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Introduction

Good Morning and thank you, Andy [Nicholson, head of CDE], for that introduction.

It鈥檚 a pleasure to return after being lucky enough to attend the first CDE marketplace, back in 2012鈥�not too long after I became a defence minister.

Back then, the remarkable array of ingenious technology on display reinforced, not only how fascinating鈥�but also how challenging鈥�my role would be in maintaining the UK鈥檚 decisive military and technological edge鈥�

鈥�in a world of ceaseless technological advance and shrinking budgets鈥�

鈥�and in which our future superiority is no longer a given.

At the end of my speech, I laid down the gauntlet鈥�

鈥�challenging the primes, SMEs and academics in the room to grasp the opportunity placed before them by CDE, with both hands, and to make things happen.

I wasn鈥檛 disappointed.

Because there were a number of successes following that event.

Success of last marketplace

One was clocked up by Flight Applications Ltd, a Surrey-based micro SME that had used CDE funding to prove the concept of its groundbreaking flight-trajectory software for unmanned aircraft.

Flight Applications got talking to MBDA Systems at the marketplace and now their software is being reused and adapted as part of research into generic cruise missile mission planning.

Another success story was 2d3 Sensing, an Oxford based SME that had developed a real-time 3D scene generator to improve understanding of operating environments in autonomous vehicles.

After the marketplace, Thales UK, went on to buy elements of 2d3鈥檚 software suite and is actively considering its product line for use in a number of contract opportunities.

But, beyond these tangible triumphs, who knows what relationships were formed that are yet to bear fruit鈥�what ideas fomented鈥�and what slow-burning touch papers were lit.

Innovation: key to our future security

And looking at what鈥檚 on show today I鈥檝e every hope that the second marketplace will be just as, if not more, successful that the last.

With ideas ranging from ways to combat insider threats鈥�to casualty care on the battlefield, once again, I am struck by the resourcefulness and sheer brilliance of our SMEs and universities.

Together, our 24 exhibitors, exemplify why Britain鈥檚 reputation for world-class innovation continues to precede it.

It鈥檚 a reputation stretching back a long way鈥�

Well beyond the tank, which started life exactly 100 years ago when 2 British Engineers, William Tritton and Lieutenant Walter Wilson鈥�scribbled some designs literally on the back of cigarette packets in a hotel room in Lincoln.

And it鈥檚 a reputation we must continue not only to live up to鈥�but also to exceed鈥�if we鈥檙e to meet鈥�head on鈥�the kaleidoscope of global threats and challenges we face.

In the past year alone we鈥檝e seen鈥�the rise of ISIL, Russian aggression in Eastern Europe, Iran鈥檚 machinations鈥�

And despite all the advantages that technology has bestowed on our modern world, we have to face the flipside.

Weapons proliferation, the relentless advance of cyber warfare, non-state actors pedalling an expansionist global ideology, rogue states and traditional military advantage being undermined by disruptive technologies.

So, in this era it will be our attitude to innovation that defines us.

That allows us to face the unpredictable threats of the future.

That gives us that battle winning edge.

Just as it will be innovation that delivers greater bang for our military buck, as defence budgets in Western economies are squeezed tighter.

Innovation: vital for prosperity

But, innovation is more than just a mainstay of national security.

It is vital to our national prosperity鈥�

Driving productivity, underpinning business resilience and helping us move towards an export led recovery.

And the wheel turns, neatly, full circle when you consider that a strong economy is vital for national security.

Which is why the MOD is working hard to champion innovation

So鈥�with such high stakes鈥�it should come as no surprise that the MOD is unstinting in its efforts to unlock, stimulate and back innovation wherever we can.

And we鈥檙e doing this in 3 key ways.

Firstly, by investing in world class science and technology鈥�

鈥�protecting our annual investment in science and technology鈥�so it remains at least 1.2 % of the defence budget鈥�

And, of course, continuing to champion the invaluable work CDE does.

Since it opened in May 2008, CDE has received almost 5,500 research proposals and funded over 900 of these at phase 1 to a value of 拢55 million.

And, in a new departure, just last year it began phase 2 funding for the very best ideas from its themed and enduring challenge competitions鈥�

Ensuring that we help bridge that yawning gap between concept and production鈥�that 鈥淰alley of Death鈥濃��down which so much potential can fall. But encouraging innovation isn鈥檛 the preserve of CDE.

Also here today are representatives from Dstl鈥檚 Easy Access IP scheme鈥�an initiative to make new technologies available to those best placed to exploit them.

Under the scheme, Dstl is initially making 6 patent families available, ranging from protective garments to animal training aids.

And I hope you will take the opportunity to talk to the team about their work today.

Secondly: weaving innovation into the DNA of our procurement process

But we can鈥檛 just throw ideas at the wall and see if they stick鈥�we have to lead the way.

Which is why the second thing we鈥檙e doing to champion innovation is weave it into the very DNA of our procurement process.

So, we鈥檝e devolved budgets to the single services鈥�ensuring the men and women who actually use the capability鈥�have the opportunity to input into innovation. We鈥檝e also overhauled an unwieldy and outmoded procurement system鈥�

Sorting out an overheated equipment programme, getting a grip of our big-ticket procurement projects, curbing delays and cost overruns and injecting Defence Equipment and Support (DE&S) with much needed private sector expertise.

They now adopt a more commercial approach鈥�ensuring we are a more intelligent customer; one that demands world-class equipment at the best value for the taxpayers鈥� pound鈥�

鈥�and one that places the onus on UK industry to up its game and become more innovative if it is to win our business鈥�a point I鈥檒l come back to a little later.

But before I do, I want to illustrate how our more disciplined approach is working鈥�

鈥�to illustrate how bad it was, the NAO Major Projects report for 2009 reviewed the in year performance of the top 17 defence projects which were a staggering 拢4.5 billion over budget and 339 months overdue.

And the proof that defence has been transformed is in the latest NAO report on Major Projects for 2014, published earlier this month where the 11 top defence projects are 拢397 million under budget and a total of only 14 months over time.

Crucially, under this new regime, we鈥檙e working hard to increase opportunities for SMEs, the lifeblood of the defence industry鈥�providing the niche capability, the groundbreaking ideas and the enterprise that gives us the edge.

So we鈥檙e making our procurement processes more transparent, simpler and faster鈥�

We鈥檝e a dedicated SME forum, which I chair, and a detailed SME action plan

And we鈥檙e taking action where SMEs identify concerns鈥�so we have established an effective dialogue between defence SMEs and the UK banking community, to ensure SMEs can continue to thrive.

But, beyond the confines of the MOD, we鈥檙e working with defence primes鈥�encouraging them to open up their supply chains to SMEs鈥�through events like this鈥�and another I attended, in Telford, just last month where SMEs from the Motorsports industry were pitching ideas to BAE Systems.

And, through initiatives like our Defence and Security Industrial Engagement Policy鈥�we鈥檙e actively encouraging overseas primes to extend opportunities for UK innovators to become part of their supply chains.

And this is work, non-UK domiciled defence primes are actively looking to the UK supply chain to fulfill requirements because UK suppliers are competitive and this country is open for defence and security business.

Thirdly, engaging our whole force.

Which brings me to the third way in which we鈥檙e championing innovation: engaging our whole force鈥�harnessing everyone鈥檚 talents鈥�not just those from the military but those from the defence, civilian and commercial worlds.

So, for example, our Niteworks programme brings together more than 120 companies, ranging from primes to SMEs, to work with the MOD and Dstl on providing impartial solutions to some of our most intractable defence problems.

And the Defence Growth Partnership, is bringing together the best brains in industry, government and academia鈥�

鈥�fostering a collaborative environment to ensure the UK defence industry becomes more innovative, sustainable and more competitive.

Things are moving fast.

Its Centre for Maritime Intelligence Systems in Portsmouth is already up and running鈥�a test bed for new systems and technology that can be sold to defence and civilian customers around the world.

And I鈥檓 looking forward to the imminent opening of the Defence Solutions Centre in Farnborough, which I have high hopes will become a UK centre of excellence, recognised as such by defence customers鈥� and other defence supply chains around the world.

International partnerships

We鈥檙e also casting our net beyond our shores鈥�working with our international partners鈥�pooling our resources鈥�using the mechanisms we have in place to share everything from nascent ideas to deep technical data鈥�

Ensuring we exploit innovation as widely as possible.

We鈥檙e seeing it with Anglo-French Cooperation on the development of Unmanned Combat Air Systems.

We鈥檙e seeing it on a multinational scale with the Meteor missile.

And at the end of last year I flew to Washington鈥�where I spoke to my US counterpart about the 100-or-so distinct research and development arrangements underway between our 2 countries.

Our ask of Industry

So we鈥檙e doing all we can, in MOD and across government, to not only sustain鈥�but to grow鈥�our national potential for innovation and excellence.

But we can鈥檛 do it alone.

Which is why Industry must meet us halfway鈥�a point I touched on earlier on.

Let me explain.

In the past, defence contractors looked upon the MOD as a benevolent cash cow that would fund all of the R&D, and then development cost overruns.

The initial Carrier contract was a prime example鈥�a frankly shocking contract鈥�where 90 pence in every pound of cost overruns was borne by the taxpayer.

Under our stewardship the Carrier has become a watershed.鈥ㄢ��

Because, working with industry, we have established a new mechanism to share pain and gain equally above a realistic threshold.鈥ㄢ��

This collaborative approach represents a new way forward through aligning our interests more closely.鈥ㄢ��

I want to see industry taking the initiative to adopt this approach more widely.

Not just to identify, understand and manage risk but also to bear and share risk in a spirit of partnership as we look to develop capabilities for a broader defence (and sometimes adjacent civilian) customer base.鈥�

But our ask of industry goes beyond just risk.

In the past the MOD contracted for highly bespoke products, often at great expense.鈥�

We received cutting edge equipment but its high specification often proved to be its Achilles heel on the generic market.鈥�

So we鈥檙e demanding that defence contractors build exportability into their thinking from the outset.鈥�

Actively considering it early on in the MOD acquisition cycle.鈥�

Making greater use of modularity and open systems.

And developing and procuring equipment with partners where it makes sense to do so.鈥�

The benefits will be three fold.

First, the MOD will get the best kit it can for the best price.

Second, industry will reap the rewards of a virtuous circle of innovation, exporting and productivity.

And third, UK PLC will benefit from greater security and prosperity.

Conclusion

So as we head into the final 3 months of this Parliament, as one who has had the privilege to help lead the transformation of defence, we can take some pride that where there was a deficit, now there is a balanced budget; where there were cost overruns, now there are cost savings; and where equipment programmes were late and over budget, they are now overwhelmingly on time.

But there is more to do, and yes鈥�we鈥檙e asking a lot鈥�

And it won鈥檛 be easy鈥�as we confront the constantly evolving challenges of this volatile world.

But it should be a great comfort and inspiration to us all that鈥�here鈥�today鈥�we have hard evidence that together, government, industry and academia, possess鈥�

鈥�the innovative flair

鈥�the ideas

鈥�the passion

鈥�and the drive

鈥�to rise to those challenges.

Just, as the centenary of the main battle tank reminds us, we鈥檝e done time and time again throughout the course of history.

So thank you for coming today鈥� and for supporting the great work of CDE.

I look forward to hearing about your marketplace successes.

I鈥檇 now like to declare the exhibition open of business and ask people to make their way back up to the second floor.

Thank you.