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Defence Innovation and the UK: Responding to the Risks Identified by the US Third Offset Strategy

John Louth, Trevor Taylor and Andrew Tyler
Occasional Papers, 11 July 2017
United States, Defence, Industries and Society, Equipment and Acquisitions, Defence Management, UK, Technology
This paper examines the implications of the US Third Offset Strategy for the UK. It finds that UK defence equipment capabilities costing £16 billion a year are increasingly vulnerable to low-cost, technology-rich weapons from hostile states. It argues that the UK government has focused more on offensive systems over protective capabilities, and it calls for a commitment to research, innovation and adaptive technologies for defence.

The Third Offset Strategy (TOS), announced by the US in November 2014, stressed the need for a step-level change in American military capabilities to counter the increasing anti-access/area denial systems being developed by potential adversary states. The TOS emphasis was on the potential for innovation at many levels of defence, but technological change was to have a particularly significant role.

This paper examines the implications of the TOS for the UK. It is based on a mixture of desk-based research and three day-long workshops, from November 2016 to March 2017, which brought together senior stakeholders from the governments and private sectors of the UK, the US and continental Europe. Participants in the workshops were directed and challenged through the chairmanship of Lord Arbuthnot of Edrom.

The paper endorses the core assertion of the TOS – that potential adversaries have developed or are developing threats to major Western platforms on the sea, in the air and on land that significantly increase the risks of deploying such platforms in strategic areas, including the Baltics and the North Sea, East Asia and the Gulf. Moreover, these potential adversaries continue to develop offensive cyber capabilities and technologies that threaten the Western use of space for surveillance, communication, navigation and other purposes. It would not be accurate to assert that potential adversaries have ‘caught up’ across the full range of defence capabilities, but they have effectively focused their efforts, particularly on sensors, space denial, many extended-range precision missiles able to attack targets on land, at sea and in the air, as well as cyber. There are thus growing challenges for UK as well as US forces, especially those concerned with force projection.

This paper also recognises that, in any major future conflict, an important part of the battle will be threats to the UK’s critical national infrastructure from hostile cyber operations. In the US, while the Third Offset label may not be adopted by Donald Trump’s administration, we expect Washington’s emphasis on the need for innovation and increased defence effort to be sustained.

In response to the US’s TOS, the British Ministry of Defence (MoD) launched its own Defence Innovation Initiative in September 2016 and has committed £800 million over a decade for basic research purposes, as well as maintaining the assurance that the MoD’s core science and technology budget will be a minimum of 1.2% of the defence budget. These positive steps will need to be supplemented by significant changes to encourage a stronger innovation culture within government defence. These should involve:

  • Establishing an appetite for risk in the public and private parts of the UK defence enterprise that recognises the need for experimentation and the inevitability of regular failure. Clearly, work that is not going to succeed needs to be identified quickly, so that failure is early and comparatively inexpensive.
  • Managing innovation on a programme-by-programme, case-by-case basis, by being ready to prioritise valued areas, and searching for technology demonstrators and prototypes with potential in a range of capability applications. The potential of a system or piece of equipment to impact positively the UK’s exports and prosperity should be taken into account. A range of technologies (including those at low, medium and high technology readiness levels) should be supported, and the balance managed between upgrading existing assets and the development of novel capabilities and systems.
  • Reinforcing government readiness to work closely with the private sector, taking forward such arrangements as Niteworks and the UK Defence Solutions Centre. If the MoD is to incentivise firms – including small and medium-sized enterprises – to bring their best thinking to defence, it may have to put aside an instinctive preference for competitive tendering and the desire to acquire control over the intellectual property it will use. 
  • Reviewing the Defence Equipment Plan published in January 2017 to ensure that innovation is a guiding principle for capital investment.


The political stances and developing capabilities of potential adversaries require that the UK consider its role in the world, not least its military links with the Middle East and East Asia. The UK must also, in conjunction with its allies, review thinking about how deterrence and conflict avoidance can be strengthened. The readiness of NATO to explicitly consider escalation to the nuclear level in the face of losses at the conventional level seems like a hangover from the Cold War and looks less appropriate and credible in the contemporary world.

As the UK reacts to the changing vulnerability of many of its forces, an overarching claim of the paper is that, of the seven categories in the Defence Capability Framework (prepare, project, inform, command, operate, sustain and protect), most emphasis should be placed on the last of these: protect.

The paper also offers a four-category approach to the analysis and treatment of specific capabilities and the hardware on which they are based. Summarised as Tolerate, Treat, Transform or Terminate, it is argued that capabilities that face only acceptable risks can be left in place (Tolerate). Other capabilities can be rendered less vulnerable by modest changes (Treat), which is broadly the agenda of the Strategic Capabilities Office in the US. More drastic additions to capabilities, probably taking longer to introduce, fall into the Transform category. Treat and Transform depend significantly on innovation success. Finally, it is recognised that some areas may have to be abandoned (Terminate) and alternative arrangements made, including possible increased reliance on allies.

The effective management of defence has never been easy and has arguably never been so demanding, given the range of challenges on the agenda, the importance of agility in the use of armed forces, and the prevalence of uncertainty and incidence of surprises. The capacity to innovate is a significant aspect of being able to deal with these issues. To maximise the UK’s potential in this area, financial changes, as well as a range of behavioural changes, will be needed.

About the Authors

Professor John Louth is Director, Defence, Industries and Society at RUSI. He served in the RAF for sixteen years and has worked extensively across industry as a consultant and programme director. Professor Louth is an adviser to the Defence Select Committee in the House of Commons and is the UK representative of the Permanent Monitoring and Analysis Review Team of defence capabilities for the EU. He supervises PhD students at the University of Roehampton Business School.

Professor Trevor Taylor is Professorial Fellow in Defence Management at RUSI where he is based in the Defence, Industries and Society Programme. He is an Emeritus Professor of Cranfield University where he headed the Defence Management and Security Analysis Department at the Defence Academy of the UK for twelve years. He is a former head of the International Security programme at Chatham House and was for six years an elected council member of the Defence Manufacturers’ Association.

Dr Andrew Tyler CBE is an industrialist and former senior government servant. He worked in defence first as Managing Director of BMT Defence Services and from 2006 in the Ministry of Defence, becoming Chief Operating Officer of the Defence Equipment and Support organisation. Since 2013 he has been Chief Executive of Northrop Grumman Europe. He has a PhD in environmental science and is a Fellow of the Royal Academy of Engineering.

Author

John Louth
Director, Defence, Industries and Society

Professor John Louth is Senior Research Fellow and Director for Defence, Industries and Society at RUSI. 

He served as an officer... read more

Trevor Taylor
Professorial Research Fellow, Defence, Industries and Society

Trevor Taylor is Professorial Research Fellow in Defence Management at RUSI, where he heads up a research programme in Defence,... read more

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