prudent man” rule was revised for pension funds, and Venture Capital began to be treated as an institutional asset class, that venture capital at scale became a business in Silicon Valley. This is the moment when finance replaced learning as the dominant logic.
For the next 25 years, Venture investors – most of them with MBAs or with backgrounds in finance, treated startups like smaller versions of large companies. None of them had worked on cold war projects nor were they familiar with the agile and customer centric models defense innovation organizations had built. No VC was thinking about whether lessons from corporate strategic management thinkers of the time could be used in startups. Instead, VCs imposed a waterfall mindset —business plans and execution of the strategy in the plan — the opposite of how the Valley first innovated. The earlier language of experimentation, iteration, and customer learning disappeared.
And now we come full circle – to the Lean Startup.
At the turn of the century after 21 years as a practitioner, and with a background working on cold war weapons systems, I retired from startups and had time to think.
The more I looked at the business I had been in, and the boards I was now sitting on, I realized a few things.
The sum of these tools – Customer Development, Agile Engineering and the Business Model Canvas – is the Lean Methodology.
What I had done is turn a craft into a discipline of strategic learning—a continuous loop of hypothesis testing, experimentation via minimum viable products, and adaptation via pivots.
Lean is a codified system for strategy formation under uncertainty.
Over the last two decades Lean has turned into the de facto standard for starting new ventures. The classes I created at Stanford were adopted by the National Science Foundation and the National Institutes of Health, to commercialize science in the U.S.
And while contemporary entrepreneurs didn’t know it they were adopting the continuous learning cycles that had fueled wartime innovation.
What comes next is going to be even more interesting.
We’re going to remember – for better or worse – 2025 as another inflection point.
AI in everything, synthetic biology, and capital at previously unimaginable scale, are collapsing the distance between exploration and exploitation.
The boundary between discovery, invention, and strategy is dissolving.
Given how fast things are changing I’m looking forward to seeing strategy itself become a dynamic capability—not a plan, but a process of learning faster than the environment changes.
I can’t wait to see what you all create next.
In closing, my work at Stanford was made possible by the unflinching support from Tom Byers, Kathy Eisenhardt and Riitta Katila in the Stanford Technology Ventures Program who let a practitioner into the building.
Thank you.
2025-10-15 21:00:11
The October 2025 PEO Directory – Update 2.
The Department of War (DoW) is one of the world’s largest organizations. If you’re a startup trying to figure out who to call on and how to navigate the system, it can be – to put it politely – challenging.
Those inside the DoW have little perspective of how hard it is to understand what to an outsider looks like in an impenetrable, incredibly complex system.
Insiders know who to call, and prime contractors have teams of people following broad area announcements and contracts, but if you’re startup, you have none of those relationships. (And with the advent of Social Media even our adversaries have better knowledge.)
If we’re serious about building a next generation defense ecosystem (not just buying the next shiny object), then this is the directory the Department of War should be publishing.
Until then, here’s the second update to the Department of War PEO Directory.
500 new names/organizations in this DoW phonebook and startup Go-to-Market Strategy playbook.
(See Appendix H for a summary of the changes.)
Downloads of the Directory can be found here.
Sign up for timely updates here.
2025-10-13 21:00:56
Tons of words have been written about the Trump Administrations war on Science in Universities. But few people have asked what, exactly, is science? How does it work? Who are the scientists? What do they do? And more importantly, why should anyone (outside of universities) care?
(Unfortunately, you won’t see answers to these questions in the general press – it’s not clickbait enough. Nor will you read about it in the science journals– it’s not technical enough. You won’t hear a succinct description from any of the universities under fire, either – they’ve long lost the ability to connect the value of their work to the day-to-day life of the general public.)
In this post I’m going to describe how science works, how science and engineering have worked together to build innovative startups and companies in the U.S.—and why you should care.
(In a previous post I described how the U.S. built a science and technology ecosystem and why investment in science is directly correlated with a country’s national power. I suggest you read it first.)
How Science Works
I was older than I care to admit when I finally understood the difference between a scientist, an engineer, an entrepreneur and a venture capitalist; and the role that each played in the creation of advancements that made our economy thrive, our defense strong and America great.
Scientists
Scientists (sometimes called researchers) are the people who ask lots of questions about why and how things work. They don’t know the answers. Scientists are driven by curiosity, willing to make educated guesses (the fancy word is hypotheses) and run experiments to test their guesses. Most of the time their hypotheses are wrong. But every time they’re right they move the human race forward. We get new medicines, cures for diseases, new consumer goods, better and cheaper foods, etc.
Scientists tend to specialize in one area – biology, medical research, physics, agriculture, computer science, materials, math, etc. — although a few move between areas. The U.S. government has supported scientific research at scale (read billions of $s) since 1940.
Scientists tend to fall into two categories: Theorists and Experimentalists.
Theorists
Theorists develop mathematical models, abstract frameworks, and hypotheses for how the universe works. They don’t run experiments themselves—instead, they propose new ideas or principles, explain existing experimental results, predict phenomena that haven’t been observed yet. Theorists help define what reality might be.
Theorists can be found in different fields of science. For example:
Physics Quantum field theory, string theory, quantum mechanics
Biology Neuroscience and cognition, Systems Biology, gene regulation
Chemistry Molecular dynamics, Quantum chemistry
Computer Science Design algorithms, prove limits of computation
Economics Build models of markets or decision-making
Mathematics Causal inference, Bayesian networks, Deep Learning
The best-known 20th-century theorist was Albert Einstein. His tools were a chalkboard and his brain. in 1905 he wrote an equation E=MC2 which told the world that a small amount of mass can be converted into a tremendous amount of energy. 
When he wrote it down, it was just theory. Other theorists in the 1930s and ’40s took Einstein’s theory and provided the impetus for building the atomic bomb. (Leo Szilard conceived neutron chain reaction idea, Hans Bethe led the Theoretical Division at Los Alamos, Edward Teller developed hydrogen bomb theory.) Einstein’s theory was demonstrably proved correct over Hiroshima and Nagasaki.
Experimentalists
In addition to theorists, other scientists – called experimentalists – design and run experiments in a lab. The pictures you see of scientists in lab coats in front of microscopes, test tubes, particle accelerators or NASA spacecraft are likely experimentalists. They test hypotheses by developing and performing experiments. An example of this would be NASA’s James Webb telescope or the LIGO Gravitational-Wave Observatory experiment. (As we’ll see later, often it’s engineers who build the devices the experimentalists use.)
Some of these experimentalists focus on Basic Science, working to get knowledge for its own sake and understand fundamental principles of nature with no immediate practical use in mind.
Other experimentalists work in Applied Science, which uses the findings and theories derived from Basic Science to design, innovate, and improve products and processes.
Applied scientists solve practical problems oriented toward real-world applications. (Scientists at Los Alamos weretrying to understand the critical mass of U-235 (the minimum amount that would explode.) Basic science lays the groundwork for breakthroughs in applied science. For instance: Quantum mechanics (basic science) led to semiconductors which led to computers (applied science). Germ theory (basic science) led to antibiotics and vaccines (applied science). In the 20th century Applied scientists did not start the companies that make end products. Engineers and entrepreneurs did this. (In the 21st century more Applied Scientists, particularly in life sciences, have also spun out companies from their labs.)
Where is Science in the U.S. Done?
America’s unique insight that has allowed it to dominate Science and invention, is that after WWII we gave Research and Development money to universities, rather than only funding government laboratories. No other country did this at scale.
Corporate Research Centers
In the 20th century, U.S. companies put their excess profits into corporate research labs. Basic research in the U.S. was done in at Dupont, Bell Labs, IBM, AT&T, Xerox, Kodak, GE, et al.
This changed in 1982, when the Securities and Exchange Commission ruled that it was legal for companies to buy their own stock (reducing the number of shares available to the public and inflating their stock price.) Very quickly Basic Science in corporate research all but disappeared. Companies focused on Applied Research to maximize shareholder value. In its place, Theory and Basic research is now done in research universities.
Research Universities
From the outside (or if you’re an undergraduate) universities look like a place where students take classes and get a degree. However, in a research university there is something equally important going on. Science faculty in these schools not only teach, but they are expected to produce new knowledge—through experiments, publications, patents, or creative work. Professors get grants and contracts from federal agencies (e.g., NSF, NIH, DoD), foundations, and industry. And the university builds Labs, centers, libraries, and advanced computing facilities that support these activities.
In the U.S. there are 542 research universities, ranked by the Carnegie Classification into three categories.
R1: 187 Universities – Very High Research Activity
Conduct extensive research and award many doctoral degrees.
Examples: Stanford, UC Berkeley, Harvard, MIT, Michigan, Texas A&M …
R2: 139 Universities – High Research Activity
Substantial but smaller research scale.
Examples: James Madison, Wake Forest, Hunter College, …
R3: 216 Research Colleges/Universities
Limited research focus; more teaching-oriented doctoral programs.
Smaller state universities
Why Universities Matter to Science
U.S. universities perform about 50% of all basic science research (physics, chemistry, biology, social sciences, etc.) because they are training grounds for graduate students and postdocs. Universities spend ~$109 billion a year on research. ~$60 billion of that $109 billion comes from the National Institutes for Health (NIH) for biomedical research, National Science Foundation (NSF) for basic science, Department of War (DoW), Department of Energy (DOE), for energy/physics/nuclear, DARPA, NASA. (Companies tend to invest in applied research and development, that leads directly to saleable products.)
Professors (especially in Science, Technology, Engineering and Math) run labs that function like mini startups. They ask research questions, then hire grad students, postdocs, and staff and write grant proposals to fund their work, often spending 30–50% of their time writing and managing grants. When they get a grant the lead researcher (typically a faculty member/head of the lab) is called the Principal Investigator (PI).
The Labs are both workplaces and classrooms. Graduate students and Postdocs do the day-to-day science work as part of their training (often for a Ph.D.). Postdocs are full-time researchers gaining further specialization. Undergraduates may also assist in research, especially at top-tier schools.
(Up until 2025, U.S. science was deeply international with ~40–50% of U.S. basic research done by foreign-born researchers (graduate students, postdocs, and faculty). Immigration and student visas were a critical part of American research capacity.)
The results of this research are shared with the agencies that funded it, published in journals, presented at conferences and often patented or spun off into startups via technology transfer offices. A lot of commercial tech—from Google search to CRISPR—started in university labs.
Universities support their science researchers with basic administrative staff (for compliance, purchasing, and safety) but uniquely in the U.S., by providing the best research facilities (labs, cleanrooms, telescopes), and core scientific services: DNA sequencing centers, electron microscopes, access to cloud, data analysis hubs, etc. These were the best in the world – until the sweeping cuts in 2025.
Engineers Build on the Work of Scientists
Engineers design and build things on top of the discoveries of scientists. For example, seven years after scientists split the atom, it took 10s of thousands of engineers to build an atomic bomb. From the outset, the engineers knew what they wanted to build because of the basic and applied scientific research that came before them.
Scientists Versus Engineers
Engineers create plans, use software to test their designs, then… cut sheet metal, build rocket engines, construct buildings and bridges, design chips, build equipment for experimentalists, design cars, etc.
As an example, at Nvidia their GPU chips are built in a chip factory (TSMC) using the Applied science done by companies like Applied Materials which in turn is based on Basic science of semiconductor researchers. And the massive data centers OpenAI, Microsoft, Google, et al that use Nvidia chips are being built by mechanical and other types of engineers. 
My favorite example is that the reusable SpaceX rocket landings are made possible by the Applied Science research on Convex Optimization frameworks and algorithms by Steven Boyd of Stanford. And Boyd’s work was based on the Basic science mathematical field of convex analysis (SpaceX, NASA, JPL, Blue Origin, Rocket Lab all use variations of Convex Optimization for guidance, control, and landing.)
Startup Entrepreneurs Build Iteratively and Incrementally
Entrepreneurs build companies to bring new products to market. They hire engineers to build, test and refine products.
Engineers and entrepreneurs operate with very different mindsets, goals, and tolerances for risk and failure. (Many great entrepreneurs start as engineers e.g., Musk, Gates, Page/Brin). An engineer’s goal is to design and deliver a solution to a known problem with a given set of specifications.
In contrast, entrepreneurs start with a series of unknowns about who are the customers, what are the wanted product features, pricing, etc. They retire each of these risks by building an iterative series of minimum viable products to find product/market fit and customer adoption. They pivot their solution as needed when they discover their initial assumptions are incorrect. (Treating each business unknown as a hypothesis is the entrepreneurs’ version of the Scientific Method.)
Venture Capitalists Fund Entrepreneurs
Venture capitalists (VCs) are the people who fund entrepreneurs who work with engineers who build things that applied scientists have proven from basic researchers.
Unlike banks which will give out loans for projects that have known specifications and outcomes, VCs invest in a portfolio of much riskier investments. While banks make money on the interest they charge on each loan, VCs take part ownership (equity) in the companies they invest in. While most VC investments fail, the ones that succeed make up for that.
Most VCs are not scientists. Few are engineers, some have been entrepreneurs. The best VCs understand technical trends and their investments help shape the future. VCs do not invest in science/researchers. VCs want to minimize the risk of their investment, so they mostly want to take engineering and manufacturing risk, but less so on applied science risk and rarely on basic research risk. Hence the role of government and Universities.
VCs invest in projects that can take advantage of science and deliver products within the time horizon of their funds (3–7 years). Science often needs decades before a killer app is visible.
As the flow of science-based technologies dries up, the opportunities for U.S. venture capital based on deep tech will decline, with its future in countries that are investing in science – China or Europe.
Why Have Scientists? Why Not Just a Country of Engineers, Entrepreneurs and VCs (or AI)?
If you’ve read so far, you might be scratching your head and asking, “Why do we have scientists at all? Why pay for people to sit around and think? Why spend money on people who run experiments when most of those experiments fail? Can’t we replace them with AI?”
The output of this university-industry-government science partnership became the foundation of Silicon Valley, the aerospace sector, the biotechnology industry, Quantum and AI. These investments gave us rockets, cures for cancer, medical devices, the Internet, Chat GPT, AI and more.
Investment in science is directly correlated with national power. Weaken science, you weaken the long-term growth of the economy, and national defense.
Tech firms’ investments of $100s of billions in AI data centers is greater than the federal government’s R&D expenditures. But these investments are in engineering not in science. The goal of making scientists redundant using artificial general intelligence misses the point that AI will (and is) making scientists more productive – not replacing them.
Countries that neglect science become dependent on those that don’t. U.S. post-WWII dominance came from basic science investments (OSRD, NSF, NIH, DOE labs). After WWII ended, the UK slashed science investment which allowed the U.S. to commercialize the British inventions made during the war.
The Soviet Union’s collapse partly reflected failure to convert science into sustained innovation, during the same time that U.S. universities, startups and venture capital created Silicon Valley. Long-term military and economic advantage (nuclear weapons, GPS, AI) trace back to scientific research ecosystems.
Lessons Learned
- Scientists come in two categories
- Theorists and experimentalists
- Two types of experimentalists; Basic science (learn new things) or applied science (practical applications of the science)
- Scientists train talent, create patentable inventions and solutions for national defense
- Engineers design and build things on top of the discoveries of scientists
- Entrepreneurs test and push the boundaries of what products could be built
- Venture Capital provides the money to startups
- Scientists, engineers, entrepreneurs – these roles are complementary
- Remove one and the system degrades
- Science won’t stop
- Cut U.S. funding, then science will happen in other countries that understand its relationship to making a nation great – like China.
- National power is derived from investments in Science
- Reducing investment in basic and applied science makes America weak
Appendix – How Does Science Work? – The Scientific Method
Whether you were a theorist or experimentalist, for the last 500 years the way to test science was by using the scientific method. This method starts by a scientist wondering and asking, “Here’s how I think this should work, let’s test the idea.”
The goal of the scientific method is to turn a guess (in science called a hypothesis) into actual evidence. Scientists do this by first designing an experiment to test their guess/hypothesis. They then run the experiment and collect and analyze the result and ask, “Did the result validate, invalidate the hypothesis? Or did it give us completely new ideas?” Scientists build instruments and run experiments not because of what they know, but because of what they don’t know.
These experiments can be simple ones costing thousands of dollars that can be run in a university biology lab while others may require billions of dollars to build a satellite, particle accelerator or telescope. (The U.S. took the lead in Science after WWII when the government realized that funding scientists was good for the American economy and defense.)
Good science is reproducible. Scientists just don’t publish their results, but they also publish the details of how they ran their experiment. That allows other scientists to run the same experiment and see if they get the same result for themselves. That makes the scientific method self-correcting (you or others can see mistakes).
One other benefit of the scientific method is that scientists (and the people who fund them) expect most of the experiments to fail, but the failures are part of learning and discovery. They teach us what works and what doesn’t. Failure in science testing unknowns means learning and discovery.
2025-09-17 21:00:43
Great founders shine in a crisis.
Ordinary ones watch their companies burn down.
I just had coffee with two co-founders of an e-bike company who were mentoring one of our student teams. In short order I realized they were great founders – creative, agile and still having fun building their company. Unlike other e-bike rental companies, their business model was unique, offering riders free rental time in exchange for looking at ads. We had a great conversation, and they talked about everything – except the dead moose on the table.
The Dead Moose
Before we met, I read they had just lost out to three other e-bike companies (including Uber) to operate in another major city. This meant they were now shut out of that market for the next four years. Being fourth in a group of three is painful, but good CEOs learn from failure and ensure that those lessons get baked in going forward so they never happen again. (And if not, their board hits them on the head until they do.) As we talked, I learned that wasn’t the case with these founders.
They casually mentioned they were again competing for the rights to operate in a major city, this time the one I was in.
I asked what I thought were obvious questions, starting with, “What did you learn from the loss? What did you change to ensure it won’t happen again?” And to me, most important, “What happens to your valuation and business if you lose this city?” The answers were vague, and if I had been on their board would have given me pause. (That’s a polite description of what I would have said.)
A Crisis – Ignored
While the founders were still talking about new product offerings, brand partnerships, and customer acquisition programs, they hadn’t processed what their past loss meant, and the potential consequences of losing this next city. Let alone that they were now in a life-and-death struggle for the survival of their company. If not for survival, at least in a fight for one- or two-orders of magnitude difference in their valuation.
The CEO just didn’t have the urgency of what would happen if they lost this next city selection. Having seen this movie before, I suggested that they needed to treat this competition as a four-alarm fire. This was a crisis, and they were treating it like any other day-to-day issue.
Recognize When It’s Not Business As Usual
Startups are inherently chaotic. Founders face a constant barrage of decisions, demands, and distractions. But they need to recognize when an event/outcome can have an order of magnitude/life or death impact on their company. When a crisis happens the CEO needs to marshal all resources and organize to deal with them differently than the multitude of other day-to-day “hair on fire” issues in a startup. Rather than making this “one more fire drill,” as a first step startup CEOs need to articulate why this is an existential threat to the survival of the company. I found the best way to do this is to draft a one-page memo laying out:
And unless the building is on fire, test the memo with some trusted advisors (not your exec staff or board.)
Then, the CEO needs to personally lead the response:
Lessons Learned
- A competent founder can recognize when it’s a crisis, not business as usual.
- A good founder knows how to build new skills and capacity to manage a crisis.
- A great founder already has a plan B in place.
- In a crisis if you can’t manage chaos and uncertainty, if you can’t bias yourself for action and if instead you wait around for someone else to tell you what to do, then your investors and competitors will make your decisions for you and/or you will run out of money and your company will die.
2025-09-10 21:00:06
Announcing the 2025 edition of the DoW PEO Directory. Online here.
Think of this PEO Directory as a “Who buys in the government?” phone book.
Finding a customer for your product in the Department of War is hard: Who should you talk to? How do you get their attention? What is the right Go-To-Market Strategy? What is a PEO and why should I care?
Ever since I co-founded Hacking for Defense, my students would ask, “Who should we call in the DoW to let them know what problem we solved? How can we show them the solution we built?” In the last few years that question kept coming, from new defense startups and their investors.
At the same time, I’d get questions from the new wave of Defense Investors asking, “What’s the best “Go-To-Market (GTM)” strategy for our startups?
PEOs, PMs, PIAs, PoRs, Consortia, SBIRs, OTAs, CSOs, FAR, CUI, SAM, CRADAs, Primes, Mid-tier Integrators, Tribal/ANC Firms, Direct-to-Operator, Direct-to-Field Units, Labs, DD-254… For a startup it’s an entirely new language, new buzzwords, new partners, new rules and it requires a new “Go-To-Market (GTM)” strategy.
How to Work With the DoW
Below are simplified diagrams of two of the many paths for how a startup can get funding and revenue from the Department of War. The first example, the Patient Capital Path, illustrates a startup without a working product. They travel the traditional new company journey through the DoW processes.
The second example, the Impatient Capital Path, illustrates a startup with an MVP and/or working product. They ignore the traditional journey through the DoW process and go directly to the warfighter in the field. With the rise of Defense Venture Capital, this “swing-for-the fences” full-speed ahead approach is a Lean Startup approach to become a next generation Prime.
(Note that in 2025 selling to the DoW is likely to change – for the better.)
Selling to the DoW takes time, but a well-executed defense strategy can lead to billion-dollar contracts, sustained revenue, and technological impact at a national scale. Existing defense contractors know who these DoW organizations are and have teams of people tracking budgets and contracts. They know the path to getting an order from the Department of War. But startups?
Why Write the PEO Directory?
Most startups don’t have a clue where to start. And selling to the Department of War is unlike any enterprise or B-to-B sales process founders and their investors may be familiar with. Compared to the commercial world, the language is different, the organizations are different, the culture of risk taking (in acquisition) is different, and most importantly the go-to-market strategy is completely different.
Amazingly, until last year’s first edition of the PEO directory there wasn’t a DoW-wide phone book available to startups to identify who to call in the War Department. This lack of information made sense in a world where the DoW and its suppliers were a closely knit group who knew each other and technology innovation was happening at a sedate decades-long pace. (And assumed our adversaries didn’t have access to our DoW web pages, LinkedIn and ChatGPT.)
That’s no longer true. Given the rapid pace of innovation outside the DoW, and new vendors in UAS, counter UAS, autonomy, AI, quantum, biotech, et al, this lack of transparency is now an obstacle to a whole-of-nation approach to delivering innovation to the warfighter.
(This lack of information even extends internally to the DoW. I’ve started receiving requests from staff at multiple Combatant Commands for access to the PEO Directory. Why? Because “…it would be powerful to include a database of PEOs to link to our database of Requirements, Gaps, and Tracked Technologies to specific PEOs to call.”)
This is a classic case of information asymmetry, and it’s not healthy for either the increasingly urgent needs of the Department of War or the nascent startup defense ecosystem.
Our adversaries have had a whole-of-nation approach to delivering innovation to the warfighter in place for decades. This is our contribution to help the DoW compete.
2025 PEO Directory Edition Notes
The first edition of this document started solely as a PEO directory. Its emphasis was (and is) the value of a startup talking to PEOs early is to get signals on what warfighter problems to solve and whether the DoW will buy their product now or in the future. Those early conversations answer the questions of “Is there a need?” and “Is there a market?”
This 2025 edition of the PEO Directory attempts to capture the major changes that are occurring in the DoW – in organizations, in processes and in people. (For example, the PEO offices of the three largest new defense acquisition programs — Golden Dome, Sentinel and Columbia – will report directly to the Deputy Secretary of War, rather than to their respective Services. And the SecWar killed the cumbersome JCIDIS requirements process.)
What this means is that in 2025 the DoW will develop a new requirements and acquisition process that will identify the most urgent operational problems facing the U.S. military, work with industry earlier in the process, then rapidly turn those into fielded solutions. (That also means the Go-to-market description, people and organizations in this document will be out of date, and why we plan to update it regularly.)
What’s New?
This 2025 edition now includes as an introduction, a 30-page tutorial for startups on how the DoW buys and the various acquisition and funding processes and programs that exist for startups. It provides details on how to sell to the DoW and where the Program Executive Offices (PEOs) fit into that process.
The Directory now also includes information about the parts of the government and the regulations that influence how the DoW buys – the White House Office of Management and Budget (OMB), and the Federal Acquisition Regulations (FAR). It added new offices such as Golden Dome Direct Reporting Program, DIU, AFRL, DARPA, MDA, CDAO, OSC, IQT, Army Transformation and Training Command, SOCOM, and others.
To help startups understand the DoW, for each service we added links to the organization, structure, and language, as well as a list of each Service’s General Officers/Flag Officers.
Appendix B has a linked spreadsheet with the names in this document.
Appendix C has a list of Venture Capital firms, Corporate Investors, Private Equity firms and Government agencies who invest in Defense. In addition, the Appendix includes details about the various DoW SBIR programs, a list of OTA Consortia, Partnership Intermediary Agreement (PIA) Organizations, and Tribal/Alaska Native Corporation (ANC) Companies.
Appendix D now lists and links to the military and state FFRDC test centers where startups can conduct demos and test equipment.
Appendix E added a list and links of Defense Publications and Defense Trade Shows.
Appendix F has a list of all Army system contractors.
A few reminders:
Thanks to this year’s partners helping to maintain and host the Directory: Stanford Gordian Knot Center for National Security Innovation, America’s Frontier Fund and BMNT.
This edition of the PEO Directory is on-line so it can be updated as the latest changes become available.
Send updates and corrections to [email protected]
You can access and download the full document here.
