Ongoing Global Disruption

What is disruption in contemporary society and economy?

Disruption = the act or process of disrupting something - a break or interruption in the ordinary course or continuation of some activity, process, etc.  Also derangement, dislocation, disturbance, upset and related convulsion, revolution, unsettledness, unsettlement, upheaval.

Innovation is the opposite of complacency — and strategic innovation is, in fact, how disruption is delivered.

Disruptive technology is an innovation that significantly alters the way that consumers, industries, or businesses operate. A disruptive technology sweeps away the systems or habits it replaces because it has recognizably superior attributes. 

Creative destruction describes the way technological progress improves the lives of many, but only at the expense of a smaller few.  

• Creative destruction occurred during the industrial revolution when machinery and improvements to the manufacturing process, such as the assembly line pushed out craft and artisan production. While the economy as a whole benefited from such improvements, those craftsmen who were displaced saw their jobs destroyed, never to return.

In the last decade, digital transformation has been a critical driver for profitable growth, customer delight, and seamless operations. Today, we are well into the digital revolution, reaping its benefits, solving problems that lie in its wake, and trying to determine our next steps on the way forward. 

• Digital transformation is redefining education for the age of machines. What started as an attempt to close skills gaps in the workforce, has fast become a race against time to not only equip people with new, digital age skills but to also create an environment where creativity and innovation have free rein.
• Here again, it is the digitally mature organisations who have been most successful in embedding technology into learning and creating digital platforms that offer seamless, personalised learning. They are best poised to advise on how to create a new multidisciplinary, technologically savvy workforce that can draw on the prowess of technologies and work alongside it.
• Take the case of our new digital identities; they are the gateway to a range of services. Now, even those without traditional identities can obtain digital ones based on biometrics and access essential services such as healthcare, financial aid, education and, with that, the possibility of a better life, where none existed before.

In business theory, disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market-leading firms, products, and alliances.  

• Not all innovations are disruptive, even if they are revolutionary. For example, the first automobiles in the late 19th century were not a disruptive innovation because early automobiles were expensive luxury items that did not disrupt the market for horse-drawn vehicles. The mass-produced automobile was a disruptive innovation, because it changed the transportation market, whereas the first thirty years of automobiles did not. 
• Disruptive innovations tend to be produced by outsiders and entrepreneurs in startups, rather than existing market-leading companies. The business environment of market leaders does not allow them to pursue disruptive innovations when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations (which are needed to compete against current competition).

New technologies and disruptive innovations are influencing not only international politics and the global economy but also the strategies and operational toolkits of state and nonstate actors alike. Above all, they create new threats, but also opportunities for peace operations and humanitarian missions and have complex implications for Austrian and European stability. 

Macro-level disruptors may be, for example :

• Innovations that enable recovery of precious materials or supplanting traditional materials
• The shift from disposability to restoration drives regenerative design and reduced consumption
• Closed-loop systems reduce the need for extraction and processing of new resources
• Worldwide adoption of the just-in-time vs just-in-case model of production reduces consumption
• The shift from subtractive manufacturing to additive manufacturing eliminates waste
• Resources substituted by alternatives enabled by technology (e.g. 3D Printing, Nano-technology)
• Decreased automobile demand due to urbanisation and the sharing economy 
• The shift in automobile material requirements as experience design replaces safety needs
• The shift to renewable energy drives a shift in the materials required to generate energy
• Sustainability demands drive a need to improve safety, increase productivity, and reduce costs
• Sustainability forces companies to radically re-think their business models
• Resource scarcity drives the need for alternative sources
• Resource scarcity and environmental impacts drive a reduced consumption agenda
• The price tag to extract scarce resources becomes prohibitively expensive
• Economic incentives drive metals consumers to look for alternatives
• The shared economy drives a reduction in manufacturing and consumption
• Increased demand from 3 billion people that join the consumer ranks by 2025
• Increased demand from 5 billion people that join the ranks of the middle class by 2030
• Spiralling prices and unparalleled volatility continue in the future.

International level disruption sees the below trends: 

Battle for technological supremacy. 

• The United States and China have emerged as the dominant players in the race for hegemony in the Fourth Industrial Revolution. Divergent technology standards will persist while the competition continues. The winner will have outsized influence—with economic, political, and military implications for years to come. 

Rise of the Indo-Pacific. 

• The Indo-Pacific is the new megaregion at the heart of the global economy and geopolitical competition. As China steps up, the United States bows out, and a variety of middle powers move into the mix, the Indo-Pacific will simultaneously become more critical to the commercial success of multinational corporations and more challenging to navigate. 

Clean food revolution. 

• The global food industry is experiencing a profound disruption. More consumers prefer eating “clean foods” that are healthier and more environmentally sustainable. Furthermore, technological innovations in food production are enabling a new meat mix that will change how people around the world consume protein. 

Next-generation fake news. 

• Fake news has already proven costly to governments, businesses, and societies around the world. Get ready for more volatility. Falsified video and audio are becoming less expensive and more convincing—and have a wider global reach. This next generation of fake news could prove far more damaging as fabricated stories become much harder to disprove. 

Transformation of higher education. 

• Technological changes, policy shifts, and companies taking a more active role in addressing skills shortages are reshaping higher education for the 21st century. As education shifts toward more technical training, a more specialised global workforce will emerge, and education systems will become a more important determinant of national competitiveness.
• According to the OECD, 65% of today's children will have jobs that have not yet been invented. This means that the knowledge and skills required to enter the labour market will be very different from those provided by the current educational model. 

Management and disruption

The following characteristics are critical for leading through disruption: 

• A leader must think of themselves as akin to a Chief Communications Officer. They must develop and articulate clear messaging, so the vision is easily and widely understood.
• Leaders must drive execution. The key is to make decisions that are “nearly right, but now”, then pivot if necessary when new information becomes available.
• Success rests on the ability to engage the entire leadership team and other key stakeholders around a shared vision and shared goals. Focus on own team, championing others and calling out their achievements, while inspiring, motivating and leading by example. “Never on your own”.
• Credibility is an essential leadership attribute for any situation, but when leading through change it becomes even more critical. Furthermore, leader is expected to act with consistency and reliability, be a moral compass, have integrity and remain calm.
• In times of disruption, the leader must be brave enough to make tough decisions. Moreover, leader must also be bold and confident enough to remain optimistic, even as one navigates difficult times.
• Good leaders through disruptive times can see the big picture and understand the steps needed to achieve the desired outcome. However, great leaders also have the grit to recognise what is realistic and achievable at a tactical level, as well as the timelines needed to execute effectively.
• No one is immune to the fact that change is difficult. Even the most enlightened among us have moments of struggle. When leading through disruption, one must never lose sight of this fact.

Investments, innovation and disruption

With the importance placed on technology as the platform for innovation in an organisational context, a common pitfall is focusing investments on the latest and greatest technology, without a clear vision as to what this is going to do for the organisation.  Innovation cannot be rushed in response to sector disruption or competitor moves. The forward-looking and future-ready organisation is every stakeholder’s dream, whether customer, investor or employee.

History shows that at the dawn of each major IT innovation, ex-ante predictions about its adoption and impact have invariably been proven wrong. They overestimated the adoption pace and underestimated the magnitude of the impact. The pace turned out to be slower but its eventual impact much more substantial.  KPMG survey 2018 showed that:

• Only 2 per cent of our respondents anticipate a ‘business as usual’ scenario. The rest see it as a treadmill to oblivion since digitisation is now a necessity as much as a choice.
• Thirty-five per cent anticipate ‘incremental changes’. This, in the belief that the pace of adoption will remain moderate over this period, due to the persistence of various technology and legacy issues.
• More importantly, among the remaining majority of respondents, 53 per cent anticipate ‘partial disruption’ and 10 per cent‘ full disruption’.

Where does the disruption emerge in the financial sector: 

• Thirty-four per cent expect internal disruption, as alternative investment managers themselves get on the front foot and digitise their businesses
• Forty-four per cent expect joint disruption, as incumbents collaborate with potential external rivals. This group includes many medium and small-sized managers who want to stay in the driving seat.
• Twenty-two per cent expects external disruption, as current internet titans and FinTech start-ups venture into alternative investments, especially into areas where they have a dominant digital advantage and brand presence. This group included many medium-sized managers.

Disruptive research and development will source its financial capital from different sources:

- Innovation oriented hedge funds  

- Private equities like angel investors, venture investors 

• Although our data set revealed that builder-led startups were nearly ten times more common than disrupter-led ones, “disrupter” startups received 1.7 times more funding, on average, than “builder” startups. 

- Government R&D or Academic budget 

• The decline in U.S. federal spending on R&D from 1.2% GDP 1976 to 0.7% in 2018 is even more apparent in comparison to China, which increased its R&D expenditure thirtyfold between 1991 and 2015. 

- Crowdfunding

• Digital bank Monzo proved that crowdfunding is not always a slow burner. In two days, two hours and 42 minutes, the bank hit its £20m target in the biggest crowdfunding round ever completed by a UK FinTech company. 

- Traditional bank loans for entrepreneurs

- Corporate R&D budget 

• Technology companies represent 9 of the top 20 global spenders on research & development 

- Cost and resource sharing practices among multiple healthcare stakeholders to lower R&D costs 

- Equity partnerships between clinical research organisations and industry players to ease the R&D financial burden and drive innovation and cost-effectiveness 

Disruptive enterprises source their knowledge capital from sources like:

- Research institutes both public and private funded

- Clinical research organisations (CRO) 

• Equity partnerships between CROs and industry players will ease the R&D financial burden and drive innovation and cost-effectiveness.
• Owning platforms and offering a broad portfolio of services across the R&D value chain, beyond outsourced clinical trials. 

- Universities

• Compared to North America, the average university in Europe generates far fewer inventions and patents. This is mainly due to less systematic and professional management of knowledge and intellectual property by European universities. Moreover, efficient knowledge transfer in European research institutions is hindered by a range of factors, including cultural differences between the business and science communities; lack of incentives; legal barriers; and fragmented markets for knowledge and technology. All these factors adversely affect European growth and jobs creation. 

- Open innovation channels

• Many companies are developing open innovation approaches to R&D, combining in-house and external resources, and aiming to maximise economic value from their intellectual property, even when it is not directly linked to their core business. In particular, they have begun to treat public research as a strategic resource.

- Innovation cooperation

• “Marie Curie Industry-Academia Strategic Partnership” scheme which supports the development of such long-lasting collaborations via the exchange of researchers. 
• State aid framework has also introduced a measure on aid for the loan of highly qualified personnel from research institutions (or large companies) to SMEs.
• Solo scientists like Einstein, or small teams, appear to come up with novel ideas that change the course of a field. Those are becoming rarer, though: authorship lists on scientific papers have grown in the last century, from about one author per paper in 1913 to an average of 5.4 authors per paper in 2013. 

- Technology players: playing a pivotal role in the R&D value chain 

• Leveraging new technologies such as AI, cloud-based platforms, machine learning, cognitive technology and wearables.

- Project-focused players: managing the R&D value chain end-to-end 

• Teams of stakeholders including pharma and biotech players, academia and healthcare startups

- Open-source

• Value has shifted from product to data encouraging software vendors to make software open source.  

The creative destruction in the economy is evident in S&P 500 list: 

• The 33-year average tenure of companies on the S&P 500 in 1964 narrowed to 24 years by 2016 and is forecast to shrink to just 12 years by 2027.
• Record private equity activity, a robust M&A market, and the growth of startups with billion-dollar valuations are leading indicators of future turbulence.
• At the current churn rate, about half of the S&P 500 companies will be replaced over the next ten years. 
• Retailers were especially struck by creative destruction, and there are definite signs of restructuring in financial services, healthcare, energy, travel, and real estate.
• The turbulence points to the need for companies to embrace a dual transformation, to focus on changing customer needs, and other strategic interventions.

Where is the economy currently with its digitalization?

Currently, enterprises are using digital technologies across a variety of areas in their core IT management (79 per cent), business process management (60 per cent) and customer relationship management (62 per cent).  The research also found that respondents’ organisations are looking to utilise digital technologies (if they have not already) across knowledge management (33 per cent), operational intelligence (31 per cent) and product development (28 per cent). 

• Almost 64 per cent of respondents’ organisations have implemented cybersecurity to improve existing business operations, 53 per cent to solve new business problems, whereas just 28 per cent implemented cybersecurity to create new opportunities.
• Forty-one per cent of respondents in the banking industry believe that data analytics for deep personalisation of products is the top trend that will have the most positive impact on their organisation within the next three years.
• Modernisation of processes is seen as a key trend within the automotive industry to invest in digital supply chains, with 45 per cent respondents ranking it among the top three trends, and 25 per cent ranking it first. Of those that see investments in digital supply chain as a key trend, respondents estimate over 16 per cent increase, in their organisation’s global annual revenue as a result of improving this.
• Digital technologies can be used with insurance products to update risk calculations immediately and provide more accurate underwriting outcomes. This may be a contributing factor for intelligent automation of underwriting being identified (by 38 per cent) as a top trend in the insurance sector.

Few industries that are prone to disruption as follows: 

• Travel websites such as Expedia (EXPE), Kayak, and Travelocity have eliminated the need for human travel agents.
• Tax software such as TurboTax has eliminated tens of thousands of jobs for tax accountants.
• Newspapers have seen their circulation numbers decline steadily, replaced by online media and blogs. Increasingly, computer software is writing news stories, especially local news and sporting event results.
• Language translation is becoming more and more accurate, reducing the need for human translators. The same goes for dictation and proof-reading.
• Secretaries, phone operators, and executive assistants are being replaced by enterprise software, automated telephone systems, and mobile apps.
• Online bookstores such as Amazon (AMZN) have forced brick-and-mortar booksellers to close their doors permanently. Additionally, the ability to self-publish and to distribute e-books is negatively affecting publishers and printers.
• Financial professionals such as stockbrokers and advisors have lost some of their business to online trading websites like E*TRADE and Robo-advisors like Betterment. Robinhood is a free online brokerage service that is subsequently stealing market share from traditional online brokers. Many banks are giving customers the ability to deposit checks via mobile apps or directly at ATMs, reducing the need for human bank tellers. Payment systems like Apple Pay and PayPal make even obtaining physical cash unnecessarily. Ant Financial has already disrupted the Chinese financial industry and - via its investment in Paytm - is well on the way to repeating this in India. The thought of 2.5 billion people accessing financial services via their smartphones, disintermediating physical banks, is a frightening prospect. 
• Job recruiters have been displaced by websites like LinkedIn Indeed.com, and Monster. Print classified ads have also been replaced by these sites, while sites like Craigslist have replaced other kinds of classifieds.
• Uber, Lyft, and other car-sharing apps are giving traditional taxi and livery companies a run for their money.
• Airbnb and HomeAway are doing the same for the hotel and motel industry.
• Driverless cars, such as those being developed by Google (GOOG), may prove to replace all sorts of driving jobs, including bus and truck drivers, taxi drivers, and chauffeurs.
• Drone technology may revolutionise the way products are delivered, and Amazon is trying to make that a reality. Drones may also replace pilots in several specialisations including those pilots in the film, crop-dusting, traffic monitoring, and law enforcement sectors. For years, fighter pilots have been replaced by drones on numerous military missions.
• 3D printing is proliferating, and technology is becoming better and faster. In a few years, it may be possible to manufacture a wide variety of goods on-demand and at home. This will disrupt the manufacturing industry and diminish the importance of logistics and inventory management. Goods will no longer have to be transported overseas. Assembly line workers have already been primarily displaced by industrial robots.
• Postal workers first saw terrible news with the widespread use of email reducing the volume of the daily mail. High-tech mail sorting machines will eliminate even more jobs in the postal service.
• Fast-food workers recently protested to raise the minimum wage. Fast food companies responded by investing in computerised kiosks which can take orders without the need for humans. Retail cashiers have also been displaced at supermarkets and big-box stores with self-checkout lines. Toll-booth attendants have been replaced by systems like E-ZPass.
• Radio DJs are mostly a thing of the past. Software now chooses most of the music played, inserts ads, and even reads the news.
• Educational sites such as Khan Academy and Udemy, as well as Massively Open Online Courses offered by leading universities for free, will significantly reduce the need for teachers and college professors over time. It is plausible that today's children will receive their undergraduate education mostly online and at a minimal cost.
• Traditional television distribution is being upended by digital distribution outlets such as NetFlix (NFLX) and Hulu. People are dropping their cable or satellite TV services opting to stream online instead. Spotify and iTunes have done the same for the recording industry: people now choose to download or stream on-demand rather than buy records.
• Libraries and librarians are moving online. References like Wikipedia have replaced the multi-volume encyclopedia. Librarians used to help people find information and conduct research, but much of that can be done individually over the internet nowadays.
• Farmers and ranchers used to make up over 50% of the U.S. workforce. Today less than 2.5% are employed in this sector. However, more food than ever is being produced in America due to the automation in agriculture and food production.

Brief review of the Global Innovation Index 2019

The Global Innovation Index (GII) 2019 is an annual metrics assessing national investments and benefits in innovation. The index combines measures in several areas like institutions, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and technology outputs and creative outputs. 
https://www.globalinnovationindex.org/gii-2019-report

The 2019 GII top ten countries were 

1. Switzerland 
2. Sweden 
3. The United States of America 
4. The Netherlands 
5. The United Kingdom 
6. Finland 
7. Denmark 
8. Singapore as only Asian country
9. Germany and 
10. Israel.

The UAE came to 36 improving two ranks from 2018. The UAE keeps the position of the highest innovative Arabic nation.

General Findings:

1. Public R&D funding is growing very slowly whereas business R&D is in steep rise. This means that there will be hype commercial applications of existing technology, but less new knowledge created in base research for future opportunities. The rising protectionism will slow down the global innovation networks and knowledge flows.
2. The top 10 innovative nations have remained almost the same. Switzerland being at the top, Nordic countries, Netherlands, UK, Germany and USA persisting. Singapore being the only Asian country. Israel rising to 10th position. At the low GDP category, some Southern African countries stand up like Burundi, Malawi, Mozambique and Rwanda. Somewhat the small nations with high education and knowledge infrastructure keep up with competition.
3. Some nations get more out from the innovations than the others. China stands out as a good utiliser of its innovation investments. The best beneficiaries may have more balanced support over the life-cycle of innovation: idea-design-investment-production-marketing-consumption.
4. Science and Technology (S&T) clusters accelerate innovation. Clusters create knowledge, patents and products. US (26) and China (18) are leading countries in numbers of clusters. Iran ranks 46 with Teheran cluster.

Conclusions:

• Science and Technology clusters correlate well to high innovation index. It is essential to bring different sciences together and provide platforms for design, manufacturing, finance and market. Combination of ideas and ability to build and deliver create the best foundation to innovation.
• New knowledge needs to build on previous knowledge. New knowledge needs to foster new designs and models particularly in digital economy. 
• The GII ranking is based on quantitative data rather than qualitative therefore may give a biased view to global innovation i.e. higher the GDP the better in innovation.
• Besides the generation of Wikipages, there is no reference in indicators to innovation activity that happens in open societies, digital services or products in video game industry, mobile applications etc. It may be that GII is counting only the 3rd generation of industrial and economic value creation and misses the emerging 4th generation value production and consumption.

Are we considering Artificial Intelligence from a biased viewpoint?

We assume that human intelligence is the highest form of intelligence and compare Artificial Intelligence to the human way of logical behaviour - Touring test, Asimov rules, the way that a child learns abstract things, namely the Artificial General Intelligence. https://en.wikipedia.org/wiki/Artificial_general_intelligence

Taking a look back to human evolution, we survived because we were doing better in larger social groups than any other primate when the environment changed. The adaptation was enabled by our ancestor’s larger frontal cortex that supported abstract language and social cooperation. Because of this evolution, our brains mostly deal with motor control, sensory and regulation. Secondly, they are busy with emotions, social relationships and language, and time to time with actual cognition.

AI intelligence is said to be at a level of a simple animal. However, currently, AI is far better at playing chess and Go than any human being. In games with uncertainty like Texas Hold’em poker and DOTA2, AI is at the level of best human players or teams.

What if thousands of AI entities (IoT) connected (Internet, Bots, 5G) and they are much better in communication and cooperation than human society (team of teams, swarming bees, a colony of ants). Will they outperform us as a network even with less individual intelligence than in a human entity? 

After all, there are organisms like Herpes-virus and parasites like Schistosomiasis in humans that adapt their behaviour according to the host body. Furthermore, some parasites may manipulate the functioning of the host organism like protozoan which cycles between mice and cats. For transaction from mouse to cat the parasite makes mice not afraid of cats, therefore increase the change to get the host mouse captured by a cat. https://www.seeker.com/parasite-brainwashes-mice-to-not-fear-cats-1767894670.html

We have created smart viruses that change their appearance to avoid defence measures in the cyber environment, what prevents us from developing an intelligent micro-organism in physiological/chemical environment and change human behaviour?

Figure from Westefhoff et al (2014):  Macromolecular networks and intelligence in micro-organisms

Huawei Situation from a Small Nation Viewpoint

How the US has put China and Huawei to the current situation and how this may affect an independent, small nation and its national defence?

The memorandum reminds of the main events that have taken place in the so-called Huawei case. It provides a context to analyse the situation. The analysis is done both from political and military security viewpoints. Finally, recommendations are made for military action.

1. Escalation of the Huawei Situation this far (16. June 2019)

The first act of the Huawei case started back in 2012 when the US Government discouraged companies from buying Huawei or ZTE equipment since 2012 (although phones were outside of this preference) . 

The second act was launched at January 2018 Consumer Electronics Show; CEO of Huawei announced that it fails to have AT7T to sell its flagship phone Mate10 Plus.

• May 2018, the US DoD banned the sale of Huawei and ZTE phones on US military bases worldwide with the reasoning that “Huawei and ZTE devices may pose an unacceptable risk to Department's personnel, information and mission." 
• July 2018, Australia was the first to say that it will ban the Huawei from 5 G rollout publicly. The reason was being a Chinese company: “It is a Chinese company, and under Communist law, they have to work for their intelligence agencies if requested. There aren't many other companies around the world that have their political committees.” Possibly, the Australian government was following its 2012 decline from Huawei to provide $38 B National Broadband Network project. 
• December 2018, the UK telecommunications operator, British Telecom announces intent on stripping Huawei from their existing 4G network within two years and will not use Huawei in its coming 5G core. Nevertheless, “Huawei remains an important equipment provider outside the core network and a valued innovation partner" of BT. 

Since New Zealand  had banned Huawei from their 5 G rollout on November 2018 and Canada  will most probably follow the line, the Five Eyes Intelligence coalition seem to have concerns in using Huawei equipment in their 5 G core networks.

Then the situation escalated towards the third act:

• January 2019, The US Department of Justice on Monday charged Huawei with theft of trade secrets, wire fraud and obstruction of justice. FBI said that "The charges unsealed today clearly allege that Huawei intentionally conspired to steal the intellectual property of an American company in an attempt to undermine the free and fair global marketplace." 
• February 2019, US starts diplomatic coercion operation in other countries to stop them using Huawei in their future 5 G investments. The reasoning included: "The US advocates for secure telecoms networks and supply chains that are free from suppliers subject to foreign government control or undue influence that poses risks of unauthorized access and malicious cyber activity."  Besides diplomatic means, the US also threatened to stop sharing their intelligence information, if their guidance would be abandoned. 

During the lastest act:

• May 2019, Trump effectively bans Huawei with a national security order. "The executive order prohibits transactions that involve information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary whenever the secretary of commerce determines that a transaction would pose a threat to national security." 
• June 2019, The US Commerce Department later gave Huawei a temporary license until August to let Huawei keep existing networks and issue updates.  Nevertheless, companies like Google, Facebook, Arm and alliances like IEEE have been dropping Huawei from their future cooperation.
• June 2019, Russian telecom agrees to let Huawei develop country’s 5 G network along with a statement of "We both add momentum to strategic cooperation between the two companies in high tech, thus building a foundation for commercial 5G rollouts in Russia in the nearest future."  In fact, in Russia FAPSI runs a separate government network for sensitive information

Meanwhile, Huawei has announced that it will deploy its own, much improved , smartphone operating system, “HongMeng”, later this year to China and provide it internationally 2020 . Furthermore, Huawei is promoting their 5 G forcefully in countries outside of US hegemony to give them an advantage over the western countries in gaining the benefits of 5G. Ren Zhengfei has stated this as “America doesn't represent the world. America only represents a portion of the world." 

There are also signs on the U.S. side that the operation, although started as a security concern, may have been escalated as a part of broader economic confrontation since June 2019 the U.S. Treasury Secretary said that President Donald Trump might ease U.S. restrictions on Huawei if there was progress in the trade row with China - but absent a deal, Washington would maintain tariffs to cut its deficit. 

2. The context for Situation Analysis

2.1 The so-called “Tradewar” or techno-economical confrontation between US and China

There is a profound difference in the way the two confronting nations are investing in the future where 5G , supercomputing  and Artificial Intelligence are considered to be the main accelerators for Gross Domestic Production .  Besides the Defence Industry, the US relies on private sector (Silicon Valley Techno Hub) commercial motivation and venture capital for research and develop the future technologies and competencies (mostly private funding and private companies).  Whereas the Chinese government invests widely (“China is executing a multi-decade plan to transfer technology to increase the size and value-add of its economy.”) into key technology areas within the nation (Globally: most online citizens, highest educated digitalized society) and internationally (2017 $515M). China plans to create a $150Bn industry from artificial intelligence related technology only.  The Chinese are seeking start-ups and innovative SME’s to invest in an early stage company developing advanced technology. Based on US law, foreign investment makes the innovative technology off-limits for purposes of the Defence Department. 

The US seems to have wake up with a fact that they will lose the leader of technology posture in the long-term unless they start holding China back. China depends on high-tech manufacturing and some U.S. origin components to keep up the growth and collect tax revenues. China is investing their tax capital in the critical future technologies that will be foundational for future innovations both for commercial and military applications: artificial intelligence, robotics, autonomous vehicles, augmented and virtual reality, financial technology and gene editing. The US has not used its federal taxes wisely in this competition, but merely compensated its defence industry and military operations abroad. The U.S. government does not have a holistic view of how fast this technology transfer is occurring, the level of Chinese investment in U.S.  technology, or what technologies we should be protecting.

On the surface, there is the fixation with President Trump and his closest advisors of fear of Asian economic raise - Japan 1980s and now China. They fear that Asian economic development declines the US economy. On the other hand, Chinese government may suffer from the feelings from centuries of humiliation by western nations. 

2.2 Next revolution of industry and society enabled by networks and technology 

With the introduction of the smartphone (Nokia 1995), the competition of establishing a platform for all consumables provided in smartphones begun. Apple and Google won the competition bypassing all old mobile phone manufacturers (Nokia, Ericsson, Motorola) and Microsoft, who entered the race too late to gain market leverage from the content.

The 5 G technology introduces a new platform – edge computing. The edge computing will provide access to virtual and augmented reality equipment, Internet of Things, and application market as Apple’s App Store and Google Play did for smartphones and their users. If Huawei gets one teleoperator from each country, it will be enabled to provide new edge services. Some claim that only Huawei and Samsung can manage the whole service chain and therefore rule what applications will be published. Who controls the edge computing platforms, can also access the transaction data generated billions of Internet of Things and devices like augmented reality spectacles.  

The 5 G technology also provides global platform business, finance, the 4th industrial revolution, smart cities, and smart government a significant boost. Therefore, countries are striving to establish 5 G infrastructure to give their economy new areas to explore and increase Gross Domestic Production. 

3. Analysis and Recommendations

The question for the analysis is: Should a small nation that wants to build its knowledge economy and gain a strategic defensive posture through the digitalization of its defence avoid or engage with Huawei manufactured technology? The analyse that follows, is done at three different, but somewhat interrelated levels: Technology, Economy, and Political.

3.1 Technology viewpoint

Analyse:
The 5 G mobile networks will connect the Internet of Things to enable the change in controlling cities, energy grids, population, transportation, supply chains, factories, education, among other things. Therefore, a small nation and its defence forces should start the pilot applications as soon as possible, but possibly delay the full roll-out to make sure that there will not be any technical single-point of failure emerging when transforming the society and its defence. The 5 G technology is by no means an end, but an enabler or way for innovative ways to improve business, governance and military affairs. These innovations occur only by experimenting itself or learn from the lessons gained by other fields or nations. 

Recommendation at a technical level:
In preventing the single technological point of failure, a strategic distribution should be considered. Guiding the national teleoperators and military to use different manufacturers in building the 5 G networks or a combination of network components from several vendors may prevent the situation, where the failure of one technology will crash the whole system. The military has always been aware of downgraded export versions of military gear , enemy exploiting possible weaknesses in armament , and potential backdoors implanted in some of the core commercial communications equipment. 

3.2 Economy viewpoint

Analyse:
The 5 G technology provides a new opportunity for platform business: the edge. The U.S. based companies have captured most of the global 3-4G platforms in social media (Facebook, Google), retail (Amazon) and cloud computing (AWS, Google, Microsoft). Therefore, they also control the data collected from vast global user society and benefit from the analysis of consumer behaviour (Google revenue from Ad’s is almost as much as the total of publishing business in the US ). A new, possibly regionally exploitable opportunity for platform business will give leverage for new ways of business and more nationally earned (tax possibility for governments) revenue. 

Recommendation at the economy level: 
Therefore, it is imperative for a business viewpoint to start experimenting and developing as soon as possible to gain the innovation opportunities and lessons required for new ways of a profitable business. If the Huawei edge technology and their ability to control the whole chain will indicate that they would deny the opportunities of the local economy, then alternative vendors should be sought. It is essential that investment decision also considers the future effects on the economy and not just sub-optimise the time of acquisition of 5 G infrastructure.

3.3 Political viewpoint

Analyse:
If the US and China are continuing the current “Trade War” and escalate it to a “Cold War” based on the zero-sum game as they have done this far, the US will pressure its allied/partnering countries to join their side of a blockade. China will, in this case, enforce their belt and road policy and use both financial and diplomatic ways to coerce nations to their side. The unfortunate confrontation would not benefit small countries but keep them from enjoying the possible accelerated opportunities.
In the other hand, if the parties come to see the win-win possibilities after inflicting their economies enough, then a neutral politics during the crises may appear beneficial in the future. 

Recommendation at the political level:
When pressurised from either party, the political level of a small nation may gain the best outcome by stalling and avoidance rather than drastic choose of side in confrontation. The decision should be made compared to possible benefits of early adaption of the new technology to boost the economy rather than short-term political face-saving.

Digital Transformation of Military Affairs

1. Introduction

The world is facing a possible societal revolution with ubiquitous digitalization enabling new ways of doing governance, manufacturing, business, transportation, education and social relations. The change will also affect the reflection of power between interest groups and, therefore, also ways of military affairs. 

When facing the inevitable change, the military is forced to transform, particularly undertake a digital transformation since digitalization will enable the military to change their affairs at least to the degree as it enables the society and government. 

The paper defines the digital transformation, gives an example of the benefits gained from transformation, presents two examples of recent transformations from the US and Russia, tries to foresee the way the military may react in transformation based on historical analysis, and explains the environment, challenges and, lastly, the opportunities presented for military within the next decade.

2. What is Digital Transformation in a Military Context?

Digital transformation  of military affairs means integration of digital technology into all areas of military functions, fundamentally changing how military force is utilised, supported and generated to gain strategic advantages.

Digital transformation  is enabled by Digitalization, which is supported by Digitisation.  These stages are commonly followed in the evolution of force digitalization.

• Digitalization  evolves the ways of affairs, improves the force performance, builds agility and robustness of military processes using digital infrastructure and platforms.  Military process digitalization is achieved, for example, through integrated Command and Control platforms from soldier and platform level to higher commands, integrated enterprise resource management platforms, and integrated development and training platforms.
• Digitisation includes Communications and Information Technology infrastructure that enables mobility, one pane for services, one source for truth, and secure and available information related services. 

The above two stages define the common roadmap for digital transformation in Figure 1. The military has been digitising its functions using digital and computer technology. Primarily, digitisation has automated isolated functions, creating some improvements by automation (e.g., office automation, simulator training, targeting automation).  Nevertheless, the military system has an invisible ceiling that requires effort to break through and gain significant performance advantages. The ceiling is created by the hierarchical and stove-piped organisation, conservative organisational culture, and challenges in significant transformation programs (technology, processes, competence). 

Figure 1: Roadmap for Digital Transformation of Military Affairs

Digitalization of end to end processes (e.g., enterprise resource management systems, integrated C4ISTAR systems, integrated learning and force generation systems) provides military with much better performance than for example produces cost-savings, less workforce in support functions, and faster force generation cycles. Further improvements in sharing information and gaining advantages in affairs are hindered by the next ceiling preventing to gain new capabilities. Breaking the capability ceiling requires different security policy and essential resources, which calls after a change in political thinking. Democratic political decision making is prone to evolve military capabilities only slowly and mainly replacing old capabilities with updated technology (e.g., better protected main battle tank, more performing fighter, or more automated aircraft carrier).

Only after having digitalized the main processes of force utilisation, generation and support, the military may be able to do them differently and gain a strategic advantage compared to probable adversaries. The strategic advance means, for example, acquiring tactical mobility that surprises enemy (German armoured units in WW II), operational mobility that surprises adversaries (German use of train transportation in WW I) or gaining dominance of essential battle dimension (Russian dominance of space with Sputnik in 1960s).

Currently, there may be indications and opportunities for political decision making to assess security situations differently and create a revolution in military affairs through digital transformation. Considering the environment where military force is generated, supported and utilised, there are significant changes illustrated in Figure 2 (leaving out the actual environment of confrontation and conflict):

• Space-based economics and security 
• Smart Governance
• Social Media
• Platform and Social business
• 4th Industrial revolution
• Internet, 5G mobile connectivity, Internet of Things, Big Data, and Artificial Intelligence 

Figure 2: Contemporary environment of military affairs

3. Why is Military Interested in Digital Transformation?

The reasoning behind the need for the digital transformation of military affairs may be illustrated through a story of the transformation of Finnish Defence Forces (FINDEF) 2004 – 2015 in Figure 3. The FINDEF started their significant functional automation effort in the 1950s when establishing first mainframe computing resources for administrative support, radar-based air defence surveillance, and networked archipelago defence on the shores of Gulf of Finland. The digitisation of force created hundreds of specialised digital systems which seldom were in connection with each other, but a human operator was required for data transfer. The era of digitisation ended when the white paper for Finnish Security and Defence Policy 2004  declared the following goals to guide the transformation:

 “Command of the smaller, more mobile wartime forces in the 2010s requires a situation picture as real-time as possible. To ensure correctly timed command arrangements, an integrated intelligence, surveillance and command, and control system will be developed for the Defence Forces. This will enable the common real-time situation picture to be communicated to every service and the creation of sufficient communication links. The command and control system will be internationally interoperable.”

“The Defence Forces’ information management system will be rationalized. The new information technology platform will be divided into operational and administrative environments by the end of 2009. The administrative environment will be highly centralized, allowing allocation of resources to meet the needs of the operational information technology environment and also to enable other security authorities (determined separately) to be linked as users into the system.“

The portfolio of the transformation of the FINDEF included three primary folders of change programs:

1. ICT Rationalisation (TIERA) 2004 – 2008 creating an enabling Information and Communications Technology infrastructure to support other changes. The focus was both on technical development but also improving the ICT service provider maturity. Subprojects included, for example, Rearranging the network infrastructure, Consolidation of shared services in the Administrative environment and establishing joint operational ICT environment providing simple information services empowered with collaboration and content sharing.

2.Development of both operational and support processes of FINDEF with two programs of:

• Integrated Command, Control, Communications, Computers, Information, Surveillance, Target Acquisition and Reconnaissance (iC4ISTAR) 2004 – 2010 focusing on improving mainly the processes of force utilisation and
• Enterprise Resource Management (ERM) 2005 – 2012 focusing on enabling force generation and support processes.

3. Network Enabled Defence 2006 – 2015 where joint and shared enablers will help to reach more excellent capabilities. This phase was calling after innovations and research to exploit new capabilities at military levels of tactics, operations, and strategy in pursuing advantages over possible adversaries.

The challenge of this kind of transformation was captured from Gartner Group, who says that there are two main gaps to overcome on the journey:

• The first gap is preventing the development of joint functions. Stovepiping is predominant in enterprises where units are diversified with a historical, cultural legacy. There is a need to change the power structure in the enterprise as “stovepipe” ownership, investments and service production.
• The second gap is preventing the development of new capabilities. Overcoming this calls for new ways of approaching adversary, projecting force, and affecting an adversary’s system and utilisation of force. Militaries throughout history have struggled with these transformations of doctrine .

Figure 3: Plan for the digital transformation of the Defence Forces Finland

By 2008, the first phase was achieved, and the description of enabling ICT structure as part of the defence system in Finland was described as a nationally defined service platform for common and joint processes. The technical structure included a core network that connected data centres, providing application and content services accessed via access networks. Tactical level field networks were connected to nation level structure via connection points.  The 2009  white paper for national security provided acceleration to transformation proclaiming that:

“The Defence Forces command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) systems generate an integrated military situation picture (land, sea, and air as well as information and the IT environment). The national system is utilised to expedite planning, command and control and execution. Defence capability against an adversary’s cyber-attacks is maintained and improved. The nationwide logistic system taps into the resources of the entire society in supporting the military defence.” 

The 2012 white paper  recognised the achieved process performance improvements and guided towards further steps in transforming the force structure and capabilities towards 2015:

“In 2015 the wartime strength of the Defence Forces will be approximately 230 000 troops. The aim is to have more capable units and weapon systems in order to compensate for the reduction in troop strengths. The formation of regional troops alongside operational and territorial units will bolster the local defence capability.”

The 2017 white paper for defence  recognised the outcome of the reform by stating that:

“The Finnish Defence Forces reform, carried out from 2012–2014, adapted the size and the basic structure of the Defence Forces to meet stringent financial demands and the then lower threat level of the security environment. The defence budget was cut by approximately 10 per cent. The reform’s savings goals were met. During the defence reform, the number of salaried personnel was reduced to approximately 12 000 employees. The Defence Forces’ service activities and logistics were concentrated. The wartime strength was reduced to 230 000 troops.”

Furthermore, the 2017 defence report acknowledged the new joint capabilities, flat command organisation (from 4 levels to 2), less than half of the cold war forces managing the same defence mission, and shared C4ISR and logistics capabilities:

“The actions of the Army, Navy and Air Force as well as the Defence Forces’ joint capabilities are coordinated in joint operations, led by Defence Command Finland. The military services make use of the Defence Forces’ shared C4ISR and logistics. The Defence Forces prepare to carry out military defence according to the concept of comprehensive security, in concert with the other authorities and partners.”

4. What other Technically Accelerated Transformations Have Made an Advantage for Military?

Military forces have gained from the technical development of their societies before. If the industrial revolutions and the development of military capabilities creating strategic advantage are illustrated on the same line of time, the alignment is evident in Figure 4:

• The first Industrial revolution produced standard armament, national conscript armies and Navy. Napoleon exploited these to their full, followed by Prussians designed by Scharnhorst.
• The 2nd Industrial revolution created an assembly line, railroad, telegraph, and automobile. They created a definite advantage in operational manoeuvrability and firepower first in the U.S. Civil war and later in the First World War.

               (The 2nd Industrial performance was further developed to tactical “Blitzkrieg” 

                 manoeuvrability and firepower by Mechanised Wehrmacht and Luftwaffe in the 

                 Second World War.)

• The 3rd Industrial revolution introduced synthetic manufacturing, digitisation and software applications. They were fully exploited as both operational and tactical capabilities in NATO AirLandBattle doctrine and then in practice Desert Storm operation in Gulf.
• The ongoing 4th Industrial revolution has introduced cyber-physical products, Internet-based supply chains and software-defined everything. Most probably the military will utilise these abilities in creating new capabilities for operations in Multi-dimensional Battlespace.

Figure 4: Comparing Industrial revolutions to Military capability use in the battlefield

The industrial revolutions seem to affect military capabilities and their use. Nevertheless, the effect has not been linear, but:

• The military was able to quickly to copy the abilities of manufacturing, communications and transportation
• The military has been much slower in applying the technical abilities in creating tactical or operational capabilities
• Forces who have been supported by the strong political will were able to gain strategic advantage, which adversaries were able to copy fast if their societal abilities have allowed.

5. How Digitation and Digitalization have improved Armed Forces?

In order to understand the contemporary transformation programs enabled by digitation or digitalization, we take a look of examples from the U.S.A and Russia.

5.1 U.S. Network Centric Warfare, 1996 – 2002

The U.S. Joint Vision 1996 is an example of holistic digital transformation that aimed to improve both operational and tactical performance remarkably using digital technology and data to create superior situational awareness. The Network Centric Warfare transformation is illustrated in Figure 5. The transformation is based on technologies trying to overcome the stove-piped organisation and systems. Therefore, a System of systems (SoS) concept was created to integrate existing and new systems. Global Information Grid (GIG) provided strategic and operational connectivity. Holistic encryption solution enabled everyone to share their information at the Secret level (Type 1 encryption).

The program faced challenges of autonomous systems that were not designed to work together, disconnected networks and non-interoperable encryption, and lack of training and experience in Joint Fighting. The Gulf War 2003 saw the power of operational and strategic situational awareness but also suffered from a lack of tactical awareness and cooperation.

Figure 5: U.S. Network Centric Warfare transformation, 1996 - 2002

5.2 Russian Red Army Tactical Command and Control transformation, 2009 – 2018

The Red Army experienced in their Ladoga 2009 exercise that their command and control process did not address the needs of modern fast pace battlefield. Therefore, Russia launched a digitalization of its tactical land command and control in Figure 6, aiming for performance three times better than what they witnessed in 2009. 

The tactical C2 was changed from manual to digital end to end using YeSU TZ battle management system incorporating 11 C2 functions including artillery, EW, ground vehicles, air defence, engineering and logistics.  In the Zapad 2018 exercise, the western observers witnessed changed tactical units capable of modern combat.

Figure 6: Russian tactical C2 transformation, 2009 - 2018

6. What may be the Opportunities or Constraints for Military Digital Transformation within the next decade?

To understand the outside forces of change, we first explore the possible changes in the security environment where military power may be projected. Secondly, we change the viewpoint to actual transformation and see what challenges the military may face in their next journey. Thirdly, we introduce some of the opportunities of digital transformation and their possible effects on military power.

6.1 Evolving environment of confrontation, conflict, and war

The evolving operational environment and spectrum of threat have forced the military to transform their legacy organisations, doctrines and capabilities. The next decade will see, for example, the following trends of change that may affect in military ways of projecting power:

1. Operations will happen in a multi-domain environment cross the traditional air, maritime, land and extending to space, electronic, and human. "Multi-domain formations possess the capacity, endurance and capability to access and employ capabilities across all domains to pose multiple and compounding dilemmas on the adversary. "Convergence achieves the rapid and continuous integration of all domains across time, space and capabilities to overmatch the enemy. Underpinning these tenets are mission command and disciplined initiative at all warfighting echelons." 
2. The capabilities that provide multi-domain effects reside throughout the instruments of national power, within the private sector, as well as within coalition partner instruments of national power. 
3. Large groups of combat and support units moving together are replaced by smaller clusters of tactical units separated by empty spaces. A disaggregated battlefield favours autonomy and demands that close-combat units operate for long periods without reinforcement. 
4. Recent conflicts involving states are increasing “hybrid” in nature, combining traditional battlefield techniques with elements previously associated with nonstate actors. Adversary creating hybrid threat can synchronise various instruments of power against specific vulnerabilities to create linear and non-linear effects. 
5. The distinction between war and peace, combatant and non-combatant, and even violence and nonviolence (think cyber warfare) is becoming uncomfortably blurry. War amongst the people is the reality in which the people in the streets and houses and fields - all the people, anywhere - are the battlefield. Military engagements can take place anywhere, with civilians around, against civilians, in defence of civilians. Civilians are the targets, objectives to be won, as much as an opposing force. 
6. The six megatrends in software and services  will change the societies and the way they use power and are vulnerable to it:
7. People will be more connected to others and machines through wearable and implantable technologies.• Ubiquitous computing, computing and storage are available for everyone. Today’s supercomputer will be in a pocket,• Smaller, cheaper and smarter sensors will be planted in homes, clothes, accessories, cities, transport, processes and networks. Therefore, providing both real-time and life-cycle data for better optimisation.• Collected big data will provide better situational awareness for decision making. Artificial intelligence will automate some information intensive functions and will provide human reasoning with a significant enhancement.• Social and economic life will be changed through networks and platform-based models. Assets can be shared; people can create social organisations other than nation and company; centralised trustees will be distributed.• Physical objects are “printed” from raw material. Construction, manufacturing, and health care will change. 
8. As this process takes place and new technologies such as autonomous or biological weapons become easier to use, individuals and small groups will increasingly join states in being capable of causing mass harm. 
9. Advances in technology will create the potential to reduce the scale or impact of violence, through the development of new modes of protection, for example, or greater precision in targeting.

The above indicates that significant powers are affecting current military structures and capabilities demanding changes in the next ten years. How the military will adapt to these forces may be analysed using the model of strategic posture and processes of military affairs in Figure 7. The strategic confrontation posture view studies the abilities of a military enterprise to manage risks and approaches to acting. Mattila and Parkinson  use these two dimensions  to assess the social capabilities of a military enterprise in a given area of confrontation.  The two dimensions lead into four different strategic postures: Evolutionary, Operational, Protective, or Pathfinder.

The evolutionary means that the military adopts new abilities with small and careful steps while sustains the performance of existing capabilities and processes. The Defence Forces of Finland (FINDEF) was in this posture compared to the Soviet Union during 1970–1980s .  The approach for FINDEF seems to remain the same since their 2017 Governments defence report  states that:

“The systematic development of the defence capability builds on decisions taken over the course of decades. Readiness which meets the demands of the operating environment’s transformation as well as rapidly deployable forces and systems and a large, trained reserve improve Finland’s chances to respond to a rapidly developing or a drawn-out military crisis.”

The operational dominance means doing things according to good practices, but faster, more robust, or using more resources than an adversary. The capability of joint operations has been the major advantage for the US and seems to be the foundation for the future, as stated in their National Military Strategy 2015 :

“The U.S. military is the world’s preeminent Joint Force. … We are prepared to project power across all domains to stop aggression and win our Nation’s wars by decisively defeating adversaries.”

The protective posture includes building on existing strengths and improving their quality while the same time tries to prevent adversaries from gaining the same dominant posture. According to Pellerin (2017), the U.S. has possessed this posture since their technological dominance has gone unchallenged in every operation domain, but today is challenged in all of them. According to the NATO  European nations defence expenditure (avg. 1.5% of GDP 2011-2015), they have relied on the US umbrella of protective posture with an average 4.0% of GDP defence expenditure.  

Achieving at the pathfinder position means driving innovation and development and adapting novel solutions while trying to improve the agility of the enterprise. According to the assessment by Finland MoD (2013; 31-53), the Russian military and defence industry under the guidance of Vladimir Putin chose this path when they transformed their old, cold war force towards a modernised, digitized force since 2000. China has been seeking asymmetric pathfinder advantages to degrade the US operational dominance with technical innovations :

“China’s military modernization also targets capabilities with the potential to degrade core U.S. operational and technological advantages. China uses a variety of methods to acquire foreign military and dual-use technologies, including targeted foreign direct investment, cyber theft, and exploitation of private Chinese nationals’ access to these technologies, as well as harnessing its intelligence services, computer intrusions, and other illicit approaches.”

Figure 7: A framework for confrontation posture and value stream situation of military affairs 

The other part in Figure 7 is the structure of the enterprise, its processes and value streams. The model  presents two dimensions of process integration and process standardisation. These two dimensions outline the strategic operating model for the enterprise to arrange its processes and value streams: Diversification, Replication, Coordination, and Unification.

The diversified operating model is evident in the loosely integrated military enterprise, where smaller, independent forces are conducting operations independently in separate areas of operations. The autonomous forces fight differently, support their activities and develop their forces uniquely. These military units are usually deeply hierarchically arranged, and value is created mostly vertically along the lines of command. This operating model was typical in I WW when infantry and artillery regiments fought their battle separately, and air force was still in its infancy (Vego, 2007; I-19). It may be easy to introduce new branches or services to this functionally diversified organisation.

The replication operating model is trying to enhance operational efficiency by standardising the processes but not integrating them. The goal is to execute standardised processes faster than the adversary. Tactically and technically, the forces are similar, but they may engage the enemy in different areas of operation. The Commander in Chief is controlling the force production and support to maintain and improve standardisation. The western military were generating their forces before the II WW arranged in regiments of the branch (artillery, infantry, cavalry, engineers, signals) and learned during the war to create multi-arm brigades for combined arms effect (van Creveld, 1991; 98-116). The standardisation may become a legacy obstacle for revolutionary transformations but enable evolutionary development. Integration of branches may become an issue, however.

The coordination model integrates different processes aiming to optimise the operational efficiency. Multi-arm effects are used to engage a joint adversary in each area of operation. Operational level autonomy of force utilisation is enabled by coordinated efforts of force production and support. The Commander in Chief is coordinating the effort of each, possibly specific, force element. The classic example is a combined arms brigade, where unified command and control makes all different arms and branches to fight together (van Creveld, 1991; 98-116). Lately, a flatter organisation has been called a network-centric force (Vego, 2007; XIII-3). The armed forces of this process model may find it easy to introduce new digitalized units in its Order of Battle, but the size of the whole force may be a hindrance for more thorough transformations.

The unification model combines integrated processes and standardised force elements. The operating model aims to maximise operational effect and effectivity through similar force elements all facing the same kind of adversaries in their area of operation. The maturity of processes enables deep specialisation of units since they are always used in combined arms and joint manner. McChrystal (2015; 115) transformed the special operations force Iraq to work as a team of teams – many similar special operations teams that were fighting against Al-Qaeda in Iraq as one extended matrix enterprise. The revolutionary approach may work for this level of value streams and processes in military affairs.

The approach and success of the digital transformation depend on the political guidance, confrontational posture and the way that military units are organised. Next section will explore the challenges military may face when intending the digital transformation.

6.2 Challenges faced in private and military enterprises intending digital transformation

Before analysing the enablers for military organisations in their digital transformations, let us see what has happened in private enterprises meanwhile:

Most organisations are undergoing a digital transformation that directly impacts how they do business , 

• yet 70 per cent of employees have not mastered the skills they need for their jobs today, and 
• 80 per cent of employees do not have the skills needed for their current and future roles.
• Only 7% of leading organisations exhibit a digital-first and dexterous mindset 

In conclusion, the man is not ready for the opportunities that machines may provide. Either their skills or understanding is behind the possibilities offered by digitalization. 

Elsewhere, IDG has surveyed the challenges  enterprises see in transformation as follows:

1. Organisational resistance to change (Change is painful for 85-90% of personnel)
2. Lack of clear vision for a digital journey
3. Ineffective gathering and leveraging of data
4. Inflexible technology stack and development process
5. Stuck with a legacy business model.

The above results are aligned with previous findings of military technically enhanced transformations as follows:

1. The military is not riding on the first wave of technical development because they either lack of resources from political decision makers or military culture prefers the legacy solutions and evolutionary development of capabilities. (General Foch is reported to have said 1915 that "aviation is a good sport, but for the army it is useless" )
2. Once the military has seen the new opportunities on the battlefield, they are quick in adopting them in use if their force generation and support are flexible enough to absorb them. Although the injection of technology may not end with the expected outcome since the tactics and processes are much harder to change. Sometimes the institutionalised training units and school are slow to change their syllabus and send out soldiers and officers with outdated competencies. (Guderian developed the Wehrmacht tank tactics in transportation company with automobiles )
3. The military has to be given a clear vision and resources from political decision making, or the adversary has to present significant developments before they start transformations. (Red Army Command and Control transformation 2000-2018)
4. Even there is will, resources and understanding, the military may stumble with transformation because their System of systems is not fully digital, connected or integrated. Therefore, the data and performance are lost behind deeply isolated domains exclusive for each hierarchical organisation. (US Network Centric Warfare vision)

6.3 Opportunities and Enablers for Digital Transformation

Now it remains to present the opportunities and enablers for the digital transformation of military affairs.  According to a World Economic Forum survey made 2015 , the software and services sector will see the technologies in Figure 8, breaking the point of significant use within the next 10 years.

Figure 8: Tipping point of some critical software and service technologies

If the emerging technologies are exploited evolutionarily, then the 2025 scenario for coordinated way arranged military affairs may look like the following description in Table 1.

Table 1: Digital transformation of an evolutionary and coordinately arranged military force

Whereas, the pathfinder strategy may revolutionise military affairs like the description in Table 2. 

Table 2: Digital transformation of a pathfinder positioned and unified military force

Future technology may provide even further opportunities for changing the behaviour of one’s adversary, but this study is focusing on the conventional effects and force utilisation. Finally, it depends on military enterprises strategic posture, way of arrangement of forces and ability to wield new concepts, how it succeeds in digital transformation. All enabling technology is available for those capable of exploiting their features.

7. Conclusion

This paper seeks clarity and models to analyse the digital transformation in military affairs. Therefore, it defines the digital transformation of military affairs and creates a model to analyse different armed forces that attempts to transform using digitalization. Using the model, an example of the transformation of the Finnish Defence Forces gives a holistic view of a journey rather than separate, narrowly focused projects. 

A historical perspective puts the digital transformation in the context of earlier transformations and gives a hint of powers affecting the achievement. Examples from the US and Russia generate assurance of successful transformations but with clear strategic guidance, measurable outcomes and focus for the utilisation of resources.

The environment in the area of operation, the strategic posture of force, and the arrangement of value stream effect significantly in the ends, ways, and means of digital transformation. The two scenarios, in the end, are emphasising the different outcome with diverse postures and structures of military affairs.

The transformation journey, once taken, will not be without challenges as so many civilian organisations have experienced. From the historical viewpoint, the existing doctrine is the main prohibitor for transformation since it binds the tactics, training, weapons, organisation and culture into one amalgamated system.

This study does not use any particular or more statistical data from any of the current military transformation programs, so it would be interesting to see if the method and models introduced in the paper would provide foresight that improves the success in the journey of transformation of military affairs.