Lockheed Martin is the world's biggest defense contractor, capturing billions of dollars in U.S. government spending on missiles and aircraft. But CEO Jim Taiclet sees its future differently, as the world's leading defense technology company. From AI and autonomy to lower-cost weapons designed to counter cheaper threats, Taiclet is giving Lockheed's engineers and scientists more freedom to innovate and looking to technology to reignite growth ahead of an exclusive visit to the company's storied Skunk Works. Bloomberg Tech had the opportunity to speak with Jim Taiclet.
Jim, you've said pretty clearly you don't want Lockheed Martin just to be the biggest defense contractor. You want Lockheed Martin to be the biggest defense technology company in the world. What's the distinction, and what does it take to do that?
Great to be with you. And by the way, if you're going to talk about defense technology in the state of the art, Skunk Works is the place to do it. It's really great to have you. What we're differentiating ourselves with is to make sure that we can create the biggest tent possible. Because, yeah, we're in the aerospace and defense industry, but our product is deterrence. It's deterrence from armed conflict. And for the people that are in our military services on the front line, they deserve the best equipment, the best software, the best network that anybody can have to make sure that they can defend themselves and our country's interests and our allies' interests as well. And so that requires this big tent of the leading tech companies, startups, new entrants, our colleagues in the aerospace industry to come together and really create solutions that are above and beyond just building the best aircraft or building the best submarine. We want to have solutions to missions, and if those missions can be upgraded with a new piece of hardware, a new platform, a new firmware operation, or even some software, we want to get the best in the world of each of those kinds of products, to weave them into a mission set where our soldiers, sailors, guardians, Marines, and airmen can successfully execute their mission. So that's the difference. It's not just having the best technology; it's having the best integration capability for other companies, big and small, to contribute.
What are you changing at Lockheed to get there? If the goal is to be the best and biggest defense technology company in the world, what are you changing among the teams and in the culture?
It was very much additive. And so we build great airplanes. We make the best radars we think around. It's a leader in the space domain as well. And even the helicopters, you know, through Sikorsky, all those brand names, best in the world, highly respected. We make great products. But what we needed to do, and it started in the year 2020 when I joined the management team from the board of directors, was that we drove a Z-axis through all of our products, all our services, all our systems, and said, how do we actually make a mission a mission for us? It is like a service for an app provider, like you think about Google Maps. It's a navigation service and a location service. Well, our services, you know, they are what they are. It's shooting down airplanes, air superiority. It's sinking ships, naval surface combat. And so what we did was we had a colleague in our company who had run DARPA before, and I got with him and said, can we just map out, you know, that 8 to 10 key missions for our military services? What do they do every day? What are they trying to accomplish, and how do they use those mission sets to deter armed conflict? Basically, not have any adversary think that they can be successful and take action against us or our country. And we mapped those out. And what we did was we tried to draw again a Z-axis through everything we could do at the company on a mission perspective. So if you're trying to sink ships in the South China Sea, for example, there are satellites that you can use. Well, we make the satellites. There are ships with Aegis weapons control systems on them and radars. We make those. There are aircraft that can actually help, as they did in World War II, to look for naval targets and either attack them directly or pass the data back to a ship so they can launch a missile, oh, by the way, which we often make, and accomplish that mission. So our business areas are designed in a vertical way to produce outcomes and produce products and systems. But what we needed to change, or really be additive again, was our way of thinking about national defense as a company, and that enabled us to go way outside of our traditional cohorts in the A&D industry and gain partnerships with Verizon on 5G, with Microsoft on distributed cloud, with IBM and other tech companies, and even startups. We have a venture group with a billion dollars' worth of capital, and they can invest and do invest in all kinds of new entrant companies. And then we try to weave those new entrant companies into our mission sets and get quick access to the best technology, even if it's from a brand new startup with 40 people in it.
We're going to talk about technology, those that you work with, those that you bring into Lockheed, what you do internally. But when you talk about outcomes, you bring up a really interesting change of approach, which is to offer the government or the Pentagon a solution before it even asks for it. Right. The idea of identifying a threat and saying, here's a technology, you don't know if you need this yet, but we're telling you we have it. How does that work?
Well, we've got 75,000 scientists and engineers in our company, all familiar with certain aspects of creating this deterrent factor. And what we basically did was free them up. I mean, they have to do their day-to-day job. Most of them are delivering product. They're designing manufacturing systems, all those kinds of things on the shop floor, etc. But we enabled them to think differently again when they could, or when we could, direct people to new solutions. So, for example, we have a product called HIMARS, and the HIMARS is a vehicle that can shoot, you know, guided missiles, if you will. And it's designed from the start to hit stationary targets like a command bunker or an Air Force base or something like that, that doesn't move. Well, now a lot of targets are potentially mobile and they move. And so what we've decided to do is say, how can we connect systems from different parts of our company and other companies to create a chain of events where that product, the HIMARS, and it's called GMLRS, Guided Multiple Launch Rocket System, can actually hit a moving target. And we didn't have to build a new vehicle. We didn't have to change the missile. What we had to do was get the data and the network designed in a way where we could take those existing products and advance the mission. So go from, again, stationary target to mobile target that advances the mission. That creates a greater deterrent. And we were able to actually pull that off now. So we can do that with F-35 sensors that are tied into an open architecture network that provides that data to do that mission. And we didn't have to buy that in the military, didn't have to buy a single extra piece of hardware.
So this is interesting because the defense industrial base always kind of has to anticipate what the Pentagon is going to want. But how much is the big swing? Lockheed saying we'll take the risk. We'll put our own money into these projects on the R&D side, you know, before they're scaled, they're deployed, before they're purchased.
Well, I think our experience as a company and our connection to our customer base, who like to participate in these endeavors with us on the early stages, that gives us an ability to make intelligent, high ROIC, risk-adjusted investments. And I'll give you another one where, you know, we all saw that force protection or base defense became a much more important mission over the last three or four years. And it came to us that, well, there's great new entrants and startups coming up with counter-UAS systems. What can we contribute that is already deployed, already in use by the U.S. Army, for example? Add a new capability to that and then create a counter-drone system out of it. So one of the things that the Army has plenty of, tens of thousands of rounds, are JAGM now, air-to-ground missiles or Hellfire missiles. So those missiles are designed to fly off of helicopters into hitting ground targets. And our engineers designed a system where it's kind of like a six-pack of beer, four-pack, but you could actually put four of these missiles in a containerized launcher that could be in the back of a pickup truck or on the deck of a ship or whatever you want to. And they repurposed the software and the guidance systems of the missiles, not to go from air-to-ground missiles to ground-to-air missiles and hit drones, and it works. And so we also said, well, we need a mobile, relatively inexpensive radar to go along with this amazing system. And one of our venture investments, called Fortem, builds those kinds of radars. And we put another $25 million into the company and said, here's the mission. We need a radar, a radar with this weight, this form factor, this mobility, this battery life, so we can put it into this mission, match it up with this new container that we came up with, and be able to use those tens of thousands of Hellfire and JAGM missiles to defeat the drone threat that's coming at bases and coming at our troops and coming at our air defense system. So again, if you think differently, like a technology company would think, and constantly improve what you have, add the new hardware when it's ready, you can continuously improve the mission capability. We aim for every three to six months on every mission that we've identified.
Jim, Bloomberg Tech is getting a very rare opportunity to go inside Skunk Works. What are we going to see?
Well, you're going to see the original defense technology startup, which was a group outside of the main organization of Lockheed at the time. And what happened with that group was they got the right to do the kinds of things you and I are talking about today, 40, 50 years ago. And they came up with the first jet fighter for the United States. They came up with the U-2, the SR-71, etc., the F-117 stealth fighter. And what they were doing was exactly what we're talking about. They're saying, what is the next need? What are we going to need next to help defend the country? And we put the best engineers we could find internally on it. We gave them a lot of slack and leeway, and we let them iterate till they found a solution that would work. And we're doing that today in Skunk Works in a number of areas, not just manned aircraft anymore, and unmanned aircraft, missiles, lots of other approaches. And we've spread that mentality to all four of our business areas. So our space business area, our rotary and mission systems area, and our missile systems area all have the mentality of Skunk Works in certain locations and the leeway to create these kind of creative solutions, that mentality of Skunk Works.
How do you take it from the small, secretive group at the cutting edge and bring that culture company-wide?
So that is one of the specialties, I think, of our company, of Lockheed Martin, which is not only can we be innovative and come up with a new prototype or a new single article, we've got the industrial capability to then create that new device or add the software to massive numbers of major platforms of, again, systems that are being used by the U.S. Navy, Space Force, Air Force, Marines, etc., that they have in stock and can apply that new solution, whether it's a vehicle or a platform, a set of software, a firmware upgrade. That's the benefit of a company like this that is born in innovation, which it was, and then can scale that innovation to have basically theater-level impact against a potential adversary, which gets their attention. And that gives them pause. Not today. Today is not the day to make the move I want to make against the United States or its allies, because now I see this capability. I don't have an answer for that.
You know, present day, Jim, you've talked about taking the straitjacket off your engineers and scientists. What was the straitjacket?
