The Modern Security Environment Is Changing at an Unprecedented Pace
The modern security environment is changing at an unprecedented pace driven by rapid technological advancement. Competition between nations has entered an era where outcomes are determined not only by traditional military power, but by superiority in advanced technologies such as AI, autonomous systems, and cyber capabilities. Against this backdrop, the U.S. Department of Defense (DoD) faces the urgent challenge of how to rapidly and effectively incorporate innovative technologies from the private sector to modernize its defense capabilities. At the forefront of addressing this challenge is the Defense Innovation Unit (DIU). DIU's mission is to connect the innovation ecosystems of Silicon Valley and beyond with DoD's needs, accelerating the adoption of dual-use technologies.
This article draws on a conversation between DIU Director Liz Young McNally and Qasar Younis, co-founder and CEO of Applied Intuition — a vehicle intelligence company born in Silicon Valley that has grown rapidly in the defense space through its collaboration with DIU — to explore the current state of defense innovation, strategies for overcoming the gap between technology and national defense, and the strategic vision for the defense of tomorrow. Their dialogue illuminates the role startups should play in the defense sector, and the trends that Japanese and American business leaders should be watching.
Topics covered:
- DIU: Champion of Defense Innovation — Mission, Role, and Collaboration with Applied Intuition
- Breaking Down the Wall Between Technology and Defense — DIU's Approach to Closing the Gap and a Software-First Future
- Defense Innovation in a Global Competition — AI in the Indo-Pacific, the China Challenge, and a Message to Founders
- Conclusion
How to solve export compliance challenges?
Learn about TRAFEED (formerly ZEROCK ExCHECK) features and implementation benefits in our materials.
DIU: Champion of Defense Innovation — Mission, Role, and Collaboration with Applied Intuition
The Defense Innovation Unit (DIU) is an organization whose mission is to rapidly and at scale bring the most advanced private-sector technologies — particularly dual-use technologies — into the Department of Defense in order to maintain and enhance America's defense capabilities. As Liz Young McNally explains, DIU's core role is to connect battlefield needs with private-sector technological capabilities. Concretely, DIU begins by working closely with Combatant Commands across regions — including INDOPACOM — to deeply understand the urgent challenges they face and the threats they anticipate, and to identify which commercial technologies would be most effective in addressing them. Through this process, DIU sometimes goes beyond responding to existing requirements, offering solutions made newly possible by technology that the military may not yet have recognized.
DIU builds a portfolio spanning multiple technology domains — AI, autonomous systems, cyber, space, and human systems — and continuously monitors and analyzes developments in the private market. This includes dialogue with a diverse ecosystem of players: venture capital firms, startups, research institutions, and others. As McNally notes, through conversations with companies like those in the audience at these events, DIU constantly explores what technologies currently exist and how they can be applied to defense needs — or how they might generate new ones.
Once needs and capabilities are identified, DIU works with the military services within DoD — Army, Navy, Air Force, Marine Corps, Space Force — and other innovation organizations to begin prototyping the selected technologies. This prototyping aims to validate effectiveness in conditions that approximate real operational environments and to obtain rapid feedback. When prototyping is successfully completed, the next step is to field the technology at scale, making it available to actual warfighters. Advancing this entire process rapidly is the core of DIU's operations.
Beyond introducing individual technologies, DIU's work also serves as "pathfinding" for the DoD's overall procurement process and approach to modernization. As noted in comments from senior officials, expectations for expanding initiatives like DIU are high, and the rapid prototyping DIU practices — along with the flexible contracting authorities granted by Congress — could serve as a model for future defense procurement reform.
In DIU's activities, partnerships with companies like Applied Intuition are critically important. Founded in 2017, Applied Intuition is a Silicon Valley-based vehicle intelligence company that provides software and simulation tools supporting autonomous vehicle development for automotive manufacturers. As CEO Qasar Younis explains, the company began entering the defense space around 2019, shortly after its founding. Applied Intuition's business model itself exemplifies dual-use: commercial operations are the main business, but the technology developed there is also applied to defense.
For Qasar Younis, DIU was a decisive "gateway" into the defense sector. At a time when the company still lacked connections in Washington D.C. and deep knowledge of the DoD's complex procurement processes, DIU opened the door and provided an opportunity to build a track record through concrete projects. Younis considers Applied Intuition a "poster child" — a model example of a company that was able to establish a defense business through its collaboration with DIU.
Younis highlights that the current administration's emphasis on "efficiency" is central, and that dual-use technology holds the key. In Applied Intuition's case, its massive commercial R&D investment and customer base effectively subsidize product development costs for the defense sector. This allows the DoD to obtain "the best technology at the lowest cost" — a compelling proposition both from a taxpayer perspective and a pure technology procurement standpoint. In an environment of constrained national budgets, this is an extremely important factor in maintaining and advancing frontier capabilities.
Younis also makes the case for dual-use from a competitive standpoint against China. In China's case, dual-use is in part mandated by government policy, which can accelerate the speed at which commercial technologies are transferred to military applications. To counter this, the U.S. also needs to strengthen procurement mechanisms that can fully leverage the power of private industry — and organizations like DIU play an indispensable role in building that "muscle." Younis repeatedly emphasized that Applied Intuition's ability to enter the defense sector's "slipstream" through DIU was fundamentally important to the company's growth. This collaboration stands as a success story of near-perfect alignment between DIU's mission and private-sector potential.
Breaking Down the Wall Between Technology and Defense — DIU's Approach and a Software-First Future
Between the technology industry and the Department of Defense, a long-standing gap has existed in culture, language, mindset, and above all, pace. Silicon Valley technology companies update their products on cycles of weeks and months, while the DoD's procurement processes are based on multi-year budget cycles and stringent requirements definition — the speed differential is stark. One of DIU's most important roles is to bridge this gap and enable effective collaboration between the two worlds.
McNally emphasizes that closing this gap is not something DIU can accomplish alone — it truly takes a village: the collaboration of broader movements like American Dynamism, companies, investors, and many other stakeholders. Progress has been significant compared to ten or twenty years ago, but there is still a long way to go.
As one key element in closing the gap, McNally highlights the importance of people with "Dual Fluency" — the ability to understand both the language and culture of the technology industry and the language and culture of the DoD, and to effectively bridge the two. Such people are needed not only within the DoD itself, but also on the company side providing technology and in the venture capital firms making investments — throughout the ecosystem.
McNally breaks down the gap concretely by thinking about three communities involved. The first is the "Warfighters" — the service members who actually use the technology. In particular, younger soldiers who grew up as digital natives are accustomed to cutting-edge technology and may be frustrated by military-provided equipment and systems that fall short of civilian standards. They may seek out better tools on their own, and might even try to adopt them informally. Meeting the demands of this generation is essential to maintaining military morale and effectiveness, and can be a powerful driver of technology adoption.
The second community is the "Military Buyers" — procurement officials and program managers. They operate within existing regulations and processes, but also recognize the need for transformation. The "Commercial Solutions Opening (CSO)" procurement model pioneered by DIU is one example of that transformation. Unlike traditional procurement based on rigid requirement specifications, CSO flexibly accepts innovative proposals from companies and enables rapid prototyping. Through this model, approximately 40% of the companies that contract with DIU are entering into their first-ever contract with DoD — demonstrating its significant effectiveness in lowering barriers to entry for new market participants. A notable recent development is that Deputy Secretary of Defense Kathleen H. Hicks signaled an intention to apply a CSO-like approach to software procurement more broadly — suggesting this momentum will accelerate further.
The third community is the "Company Partners" — the firms providing technology. McNally notes that DIU focuses on reducing barriers and making it easier for companies to navigate complex processes in order to collaborate with the DoD.
Qasar Younis approaches the need to close the gap from a more fundamental perspective. If the DoD's procurement system were designed from scratch today, he argues, it would be based in Silicon Valley and centered around software rather than hardware. Today's consumers, when buying a car or smartphone, care not just about hardware specs but about software functionality and ease of use — Tesla's FSD being a prime example. In the commercial market, hardware and software have become somewhat separated, with specialized firms in each pursuing cost efficiency and performance through "abstraction." The DoD's procurement, Younis argues, needs to catch up to this reality — where software is at the core of product value.
Younis describes the gap between the technology that warfighters are actually using and the state-of-the-art technology available more cheaply in the market as "crazy" — something everyone should pause and think about. He sees the current administration as offering a prime opportunity to fundamentally rethink how software is procured. Rather than thinking of procurement as buying another "box" (hardware) like the last one purchased, Younis proposes adopting a "venture-first" mindset — investing in promising technologies and software the way a venture capitalist would. His strong sense of urgency is that adhering to bureaucratic processes will leave the U.S. unable to compete against fast-moving adversaries, particularly China, which places high importance on software.
As a concrete measure for more rapidly adopting commercial technology, McNally acknowledges that while initiating prototypes using approaches like CSO has become relatively easier, the real challenge lies in the subsequent transition to "production" and "fielding." The mismatch between DoD's biennial budget cycles and technology cycles that evolve on daily and weekly timescales makes this transition difficult. The flexible "agile fielding" budget (colorless money) that Congress has provided to DIU is an important step toward bridging this gap — but remains a limited initiative. The larger challenge is how to accelerate the transformation of the entire procurement system, including budget formulation and requirements definition.
This transformation requires both strong top-level leadership — the "four-star action officer" figure McNally invokes — and demand for change from the field, along with "top cover" that enables it. McNally notes that in the past — during the Iraq War era in the 2000s, for example — the military has succeeded in driving transformation when necessity demanded it, and argues that spirit needs to be revived.
The most effective way to accelerate transformation, both McNally and Younis emphasize, is "seeing is believing" — getting new technology into the hands of warfighters as quickly as possible and letting them experience its effectiveness. Once warfighters directly feel the impact of a technology, they understand that it has the potential to bring not just incremental improvement but fundamental change to how they fight. When that happens, demand from the field grows, and transformation in related areas — doctrine, training, logistics — follows naturally. The story Younis recounted — where a CTO from an automaker sent a vehicle to Applied Intuition with the instruction to "show me what the software can do in a month" — symbolizes the power of this "seeing is believing" approach.
The key points for closing this gap and transitioning to a software-first future can be summarized as:
Actively placing and empowering people with deep knowledge and experience in advanced technologies — particularly in software development and deployment — at senior decision-making levels (flag officer rank and senior management) within the DoD.
Empowering these technology-literate leaders to move away from traditionally hardware-centric, process-heavy thinking, properly value software, and lead agile procurement and development processes.
Identifying and systematically addressing the budget cycles and institutional barriers that impede the transition from prototyping to fielding — institutionalizing flexible mechanisms like expanded agile fielding funding as permanent structures.
Strengthening systems that deliver new technology to warfighters early, iterate on improvements based on their feedback, and catalyze demand for change from the field through "seeing is believing."
Younis puts it bluntly: "Bureaucracy cannot beat Beijing." Victory comes not from process, but from individual people who understand technology and can act quickly. Based on this insight, placing technically literate talent at the center of organizations will be the key to securing America's competitive advantage in future competition.
Defense Innovation in a Global Competition — AI in the Indo-Pacific, the China Challenge, and a Message to Founders
As technology competition between nations intensifies, developments in the Indo-Pacific region and the application of AI are drawing particular attention. DIU and Applied Intuition share a common focus in their recognition of challenges in this important region and their technological approach to addressing them.
McNally explains that AI is not just a specific portfolio item for DIU — it is involved in virtually every project the organization takes on. In the Indo-Pacific, she emphasizes the presence of a powerful partner in Admiral Samuel Paparo, the regional commander, who deeply understands the importance of AI and is actively committed to its adoption. DIU works closely with Paparo to integrate AI technology into the defense strategy for the region.
McNally frames AI application at several levels. At the "Tactical Level," technologies such as "Collaborative Autonomy" and "Swarms" — in which multiple drones operating across multiple domains (air, land, sea, undersea) act in coordination autonomously while following human direction — represent key capabilities. These make possible complex operations and saturation attacks that conventional weapons systems cannot achieve. At the "Operational Headquarters Level," AI analyzes vast data to support faster and more accurate data-driven decision-making, dramatically improving headquarters' information processing capabilities and situational awareness.
Additionally, given the unique challenges of the vast and complex Indo-Pacific environment (covering half the earth's surface — 100 million square miles of ocean), AI application at the "Edge" — the forward line where communications may be unreliable — becomes critically important. This involves technical challenges around running AI models efficiently within constraints of limited computing resources, power supply, and data bandwidth. DIU focuses on developing and fielding technologies capable of meeting these challenges.
Underpinning all of these AI applications is the concept of "AI Assurance" — ensuring that AI systems function as intended, are reliable, safe, and incorporate ethical considerations. It is based on principles of using appropriate data, establishing guardrails for human involvement in final decision-making, and supporting data-informed decisions. DIU promotes AI adoption that is both effective and responsible.
Qasar Younis, for his part, shared insights gained from Applied Intuition's global operations — particularly regarding China's technological capabilities. While the company does not operate in the Chinese market, it carefully analyzes innovations in China's automotive industry, particularly progress in autonomous driving technology. Younis cautions that simply dismissing Chinese technology as "imitation" or conversely overly "praising" it are both errors. The reality lies in the middle — Chinese companies have moved past an initial phase of imitation and are now generating original innovation.
Behind this is the fierce competition within China's domestic automotive market — the world's largest, where well over a dozen major OEMs compete for dominance, and where the CCP has explicitly signaled future industry consolidation, driving each company to desperately advance its technology to survive. Benchmark results from the Shanghai Motor Show that Younis cited indicate that China's autonomous driving technology has reached a level roughly between Tesla (camera-based advanced driver assistance) and Waymo (full self-driving using LiDAR and other sensors) — and he expressed surprise that mature technology such as "assisted parking" is already being deployed in mass-market vehicles in China in ways not yet seen in the West.
This is "concerning" for the United States, Younis says. However, he also notes that these technologies are not incomprehensible to Silicon Valley engineers — rather, "bureaucracy" and slow decision-making in large Western companies is partly what prevents similar technologies from reaching practical deployment. In China's case, "intense pressure" from the government — the existential threat of "advance or your company won't survive" — is one of the factors accelerating innovation. This may be a short-term advantage of centralized planning, Younis believes, but in the long run a free and open economy will produce superior outcomes.
For the U.S. to maintain its advantage in this competition, Younis repeatedly stresses that not just the DoD but private companies as well need senior-level leaders with deep understanding of technology — especially software. The fact that many talented people who once pursued MBAs to enter management consulting or investment banking now aspire to work at technology companies is a "fantastic change" and a strength for the U.S. Leveraging the country's STEM talent — both in commercial and defense contexts — is the source of competitive advantage, he emphasizes.
Younis also stresses the importance of actually visiting China — going to local dealers and test-driving cars, for example — rather than just reading blog posts and media commentary, to see "reality" for oneself. (He adds the caveat to be mindful of security.) Through concrete experience rather than abstract discussion, he urges, people need to recognize that we are in the middle of a "drag-out fight."
Finally, both speakers offered specific advice and messages to the many founders in the audience. McNally said that DIU is always looking for new technologies and welcomes contact from startups. DIU has a dedicated team (Commercial Engagement Executives) for engaging with companies, and can be reached at info@diu.mil. She expressed deep gratitude to the founders tackling difficult defense technology challenges, and acknowledged that they are part of the larger movement to rebuild America's defense industrial base.
Younis delivered a strong message especially to founders working on dual-use technology. The debate that once existed in parts of Silicon Valley about "whether to engage with the defense sector" is a thing of the past, he said, asserting that if commercial software companies do not support the government — and especially the DoD — the United States will be "in peril." For founders, contributing to the defense sector is not just a business opportunity but also a "civic responsibility," he argued. Sharing his own experience of entering the defense sector with no prior background in it, through the support of organizations like DIU, and calling it a great experience, Younis concluded: "The infrastructure is there — find us and we'll show you how." This call to action clearly signals both the importance of technology-equipped startups contributing to national security, and that a pathway for them to do so has been established.
Conclusion
Through the conversation between DIU's Liz Young McNally and Applied Intuition's Qasar Younis, this article has surveyed the challenges facing U.S. defense innovation and the front-line efforts underway to address them. Their discussion brings into sharp relief the critically important contemporary challenge of how to close the deep-seated gap between technology and national defense, and how to maximize the innovative power of the private sector — especially startups — in service of national security.
DIU is establishing itself as a leader in DoD modernization by connecting battlefield needs with commercial technology and accelerating the process from prototyping to fielding. The successful collaboration with dual-use companies like Applied Intuition proves its effectiveness. The fact that cutting-edge technology refined in commercial markets can be efficiently adopted in defense contexts — controlling costs while advancing capabilities — suggests that an ideal model can be realized.
However, significant challenges remain. The cultural and pace differences between the technology industry and the DoD, rigid procurement processes, and the slow transition to software-centered systems that properly value software as a core asset all persist. Overcoming these challenges requires not only expanded activities by organizations like DIU, but also the appointment and empowerment of technically literate talent within DoD, the establishment of agile procurement and budget frameworks, and above all — the early delivery of technology to warfighters in ways that enable "seeing is believing." As Younis warns, if the U.S. cannot break free from traditionally hardware-centric, process-heavy thinking in a future conflict being defined by software, it risks losing its competitive edge.
The global context of AI application in the Indo-Pacific and the fierce technology competition with China also cannot be ignored in thinking about the direction of defense innovation. Efforts to adopt AI effectively and responsibly, objectively evaluate China's technological capabilities, and strategies for maximizing the STEM talent and innovation ecosystem that represent America's core strengths — all of these are urgently needed.
Finally, the message both speakers sent to founders reflects a shared, deep conviction: contributing to the defense sector is not merely a business opportunity, but a vital responsibility that will determine the nation's future. With support structures including DIU increasingly in place, expectations for technology-equipped startups to actively engage in this space and contribute to strengthening America's defense capabilities and technological innovation are growing. I hope the discussion introduced in this article serves as a useful prompt for Japanese business leaders, engineers, and future founders to consider how their technologies and businesses can contribute to national security.
Reference: https://www.youtube.com/watch?v=VdxGI__WRjE
TIMEWELL AI Consulting
TIMEWELL is a professional team supporting business transformation in the age of AI agents.
Services Offered
- AI Agent Implementation Support: Workflow automation leveraging GPT-5.2, Claude Opus 4.5, and Gemini 3
- GEO Strategy Consulting: Content marketing strategy for the AI search era
- DX Promotion and New Business Development: Business model transformation using AI
In 2026, AI has moved from "something you use" to "something you work with." Ready to think through your AI strategy together?
Related Articles
- 2024 Edition: What Is Export Classification? A Complete Guide from Basics to Practice
- Vertical Integration and Technological Innovation in Next-Generation Mining: The Challenge of Securing Critical Mineral Supply
- 2026 Edition: Which Components and Technologies Are Vulnerable to Military Diversion? Identifying Dual-Use Items with Examples