Business models for long-term and complex capabilities in strategic defense projects – insights from the business community

For companies, business value is primarily defined as profitability, growth, and returns to owners. They operate in competitive markets where risk is taken in relation to return, and where incentives are created for efficiency and innovation.

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About the project

The perspective is often short-term and measurable in financial results. For the state, business value instead means societal value. In strategic defense procurements, goals such as security of supply, technological sovereignty, and national security are prioritized over economic profitability.

The state may accept costs and risks that are not market-economically motivated, as freedom of action and long-term preparedness take precedence. Ownership structure also affects business value. Wholly state-owned companies can ensure control but risk inefficiency. Co-ownership and public–private partnerships can promote innovation but also lead to goal conflicts between national security interests and corporate profit motives.

If the state is only a customer to international suppliers, value depends on contracts and political relations. In summary, the state’s concept of business value is multidimensional and long-term, where value is measured in security and societal benefit rather than financial return. Traditional business model theories cannot be fully applied in this context. However, within the procurement domain, there are several theories that can be wholly or partially applied to the acquisition of complex defense systems.

This research project aims to analyze business models in large-scale and strategic defense projects. Key questions are: How do different total defense industries function as markets, and in what way do its business models, logic, and incentives shape the relationship with the state in strategic procurements of defense systems? How can the state use and adapt business models in strategic defense procurements to navigate value, risks, and incentives, given different supply solutions and ownership structures?

Research team