Investing into Defence Assets

By Dr. Mike Körner und Dr. Martin Krause //

More than two years after Russia’s major attack on Ukraine, the super cycle in the defence sector has led to a strong and growing interest of private investors, family offices and private equity in the sector. The valuations of defence assets have now reached new, ambitious heights. For investors with little experience in the defence sector, it is therefore even more important to correctly value the pitfalls and specifics of the industry.

Creating defence-specific growth projections

Traditional corporate planning as the basis for a company valuation is reaching its limits in these times. Traditional market data and analyses such as Jane’s Defence only partially reflect the dynamics of the expected growth. There is a lack of a reliable market projection. Estimating the top-down market potential requires not only a good understanding of the military planning logic, but also specific industry expertise.

Understanding technological change & innovation

The war in Ukraine is an impressive example of the impact that technological innovation can have on the weapon systems used and their military value, for example in the areas of unmanned systems or digitalisation. Such rapid and far-reaching changes have a fundamental impact on military planning and the resulting future requirements and procurements. For an investor, this results in significant opportunities and risks with regards to their defence investment strategy.

Identifying defence-specific risks

In the particular context of the defence industry, there are a number of constraints, specifics, and pitfalls that need to be included in the assessment. Some example keywords here are procurement cycles, complex programmes, technological developments, export control, political stakeholders, and financing problems. All of these industry-specific issues must be realistically factored in when making the assessment.

Incorporating defence-specific expertise

ACTRANS is a management consultancy with a focus on the defence sector and has experience in supporting defence investors in the areas of commercial, technical and programme due diligence. By integrating our network of defence experts, we are able to assist with specific topics in all military domains.

Software-defined Defense – Key to Combat Superi­ority

By Dr. Martin Krause and Dr. Mike Körner //

Today, most products in the defense sector can no longer do without software, and digiti­zation is becoming an increasingly important differ­entiator. In recent months, a paradigm shift towards software as the defining element has become increasingly apparent. Is software-defined defense on the way?

Software-defined Defense

Software-defined defense describes a sophisticated combination of hardware and software in which the entire functionality spectrum of the armament system is constructed around the functionality of the software. This does not represent a proprietary system, but an open, modular architecture with standardized interfaces for hardware and especially for software. While hardware is often exhausted to a significant extend, software-driven functionalities offer a comparatively high potential to enhance the performance of the overall system.

Civilian products where a combination of hardware and software has been successfully built around software functionality include the iPhone or Elon Musk’s Tesla cars.

Advantages and possible applications

This offers numerous advantages, including:

  • Fundamental new functionalities
  • Shorter development times
  • Lower development costs
  • Higher flexibility
  • Interchangeability of individual modules
  • Higher potential for performance enhancing upgrades

It is a data-centric approach where automation is not necessarily about operating autonomous systems without a human operator (human-out-of-loop). Rather, it enables one operator to efficiently and effectively monitor and guide a large number of systems, such as a swarm of drones (human-on-loop).

Possible applications for software-defined defense exist in almost all areas of the armed forces: autonomous systems (UxS), manned-unmanned teaming (MUM-T), command and control (C2), cyber warfare, networked communications, virtual/ augmented reality (VR/ AR), logistics, electronic warfare (EW), intelligence, surveillance and reconnaissance (ISR), and many more.

While the software portion is on the rise with every new military system, these systems are mostly based on proprietary software that is only sporadically developed once the systems are delivered. Software-defined defense is still in its infancy and no complete system has yet been developed based on this concept. Various major development programs such as the Future Combat Air System (FCAS) are attempting to create cross-domain networking of sensors, effectors, and situation pictures at a previously unattainable level. This is being done through new approaches such as a Multi-domain Combat Cloud. However, there are also initial examples, which can already be observed in the Ukraine war.

Starlink – resilience through flexibility

Elon Musk’s Starlink communication satellites proved particularly important for Ukraine’s military coordination. Their forces relied on the small, portable terminals to communicate and relay information across the battlefield. The Starlink terminals were also integrated directly onto reconnaissance drones, allowing them to reconnoiter enemy positions and relay target coordinates directly to artillery via Starlink satellites. This has led to a significant shortening of the so-called “kill chain”.

Russia attempted to disrupt Starlink communications in the early months using electronic warfare and targeted jamming attacks on the frequencies used. However, these jamming attacks were only successful for a short period of time. At Starlink, a software update for the satellites and terminals was developed in a very short time, which successfully repelled the Russian jamming attacks. The Starlink system thus proved adaptable and resilient via software updates. Classical proprietary satellite systems without the possibility of software updates would not have been capable of this adaptation in the frequency spectrum. Military experts were enthusiastic about the possibilities of such software updates.

However, there are now increasing reports that Russia is back in the lead, as Russian electronic warfare (Tobol system) now relies on a different attack vector. Instead of jamming the frequencies, reports say that they are relying on jamming the GPS signal. This disrupts or complicates synchronization between the Starlink ground station and the Starlink satellite. How Starlink will respond to this new challenge remains to be seen. However, scientists have now demonstrated that the signals from Starlink satellites can be used to determine position with an accuracy of eight meters. This inherent GPS alternative could put Starlink back in the lead over Russian electronic warfare and, of course, would have other interesting applications. The Starlink example provides a preview of the speed and dynamics of mutual adaptations in future software-defined defense.

Challenges for the introduction of Software-defined Defense

The rapid adoption of software-defined defense faces a number of challenges:

  • Lack of interoperability of systems
  • National norms and standards
  • New cyber security risks
  • Complexity of the overall system
  • Integration of non-digital legacy systems
  • Legal and ethical requirements

Transformation of the business model

For traditional defense companies, the introduction of software-defined defense is associated with a comprehensive transformation. The business model will change from a hardware-driven project business to a software-driven service business. This change is associated with the development of new competencies, especially in R&D and product management as well as in the context of redesigning development processes. However, early and deliberate transformation is worthwhile, as it enables a long-term competitive advantage to be gained.

This advantage takes effect as soon as governmental customers will demand these functionalities. For example, in the case of the US Optionally Manned Fighting Vehicle program (OMFV), with which the Pentagon intends to replace the US M2 Bradley infantry fighting vehicle (IFV), this is already explicitly the case in the form of a modular open system architecture (MOSA).

Of course, there is a certain resistance to this transformation process among the established OEMs, as the companies have long benefited from the lock-in effect of proprietary systems. And the service business will partially cannibalize the established project business. However, changing customer demands will most likely enforce this adaptation sooner or later anyway. In this respect, setting the course at an early stage creates a first-mover advantage that differentiates one’s own products from the competition and avoids a changeover that will be even more painful later on.

ACTRANS is a management consultancy with a focus on the aerospace and defense industry. Together with our network of experts, we support our clients in aligning their product portfolio, processes, and technology to software-defined defense.

How to Quantify Defense Market Potentials

By Dr. Mike Körner and Dr. Martin Krause //

The Ukraine war requires a dynamic shift to growth in the Western defense industry in the short term. Some people are talking about a super cycle for the defense industry, as old weapon systems will often have to be replaced. Additionally, the number of available systems will have to be increased significantly in the next few years due to the new security situation. Based on what market assumptions should Defense companies make long-term plans, make investment decisions, and manage global sales? However, the speed, trajectory as well as the peak of market growth by country and weapon system cannot be quantified with traditional methods of the last 30 years or with today’s Defense market databases. Therefore, ACTRANS has developed a new top-down method for market projection.

Planning, but with which numbers?

Both the demand for armaments and the overall armaments market have developed a great deal of momentum since the start of the war in Ukraine. While numerous NATO countries have already announced or ordered large arms packages, only a small part of the announced EUR 100 bn has so far reached the German defense industry. Moreover, the total military requirements for Germany as well as for other countries have not yet been planned – or if they have, it is not known to the public and the industry. The dynamics, course, and peak of growth must therefore be estimated using new methods. Complex defense equipment in particular with its long supply chains requires long-term planning and investment.

Market leader “Janes Inform­a­tion Services” will not be able to map the new market dynamics for years to come

The defense market has been relatively easy to plan and analyze over the past 30 years. Janes Information Services has built a detailed global database based on publicly available information (OSINT) that stores all published procurement projects in detail (bottom-up). A stable military focus on overseas operations, predictable procurement of mostly replacements, and long-term budget planning made estimating market potential relatively easy and Janes indispensable.

However, the market-leading Janes database contains only confirmed defense procurement programs, stored by name, unit quantity and budget. In addition, updates by country occur at intervals of several months. As a result, this bottom-up approach still largely reflects the market situation before the Ukraine war and does not allow conclusions to be drawn about dynamics, progression, and growth peaks in the long term. One always remains “behind the wave” and on sight with this market model.

Military planning and procurement are complex and take a long time to translate into actual procurements. Western military planners had relied heavily on hybrid warfare with elements such as reconnaissance or cyberattacks in past decades and were surprised by conventional land warfare in Europe with its masses of tanks, ammunition, and artillery. The dynamics of the threat from China, in particular, require comprehensive military replanning.

New method for evaluating the defense market

With our top-down approach, we put ourselves in the shoes of top military planners. Their task is to define a worst-case scenario for the next ten years and align their military capability and procurement planning with it. For scenario design and capability planning, we draw on external military expertise and work with historical analogies, reference values as well as transparent assumptions. Conventional, high-intensity land warfare against an equal or superior adversary (Russia, supported by China, without US support for Europe) combined with a nuclear threat could serve as a European worst-case scenario in the context of the China great power rivalry between the US and China.

Based on this worst-case scenario, we plan a target value for weapon systems and compare it to current actual values. Once the overall market potential has been approximated in this way and a realistic ramp-up has been planned, various specifics such as a change in technology can additionally be modeled for individual companies in the second step. The ACTRANS method makes it possible to determine top-down the market potential and various scenarios over a ten-year period by country and region, but also by military branch and weapon system along the value chain.

ACTRANS is a management consultancy focusing on Aerospace and Defense technology, transformation, and innovation. Together with our network of experts, we help our customers to adapt their market intelligence, their demand forecasts as well as their investments so that they can build up production capacities to the realities of the new dynamics. For this purpose, ACTRANS has developed the market sizing model presented above to assess the potential.

Managing rapid growth in the Defence industry or how the elephant learns to dance

By Dr. Mike Körner and Dr. Martin Krause //

After decades of contraction, the defence industry now needs to grow substantially. In the past, defence projects have not exactly been associated with quick time-to-market schedules or reliable delivery timelines. So how can this rapid growth be managed in a brief time, or how do you get the elephant to dance?

Simply multiplying the company’s own capacities is often neither possible within the required timeframe, nor sensible due to the extensive investments and the build-up of future fixed costs. In addition, the defence industry also suffers from staff shortages in combination with an aging workforce and often unattractive company locations. Supply bottlenecks or long lead times for intermediate products and components ranging from electronics to steel have also been a problem, not just since the Corona era.

Realizing rapid growth by means of strategic partnerships

One approach to managing rapid growth is to build strategic partnerships. Collaboration offers the opportunity of faster response time to strong demand, a more flexible overall organization with significant expertise, and a lower fixed cost base. In this context, it is important to understand that a strategic partnership is not just another word for an exchangeable supplier relationship, but a commitment to working together for a long time and to pursuing common goals in the long term. In doing so, both partners make themselves dependent on each other to a certain extent, integrate the other side into their own processes and make long-term, project-specific investments. Rapid growth requires defence management to turn away from the previous business model in shrinking markets. At that time, the focus was on maximizing the company’s own value creation for the utilization of its own plants as well as on margin optimization within the corporate group. In the case of rapid growth, on the other hand, a significant part of the value-added and margin is deliberately outsourced to increase speed, reduce complexity, and enhance flexibility.

Approach for building strategic partnerships

What can a result-oriented approach look like? From our experience, a sensible approach can be structured as follows:

Step 1: Determining opportunity costs

The main motivator of a strategic cooperation is the combination of a lack of resources, rapid growth, and immense time pressure. In this respect, the partnership aims at gaining a long-term competitive advantage, which will enable rapid growth in the current situation and beyond. Consequently, one should first determine the volume of this potential growth and then estimate the opportunity costs that will be incurred if the company is not able to realize this growth, or only with a delay. These costs, including the necessary investments, are then the benchmark for all further steps in the adaptation process.

Step 2: Creation of a project plan

The second step is to check how much time is available for the development of the strategic partnership. This allows for a clear estimate of the timeframe in the reorganization must be completed. It clearly limits the number of practical solutions and defines the time requirements for potential partners. Thus, it is important to create an integrated overall plan. Frequently, some crucial topics are systematically underestimated or neglected in terms of duration and scope during planning. These include, for example, necessary development activities or obsolescence removal, which are required for the restart of series production. Furthermore, it is necessary to quickly expand supporting functional areas such as incoming goods inspections or internal logistical activities in order to avoid negative consequences for the production ramp-up.

Step 3: Selecting the Buy components

The third stage involves selecting the systems, subsystems or processes to be handed over to the strategic partner. In this make-or-buy decision, care must be taken to ensure that the selected subsystems / components do not require core competence expertise, otherwise there is a risk of building up a competitor in the long term. When selecting and allocating systems and subsystems to different strategic partners and suppliers, knowledge protection plays a key role. In our experience, internal resistance and fears among managers and employees can be expected at this stage. Some are worried about losing power or core competencies, while others fear for their future jobs. A structured assessment as well as clear objectives and sound communication help to overcome fears and outdated legacy structures. What was considered internal core capabilities ten years ago may now be technology widely available on the market.

Step 4: Selection and development of partnerships

Now one can identify partners that meet the requirements in terms of capabilities, resources, finances, soundness, quality, reliability, etc. When selecting partners, one should look beyond the usual defence contractors and suppliers. The physical proximity of the partner has taken on a new importance in the context of security of supply and the new geopolitical realities. Short distances as well as cultural proximity allow for a much higher speed in the implementation of a cooperation and contribute to the security of supply.

When selecting components and strategic partners, the specific aspects of the defence industry must be considered. These include, for example, legal requirements such as the German War Weapons Control Act (KWKG) or export controls. Particularly in security-relevant, innovative technologies, an expansion of banned lists, trade restrictions, sanctions and tighter export controls is to be expected.

Partner selection also requires a structured risk analysis that considers both short-term operational and long-term strategic aspects. Once the right partner has been selected, the modalities are defined and contractually fixed. This includes, among other things, the details of the cooperation, the associated investments, the communication channels, or even a division of risks. The partner becomes part of the company’s own value chain.

Success factors for strategic partnerships

What are the success factors for building strategic partnerships?

(1) Combining forces

Rapid growth regularly pushes employees to the limits. Integrating new partners is not a walk in the park as well and requires significant efforts for the organization. To successfully establish strategic partnerships, a powerful team from different functional areas must work together. In addition to the traditional areas such as program, development, production and procurement, other functions such as quality, finance, IT and legal must also be involved. Only a broad and intensive involvement of all relevant areas ensures that no substantial mistakes are made in the design of the partnership, especially in the important initial phase.

(2) Building up new competencies

Integrating external partners into internal structures and processes requires a higher degree of formalization and documentation at the most important technical and commercial interfaces to the partner. Internal work plans and handwritten documentation must be replaced by formal specifications, comprehensive technical documentation and manuals. The effort required for this conversion should not be underestimated. This formalization requires new competencies, for example concerning development, manufacturing, or purchasing.

(3) Adapting processes and structures

Strategic partnerships require innovative approaches and processes in various functional areas. An example of necessary changes is displayed in Figure 1 below for the procurement function. If, for example, procurement is selecting the most economic supplier instead of the most suitable partner, conflicts and undesirable developments are inevitable.

Classic Defence procurement of componentsRole of procurement in strategic partnerships
Scope:
Simple components (e.g., DIN / standard parts)
Approach:
– Selection of the most cost-efficient supplier based on three comparable offers
– Autonomous selection decision of the purchasing department
Incentive / Variable Pay:
Realized savings as the most important KPI		Scope:
Complex subsystems / processes
Approach:
– Selection of the most suitable, not necessarily the cheapest partner
– Decision based on a complex set of criteria involving many internal & external stakeholders

Incentive / Variable Pay:
New MbO system based on various performance KPIs
Fig.:1 Exemplary comparison „classic procurement“ vs. „strategic partnership“

(4) Creating transparency

Even more than in other industries, the defence industry must have a detailed status at all times of where its supplied components come from and which companies are involved in the entire value-added process, including the third tier. Furthermore, a fast production ramp-up cannot be successful without transparency concerning lead times and parts availability. This helps to identify risks, look for alternatives and create a robust supply chain.

How can ACTRANS support?

At ACTRANS, a management consultancy focused on defence, we help general managers, business unit leaders, and program managers to handle their rapid growth. In doing so, we support the management to readjust many small and large levers at the same time for the ramp-up. The ACTRANS team has extensive experience in ramping up major military programs, optimizing cycle times, and building strategic partnerships. Our rapid growth services include among others:

– External risk analysis of existing growth plans

– Development of alternative approaches and scenarios to manage growth

– Support with planning, orchestrating and implementing all measures to manage growth

Hybrid drives for military vehicles?

By Dr. Martin Krause //

Hybrid and electric vehicles are increasingly successful on the commercial market and are no longer a technical vision. But is this technology also usefully applicable in a military context? The voices calling for more environmentally friendly operations of the armed forces are getting louder worldwide and the list of ongoing research programmes on this topicis long. Does this mean that fuel will no longer be needed in the future and that everything will be fully electric and digital? Or is it more about an absurd scenario in which batteries have to be charged in the middle of the desert and standardised charging stations need to be installed in war zones?

The best way to evaluate the sense and nonsense of such concepts is to understand the advantages and disadvantages of hybrid drives, identify the relevant key technologies and then assess for which types of military vehicles hybrid drives may make sense.

Explanation Hybrid Electric Drive

A Hybrid Electric Drive (HED) system is generally understood to be a drive system in which combustion engines are combined with electric drive components such as batteries, generators, and electric motors. Depending on the driving mode, these then power the vehicle individually or together, with the combustion engine usually charging the batteries via a generator. The design comprises either two parallel powertrains, or the combustion engine only drives a generator, but no longer provides propulsion itself via a gearbox. Fuel is still used for refuelling.

This HED architecture differs from purely electric drives, where batteries have to be charged via external power sources. Synthetic fuels such as biodiesel also result in an improved CO2 balance but are usually not considered HED drives.

Worldwide activities

There is a large number of military test programmes for HED prototypes around the world with the objective to better understand the technology, to develop meaningful concepts and to realistically test the vehicles. Many of these activities centre around the United States, the UK and France, such as for example the Bradley Hybrid Electric Vehicle Program in the US, which BAE Systems has been working on together with QinetiQ since 2020. The $32 million contract with the US Army’s Rapid Capabilities and Critical Technologies Office (RCCTO) involves the hybridisation of two Bradley A2 Infantry Fighting Vehicles (IFVs), and a possible extension to the Armored Multi-Purpose Vehicle (AMPV) and the Optionally Manned Fighting Vehicle (OMFV) programmes is considered. Also in the US, Oshkosh Defense has created the Electric Joint Light Tactical Vehicle (eJLTV), a hybrid version of the JLTV that operates significantly more fuel-efficient.

In France, Nexter is working with Arquus and Texelis on several HED vehicles from the Scorpion Programme: Griffon 6×6 and Serval 4×4, both multi-role armoured vehicles. In this context, the French Armed Forcesshow a clear interest in HED vehicles and Nexter considers HED propulsion systems a key area of its research and development. For example, Nexter intends to use the technology as well in the Franco-German Main Ground Combat System (MGCS) project. During the recent years, the French company Arquus developed two own HED vehicles, the Electer 6×6 armoured personnel carrier (APC) and the Scarabee 4×4 light armoured vehicle. The Scarabee was notably designed for hybrid propulsion from scratch. Texelis, also from France, focused on the HED elements of the powertrain and in 2021 formed a strategic partnership with QinetiQ to develop electric hub motors and methods for recuperation of braking energy.

The UK Armed Forces already started testing three different HED vehicles under mission-relevant conditions as part of the Technology Demonstrator 6 Programme (TD6) which began in 2020. The Jackal 2 4×4 is a highly mobile patrol vehicle of the UK company Supacat, the Foxhound 4×4 is a protected patrol vehicle of General Dynamics UK and the MAN HX60 4×4 is a tactical truck of the Anglo-German joint venture Rheinmetall BAE Systems Land. QinetiQ works on a variety of customer-funded development programmes, including programmes of the US-based Defense Advanced Research Projects Agency (DARPA), the Office of Naval Research (ONR), and the RCCTO. In the UK, QinetiQ works with the Mobility Test Rig (MTR) on a programme run by the UK Ministry of Defence’s Defence Science and Technology Laboratory (DSTL). This involves a one-third-scale model of an electrically powered armoured fighting vehicle.

Rheinmetall BAE Systems Land (RBSL) designs a concept to replace the diesel propulsion system of the Challenger 2 main battle tank (MBT) with a 1,000 kW HED system. Apparently, they manage to reduce the weight of the propulsion system by 25% and its volume by 15%.

In Switzerland, General Dynamics European Land Systems – Mowag (GDELS – Mowag) builds and tests a hybrid propulsion system for the EAGLE 4×4 patrol vehicle. A little more exotic is Sweden’s Splitterskyddad Enhetsplattform Programme (SEP), where BAE Systems Hägglunds hybridised wheeled and tracked armoured vehicles as a test platform back in the early 2000s to make them smaller and lighter for air transport.

Technological potential

The list of improvements that can be achieved, at least in theory, is quite long. First of all, an HED drive causes a reduced noise and heat signature, which opens up new operational possibilities (“silent watch” / “silent running”). Furthermore, the performance of the vehicle can be optimised since each wheel can be controlled and driven individually by using hub motors and drive-by-wire technology. Depending on whether the hybrid architecture connects the combustion engine and the electric motor in parallel or in series, both drives together can significantly increase the engine power for a short time if required (“burst mode”). And separate drive trains also increase the reliability of the overall system through their redundancy. Furthermore, in a hybrid structure it is possible to operate the combustion engine in a favourable speed rage, which positively influences its service life and fuel consumption.

A central advantage of HED concepts is that new vehicle architectures become possible, so that the components of the powertrain can be redistributed inside the vehicle. This also allows to realise better protection.

Furthermore, in the context of ongoing digitisation, the on-board electricity demand will continue to increase in the future due to energy-hungry systems: high-power radio, IED jammers, battle management systems, radars, cameras, remote-controlled weapon stations, charging docks for drones or infantry equipment, air-conditioning, laser weapons, etc. HED architectures can not only meet these energy needs more easily but can also be used flexibly as mobile generators for local power grids.

Last but not least, HED propulsion systems consume significantly less fuel when idling and can also be much more energy-efficient by means of braking energy recuperation. For example, main battle tanks spend most of their operational time in static idle mode and consume high quantities of fuel at the same time, especially if powered by a gas turbine. A reduced fuel consumption increases the vehicle’s range, simplifies overall fuel logistics and reduces the armed forces’ carbon footprint. This leads to “greener” operations.

Challenges and key technologies

However, all these advantages of an HED architecture are not for free, and one of the biggest problems in this context is the severely limited space inside the vehicles. Electric motors and batteries not only add further complexity, weight, and cost, but also require a lot of installation space, which is a scarce resource in all military vehicles. The total weight of armoured vehicles grows strongly out of proportion with the protected volume and therefore the solution is not to simply increase the vehicles’ size. For example, because the maximum weight is usually restricted.

From this it can be deduced that the energy density of the storage medium is a central key variable for the realisation of HED vehicles. The same applies to alternative approaches using liquid or gaseous hydrogen for fuel cells. Currently, only fossil fuels have an energy density large enough to operate heavily armoured vehicles in a meaningful way.

The key factors for successful HED realisation are an increase in the energy density of the batteries by about one order of magnitude, a very compact realisation of the HED drive unit, as well as a robust, reliable, and cost-efficient maturity of the technology. Here, for example, the danger of thermal overheating of the batteries should be mentioned, which can lead to battery fires with toxic gases in the vehicle interior.

So, for which vehicles can HED technology be usefully applied in the near future? Ideally, these vehicles should not have heavy armour, spend a lot of time idling, be equipped with a variety of energy-hungry systems, require a reduced noise as well as heat signature, and travel long distances at the same time. Based on these criteria, scout and patrol vehicles, for example, seem to be suitable first candidates for hybridisation.

When implementing HED architectures, it is fundamental to ensure that the technology represents a real improvement compared with a conventional drive system under realistic operating conditions. It should not be installed just because it appears to be modern and popular, and the CO2 balance of specific vehicles is certainly not the most important aspect in a war.

A perspective for Germany

In the recent decades, German companies have set worldwide standards with conventional drive technology for tanks and other military vehicles, and this technology is still used very successfully on a global scale today. In the case of HED drives, however, the technical pioneering role currently tends to be abroad, while comparatively little is known about the activities of German companies. Exceptions to this are, for example, the concept studies done by Rheinmetall and the companies Magnet-Motor (RENK Group) and Vincorion (JENOPTIK Group). At Eurosatory 2022 in Paris, some national and international manufacturer will most likely surprise the industry and present new HED products.

The critical question with all these concept studies is to what extent the technology is ready for use or series production. This usually requires many years of experience in dealing with HED systems, and the British company QinetiQ, for example, has been working increasingly on such systems for the past 10 to 20 years.

While in the past decades cutting-edge military technology often resulted in commercial derivates in the civilian market, this relationship has already reversed. Today, commercial off-the-shelf (COTS) technologies often replace high-end solutions from various military niche markets, which clearly shows how much disruptive potential there is in HED drive units. Procurement cycles in this field last easily for 10 to 20 years, and in some cases significantly longer. Thus, if drive manufacturers miss a trend and cannot deliver these innovative systems in time for a tender, their drive components will consequently no longer be installed in the next product generation. This means that the respective markets would possibly be closed for decades, and it would remain unclear to what extent these markets could be opened up again at a later point.

An example for the use of COTS drive technology in military vehicles is the Lynx infantry fighting vehicle of Rheinmetall. It no longer has a highly specialised military engine but is powered by a Liebherr diesel engine of the type also used in the construction sector. These established engines are robust, durable, reliable, proved themselves over time and can be serviced worldwide. And in addition to that, they are also significantly more cost-effective and available in a timely manner simply because of their large production quantities. Now that Liebherr also has the first hybrid engines in its product portfolio, it is likely only a matter of time until hybridisation of the Lynx is considered. The Lynx is a possible candidate to succeed the Bradley IFV in the United States and it can be assumed that this successor programme will include at least some hybridisation.

In this respect, it becomes apparent how fundamental the threat of disruptive HED concepts is to the strategic position of established drive technology companies. It requires a technical vision to adapt the strategic orientation of these companies to the technology change and to acquire technology leadership in the new areas as well as to implement the technology worldwide. ACTRANS is a management consultancy with a focus on technology and innovation. Together with our network of experts, we support our clients in aligning their product portfolios, their processes as well as their technologies with growth and innovation.

A new NATO calibre for assault rifles?

By Dr. Martin Krause //

On 19 April 2022, the US Armed Forces declared with regards to the Next Generation Squad Weapon tender (NGSW) to procure new 6.8×51 mm calibre assault rifles and machine guns from SIG Sauer for the US Army. The purpose is to replace, at least in part, the M4 assault rifle and the M240 and M249 machine guns with the XM5 and XM250 respectively. Does this decision have the potential to fundamentally change the entire weapons and ammunition logistics of the NATO countries in the field of military rifles?

Background

In 2017, the US military launched the Next Generation Squad Weapon programme (NGSW) to replace the M4 assault rifle and the M240 and M249 machine guns including ammunition for the two NATO calibres 5.56×45 mm and 7.62×51 mm. The controversial discussion about the performance of these two calibres is decades old and is based, among other things, on aspects such as recoil, cartridge weight, range, target impact, etc. Most recently, the penetration performance of the smaller NATO calibre 5.56×45 mm was considered too low, since ballistic body protection in particular is becoming more sophisticated and more widespread. In order to find a sensible compromise in the form of a new medium calibre, the tender specified 6.8 mm projectiles and called for the corresponding cartridge to be developed together with the weapons.

Of the remaining participants, SIG Sauer finally won with the MCX-SPEAR and the LMG-6.8 as well as the SIG 6.8×51 mm hybrid cartridge, which consists of a brass case with a steel base. Previously rejected competitors pursued concepts based on polymer case cartridges or telescoped ammunition. Furthermore, the XM157 Optronic from Vortex was chosen, which, in view of the integrated ballistic computer and sensor packages, represents a clear step towards a digitalised rifle respectively smart rifle. A total of up to USD 1.4 billion is to be invested over the next 5 years.

Significance for Germany and Europe

The current tender for a new assault rifle for the German Armed Forces has been running for more than half a decade, with the two manufacturers Heckler & Koch and C.G. Haenel still in the game. The technical evaluation of the calibre 5.56×45 mm calibre weapons was followed by a legal dispute, of which the outcome is still unclear.

Especially against the backdrop of the new geopolitical situation, a much closer transatlantic cooperation in the field of defence seems reasonable. In this respect, one might ask whether the German Armed Forces will procure a new 5.56×45 mm calibre assault rifle for the next decades when the USA, the by far most important NATO ally, already considers this calibre too small, too weak and outdated.

As a theoretically possible scenario, the time until the introduction of a new 6.8×51 mm calibre weapon could be bridged by a possible midlife upgrade of the currently used G36. Admittedly, this would also require certified ammunition of several manufacturers to be available on the market in the foreseeable future. The calibre discussion will certainly be reopened with any further future assault rifle or machine gun procurement in Europe, and there is a possibility that a new NATO standard calibre will de facto emerge to complement the existing ones.

However, the consequences of the NGSW tender for Europe are not limited to the arms manufacturer sector. European ammunition producers will also have to develop and certify their own 6.8×51 mm ammunition. In addition, it is necessary for European optronics manufacturers to consequently extend their product portfolio in the direction of digital aiming devices, for example including laser rangefinders, ballistic computers, and digital display overlays. The goal is to ensure a high hit accuracy even at a large combat distance. And last but not least, ballistic body armour must be optimised at the same time so that soldiers of European armed forces are protected adequately.

Technical challenge

Currently, no German manufacturer offers either a military 6.8×51 mm calibre gun that is ready for series production or the related ammunition. And very few producers in Europe will even have worked with this calibre to date.

Reliable military weapons with a new calibre as well as the related ammunition for them cannot be developed overnight and their design and testing require considerable resources. Simplified, one could imagine scaling up an existing 5.56×45 mm or 7.62×51 mm calibre rifle and converting it to the new calibre. However, this initially comes with a large number of technical problems for which the new weapon still needs to be adapted and optimised in detail – in some cases at considerable expense. These include, for example, the pressure curves in the cartridge and barrel, the highly dynamic behaviour of the gas loading mechanism, as well as the changed loads on the overall structure. In this respect, a military rifle for a new cartridge should ideally be a new development, which can certainly be based on proven concepts within the framework of a product family. One sets one’s own standards in particular when the weapon and the ammunition are initially designed to work together as a system.

New opportunities

If new 6.8×51 mm calibre guns, the corresponding ammunition or related optronics are put out to tender in Europe in the foreseeable future, the cards will be reshuffled among the potential manufacturers. The same applies in the event that the current tender for the Bundeswehr’s new assault rifle might actually be relaunched. In concrete terms, a reshuffled deck means that smaller manufacturers or foreign manufacturers, who used to be in the second row behind the established players with regards to large tenders, will then have a good chance of positioning themselves.

The key to success will be to develop and test the new technology faster than the competition, in other words to implement the necessary innovation quickly. However, outrunning the competition by shortening development cycles will only be possible if empirical knowledge, experimental testing, and new methodology are combined in an intelligent way throughout the development processes. This is done, for example, through the consistent use of modern simulation technology in cooperation with collaboration partners from research institutes and universities. Lengthy experimental trials can thus be shortened, and experimental data sets can be evaluated with high-quality machine learning algorithms. Furthermore, new differentiation potential arises from the use of new materials combined with innovative manufacturing processes such as 3D printing. The same holds for modular and integrated sensor technology for the optional digitalisation of a rifle.

Those who recognise this strategic opportunity and know how to exploit the disruptive potential of the situation can win the race for future orders and the associated market position. For the coming decades, the Ukraine war puts the focus back on national and alliance defence in the scenario of a symmetrical war, for which the 5.56×45 mm calibre is considered potentially too weak. The shift to a larger and more powerful calibre is not only due to the increasing use of ballistic body armour. Also the significantly improved aiming devices create new opportunities. If manufacturers see a market potential here, they should start their activities soon because of the long development times. At ACTRANS, as a management consultancy with a focus on technology and innovation, we support our clients in terms of aligning their product portfolios, development processes and capabilities, as well as technologies with growth and innovation.

European satellite constellation: a virus and Europe’s options

By Daniel Salzer //

We live in difficult times. From Wuhan, a Chinese city so far unknown to most of us, an epidemic spreads across China, and within a short period of time transforms into a global pandemic. No place on this Earth is safe from SARS-CoV-2 – a catastrophe singularly unique in centuries.

At the same time, the world of space exploration experiences its very own pandemic from the “city” of New Space. It first developed as an epidemic in the United States, with its varieties (mutations?) being Starlink, OneWeb, Kuiper and Telsat, to name a few. Tens of thousands of satellites … This constellation virus – also called “constellationitis 2” – seems to be growing into a pandemic, having reached European shores. The minds of several important economic as well as political figures are already being dominated by “constellationitis 2”.

Let’s look at this epidemic’s development in the United States where it originated. By now, the Starlink variety/ mutation seems to have pushed all other mutations there into the background. Already the OneWeb variety had to bite the dust and fundamentally change its structure after its bankruptcy in 2020. Today this variety latches onto a different kind of cells, mainly the cells of navigational systems. Of course, we do not have proof of this new OneWeb variety’s success in its new mantle; no reliable business plan is known. By contrast, the Starlink mutation with its strong Elon Musk DNA and its financial envelope made up of numerous investors continues to spread and attack all other varieties through its sheer presence. Its DNA promises great things: virtually unlimited bandwidth and data rates, a global presence, thousands of satellites. This promise has entrenched itself so thoroughly into the minds of its recipient cells – important economic as well as political authorities – that they are thinking neither about its purpose nor about its background, but are floating happily in the cloud. The apparent conclusion is that we need something like it in Europe as well. And yet several factors are being overlooked. Over here, we don’t have any Elon Musk DNA (even if we wanted to), neither do we have any investor-driven envelope with which we could plunge into any waves of “constellationitis 2”. And it’s too late for copycatting. The only thing we think we have is tax money, and even that is only a matter of faith.

Europe should ask itself the fundamental question whether we should contract this constellation virus, needing to implement our own satellite constellation to provide European citizens as well as the European industry with an adequate communication structure. Let’s look at the example of Starlink. In April 2019, Starlink released a statement that, over the course of the following 60 months, they intended to get 44 satellites each month into space, bringing all of the specified 2,200 satellites online within six years. By now, there are to be 12,000 satellites. By the end of 2019, 60 of these satellites were in orbit, 57 thereof operational, and 47 of these had reached their designated orbit. In September 2019, Starlink amended the specifications, which were approved by the FCC in December. By January 2021, Starlink has put 1,045 satellites into orbit. In February 2021, Starlink announced that the constellation had 10.000 users. Based on $ 99/month, the monthly fee advertised by Starlink in late 2020, the revenues can be projected at less than $1m. According to a statement made by Elon Musk, Starlink is projected to generate an annual revenue of $30bn from 2025 onwards – an utterly unattainable objective as the available bandwidth is simply limited. Even if by then half of the projected 12,000 satellites were operational, one could expect about $3bn annually – one tenth of the promised number. Of course, no one knows of a business plan. People suspect the constellation forming the basis for SpaceX’s profitability.

The logic behind implementing Starlink becomes clearer once the following two factors are considered. First, it is evident that in this cut-throat competition – at best, if at all – only one constellation can offer the bandwidth necessary for economic survival. And Starlink’s implementation is the quickest. Second, Mr Musk could actually be pursuing a wholly different goal: to afford his growing automotive business the kind of worldwide connectivity independent from any other networks. So perhaps it’s not at all about a constellation’s profitability but about the profitability of Musk’s world, funded by the sales of Tesla cars. Starlink may be one of the building blocks, regardless of its profitability. Interestingly enough, the virus seems to have reached Germany. In February, Volkswagen has announced in the Wirtschaftswoche that they are thinking about a co-operation with Elon Musk, including a European constellation component. The virus also seems to be spreading from the United States to China, in opposite direction to COVID-19. In June 2020, Geely, an investor in Daimler and Volvo, invested about $330 M in a satellite plant of their own. BYD, too, has shown interest in satellites.

For Europe, two fundamental questions should be asked. First, whether this kind of model would be economically feasible for Europe, and second, whether this kind of model would be crucial enough for European industry as well as European users to necessitate the implementation of an appropriate system of tax funding. The EU projects the volume of investments to be €7-9 Bn – and, as with every project of this kind, we would have to expect the total to be much higher. Like with Starlink, we cannot assume any economic feasibility from the operation of this system. The question that remains unanswered is that about the strategic significance of such a system for European industries and users – the very same question that, after many years of discussion, was answered in the affirmative for the navigational system Galileo. But a communications system is different from Galileo… Yet, like with Galileo, it would be years after Starlink’s initial operation that we could provide the respective infrastructure.

Before plunging head-first into this adventure – and there is currently no private space ventures with a market value of $74bn like SpaceX in Europe – we should endeavour to determine the actual economic and socio-political needs for European industry and citizens in a global context, instead of getting infected with the “constellationitis 2” from the very start. It is imperative that we determine the needs as well as define the best option to meet them with GEO, MEO, and LEO satellites from Europe. Already today Europe has available astronautic resources that can be adapted to the future needs in global low-latency communication, and doubtlessly with substantially lower expenses, effort, and risk.

Regrettably, we didn’t have the means to stop COVID-19, but we do have the chance to stop this constellation pandemic in Europe – although we do need a sensible and coherent alternative. The option to just watch Mr Musk et al. without taking action is one we do not have.

A European “Space Force”: the “Dark Side of Force” must be illuminated

By Daniel Salzer //

The alarm signal lights up on the screens of the employees in the blue-lit and darkened rooms – a Soyuz rocket is launched from the Plesetsk Cosmodrome with an unknown payload, for an unknown purpose. Once in space, a satellite separates from the carrier. After 11 days, this satellite suddenly becomes two, and the staff of the US Space Command and of the Space Force are surprised and shocked. Only a few days later these two objects float up to the top-secret KH-11 observation satellite, part of the Keyhole / CRYSTAL constellation, and circle it: purpose unknown. After intensive diplomatic activity, the two Cosmos satellites surprisingly leave their target and continue to orbit the earth until one of these satellites fires a shot into space. The signal from the Russian satellite power to the USA is clear – we can destroy the critical backbone of your defence, your satellites, at any time. You will then be blind, deaf, and disoriented. Science fiction? No, the Soyuz rocket with the two satellites, called Cosmos 2542 and Cosmos 2543, was launched from Plesetsk on November 26, 2019.

On January 8th, 2020 at around 1:00 AM, the infrared sensors of the US satellites detected the launch of more than a dozen Qiam-1 and Fateh-313 rockets from three launch sites in western Iran. The soldiers at Buckley Air Force Base in Aurora, Colorado respond immediately. The trajectories are evaluated, and the American bases Al Awad and Erbil in Iraq are informed via the communication satellites. The rockets hit at 1:34 AM, and almost all of the soldiers stationed at these bases have sought protection in bunkers or trenches. 109 soldiers were injured, but no deaths were recorded. This is not science fiction either, this time many soldiers owe their lives to the functioning space infrastructure of the USA.

Since October 2014, the Russian satellite Luch-Olymp has “visited” around 15 western communications satellites, including in September 2018 the French-Italian military communications satellite Athena-Fidus. An anti-satellite missile system was tested in Russia in April 2019 and a laser system to dazzle satellites in December 2019. In March 2019, India tested its own anti-satellite system and destroyed its own satellite. Meanwhile, not only Russia, India, the United States and China, but also Iran, North Korea and Pakistan have the ability to destroy satellites and plan to develop these capabilities further.

There are around 1300 active satellites registered in the USA. The backbone of its military infrastructure consists of around 190 military and 170 official satellites for communication, ISR (earth observation, signal recognition, etc.) and navigation (GPS). To protect this critical backbone, a true Achilles heel of Western defence, the US is building the US Space Command and the Space Force. For this, personnel from the other branches of the armed forces will be deployed, starting with 16,000 Air Force employees. The estimated one-off additional budget required to build up these new armed forces over the next 5 years is US-$ 3 billion, plus US-$ 1 billion for new administrative positions.

And what is Europe doing? Around 30 military satellites are in operation in Europe: in France, Great Britain, Italy, Germany and Spain. This represents a fraction of the US infrastructure, but it is all the more critical for that reason. On the occasion of the Luch Olympus case, on July 14, 2019, President Macron announced the establishment of the “Commandement de l’Espace”, which was set up in Toulouse on September 8, 2019, to protect the French space infrastructure.

Immediately after the announcement, the German aerospace coordinator commented on this, criticized the French for their stand-alone initiative and suggested a European initiative. But what happened afterwards at the European level? Where is a European initiative? Certainly, Europe cannot build anything comparable to the US Space Command – if only for financial reasons. Europe must be closely linked to US capabilities. For this purpose, Europe would have to bring in capabilities complementary to the USA, for example in the area of ground infrastructure, sensors for the observation of rocket launches from the ground and from space (e.g. complementary to US Space Fence radar system that went into operation in March 2020) and, if necessary, anti-satellite capabilities. Except for some rather embryonic national initiatives in space situational awareness, Europe has very little or nothing to offer compared with the US. We also need European data processing centres, communication, and further technology.

Is there a strategy for an effective use and defence of the critical space infrastructure at European level? Do we even need one?

Of course, Europe has an alternative – to train our armed forces intensively in the use of the sextant for position determination and to set up air force pilots in aerial photography and to deploy carrier pigeon battalions for communication. Just in case.

From Aviation Safety to Cyber Resilience

By Dr. Marco Soijer //

Leveraging aerospace industry’s century-long safety culture for cybersecurity

Software development has a poor safety record. The number of cyberattacks has risen dramatically since 2004, clearly outrunning the growth of the internet itself. In parallel, aviation has a proven track record of achieving the highest level of safety and serves as an example even in the information technology industry itself. Despite increasing software complexity, the existing certification processes for airborne equipment manage to assure extremely reliable software. The more recent certification process for information technology products applies similar methods of formal development but is not as widespread as its aviation counterpart. More importantly, the aerospace safety culture is missing. As such, information technology can benefit from applying the aerospace industry’s methods, procedures and mindset to its development process. Due to the similarities of both formal development worlds, the transfer will be easier than it may seem.

In his whitepaper, Senior Consultant Dr Marco Soijer revisits recent incidents caused by faulty software and discusses how key cornerstones of the aerospace industry’s safety culture can be applied to a wider range of IT products. Doing so, he draws on many years of experience in the European aerospace industry as well as recent knowledge from the cybersecurity industry.

PDF-Download: WhitePaper_FromAviationSafety_to_CyberResilience

Agile methods in complex Aerospace & Defence projects

By Martin Kraus //

The origin of agile methods

About 25 years ago, the hype around “lean” took of: lean management, lean production, lean etc. Nowadays, the new buzzword is “agile”. At our clients and everywhere in the industry we find change projects around agility: agile company, agile management, agile deve­lop­ment, agile processes etc. However, the understanding of what “agile” means and what these change projects are aiming at is very vague.

Its origin, to put it that way, dates to the mid-1990s with the process model described by Jeff Sutherland and Ken Schwaber in the “Agile Manifesto”, the application of which is known as “Scrum”. It focused on software developments where both the product features and the implementation path were not fully known at project launch.

Ralph Douglas Stacey developed a criteria catalogue, later named “Stacey matrix”, to determine whether a development project or project management should be carried out using “traditional” or agile methods.

The Scrum process model itself is simple, but so rigorous that the process itself cannot be considered agile. This is often a first misconception. Furthermore, Scrum is just one of many approaches to dealing with complexity, but it cannot reduce it. In my view, it has yet to be proven that Scrum has been successfully implemented in larger, complex software projects.

Transferring agile methods into Aerospace & Defence

Increasingly, there is a trend to apply the Scrum methodology to other product development projects and project management. This makes sense if the ideas and process elements of the “Agile Manifesto” are adapted as needed. Which means, however, at least from the perspective of the “ideological forefathers”, to depart from the original Scrum concept.

Riding the hype around Scrum, many companies have even started promoting their products as being developed with agile methods. In doing so, they turn Scrum and agile methods into a quality feature which they clearly aren’t.

The Aerospace & Defence world is greatly different from the software industry (e.g. gaming, VR, app development) or consumer goods in many aspects, for example:

  • Projects are larger, typically involving big teams, many people, partners and suppliers.
  • Often, projects are multinational, with partner companies located in different countries and sites. This means a multitude of process worlds and – even more importantly – company cultures.
  • This complexity mirrors the customer side with different or even diverging requirements regarding a product or system, and with sometimes contradicting political and economic interests (e.g. local workshare).
  • Development projects are complex and usually include components which test the limits of technical feasibility.
  • Development and product life cycles are much longer than in dynamic, consumer-centric industries.
  • Even though more and more functionalities are realised through software, the overall performance is determined by the integration of hardware and software and the system integration on platform level.
  • Complex qualification and certification requirements influence the design itself as well as all development, production and verification processes.

Nevertheless, agile methods and mindset can be applied in A&D. To which extent and for which elements of a product or system should, however, be thoroughly analysed for each individual case. Certain phases of a project are potentially better suited than others. For example, the concept or definition phases of a project are suited for the Scrum approach. As a prerequisite, however, all partners and especially the customer or customers, respectively, must agree to such a model, which requires a high degree of interaction. It can result in an unambiguous product description or a specification which is agreed by all parties.

A software architecture or specific software functions may also be developed using Scrum or a derived methodology. Nevertheless, in any case, this requires completely new SW and SW/HW architectures. “App”-like applications in a functional SW system do not only allow for agile development methods, but also for more flexible updates during the product life cycle.

Agile methods as a contradiction to other procedural models?

For many projects in our industry, the application of the so-called “V-model” is a contractual requirement. Since its introduction (by the German public procurement agency, by the way), the V-model has been well accepted and even applied outside the military sector. You can sometimes hear or read that companies are planning to replace the V-model by agile methods. This is another misconception. These two procedural models are in no way contradicting. Agile methods can be easily combined with the V-model. The advantages and the logic of the V-model should not be neglected or waived. It has also proved effective as the formal basis for qualification and certification.

A frequently cited example for the application of Scrum in recent aviation history is SAAB’s Gripen E. However, in the public domain you will only find a presentation given in cooperation with the “Scrum Institute”. Further research and own discussions with SAAB have revealed that all processes have been changed to “agile”, and that even safety critical software has been developed using Scrum. Nevertheless, delays in the Gripen programme leave at least some doubt regarding the success of the implementation.

In the A&D industry, hybrid approaches in development and project management turn out to be the best solution. When applying agile methods, one of the challenges for both management and customer is to accept that neither schedule nor budgetary planning exist at (sub-)project launch and that it is also unclear in which sequence which partial solutions and intermediate products will be ready.

Company-wide agility

Turning the attention to company level, “agilisation” must be approached in a comprehensive manner. Per se, it is not enough to insist on the engineering or production areas becoming more agile. In that overall context, all operational core and support processes must be analysed and amended.

For a bigger, or even group-wide change project following the motto „We want to be more agile!”, it is first of all necessary to clarify and harmonise the understanding of “agility” and “agile” and to fix the aim of the project in an unambiguous and understandable way.  If not, the change project itself is the opposite of agile and will not have the expected impact.

The ACTRANS team is here to support you with an initial discussion and the definition of aims for an “agile” change project.