China's Military-Civil Fusion (MCF) vs Free Market Dual Use Strategies
What's yours is mine.....
In 2013, China’s One Belt, One Road (OBOR) strategy introduced the world to their Military-Civil Fusion (MCF) innovation initiatives. A fancy term for what’s yours, is mine. China’s main objective was to leverage global commercial technologies to regain middle kingdom status. In the 1980s, the United States of America began investing in dual use technologies with the idea that a free market would accelerate and share the expense of the defense industrial base, thereby strengthening national and allied security. GPS, High Performance Compute, Imaging-Sensor Technology, and the internet are all examples of dual use technologies which have transformed the world in which we live.
Middle Kingdom?
The last 20 years have allowed multinationals unfettered access to global markets, particularly China. The sheer size and scope of the China market blinded many. Policy makers failed to listen to the feet on the ground. Business leaders took advantage of the short-term gains. Elected officials were influenced and bribed with pomp, show, and monetary power. Government contractors lost control of critical data. Innovative companies jumped at finding product-market fits across developed and emerging markets.
Many corporate executives have extensive experience doing business inside and outside of China. The companies they represented had refined their technologies for use in all corners of the world. These technologies had been accelerated by the push for dual uses. From the labs of the defense world to commercial use for society. For good and bad, they represented access, money, status, hope, and power. They held global badges of economic war. Competing, partnering, aligning, and brokering joint ventures with the quest for the top spot. Technology flooded the China market. Cisco for communication. IBM for compute power. Dupont and 3M for chemicals. VW and Buick (GM) for vehicles. Motorola and Nokia for mobile phones. Siemens for engineering. Panasonic for batteries.
The China Dream
The party leadership in China knew they could make or break companies. Incentives were given to relocating engineering teams to mainland China. Local foreign executives were given local currency tax breaks to keep the train moving along the tracks. Local nationals were hired to fill the large number of engineering roles with impact across multiple regions. Known and unknown, technology transferred.
Parallel to multinational market share gains, Chinese companies continued refining and integrating foreign technologies with tweaks, revisions, rebranding, and white labeling key components. Backed by the government, many companies like Huawei, ZTE, Alibaba, Hisense were able to seed, undercut, and reach new markets outside of their borders. Business models and free markets had flipped after the 2008 financial crisis. Literally, ONE belt, ONE road.
The Systems Produce the Outcomes
The strength of the United States of America falls squarely on the people. Of the people, by the people and for the people. Checks and balances across governing bodies, legal frameworks set forth by the representatives, free market business enterprise, and security alliances across the globe. The security keeps the money and innovation flowing. The creation and ownership of ideas, technology, and physical property is what creates wealth and lifts society. The individual, organization and government own what they make.
The strength of the Chinese one-party system is centered around the collective power of the ship going in one direction without choice or public dissent. All the money, power, resources, and energy zeroed in on “the plan.” The nature of the system provides a single point of faith and fear. The people are not at the center of the equation, the party is at the center. Everything is owned by the state including property, inventions, land, buildings, and technology.
The Weaknesses
The strengths of both are also weaknesses. Free markets struggle to compete with state entities with unlimited money, policy making and resources. If free market governments fail to innovate and adapt, they die. On the flip side, a one-party system has to constantly reassure their citizens of its worth. If they lose control of the population to dissent, greed, or bad policy, the power grip squeezes the life out of the individual.
Dual Use 2030
The US defense strategy around dual use needs to adapt to a new environment which leverages our unique system centered around the people. Just like corporations adapt to new competitive threats, the DOD and allied defense organizations need to change processes, access to information and how problems are solved. Replace the old with new. It’s no secret we need to increase compute power or find alternative energy sources or make data intelligent or automate non-essential tasks or exploit space resources. Besides the obvious process changes needed for doing business with the government and the access to information to solve problem sets, more is needed to enhance the competitiveness of our dual use strategy. Here are a couple of areas to focus on….
Rotate and Upskill
Talent drives the ship. Rotate people to improve learning. Critical jobs need high performing individuals who are dialed into emerging tech, use cases and how to operationally integrate. Find the integrators, builders and multi-model individuals who solve problem sets and put them in the science & technology roles and innovation teams. The Tradewinds platform from Chief Digital and Artificial Intelligence Office (CDAO) is a great example of change for the speed of modern times.
Exploit weaknesses
Ensure knowledge of the true weakness of your advisories. The weakness of the MCF strategy lies in the individual. Innovation is harder in a one-party system, and you own nothing as an individual. Integration of technologies for operational efficiency is a strength. Out innovating is the counter to the system.
Business is the accelerant to out innovate when focus on the right mission.
TJ