Why Do Many Western Defense Tech Firms Struggle in Ukraine?

[Music] You are listening to The War on the Rocks Podcast on Strategy, Defense, and Foreign Affairs. My name is Ryan Evans, I'm the founder of War on the Rocks. This episode was recorded live at an event earlier this year, sponsored by our friends at Leighenhead Capital. Mike Kaufman sat down with me to talk about why American Defense Companies, particularly newer Defense Tech Companies, have not always delivered on the battlefield in Ukraine in the ways that we all hoped. There are various reasons for this and very few people are as well equipped to understand this issue as Mike, he visits directly with units using American Defense Tech and has some unique insights. Enjoy the conversation. Thanks everyone for coming tonight. We're going to have a very senior army official who had to back out, but then I thought, what could actually be the most provocative conversation that we could have in front of an audience full of people from, you know, not just the executive branch in the military, but from the defense industry, an important conversation, a hard conversation. And I thought, I called up my friend Mike. If you are War on the Rocks member, one of the main offerings we have, of course, is the Russian contingency with this gentleman right here, Mike and a team of military analysts go to Ukraine every quarter. And they don't just go to Kiev, like a lot of people, or some people don't even make it that far east is the capital. But they go to the front, although that's harder these days because of FPV drones, but they go pretty close to the front. They talk to units involved in the fighting and they do real military analysis. One of the things that Mike has a lot of familiarity with is the performance of American Defense Kit. Old stuff, new stuff, everything in between in Ukraine. Some of you may have seen some press reporting recently about how some companies have struggled to effectively support Ukraine or Ukrainians don't really like their products very much. And this is something that Mike and I talk a lot about privately is how these companies succeed, how they fail, what the reasons are for that. So I thought it'd be great to convene a conversation for that. So Mike, when the war started and you went on your first research trip there, you were really focused more on legacy systems. So I think the newest kit we saw was a Starlink terminal on a drone doing some reconnaissance for an artillery cannon. But this was really before drones were being used for kinetic operations at scale. So when did you first start focusing on this and zeroing in on this is an important thing for analysis? Right, so initially drones on this war were basically being used for reconnaissance ISR for traditional weapons systems. And then at a certain point you saw drones emerge as a form of light bomber and mortar carrier. And then in 2023 we started to see first person view drones being used as a strike drone. And that expanded over the course of the summer of 2023. So if you think about Ukraine's offensive in summer of 2023, early on in June there were a few FPVs on the battlefield, but they weren't the principal problem. I remember by end of the summer around August, September FPV drones were really shutting down the space to conduct any kind of maneuver. Or for folks to even get to their positions within about five kilometers of the front line. And then if we fast forward to today, now the danger zones more like 2025 and it really depends on where you are. So there's lots of things that you can't do today that you could have done in 22 and 23 and 24. Drones started in some ways as a big force multiplier for traditional weapons systems. But then they were used to offset Ukraine's material disadvantages and manpower and material. And then they emerged as kind of one of the principal weapons systems that then you saw a lot of the force being built more and more around use of drones. Big force structure modifications, doctrine modifications, and so on. And so I started focusing on this much more in 2023. I would say by fall of 2023, it was clear that drones had really emerged as something else. And by 2024, you also saw a big shift. Drones started co-evolving with electronic warfare. Their natural kind of one was a natural counter to each other and they co-evolved together very quickly in the war. And by 24 drones began to evolve as a counter to drones. So people were using drones to intercept other drones and you started to see drones being used as a wave negating drones. I think a lot of companies hoped that Ukraine would be approving ground for their technology. You know, whether they were historically literate in the sense or not, but sort of like the Spanish Civil War was for a lot of systems before World War II. But instead they found this sort of brutal filter. What do you think are some of the key challenges misconceptions that have driven some failure, not just in drone companies, but other American companies trying to field and test useful kit in Ukraine? It's a hard story and look, there are success stories there, right? And I do think the Arplainian companies do actually go to Ukraine, test their kit, and try to work on ways to improve it. Okay, but I would say there's probably three broad categories of challenges. There's, you know, the experience problem, there's implementation, and then there's what I call failure by design. The first is an experienced folk show up to Ukraine. They don't know who to work with as a local partner. What unit do you give your kid to? How? Okay, do you give it to them? Who do you work for? How to work the bureaucracy? The bureaucracy in Ukraine is quite complex. While there's this whole story that Ukraine is a country of numerous defense startups where military units have their own defense labs and their own contractors and manufacturers. That is true. But if you want to get your system certified by Ukraine's MOD, it actually would take on a fast cycle something like six months. And by the time you get certified, it'll already be obsolete in this war. So that is also true. Okay. And lots of folks have challenges working through your bureaucracy, and this is why the common advice is find. Whoever has a problem for some foremost that needs solving the your kit can solve and work directly with those people is it the Air Force is it? The Navy is it the Army and then you need to have experience finding the right units that are going to use it. This is the first part. The second I think the most challenging one is actual implementation. Okay. The feedback loop and the cycle that I see isn't very good, which is, you know, if you want to improve the kid, most Western kid that shows up there doesn't work out of the box or doesn't work very well. That's just a reality. And it needs modification, needs improvement. The first versions of whatever gets deployed often don't do that well and improved versions do a lot better. But you have to work closely with the folks who are using it. You have to have the right people there. A lot of people that end up being there in Ukraine themselves are usually on the contract support or sales side. They're not on the R&D side. They're not the engineers that actually know the product that are going to tinker it. There's no way to tinker with it there. So unlike Ukrainians who have a very tight loop where the people who made it can be right there next to the unit. Then go back and fix it and see the improvements tested again and goes with cycle very quickly. A lot of times you don't see Western companies being able to do that for all sorts of practical reasons. That's another challenge. There are some successors of people who are actually making the product in Ukraine and have enough of their personal that they hired a local. But still that's a big issue across the implementation problem. So I think that you see real big issues and execution of actual testing. And to be honest, what does combat prove in Ukraine mean? Let's be honest. There's a strong incentive from governments to go to Ukraine to do something with your kid there. And to get it somehow certified to get this ticket punched that you did something in Ukraine. To me, combat testing usually reveals that the product initially is not that effective. Right? And it needs to be improved. Ideally, it answers a problem or a challenge that the Ukrainian military has. Or you try that and you're working to improve it such that it can't answer this problem. And also, ideally, it wasn't used one time on one very easy part of the front. Like the ball space in Ukraine is quite variegated. You can easily go to a part of that front where the EW is not nearly as challenging or as complex. And you can say your product was tested there. Okay? And it performed well at some point of the war. That doesn't mean that it's going to do anything in the year 2026. And then the last if I count briefly, it's failure by design. There's incentive structure issues, which is not every technology that is developed here is actually suitable for answering the challenges in this war. Okay? The company is going there, are looking primarily to Western defense sectors as the people they want to sell their products to. What people are willing to buy here are not necessarily the same things as what Ukraine needs right now. Or vice versa. Right? So there is a mismatch to some extent than incentives. And there could be really great technology solutions, but they're not solutions to problems that Ukraine has on the battlefield. They're solutions to problems we might have, you know, an our perspective fights. Right? And so how much should those folks really invest into improving their products for a war where those people are not necessarily going to buy this? And what Ukrainians are looking for is the cheapest, most cost effective solution. And they're happy to basically get things that don't need requirements here in the United States or in the Department of Defense. So there are so many important things in that answer that are going to inspire some follow-up questions. The first on the process side. So yes, there is this sort of myth that Ukraine under war is very efficient and bureaucracy flans. And that's obviously, that's just not true. I remember coming back from that research trip. This was in late 2022. And companies that you've heard of that I won't name. In fact, I think some of you are here. Where like, can you put us in touch with you? I'm like, you're a billion dollar company. You're multi-billion dollar company. Can you, you can't, they're like, no, we can't get in touch with them. So the Ukrainians didn't make it easy. The process is since matured, you know, it's been a while since 2022. And I think the things that I'm hearing that the Ukrainians do well now is subjecting Western kit to a whole battery of tests, including and especially at W before things get fielded. Have you had any interactivity on that side? Well, I'm saying there is, it really depends on the local partner people choose. And the kind of, it's not an any way she perform one actor. So you need to pick people to work with that are going to give you really good feedback. You need to incentivize them. Besides you're saying, here's my stuff. Can you try it out for me? Oh great. Why should they try your stuff out for you? They have their own stuff. Your stuff is different. It requires training. Why should they train on a very small amount of your stuff just to try it out for you? What's in it for them? They're in the middle of a war. This is not like a war game simulation. Why should any brigade take 50 pieces of your kit, train people to use it separately and try it out just for you. It's a very fair question. And then provide you feedback and all this. Okay. What is it in it for them? Are you going to give them lots of these things then in the future cost free? Just to understand like the reality of this battlefield and working, working to pick the right partners. Second issue is how do you get these approvals? I mean, yes, it's still a challenge for you, creating bureaucracy and you have to find people that have a problem that your product answers. So often you see companies basically, if they don't have this wired well, then looking to see if they can get some kind of request or letter from Ukrainian M.O.D. to then basically solicit their product and see them they can get their product there. And the challenges if you work to that central bureaucracy, you're not likely to find a good partner or you're not likely to find a good speedy path towards getting your product into the field and getting a test. And the last part I'll say is it is important to do that as opposed to just kind of showing up to Ukraine and doing some trials and some field with your stuff. Okay. Or going, you know, 40 minutes west of Kiev and say, Hey, I was in Ukraine and I tested some stuff and this product is now tested in Ukraine and somehow combat proven. Yeah, I've heard so many times from so many companies saying, you know, everyone else's stuff in Ukraine is working terribly, but ours is working great. And they all say that and can't all be true. But I'll also, you know, just on it's not just one system. It's not just like I'm sure that's activating some maybe even PTSD in this audience for people that are selling the D.O.D. is of course not one system and there's a lot of those same problems. But what's different in Ukraine and maybe you can talk a little about this is there's actually entire different acquisition systems that individual brigades and divisions and units have that are walled off from Ukrainian M.O.D. proper. Yeah. Many of them are actually most of the best ones are it is people who have a whole innovation unit within their military unit who have specific contractors and manufacturers that they work with who use funding to procure from them without going through the Ministry of Defense without going through the regular military. And that's why to some extent a lot of Ukrainian military units in of themselves are kind of defense startups and they're plenty of the best units where I know that the unit is both a large military formation that is a drone regiment or drone brigade or whatnot. And they also have a contractor associated with them that produces these things, you know, and they also have a part of the unit that does defense innovation and testing. And of course that's a very cool cycle-type loop that allows them to constantly iterate in Western companies, not necessarily going to get that. I think the challenge for Western companies is not to be competitive with that necessarily. But to try to get closer to this than, you know, the method of let's get some products out to Ukraine. Let's find some organization. We don't know that. We'll give it to them. And hopefully they'll use it and maybe we'll get some feedback from that and have most of the people who are there primarily from sales or contracts or staff and will be very hard to iterate or take any of that feedback back. And lastly, again, not all Western products are necessarily suited for this battle space. They may answer problems, but not problems that are necessarily found in Ukraine and not necessarily in a timely or cost effective manner there. So sometimes there's just fundamentally a mismatch between what's being offered and what's needed. And this sort of structural problem that you point to is interesting to me is that it's really hard for any outside company to be like, you know, let's just take drones and I'll we'll go beyond drones in a second. But, you know, the EW picture changes every two weeks to a month. They need to change signals. They need to change the way they're using the spectrum. As Mike just described, there's these Ukrainian companies and Ukrainian regiments that they're embedded with the, you know, they're doing it on the spot. Very hard for an American company, even a large one to support that kind of operation across Ukraine. But something that I also think about is it seems like Ukraine's most acute need is air defense. And I would say two things about that. One is I do think that's where some of that's some of the most quiet, but important successes of some American companies, which I won't name to preserve. Confidences, but, but also on the sort of munitions and kinetic side, you're not seeing a lot of that I'm aware of. And if you're here, I'm sorry, come talk to me afterwards, but not seeing a lot of air defense innovation on the American industry side. Yeah, if you're talking about things like interceptor drones, things of that nature, yeah, there are some good success stories, although already being overtaken by Ukrainian products in many ways. If you're talking about EW, that's if that's the thrust of the question. So look, it is a problem for sure. Couple points on EW after having spent better part of like the last four years doing field work in Ukraine. Yes, there's a challenge for us and products that is true, but I think a lot of times the real problem is not knowing the context of why a particular system doesn't perform well in that environment. And the reason why is because most of the people that provides this technology are not there. They are not there. They don't understand what's going wrong. First, a lot of times, not even adversary W can be friendly W people assume that their systems start in a W friendly environment and they don't. Okay, second, lots of things that are failures of design, Ryan, I hate to say it, get blamed on adversary W. I learned from this war now something that will never forget, which is no matter what went wrong, did you fail to properly calculate the grids? Did you is the product fail half the time coming out of the tube? You can safely blame adversary W for the problem. And I suggest the rest of you using this in your life. Like if you've something wrong, just say it was Russian EW because that's what a lot of people do in Ukraine. And then when you get into the details of the story, the thing fails to activate, you know, out to 2 30 40% of the time, it's not Russian EW. The thing calculates a lot of things that needs to in the first seconds of flight and it's not Russian W either. Okay. And a lot of the challenges that I do the Russian W, but adversary W is there available for you to blame for why the product design isn't as good as it should be or as robust as it should be. So you're welcome to now use this in your life too and say whatever happened, I'm sorry, it was adversary W in good luck proving that it wasn't. Okay. And because the joy of EW, you can't prove that it wasn't that. Yeah. Yeah. There it was. It just didn't work because of adversary W. But so basically I'm trying to say that the stories are a bit more complicated and EW learns itself too easily as a challenge to cover for other challenges with products. So the bottom line is I think it's actually a solid challenge. I don't know that the incentives are there for a lot of people who test their products in Ukraine, necessarily that's question one. And some part is the biggest problems context that you really have to be there to understand what happened with the product and why didn't perform that well in that specific context to understand what needs to get fixed. You've alluded a couple times to things that these aren't necessarily going to be Western problems and the future wars that we're actually thinking about fighting that are different from the Ukrainian battle space. What do you think are the lessons of Ukraine that may not apply to what the contingencies we were looking at and where do those industrial solutions differ? This is a thorny debate because they are and they're not. Right. A lot of things in the war are not necessarily lessons. They're observations. Okay. To generalize from a war, you have to be appreciative of the context of the war. And also the fees are examined. One of the biggest problems I see in contemporary discourse is people go to the fourth year of a prolonged conventional war, which is defined by positional and traditional fighting. And they want to take lessons from that for the opening weeks of a future conventional war, which most conventional conflicts in the opening phase are very dynamic. They're defined by high intensity combat, you know, maneuver in terms of operations. And if the operation of war fighting challenge is not resolved then it may then end up being a prolonged conventional war. Okay, but this is one of the issues, context of the conflict itself and also phasing. So drones and all these systems became so prominent on the battlefield first in part because of the presence of other traditional weapon systems and prepared defenses. Mines artillery and what have you. If you took that away you wouldn't see the percentages of attrition inflicted by drones you see now. And people I think often miss that dynamic that that dynamic is born of a combination of things and not just drones. And of course because fighting has become positional is become routinized and both forces have degraded so much that it's a real challenge for them to scale offensive operations and it makes drones much more effective in that environment. And the question is how much of this would be relevant in a huge conflict in that state. So I think there are things that are relevant for the end of Pacific. I don't agree with people I basically say, oh that's totally different geography. This doesn't matter in the fight. Like for example it could very well matter for Taiwan if they wanted to rebel a Chinese amphibious operations because mass precision offered by drones is an immense force multiplier for protecting impaired defense and so really good offset for deficit in material and manpower. So it does matter. Okay. Yeah. It could be very effective that force. Second, it poses real challenges for ground warfare. Right. And the matter, I'm going to say that we would fight differently. We'd attain air superiority, at least localized air superiority in all this. Actually, air power is not tele-smanic. It does not have easy answers to a lot of problems that drones and mass precision pose. It simply doesn't. It's nice people talk about air power and it feels like they're talking about magic present on the battlefield. And secondly, the US Army, no matter how much it gears itself to the end of Pacific, has a basic prompt, which is the next war it's going to fight will be on land. That is a very sad that. Okay. And these challenges are particularly present for those who have to conduct any kind of breaching operation or a fence maneuver, especially against the impaired defense. So they're going to be there. And even if people are not sanguine about integrating this technology into how we fight, they have to be a lot smarter about protecting the force and how it wants to operate against these capabilities because they're proliferating very rapidly. The interesting part is they're accessible, not just to countries like Russia and China, but to middle powers and small states. You are going to see them exported by Russia. And actually anyone that Russia doesn't export them to, I'll be very honest, there's a good chance Ukraine will. Because Ukrainians are very interested after this war, particularly the best drone units in providing these services elsewhere. So it's going to proliferate. To me, it's ignored, we ignore this technology or peril, but it's an integration challenge. It's not something that's substitute for traditional advantages. And the only last comment I make is that in this debate, the thing that's always missing on integration is for structural allocation. The biggest problem I see in Western militaries, people can talk about drones all they want. Right now this is manpower intensive. You can make it much more autonomous and reduce the manpower requirements for it. You will never get this technology into the force without force structure allocations. It's not going to happen. There need to be some kind of drone units. There need to be people whose job it is to use these systems. It's very manpower intensive. If you look at the Ukrainian Russian armed forces, if you look at any Western military, you cannot fight in this way or adapt it to how you currently fight without force design changes. There are a lot of great stuff out there. I'm just on that last point. There's been a lot of people arguing that when you increase automation, you actually increase the need for manpower as well because these things need to be built, maintain, feel, did sustain, things like that. On the air power stuff, it's interesting how the conversation is involved. I do think we would obviously use air power in a very different way than Ukraine has or have been able to, but it's interesting how the conversation is moved from, well, we would just have air superiority to, well, maybe air superiority only happens in minutes and windows. I think that's a healthy evolution, but it's also an admission by our leaders about where things are heading. All right. So we saw last fall, a great contest, which was F-35 versus Gibbera Styrofoam drone. This is not quite what the F-35 was really built for, but we saw how cost ineffective that is a solution to that problem. Modern ground-based air defense and current aircraft that we have are not optimized for that mission. And that's simply one subset of the problem that drones pose. If you look at high-saccharation, one-way attack drones that rush along, shows at a rate of 5,000 plus per month against Ukraine. If you look at older drones that operate within a few hundred feet on the battlefield, it's not immediately obvious how air power solves us. It's just not. Okay. I mean, yes, air power is still the best combination of mobility and firepower in the battlefield and all that I get it. But this is why I'm a little bit wary of it. I think it might take to some extent another war for us to really see how this technology matures. Because often the people who would develop a technology in first-deploying the battlefield are not the ones that come up with the best operational concepts and the best ways of using it, necessarily either. We've seen that throughout wars and we've seen that throughout interwar periods. Thank you for listening to this episode of the War on the Rocks Podcast. Thanks to our friends at Leonid Capital for supporting this important event. Don't forget to check out our membership program at warontheirox.com/membership, where you can listen to among other things the Russia contingency with Michael Kaufman. Stay safe and stay healthy.