Creating an innovation culture between Defence and Industry (Part Two)

Line of Defence Magazine, Spring 2018

RAN Centre for Innovation
Inside the RAN’s Centre for Innovation. Image courtesy Australian Department of Defence

Captain Greg Laxton CSC RAN was Master of Ceremonies at the 2018 NZDIA Forum. In this exclusive interview, he talks with editor Nicholas Dynon about the importance of trust in collaborative contractual relationships.

In Part One of this interview that appeared in the Winter issue of Line of Defence, CAPT Laxton discussed the cultural changes needed to support the Royal Australian Navy’s Guided Missile Frigate Systems Program Office’s (FFGSPO) adoption of relational contracting. In this second instalment he describes the role of trust – and the dividends delivered when contract-heavy approaches give way to trusting relationships between customer and supplier.

LoD: You described the FFG Charter as “an outcomes-focused relational contract on a single piece of paper” and as “an overarching intent sitting above the contract”. Can you elaborate on this?

GL: The charter created a safe environment to collaborate, and it eventually became a compass for our behaviours. We developed the charter together with our partners, and we used the services of IACCM (International Association of Contract and Commercial Management) to facilitate the workshops and to educate us about world’s best practices.

Our charter contained those attributes we believed to be true of a best practice collaborative enterprise. Amongst other things it said, ‘we want to work together by communicating regularly, and we are focused on the outcome.’

We were initially a little bit focused on the mission of delivering ‘materially seaworthy FFGs on-time every time’. It’s a good tight mantra, but the true reason – the ultimate reason about why we existed was to actually provide the ships so that they could go into harms way, execute their mission, and bring the sailors safely back home to their families – that is what our shared belief was – that described our ‘why’.

LoD: The need for a Charter implies that the relational model requires a degree of trust that didn’t necessarily exist previously. That’s a different concept for people to fathom.

GL: Trust arrives on foot and leaves in a Ferrari. It takes a lot of effort to earn trust, and it takes only a heartbeat for you to do something terrible and muck it up – and out goes your trust very fast with wheels spinning.

Smart trust is about trust earned. The worst thing you can do is to go in blindly and decide that you’re just going to trust everybody because you’re a trusting kind of person. It’s nice, it’s lovely… until someone does something wrong. You’ve got to earn trust.

The other thing that I found really showcased what we did in the FFG Enterprise was the concept of the ‘speed of trust’. The Speed of Trust is a book by Stephen Covey, and the concept that it establishes is that trust is proportional to speed and inversely proportional to cost.

What he’s saying is that when you increase trust you increase the speed with which things get done, and you reduce the cost. And there is no truer example of this than the FFG Enterprise.

We had been paying an absolute fortune because in the bad old days of tendering for every capability separately instead of having a long-term relationship with industry. Our mindset was that competitive tendering was a good thing and it was value for money.

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We were transactionally heavy because we had people checking the checkers and almost a hub-and-spoke model with the Commonwealth – the Program office – sitting in the centre and acting as gatekeeper between any number of ships and contractors. Were we getting ‘value for money’ through all this bureaucracy? Not really, because the ships weren’t getting delivered on time and it was costing more for each activity than what we’d actually budgeted for.

Failure to deliver a ship to Navy when they’re wanting it is a stellar way to lose trust. You’ve really got to deliver what you said you were going to deliver in order to establish that trust. I know this because previously I’ve been on the Navy’s customer side customer constantly explaining to the senior leadership why once again the ship hasn’t come out on time.

But when we started getting this collaboration working, instead of being this gatekeeper for each and every decision, we got out of the way. For example we gave industry a challenge. We sat them around the table and said, ‘we want this new capability installed on the ship, and we aren’t going to tell you how to do it. How about you guys get together and come back to us with a solution, and if it’s good we’ll say yes.’

Off they went, and they achieved this incredible extra capability within budget and within an extremely short timeframe, because there were less transactions in terms of checks and approvals at each and every step. We let them get on and do it because they had earned our trust.

If you build the trust you reduce the transactions, you increase the agility of the organisation, and overall you decrease the costs.

We were very fortunate to have a series of Heads of the Maritime Systems Division (CASG) that were tolerant of trying things a little bit differently and who built that into their strategy. So, for example, Maritime Systems Division under RADM Adam Grunsell’s inspiring leadership really has provided the headspace and top cover to think differently towards expanding this work around creating a collaborative environment.

LoD: How far are we down this track? Will we see it coming into play in the context, for example, of Australia’s shipbuilding strategy?

GL: There’s a lot of ground that’s got to be broken to get that right. Where I hope we get to soon is acquisition with sustainment in mind and with that collaborative contracting mindset. The introduction of a continuous shipbuilding program will be a bit of a paradigm shift for all of us as well.

What I have seen is that the DDGs have an intent to emulate quite a few of the useful artefacts from the FFG Enterprise. They have a Charter, and have been going down the path of working collaboratively.

An area in which we had real performance issues was the Patrol Boat space. They started with a completely clean sheet of paper and reworked the whole Patrol Boat concept. It is now the Patrol Boat Enterprise, and they are working very hard to create a similar construct to what the FFG Enterprise had. The feedback to date has been very exciting, and I hear they have really turned things around in the North.

But above all else, I have been really heartened to see key people move on from the FFG Enterprise and taking the good things they picked up into their new roles. One particular example is CAPT Brad Smith, who succeeded me in the FFG Enterprise. Brad is now heading up the Helicopter Landing Ship (LHD) Systems Program Office, and I understand his collaborative leadership is starting to shine through.

I am seeing the FFG Enterprise’s collaborative approach starting to influence strongly as we move forward.