Defence sales: 4 tips for a fast-changing market

1. Know your customer

Thoroughly knowing your customers is crucial in any line of business. The same is true for the defence sector. Weapons and tactics are evolving at a dizzying speed. And the people who know best are those actually using them: soldiers.

That’s why it’s important to get their insights to ensure military systems meet current and future needs. Carroll gives the example of the war in Ukraine. There, soldiers and businesses have worked closely to continually innovate ground-breaking new systems.

Frontline input has been the key to Ukraine’s rapid development of pioneering military systems and tactics, Carroll says. “There is a tight feedback loop driving the frontline innovation that is happening in Ukraine.”

Canadian businesses can seek to replicate this access. For example, Carroll says, they can look for ways to get feedback from active Canadian soldiers or veterans. Connections can be pursued through groups such as the Canadian Association of Defence and Security Industries, Area X.O and the Ontario Defence Association, to name a few.

Other options include military demonstration events and defence trade shows. You could even visit your local reserve unit and talk to the commanding officer, Carroll says. “Find opportunities to speak to the troops. What are they seeing on the battlefield? What are some of their challenges? What are the limitations of their equipment? End-user feedback is important.”

Get closer to “frontline ground-truth reality”

Similarly, businesses can look for ways to gain insights from soldiers who have been deployed in eastern Europe or via partnerships with defence-sector companies already active there. Carroll gave the example of a business colleague who travelled to Latvia to speak with soldiers about where to focus his efforts.

“You could reach out to Ukrainians who have moved to Canada or invite people from Ukraine to speak about their challenges,” Carroll says.

“The closer that industry can get to frontline ground-truth reality, the better it will be able to prepare the technology needed for the next war—not the current one or the last one.”

2. Be agile

Modern conflicts show that some weapons which were effective today may be quickly rendered obsolete as countries innovate to stay ahead. Other systems may remain useful, but require adaptations.

Examples of the latter include:

• counter-drone mesh for tanks
• drone jammers for logistics vehicles

It’s important to be agile and focus strongly on research and development (R&D) and continuous innovation.

Think capabilities, not product

“Don’t get too wedded to any one particular deliverable because circumstances may change and render it irrelevant,” Carroll says. “Even a cursory analysis of the war in Ukraine shows that tactics, techniques and procedures are evolving very quickly.”

“The enemy is countering with whatever they have, and that game goes back and forth. Sometimes that’s happening on a daily or weekly basis. This kind of rapid R&D—always staying ahead of the latest—is critically important.”

It may help to think in terms of capabilities instead of just products. Carroll gave the example of drone systems. “There are many forms of drones—quadcopters, hexacopters, octocopters, winged drones, one-way attack drones, bombers, signal repeaters, interceptors,” he says.

“Those are just the aerial drones. There are also land and naval drones. If you’re thinking about these as a capability, it offers much greater flexibility to solve problems as opposed to just focusing on a specific product.”

Seek help for innovation

Canadian companies can get support for their defence-related R&D. Here are examples:

• BDC’s Defence Platform—financing, capital and advice 
• Regional Defence Investment Initiative, offered by Canada’s Regional Development Agencies  
• The Defence Industry Assist initiative of the National Research Council’s Industrial Research Assistance Program (IRAP) 
• Other R&D support available under IRAP

3. Make a plan 

Don’t make the mistake of proceeding opportunistically. Defence is a complex, highly regulated sector, with long production cycles and strong competition. It’s important to carefully plan how you’ll enter and expand into the market. Follow these steps.

Understand your capabilities

What problem are you solving for military end users? What is the competitive landscape and your unique solution?

Know who you’re selling to

Depending on where you sit in the supply chain you may be selling to a prime on big contracts or bidding directly on smaller contracts with the Department of National Defence/Canadian Armed Forces. Export potential is a very big consideration. Selling to allied militaries directly or through NATO is another option.

Address internal gaps

Build a strong team, and obtain necessary certifications and licences. 

Develop a strategy

Create a strategy to enter the market, including an action plan covering the next 12 months.

Get to know military procurement

Closely study military procurement processes. While current procurement rules are changing with the hope of making them dynamic, long production cycles are likely to remain, meaning you’ll need to arrange financing to tide you over until you’re paid.

4. Focus on production

Military production comes with unique challenges. You may need to rapidly expand production if you win a contract. “Surge capacity is vital,” Carroll says. “It is difficult to predict what the market will demand and which operational requirements will peak at any one point.”

Defence businesses should also review and plan for business continuity and security risks. “Canada is no longer safe from attack,” Carroll says. “Europe has seen dozens of examples of sabotage and espionage in recent years. These types of risks need to be considered. Internal resiliency must be maintained for a firm to survive.”

For example, preparations could include lining up back-up suppliers. “Mitigating and eliminating as many potential areas of failure increases your firm’s robustness to deal with anything that may interrupt business and supply.”

The opportunities are great for businesses that invest in the right approach. “Canada is investing in defence at a level unseen in the past 80 years,” Carroll says. “Companies with the right strategic approach have significant potential for success in a sector that is important for Canada.”

Take the next step

Get the financing, capital and advice your business needs to scale, innovate and contribute to a more resilient Canada. Learn more about BDC’s Defence Platform and how it can help your business.