A new tool to help startups get a foot in the door at the Pentagon
"There are only 75 PEO offices inside the four services. And I decided to go figure out who they were," said Steve Blank.
You hear the Defense Department saying it wants to hear from those innovators and start ups to possibly work with them. However, how is it supposed to hear from them if they don’t give them a way to do it. To help, co-founder of the Gordian Knot Center for National Security Innovation at Stanford University Steve Blank has created a new resource for startups and scaleups that want to work with the department, a Directory of DoD Program Executive Offices. Federal News Network’s Jared Serbu spoke with Blank about it on the Federal Drive with Tom Temin.
Interview transcript:
Steve Blank So, you know what the emergence of venture capital now focused on the DoD. We have a lot of startups in Silicon Valley, and I have a lot of students who are interested in building companies to sell to the U.S. government. And you would think it’d be pretty easy to just pick up a phone book and figure out who to call. If you have a new tactical radio or if you have a drone or you have something else. And the answer was there isn’t a phone book. And not only isn’t there a phone book. There’s no connection to who’s running what program or how much money they have or where they are. And given the size and scale of the DoD that was kind of amazing to me.
Jared Serbu Yeah. So for the uninitiated, talk us through the role of PEOs in the DoD acquisition ecosystem, because I think even for people who are accustomed to selling to civilian government agencies, the whole PEO concept might be a little bit foreign.
Steve Blank Well, the good news is that I remind everybody in the commercial world, if you think you understand very complex commercial enterprise sales that are selling to big companies, you don’t have a clue of the complexity of selling to the DoD. It’s just huge. And it has obviously its own arcane language about how they buy things, acquisition, how they budget things about how things get into the palm that is the multiyear or sometimes multi-decade cycle of actually specifying things and whatever. But the people who manage the programs once they’re given the money are called program executive officers, and they run program executive offices (PEOs) and underneath them, if the POs or the programs are so big, they might have program managers (PMs) underneath them, they manage sub segments of them and some of these offices manage just one program. For example, there’s a PO for the Joint Strike Fighter, someone who has a bull’s eye painted on their back, or they’re like the Navy PO Digital that has 38 or 58 separate programs, separate pieces of a program managers underneath them. But basically, they manage the programs, and they have with them contracting officers that actually manage the details of the contracts. But typically I found that the PEO isn’t it in a conversation early on about buying something with a new vendor or a new startup, you’re kind of missing the boat about where to talk to because it’s really easy, much like in the commercial world to get confused about the enthusiasm of the users that is the war fighters or someone else with the buyers. And somebody in CentCom says, I really need this. Well, that’s nice. But the people managing the program for unmanned systems are over here and you don’t even know who they are. That was the rationale. And it turns out it isn’t a computationally unsolvable problem. There are only, quote 75 PEO offices inside the four services. And I decided to go figure out who they were.
Jared Serbu Yeah. And as some of that answer suggests, they do come in a lot of shapes and sizes. About the only thing PEOs have in common is that the money flows through them. So let’s say you’re a small vendor who takes a look at your guide and you identify 6 or 7 potential PEOs who might have a role for your product or service. What’s sort of the next things that you need to be looking at or asking to figure out where to spend your time?
Steve Blank Well, number one is what’s the size of their budget. Two, is who are their contracting officers? Those are the people who handle the formal purchasing, and they issue a request for proposals and sign contracts. The other thing they should do is know what’s the defense budget and how do the budget documents kind of connect to the PEO offices? So with a little practice, you could translate the top line account or program elements into a go to market strategy. And that’s what a startup is looking to do, is how do I figure out how to sell to the DoD. And it’s to understand this relationship of budget dollars, POs contracting officers, etc. And a good number of the PEO offices that I’ve put in this directory have websites that I link to with contact information, which I did not put in the guide on purpose because it changes often. So you could just go to the website and figure out how to connect with them. Some of these officers are actually really good at working with new ventures and are receptive to new entrants. Some have converted to portfolio management, and some of I’ve tried OTA other transaction authority contracts. Some are doing something novel with metrics or outcomes, but some are just hidebound to deal with the same primes and same contractors. So one of the things we’re going to do at Stanford is actually do kind of a Yelp review process of the 75, hopefully to kind of shine a spotlight on which ones are easier to work with. Does that make sense?
Jared Serbu It makes perfect sense, and it perfectly anticipated my next question, which is, there’s quite a bit of variability in how open and willing individual PEOs and PMs are to engage with small companies one on one. Are there good strategies at a company level for folks to figure that out ahead of your research?
Steve Blank Well, it turns out that others have published, which are the PEO offices that are best for innovation, and we’re going to integrate that data, for example. It’s kind of understood the least when you get to know the DoD, that Special Operations Command, and just because the nature of their job tend to be the best and most aggressive for acquisition from new entrants. But the surprise was to find the Air Force Digital Directorate and C3I&N Directorate, a Navy Sea Systems command, kind of near the top of the list as well. So we’re going to publish that list and hopefully we’re also going to publish what are the best practices of those top PEO offices and maybe implicitly help them share them with each other. Our goal is not to flood those offices with new entrants, but to reduce this impedance mismatch between this asymmetrical information that the DoD has and the lack of information that the startups have. We need to build a healthy innovation ecosystem, given the threats the DoD has today. Your listeners now understand. But I just want to repeat again, for the first time ever, the DoD no longer owns all the technology it’s needed to win or deter war. And those are commercial technologies. Whether they’re AI or machine learning or autonomy or cyber or semiconductors or biotech, all exist in the commercial market. And what’s interesting is at least Silicon Valley and I mean that not the physical place, but innovation clusters writ large are trying to bang on the doors of a DoD that had been designed not to deal with new entrants but to deal with existing FFRDC subprimes or service labs. And so this is just another way to break down those barriers.
Jared Serbu I sort of hope that your effort here sort of shames DoD into doing this themselves, because they have the real time access to information and who is who. But it seems like they’ve kind of been going in the opposite direction, which is trying to take the complexity out of that engagement process and create things like single faces to industry and funnel all of their innovation work through a smaller number of offices and organizations. Is any of that working or is this really just ultimately going to be up to individual companies to figure out where they need to go?
Steve Blank The age old, age old quote, the spirit is willing, but the flesh is weak is kind of appropriate here. It’s certainly in multiple levels there. There’s attempts and there’s willingness to kind of engage within the industry in a different way that they have. To me, the ultimate test of how successful that is you just look at the Major Defense Acquisition Programs (MDAP) and tell me how many startups are on that list or how many scale ups or how many new companies that formed in the last 20 or 30 years are on that list, and the number is zero. We have a couple of new ones that might potentially make the list Andrew or Space X, but that was over the dead body of the DoD, it was a decade or two ago. I’m sure your listeners have all seen that diagram of primes pre The Last Supper where there were a ton of them, and then after the Last Supper, they all integrated and we have five or 10 depending on who you are. When I sat with Kath Hicks in the beginning of this administration, I pointed out to her that the goal should be to kind of flip that diagram horizontally. That is what’s required today, is actually to create a whole new generation of primes and vendors to the DoD. And as I said, I think the spirit is willing. I think they understand that, but there are a lot of obstacles to do that. And hopefully this PEO directory was just one small, one tiny piece in helping the DoD do that.
Jared Serbu What’s next for the directory? You mentioned that the Yelp style reviews that are going to be incorporated in, but what else needs to happen to make sure this continues to be useful for folks?
Steve Blank Well, one of the nice things is this was, I’m retired, but I spend five days acting like an entrepreneur again when I did 24/7 putting this together, literally. People have asked me, well, how many months did your staff take to do this? And I couldn’t stop laughing. Literally, you think about it, it’s a five day effort. And yes, you ask yourself, why hasn’t other people done it? We could keep asking ourselves. But in any case, this is now going to be improved on by Stanford and the Gordian Knot Center for National Security Innovation. We have an Air Force fellow with Edward Hendricks who going to own it and actually go use some of our national security innovation fellows to start working on it in partnership with others outside in the industry and the DoD who have started. Some people have already taken the directory and put it inside a large language model so you can query it. Others are already starting to rate PR offices by innovation. We’re going to hopefully work with them and start integrating some of their data. So there will be a constantly updating source of information. Think about it, the directory has not only 75 offices, but 600 plus names. And so it’s obsolete the day it was published. The officers, tours are 2 to 3 years. And civilians move around in offices as well. So to try to keep this up to date is another one of our goals besides just ranking it, but integrating it with all this other information. In a perfect world, the DoD would take it out of our hands and do it. Or even a more perfect world, they’d fund Stanford to do it permanently. But, think of this as a right now, as a public service.
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Tom Temin
Tom Temin is host of the Federal Drive and has been providing insight on federal technology and management issues for more than 30 years.
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