Table of Contents
Dual-Use Technology an Efficient Way to Conquer the Commercial Market for the Defence Contractors
Dual-use technology has the potential to generate new revenues for the defence contractors, which house a multitude of technologies within their portfolios and R&D programmes. However, dual-use is not always a clear concept, it needs to be identified, defined, and understood so companies can make the most of it. In this paper, with an aim to facilitate the approach of dual-use technology, historical approaches will be highlighted, the inherent challenges of commercialising defence technology will be analysed, and potential business models and route to market will be introduced.
Dual-use technology may simply refer to the secondary use of a product. In specific, dual-use technology is commonly defined as a technology with current and/or potential defence and commercial applications. For the purpose of this paper, defence applications include any government (B2G) contracted technology and commercial applications refer to the private market (B2B and B2C).
This duality is considered a risk by governments, agencies, and international organisations, as civilian and peaceful technologies could be used for developing harmful devices. To prevent the diffusion of military and dual-use technology, governments and institutions such as the European Commission have listed every dual-use item. Export control and regulations apply to these sensitive items which cannot leave the customs territory without an export authorisation. High penalty fees apply to organisations that overstep the export regulations.
However, in such turbulent times for the defence economy, dual-use technology may offer new business opportunities and substantial revenues to the companies that are primarily involved in defence business. These companies have significant technical capabilities they could leverage to create successful products to move beyond their traditional markets to the larger commercial market. As a consequence it is also a great opportunity to rationalize costs (incurred from R&D and supply chain operations).
Besides, governments spend a considerable amount of money in research and technology (R&T) through federal agencies. Reaching the commercial market through dual-use technology might be seen as an opportunity to boost the economy and to create a positive dynamic in terms of employment. As the result, governments have been encouraging dual-use initiatives.
Dual-Use Technology: History and Past Examples
Historically, defence budgets have been quite cyclical, reaching peaks during war times followed by cuts. The Cold War that ran across the second half of the 20th century had driven the military expenditures particularly in the United States. Every budget cut period drove the transfer of military technology to the commercial market.
From WWII to the End of the Cold War
During the Cold War, military R&D expenditures were at a level never seen before. Governments through their department of defence were driving innovation and played a significant role in the development of new technologies. These technologies had first military applications, but many of them were transferred to the commercial market. Few famous examples are discussed here in the paper.
The nuclear power transfer to the commercial market was driven by government and mainly by the Eisenhower administration and the “Atoms for Peace” program. In France and in Russia, civil nuclear programs were also supported by governments. Firms which took part in civil nuclear energy programs very early in the transfer are now the industry leaders: General Electric, Westinghouse Electric Company (now part of Toshiba), Areva, and Atomenergoprom, respectively, in the United States, Japan, France, and Russia. This transfer did not involve the defence contractors, as nuclear power was only developed in secret by government agencies and laboratories for armful purposes at first. When they decided to transfer the technology to the commercial market to create an energy power plant they first signed contracts with the companies mentioned above.
In terms of commercial aviation, “jet engines” are a great example of successful technology transfer from military to commercial aviation. During WWII, jet engines had been developed to ensure air supremacy to the air forces. Germany was the first country to operate those engines successfully during the war. After the war, American and European engine manufacturers led the military jet engines market. However, the demand was driven by governments. Britain took the lead in the development of commercial jet engine encouraged by the government for the Comet I program. Rolls-Royce adapted its Avon turbojet previously developed for military purposes to satisfy the commercial program requirements. They later managed to supply the French program La Caravelle. The United States followed very closely with the development of jet engines for commercial programs (the Boeing 707 and the Douglas DC-8. Pratt & Whitney adapted its J57 jet engines previously developed for the stratofortress to the commercial requirements. In the meantime, General Electric, which was working on military turbojets, also developed a commercial turbojet—the CJ805—from the very successful J79 military turbojet for the Convaire program. These three companies are now leaders in the engine market for both commercial and military purposes. These three companies all decided to grow organically. They were all major corporations with knowledge of the commercial market. The French organisation Snecma (now Safran), was involved in a military turbojet program with the French Air Force until it decided to create a joint venture with General Electric called CFM International to develop a brand new jet engine for the commercial market. So far the CFM-56 born from this JV is the highest sold jet engine in the world.
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