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Opinion: Australia risks squandering AUKUS Pillar 2 unless it urgently shifts from slow, consultancy-driven processes to fast, practical, bottom-up capability building that matches the pace and realities of modern warfare, explains Beaten Zone Venture Partners’ Steve Baxter.
This month’s AUKUS Pillar II Opportunity report from the American Chamber of Commerce in Australia and the Business Council of Australia makes a case for how to deliver the advanced military technologies that Australia so urgently needs.
But between the lines it also reveals a brutal truth: we are still treating modern conflict like an academic exercise while our adversaries treat it like a race.
We keep talking about “future capability” as though the future has not already arrived. While Australia has been running tortured consultations, real wars have been fought, and the lessons are not subtle. Heavy, exquisite and slow-to-field platforms are being dismantled by cheap, disposable and rapidly iterated systems.
A well-equipped modern navy in the Black Sea was largely neutralised not by rival fleets but by swarms of unmanned maritime drones. Tanks worth tens of millions have been pushed aside by five-hundred-dollar quadcopters.
The character of warfare has already changed, and we still appear to be acting like we have the luxury of catching up whenever it suits us.
We’re spending tens of billions on AUKUS Pillar 2 priorities but, for all its promise, Pillar 2 has not delivered much. That is not a criticism of the ambition behind Pillar 2, but of the machinery grinding it down.
We are still applying old, consultancy-led, risk-averse processes to a problem where success belongs to whoever learns, adapts and deploys fastest. Meanwhile, Australia’s strategic circumstances are getting worse, not better.
The new report recognises this urgency. It calls for clearer pathways, faster decision making and better mechanisms to scale dual-use technologies.
These are sensible ideas. Unless Australia fundamentally reshapes the way it builds capability, Pillar 2 risks becoming another polished PowerPoint program instead of a source of real asymmetric advantage.
As the report points out, 2024 National Defence Strategy said Australia must mobilise a “whole-of-nation” effort. But “whole of nation” too often turns into “whole of consulting”.
If we let major consulting firms run the playbook again, we will get what we always get: frameworks, project plans, roadmaps and not much real capability in the field.
AUKUS Pillar 2 does not need more frameworks. It needs more builders. It needs the people who make things: hackers, engineers, founders, machinists, coders and small teams who move fast, break stuff, rebuild and push capability forward before bureaucracy can drag it back.
Australia needs a different operating model for Pillar 2. We need one built around the principles that are actually winning modern wars: small, local, cheap, fast.
This mindset already drives our work at Beaten Zone. Our TAK HACK initiative shows what bottom-up innovation looks like in practice. Instead of waiting years for a procurement cycle to inch forward, we work directly with the systems soldiers use today and deliver improvements in days or weeks.
No committees or glossy documents, just rapid iteration in service of the people who need it most.
This is how capability is built now. Not through grand programs but through relentless cycles of build, test, break and rebuild. Not through specification documents but through real-time field feedback.
The report is right to highlight the importance of private capital and the urgent need to better incentivise private investment, especially in small and medium-sized enterprises.
As it said, “with private sector contributions, Australia’s total R&D expenditure amounted to just 1.68 per cent of GDP in 2021–22, far below the OECD average of 2.7 per cent. In contrast, the United States has an R&D spend of 3.5 per cent of GDP”.
It’s not that we lack ideas to invest. What we lack is a deep and sovereign bench of companies working on allied defence problems. We need a pipeline of start-ups, scale-ups and sovereign tech businesses that can ship real capability quickly.
That pipeline will never emerge from committee rooms. It will emerge from labs, garages and small teams empowered to iterate at operational speed, supported by the relevant incentives.
Pillar 2 remains a generational opportunity, but without urgent reform, it risks joining the long list of slow-moving initiatives remembered more for their brochures than their battlefield impact.
Pillar 2 will only deliver if we face reality. Conflict today is shaped by cheap hardware, commercial technology and the pace of iteration, not the pace of paperwork. In modern warfare, the side that can build and rebuild fastest wins.
Right now, that is not the side sticking to business as usual.
Steve Baxter is the founder and lead investor of Beaten Zone Venture Partners, a specialist defence technology venture capital firm supporting sovereign Australian Defence capabilities for the allied market.
