WEBVTT

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- It's a fascinating conversation

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where you're seeing the
technology leap ahead

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of the business model.

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- Carsten, Diana, welcome.

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Carsten, ahead of this
event, you said that

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you thought Farnborough would
feel different this year.

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Firstly, why did you say that?

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And secondly, does it
feel different this year?

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- Last year, it still
felt very conceptual.

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You know, direction of
travel, where we're going,

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I think this year it
feels much more practical.

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The discussion is much more
practical also in a way that

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you know, we talk about S&OP,

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we talk about how do
we increase production?

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How do we solve for, you know,
our supplier ecosystem?

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How do we deploy AI to
drive maintenance processes

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and increase readiness?

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So I think the urgency has
just increased, actually.

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- What's materially changed,
though, in the past year,

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would you say?

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- So, you know,

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I think there wasn't,
like, a fundamental change.

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I think it was just a
continued, you know,

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development that we actually saw.

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I think geopolitical
pressure has increased

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or remained extremely high.

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I think the governments
have actually delivered

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on their promise to really buy more,

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to order more, so that's
actually happening.

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And then also recent procurement decisions

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like the U.S. Air Force
deciding on Anduril

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and General Atomics for their
collaborative combat aircraft

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actually shows that also
governments are ready, willing,

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and able to change their approach.

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And then, you know, talked about a lot

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but actually happening: AI has moved

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from experimentation into
a real deployment at scale,

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which I think changes a lot.

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So defense leaders really need to continue

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to modernize while delivering

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the relatively high volumes already now.

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- Diana, let's focus on
the big technological shift

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that's happening in defense.

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How is that impacting the economics?

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- Yeah, it's a fascinating
evolution that's happened

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in defense in the last
probably five, six years.

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And what you have is the emergence

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of defense tech companies,
which we classify in three.

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We call them expendable,

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affordable mass, and exquisite systems.

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Exquisite system is what
we're all used to, right?

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A Typhoon, an F-35. But in the expendable

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and the affordable is really
where you have the emergence

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of new technology.

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And that's really shifting the paradigm

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and the conversation that we're having.

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- Your new report asks,
"Are we in a defense tech bubble?"

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- Yeah.

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- You know what I'm going to ask you.

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- Yeah. I'm sure.

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- How are we in a defense tech bubble?

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- It's a little more nuanced than that.

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What you see is that
expendable and affordable mass

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that I spoke about grows really quickly,

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but they don't hold the profit pools.

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The profit pools still maintain
in the exquisite systems.

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So the industry is grappling with

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how do they make the economics
of these new entrants

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or what we call defense tech,

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actually work in an investor setting

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versus the very established
exquisite system setup.

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So it's a fascinating conversation

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where you're seeing the
technology leap ahead

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of the business model.

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So we'll see where we land
in the next few years.

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- We will indeed.

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Can I ask you, what's the one thing

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that you think you'll take away
from Farnborough this year?

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Carsten?

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- I think it's really
about practical solutions,

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delivering, executing.
- Yeah.

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- I don't know, what's your pick?

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- For me, it's really the
kind of active conversation

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that you have between investors, primes,

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and defense tech companies.

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I think that's a triangle
that we haven't seen before

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kind of exchange on
really important topics.

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- Diane, Carsten, thank
you so much for your time.

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- Georgie,

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it's been a pleasure.
- Thank you.