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Remarks On Opening DIUx East and Announcing the Defense Innovation Board

Thanks, Raj. Thanks very much for that introduction.

Secretary Ash here from the state of Massachusetts, I like you already, Secretary Ash.

OK. Good afternoon, everyone. Thanks very much for joining us. It's great to be back in Cambridge today to open up the east coast node of the Defense Department's technology startup, the Defense Innovation Unit Experimental, DIUx. And with the Boston area's rich legacy of public service, not to mention its status today as a landmark hub of innovative thinking and innovative technology, we couldn't have picked a better place for our startup.

I created DIUx last year because one of my core goals as Secretary of Defense has been to build and in some cases rebuild the bridges between our national security endeavor at the Pentagon and America's wonderfully innovative and open technology community. That's important because we've had a long history of partnership, working together to develop and advance technologies like the internet, GPS, and before that satellite communication and the jet engine. Not only benefiting both our security and our society, but truthfully changing our entire world. And that cooperation among industry, the academy and government helped make our military what it is today, the finest fighting force the world has ever known. There's no one stronger and there's no one more capable, and that's a fact that every American ought to be proud of, and I certainly am.

But it's also a fact that our military's excellence isn't a birthright. It's not a guarantee. We can't take it for granted in the 21st century. We have to earn it again and again. And today, it's imperative we do so because we live in a changing and competitive world.

Technology itself is an example of that change. When I began my career in physics years ago, most technology of consequence originated in America. And much of that was sponsored by the government, particularly the Department of Defense. And today, we're still major sponsors, but much more technology is commercial. The technology base is global, as Raj has noted, and other countries have been trying to catch up to the breakthroughs that for the last several decades made our military more advanced than any other.

Nations like Russia and China are modernizing their militaries to try to close the technology gap. And moreover, technologies once possessed by only the most formidable militaries have now gotten into the hands of previously less capable forces and even non-state actors. And at the same time, our reliance on things like satellites and the internet can lead to vulnerabilities that our adversaries are eager to exploit.

So, to stay ahead of all these challenges, to stay the best, I've been pushing the Pentagon to think outside our five-sided box and invest aggressively in innovation of all kinds, technological, organizational, operational, and in the talent management of our all- volunteer force.

One way we're doing that is by pushing the envelope with R&D and new technologies. Like data science, biotech, cyber defense, electronic warfare, undersea drones and many, many, many others. And we're making some serious investments here. The latest budget I've proposed will invest $72 billion in research and development next year alone. And for context, that's more than double what Intel, Apple and Google spent on R&D last year combined.

Another way we're investing in innovation is through people. We're building what I call on-ramps and off-ramps for technical talent to flow in both directions. So more of America's brightest minds can contribute to our mission of national defense, even if only for a time, or for a project. And so our military and civilian technologists for their part in the innovative defense industry that supports us already can interact in new ways with the entire innovative ecosystem.

Innovative technologies and people are necessary but not sufficient which is why we're also investing in innovative practices and organizational structures. The world we live in demands it. While the Cold War arms race was characterized by strength with the leader simply having more, bigger and better weapons; into today's era of technological competition is characterized by the additional variables of speed and agility. Leading the race now depends on who can out innovate faster than anyone else. It's no longer just a matter of what we buy, now more than ever it also matters how we buy things. How quickly we buy them, whom we buy them from. And how quickly and creatively we can adapt and use them in different and innovative ways. All this to stay ahead of future threats and future enemies. And to ensure we keep adopting more innovative practices in the future, I recently created the New Defense Innovation Board chaired by Google Alphabet's Eric Schmidt to advise me and future Defense Secretaries on how to continue building bridges to the technology community and how we continue to change to be more competitive. More on that in a few minutes.

Finally, one more way we're investing in innovation is by developing new partnerships with the private sector across America's many great hubs of unrivaled innovation. Places like Austin, Seattle, Silicon Valley and of course right here in Boston.

And that's where DIUx comes in. And that's why I'm here.

Over the last 11 months since we first opened the doors of the West Coast office in Silicon Valley – DIUx has been a signature part of our outreach to the tech community. It's helped us connect with hundreds of entrepreneurs and firms – making great progress in putting commercially-based innovation into the hands of America's soldiers, sailors, airmen and Marines. And it's helped us learn a lot too – identifying not only our successes but also our shortcomings. Both in how we engage with tech companies and in the tools we use to accelerate the uptake of technology in the Department of Defense.

So two-and-a-half months ago we put that knowledge into practice. We took a page straight out of the startup play book by iterating rapidly and then launching DIUx 2.0 with several new features. It now reports directly to my office. It has its own contracting capability and budget resources. It has a new flatter partnership-style leadership structure led by managing partner Raj Shah F-16 pilot and co-founder of successful technology startup. And with the opening of this office here in Boston, we've made in the DIUx 2.0 a nationwide release.

Now, over the last 10 weeks, Raj and his team have been very busy. First of all, they've reorganized DIUx into three teams.

They have an Engagement team which not only introduces the military to entrepreneurs but also and more importantly introduces entrepreneurs to military problems. We have some of the most exciting and consequential problems you get can in technology in our department and in our mission. Combined with our mission of defending this country, that's one of the strongest attractors for innovators and technologists who want to make a difference in the world. So the Engagement team is critical.

DIUx also has a Foundry team, which works with technology that's either still maturing or that might need to be significantly adapted before we can use it. To do this effectively, they've launched a Warfighter-in-Residence program and an Entrepreneur-in-Residence program which bring together servicemen and women detailed from across the military with top engineers contracted from outside the military for focused design sprints, rapid prototyping and field trials. One of the first things they're doing is exploring the potential military applications of virtual and augmented reality technologies, which will continue to mature as tech companies’ major investments in these areas come to fruition. They'll also work on new applications for commercial space technologies, advanced aerial robotics and autonomous vehicles.

The third and largest team is the Venture team, which is tasked with identifying emerging commercial technologies and exploring their applicability to potential military and civilian customers across the department.

Now, while they might sound familiar, I have to emphasize that there's a critical difference between what DIUx's Venture team does and what a venture capital firm does.: instead of making equity investments, the venture team makes R&D awards. But they're able to work with anyone, from two people in a garage or a dorm room all the way up to mature tech companies. They operate on a co-investment model On any project that DIUx moves forward with, they aim to match funding and staffing resources with a customer organization within DOD. That way, they can ensure not only that the product meets the customer's needs, but also that they have a partner to drive post-prototype transition.

With these three teams Engagement, Foundry and Venture -- it's important to note the value that DIUx 2.0 has to offer our department. Because of its tech scouting prowess and deep network with the technology and venture capital community, DIUx has a unique ability to identify and do business with companies outside our traditional defense orbit, including many so-called stealth startups that aren't even officially opened for business yet. This significantly enlarges our defense industrial base and helps existing DOD components who partner with DIUx to locate cutting-edge and best-in-breed technology, whether in a garage in Silicon Valley, a lab in Boston or a successful firm that's never worked with us before. And by rapidly capitalizing on that, DIUx can help the rest of DOD move much faster, delivering the fruits of America's unparalleled technology economy to the warfighter in weeks and months rather than years.

That ability to move at the speed of business is possible because the DIUx 2.0 team pioneered a new and an innovative method for defense acquisition. They did this working with experts from the Army Contracting Command New Jersey at Picatinny Arsenal especially one of Picatinny's key leaders, Paul Milenkowic, who's here today – where is Paul? Where did you go, Paul?

Raise your hand, Paul. You're supposed to be up here.

Paul, well done.

They developed what they call a commercial solutions opening, which leverages expanded acquisition authorities for prototyping that Congress could fund last fall.

Here's how it works: To start, DIUx posts on their website a particular problem we need to solve that we think might have a commercially based solution maybe we want to find a way to patch unknown cyber vulnerabilities in our networks, maybe we're looking for a way to quickly scale up production of the 3D printed micro drones that we're developing.

Next, any interested company can share information on their technologies and how they propose to solve the problem. And if they're invited to, they then pitch their solutions to the DIUx partners, using the same pitch deck and short concept papers they use to pitch their venture capital firms or their private sector customers. It's a merit-based competition that's truly accessible. Any startup or commercial firm could submit a proposal.

From there, things can move very, very quickly. Once the most promising solution is identified, DIUx can then negotiate and execute fast, flexible, and collaborative awards with the goal to issue funding within 60 days of a first meeting with the company. And later, if the military customer is satisfied and wants to move to follow-on production, they can do so much more swiftly as well.

This new approach is already generating lots of enthusiasm. Our military services, combatant commands and defense agencies like the speed and the agility it affords. Tech companies like that they can work with DIUx to design projects jointly, negotiate appropriate agreement clauses including those concerning intellectual property rights and move rapidly to make adjustments as needed. And there's value for everyone in being able to start with a problem set and a few perimeters, rather than having to meet a specific laundry list of predetermined and sometimes rigid capability requirements, which is how it usually works in defense acquisition. At DIUx, companies get the freedom to engage in the discovery process, which is often the most interesting part, and customers get more innovative solutions.

And more important than enthusiasm, this is generating results. Within five weeks on the job, Raj and his team developed and launched the Commercial Solutions Opening to begin work on 15 separate prototyping projects. And the first agreement was signed in only 31 days with a company named Halo Neuroscience. They've invented a wearable device that looks like a pair of headphones and uses non-invasive electrical stimulation to increase the brain's natural ability to adapt to training. These headsets will be used by teams from our special operations forces who will work with Halo to gauge how effective their device might be to improving marksmanship, close-quarters combat skills and overall strength training.

And that's just the first project on the books many more projects are expected to be finalized in the next few weeks, covering diverse technology areas ranging from secure network mapping to autonomous seafaring drones. And seven of their newest problem sets were posted in the last two weeks to develop projects for network end point inspection, high speed drone and multi-factor authentication, among others.

So, the DIUx pipeline is brimming with possibility. And I expect this portfolio will continue to grow and even more so because of our new presence here in Boston and the new people we recruited to lead it.

First is Bernadette Johnson, who many of you know from her years as Chief Technology Officer at MIT's Lincoln Lab. She'll be DIUx's Chief Science Officer, ensuring the technical integrity of its projects and serving as chief liaison to our dozens of DOD and industry labs and other R&D organizations across the department.

She'll be joined here by Air Force Reserve Colonel Mike McGinley. In civilian life, Mike is a lawyer specializing in cybersecurity. In uniform, he's been our leader of our Cyber Command's private sector partnership team – until now, that is, because Mike will be going on active duty and serving as military lead for the Boston office. And along with another senior partner to be named later this year, Bernadette and Mike will join Raj and the partners based out west to manage DIUx's efforts across the country.

That last part is important. DIUx has to be engaged nationwide because no two innovation ecosystems are alike. Each has its own unique value and expertise. And wherever innovation is happening, we need to be able to tap into it, and Boston is a perfect example of that.

In addition to being a hub of east coast economic growth, Boston is a beehive of activity for biotechnology and the biosciences. I think in decades to come, we'll look back and view the I.T. revolution as having been the recent past. The present and the future being also a revolution in the biosciences. We in DOD want to be part of that as well, because even though we don't have quite as much of a legacy here as we do in I.T. and aerospace, we know it can have a tremendous impact on the health and welfare and effectiveness of our troops. So that's part of the future we have to help build together with our partners in industry and academia, as we always have.

And that's why I'm also announcing that DIUx is exploring ways to bring leading minds in the military and DOD to work on bio-defense and biological technology, together with world-class academic researchers, biotech companies and entrepreneurs, including those right here in Boston, like Eric Lander and the Broad Institute and others. And I look forward to their findings, so we can ensure that DOD is fully aware of the biosciences revolution that we're just beginning to live through.

Like San Francisco, Austin, Seattle, and so many other places, Boston is a technology hub of great importance an ecosystem of companies, university and research institutions that exemplifies America's unrivaled innovative culture. And it's especially prominent in the union of biosciences, engineering and data, areas that together could yield new ways to fight infectious diseases, for example, or help develop new materials capable of regenerating, responding to their environment, or learning, evolving all properties never seen before in human-made substances.

Of course, the outcome of this will be just one of many ways we'll measure the success of DIUx.

The most important metric will be how much new technology is delivered to the hands of our troops. A high return on investment will mean improved warfighter capability, with innovative technologies being not only demonstrated, but incorporated into regular defense acquisition programs of record. That will require more companies that might not look for defense business getting into our game and also established defense companies having more access to talent.

We'll also gauge success in terms of access to technology leaders, the strength of relationships over time, and the ability to use these relationships to advance DOD missions including the extent to which they take advantage of our on-ramps and off-ramps for technology talent, or perhaps create new ones. And in the long run, we'll look at how many DOD components adopt DIUx practices…particularly nontraditional acquisition mechanisms like the Commercial Solutions Opening. If DIUx is truly successful in catalyzing broader interaction between DOD and non-traditional technology firms as I'm confident it will be, then it will eventually put itself out of business since the department as a whole will be doing what DIUx is doing today.

In fact we'd welcome that outcome because DIUx is, after all, an experiment as well as a path finder. We created it so we could try new approaches; learn what works and what doesn't. And iterate until we get it right. And we'll keep iterating together and learning from each other as we go forward.

That brings me back to the Defense Innovation Board which I've charged with keeping DOD imbued with a culture of innovation in people, organizations, operations and technology…to support people who innovate, those creative figures in our department who are willing to try new things, fail fast, and iterate. And also to ensure that we're always doing everything we can to stay ahead of potential adversaries.

And I have to say that Eric Schmidt has done a great job helping put together the rest of the board. In recent weeks I've announced some of the other members including Reid Hoffman, the head of LinkedIn; University of Texas Chancellor and former commander of our Special Operations Command, Admiral Bill McRaven; and the noted historian of innovation Walter Isaacson. And today I'm announcing other amazing innovators who will join them. Leaders and thinkers who represent a cross-section of America's most innovative industries and organizations.

From the private sector we have Amazon founder and CEO Jeff Bezos; Code for America's founder and Executive Director Jennifer Pahlka: Google's Vice President for Access Services, Broadband and Fiber Network, pioneer Milo Medin; Instagram CEO Marty Levine and United Technologies Senior Vice President for Science and Technology Mike McQuade. And they'll also be joined by several distinguished thinkers about innovation and technology including the Wharton School's Organizational Psychology Professor Adam Grant; Caltech Dynamical Systems and Bioengineer Professor Richard Murray; Astrophysicist Neil deGrasse Tyson; and three landmark innovators from right here in Cambridge: Harvard Legal Scholar Cass Sunstein; Computer Theorist, MIT Professor and co-founder of Applied Innovation Danny Hillis, and the President and Founding Director of the Broad Institute, Eric Lander.

Some of the board members have already begun their preliminary work. Earlier this month they spent time with airmen in Nevada, sailors in San Diego and today they're meeting with soldiers in Fort Bragg where I'll join tomorrow, and visiting our Central Command and Special Operations Command Headquarters in Tampa. And they'll continue to work over the summer.

At the outset I've given them the very specific task of identifying innovative, private sector, best practices that might be of use to us in the DOD not unlike our recent "Hack the Pentagon" pilot program which invited hackers to help find vulnerabilities in our networks, similar to the Bug Bounties that several of Americas leading tech companies have.  While this approach to crowdsourcing cybersecurity is fairly widespread in the private sector, ours was the first in the entire federal government. And was so successful we're expanding it to other parts of DOD. This is a way in which you get the white hats to explore your attack surface rather than the black hats. They do it because they love their country or they want the thrill of the reward and it's extremely effective. We'd never done it before and we just did it. Perfect example of the kind of thing I'm looking for for the Innovation Board to recommend. We can't use all the ideas that everybody uses outside of the department, but there are going to be many that we can.

Not everything in the private sector will make sense for us because we're always mindful the military isn't a company, it's a profession of arms. And for important reasons, we're not always going to be able to do things the same way, but that doesn't mean we can't look ourselves in the mirror and look around the country for new ideas and lessons we can learn for ways we can operate more efficiently. So the board will recommend a first slate of innovative practices by the fall, in time for me to review and determine which ones make sense for us to adopt.

All of this is important because as we refocus on maintaining our enduring technological dominance in a new era which is something we have to do in addition to all that we're doing today crushing and defeating ISIL, countering Russia, China, maintaining deterrence on the Korean Peninsula, countering Iran's malign influence, everything else we have to do today. In addition to all that, we recognize that DOD, we must be innovative in the future in order to stay ahead of all our competitors. That's why I created the Defense Innovation Board and DIUx in the first place to challenge our enterprise, to bring in new ideas, to open our doors to new partners and to push our existing bureaucracy to do better rather than keep doing the same things it's always done.

As I mentioned earlier, our defense budget for next year makes breakthrough investments in a range of high-end capabilities investments we need to stay ahead of potential opponents. But just as it's easy for us in DOD to default to the status quo, so also it is easy for Congress to do the same to buy the same things they've always bought for us or to put up roadblocks to the organizational innovations that we need in order to disrupt and challenge and inspire the rest of our department to change for the better.

We can't accomplish what we're trying to do in DOD without a willing partner in Congress, and I'm hopeful Congress will join us in trying to break away from the status quo, break out of our ruts and help keep our military the best and most capable in the world so we can continue to keep America safe and secure. And I'm grateful to those in our partner committees that have done so, and there are many, and I hope others will get on board quickly.

I want to close by saying this is a very exciting time. For those interested in foreign policy and national security, there are lots of interesting challenges and problems to work on. And it's also true for those interested in technology, but the intersection of the two is an opportunity-rich environment.

Let me explain what I mean by that, though, because there are opportunities for partnership in every challenge we face.

Right now, as we sit here today, our men and women in uniform are working with partners from our worldwide coalition in more ways and with more and more power every day to accelerate the defeat of ISIL, which we will surely do, but we want to do soon. They're also training with our NATO allies in Europe to deter Russian aggression. They're sailing the waters of the Asia-Pacific as part of a principled and inclusive network of nations, ensuring that the most consequential region for America's future remains stable, secure and prosperous for all nations. They're standing guard 24/7 on the Korean Peninsula and countering Iran's malign influence against our friends and allies in the Middle East. And all the while, they're helping protect our homeland

In each of these missions, you can make a difference. Because whether it's machine learning technology that might be able to recognize and block ISIL's barbaric attack plotting on social media…or algorithms to help a self-driving boat track submarines…or biotech research that could one day help our troops recover from injury faster, technology is a critical part of everything we do. And it's critical to addressing every strategic challenge facing us today.

That's why DIUx matters. It has to do with our protection and our security, creating a world where people can live their lives, and dream their dreams and give their children a better future.

The importance of that never has been lost on the people of Boston. And I'm not just talking about the Minutemen.

Think about the many members of Red Sox Nation who went on to serve our entire nation – from Ted Williams, who was a Marine Corps fighter pilot during the Korean War, to our Chairman of the Joint Chiefs of Staff today, General Joe Dunford, who was born in South Boston and grew up in Quincy.

Think about the Kennedy brothers, stories of heroism and sacrifice during World War II, and then consider the generations of Kennedy School grads who studied under Graham Allison.

Think about the technologists at MIT, when decades past, developed computer navigation systems that not only guided ballistic missiles but also landed men on the moon…and then about their contemporaries at Lincoln Labs, Draper, MITRE and Raytheon, who continue to push the boundaries of what's possible.

This city is home to a tremendous legacy of service – one that will continue in a new way with DIUx. It's a testament to the fact that Boston has always been a place where great minds and great ideas come together to help advance the safety and security of our country. That's what we do every day in the Department of Defense.

Contributing to that mission – helping defend your country and make a better world is one of the noblest things that a business leader, or a technologist, or an entrepreneur or a young person can do. And we're grateful to all of you here for your interest in doing that with us.

Thank you.