With growing presence, DIU continues efforts to lower barriers for new entrants

Less than a year since the Pentagon’s Defense Innovation Unit entered its new era dubbed DIU 3.0, the innovation hub has its eyes set on further scaling operations and bringing more non-traditional contractors into the department’s ecosystem.

DIU Director Doug Beck unveiled his updated strategic vision in early 2024 as a way to address a number of challenges that have kept the organization from accelerating the Defense Department’s adoption of dual-use, commercial technologies. A significant part of the new vision focused on both growing DIU and improving its ability to work with the commercial sector, Liz Young McNally, the organization’s deputy director for commercial operations, told DefenseScoop.

Hired in April 2024 to spearhead the unit’s collaboration with the commercial sector and investment community, McNally has spent the last several months integrating different components within DIU into a more unified commercial ops center while also helping the organization build out its regional infrastructure.

“DIU has folks all across the country helping to galvanize the defense innovation ecosystem,” she said in a recent interview. “We have onramp hubs, we have individuals — both government and contractor — bringing in talent, new companies [and] new technology into the department.”

Although the organization is still working to synchronize all relevant components into a single commercial operations center, McNally said DIU is already seeing improvements to how it brings new companies into the Pentagon ecosystem.

“I think now we’re in an even better position to focus on what the big rocks are, which are really around how do we lower the barriers for entry and … what are all the things that we can do to help make it easier to work with the department,” she told DefenseScoop.

For decades, Pentagon bureaucracy has been an obstacle for non-traditional contractors wanting to do business with the department — a phenomenon DIU and others are trying to remediate as commercial technology advances at a rapid pace.

McNally noted that while funding uncertainties have historically served as a barrier to entry, new entrants are also worried about other bureaucratic hurdles such as cyber resiliency, security clearances and the cumbersome authorization-to-operate (ATO) process. Addressing those specific challenges will be a focal point for the unit in 2025, she added.

“There’s so much chicken and egg for a lot of those in terms of when did the company work on them,” McNally said. “We’re in the process of, in the new year, launching some various efforts to pilot, in terms of what we can do even more to help our DIU portfolio companies in those different areas, using some of the [Defense Innovation Community of Entities] funding in the budget to do so.”

As it launches those pilots, McNally said her organization is taking lessons learned from working with some of the smaller companies on the Replicator initiative — an initiative that seeks to field thousands of advanced autonomous systems by August 2025. A future effort will allow the organization to aid those non-traditional defense companies in assessing their cyber resilience, she said.

“I think DIU just has more of a commercial lens to it than other parts of the department,” McNally told DefenseScoop “So when we do those assessments and help companies to think about what types of remediation they are going to do, quite frankly it feels different than when other parts of the department do it.”

The cultural difference between the commercial sector and the sprawling DOD is another barrier McNally pointed to as an area DIU will be tackling this year. For new entrants, the Pentagon is a large and opaque organization to try and navigate, and her organization wants to increase transparency to help companies know where to focus their investments and technology development, she noted.

It’s a task that requires change from both the top- and bottom-levels of the entire ecosystem, McNally said.

“By actually working together, you’re starting to evolve things as well so that there’s the top-down change,” she said. “But then ultimately, it’s starting work with those different program offices and starting to do the work that we’re doing at [Immersive Commercial Acquisition Program] offices and with the [Defense Acquisition University] and others to evolve that.”

Moving forward, a big focus will be on aligning the Pentagon’s most critical capability gaps with where the venture capitalist community is making investments. While some technologies — like AI and autonomy — are readily being funded, others that are more hardware-intensive currently don’t have as much private capital flowing in, she explained.

“Maybe there will be a window going forward to continue to think about what are the right incentives and other changes we have to make to ensure that we have enough private capital, [and] thinking about those other areas as well,” McNally said.