Building The Base

In this week’s episode of Building the Base, Hondo and Lauren join Raanan Horowitz, Chief Executive Officer of Elbit Systems of America, to discuss the future of the defense industrial network. 

Raanan's varied portfolio in key industries of the future industrial network and former military experience has made him an advocate for an engaged dialogue between the DoD and the private sector in a closed-loop, manufacturer-end-user system. He emphasizes the need to involve small- and mid-range companies in the conversation to avoid inefficiencies in the future industrial network. Raanan believes that the key to emerging technologies in national security is learning how to bring the needs of the warfighter to the innovator.

Hondo, Lauren, and Raanan go on to discuss a variety of topics, including:
  • The private and public partnership
  • International business in an era of great power competition
  • Create a strong national security workforce
  • Integrating new technologies into the public sector
  • Diversifying businesses in the government portfolio

What is Building The Base?

"Building the Base" - an in-depth series of conversations with top entrepreneurs and leaders from tech, financial, industrial, and public sectors.

Our special guests are weighing in on a broad selection of topics such as: shaping our future national security industrial base, leadership in challenging times, experiences related to the intersection of business and national security, and personal anecdotes related to their positions of influence.

Building the base is hosted by our own BENS member Lauren Bedula who is the Managing Director and National Security Technology Practice Lead at Beacon Global Strategies, and BENS Distinguished Fellow, Jim "Hondo" Geurts who retired from performing the duties of the Under Secretary of the Navy and former Assistant Secretary of the Navy for Research, Development & Acquisition.

Lauren Bedula 00:48
Welcome back to Building the Base. Lauren Bedula and Hondo Geurts here with today's guest, Ranaan Horowitz, the president and CEO of Elbit America who has been with the company over 30 years. So, he has seen a lot during that time, particularly as the defense industrial base has evolved. Elbit is an aerospace and defense company and is over 3000 people strong. So, Ranaan runs a big team focused on supporting the Department of Defense and I am excited to dig into some of the issues on our show today. Thank you so much for joining us.

Ranaan Horowitz 01:21
It's a pleasure.

Hondo Geurts 01:23
So, we were thinking it's probably been 15, maybe almost 20 years since we started working together. And when you took over as CEO, I was down at SOCOM at the time, and you've got a fascinating story of how you got here -- probably not what you expected to be doing when you first started out in your career. How did you get here? What was your journey like?

Ranaan Horowitz 01:45
It is really an interesting story. I started my career in the Israeli Army and spent almost 10 years there in technical roles. After about nine years it came time to decide whether I was going to stay there or if I was going to do something else. I had a couple of alternatives: one was more of a commercial company dealing with test equipment back then for the PCB industry and the other was Elbit and I decided to go with Elbit. So, I joined in 1989 and started there as a program manager. My first program was a collaboration of all companies with GE. Back when, GE was still in defense. So, we're talking about the industry 40 years ago. And we were teaming to do some electrical drives for the M-1 tank between Elbit and GE -- and then came the opportunity. Elbit wanted to start their business in the US, so they put in to come over here. The original guy who was planning to come, his wife decided at the last moment that she did not want to move to Michigan of all places. So, I got the phone call, I came and interviewed and that's how the journey started in 1991. We started with less than 10 people. I was the only one that came from Israel to join that company. The other people were mostly retired executives. And after a year and a half in 1993 came the opportunity for Elbit to acquire a facility in Texas from Gordon England, then the president of General Dynamics aircraft division. We bought the facility, and I came down to Texas and the journey continued there. And these days 3500 people run $1.6 billion in 11 states with major facilities. It's a hell of a journey.

Hondo Geurts 03:57
It's awesome to see what you've built there. We often talk about service, and I think some folks think if you must go in the military, it's military for life. And you're going to learn a kind of military way. Can you recall some things in those formative years that have really shaped the way you approach leadership and problem solving?

Ranaan Horowitz 04:22
Absolutely. I think this is common no matter which country you're in: when I was in the Army for 10 years, to me the mission, my purpose was very clear. And I'm sure it was the same for you as well. There was no question about that. Then you go to industry, and you start asking questions: why am I doing this? What am I doing here? What I found, in Elbit, and throughout the years, that one common thing is when we talk about our mission of creating innovative solutions to protect them to save lives. That was really a mission that resonated with me, and I think to this day it is one of the main things that resonates with our workforce. The common mission around protecting and saving lives was where we were able to create a common theme. Even in our commercial aviation business, we were the world leader in enhanced vision systems which enhance safe flight safety, or, in a medical business, we were really doing things to protect and save lives. So, I think for me, the importance of doing something that matters, something important, has always been my main motivation. And that's one of the things that I'm working with people to really import and make sure they feel the same way.

Lauren Bedula 05:38
It's really important and something we talk a lot about on our show, because we want to drive more talent towards serving and towards mission. So, along those lines, you've seen a lot over the past few decades in terms of mission, what do you think is most important today? What is top of mind from a national security perspective?

Ranaan Horowitz 05:59
I think the number one thing that I worry about and that I try to work on is to make sure that people in the nation, the people, and the workforce engage with us to understand why what we do is so important. One of the things that I've seen, and we're trying to preserve Elbit America, even as we've grown, is how do we maintain this family culture, the closeness. The family culture is more around, again, a common purpose, a common mission, a dedication to the warfighter or the customer, the pilot, or the medical technician, to really unite people to drive that. I think that's one of the things that we need to continue to do relentlessly across the board. It’s a starting point for everything that we want to achieve from a national security perspective. On top of that, of course, technology, innovation, and quick cycles. I worry, like many in the industry, that we have slowed down, we've lost the agility, we've lost the flexibility. Everything takes a very long time. How do we get innovation in? How do we speed up innovation? How do we keep our technological edge? I think this is something very important.

Lauren Bedula 07:14
I was going through some of your past work and listening to remarks you gave for the conference back in 2010. At that time, you talked a lot about the importance of commercial technology and innovation. So, I know it's something that's been important to you. Can you talk a little bit about how you think through partnerships when it comes to commercial technology? And, as you said, getting the best tech into the hands of the warfighters?

Ranaan Horowitz 07:40
Absolutely. If I recall, I don't recall the exact words, but Hondo and I were talking about the Navy, and we were talking about the fact that back then it was the first time that we put a moving digital map on a V-22. Using commercial components into a processor and recognizing this was really an innovative concept. Today, of course it's common. People do that all the time. I think there is a lot of potential in leveraging commercial technologies. On the other hand, I think that the combination of those commercial technologies with people like Elbert America who understand the mission and operating environment, is the winning formula. I think there is, on the other hand, sometimes a thought that just taking commercial technology from Silicon Valley or somewhere else, will come and solve everything. What we see in quite a lot of cases where this is happening is that it is not as easy as people think. I think a role for companies, especially companies like Elbert America, which is small, nimble and agile enough while we have scaled, is to go into depth with some of those companies to leverage that capability in a situation package into a solution that is fit for the operating environment for the warfighter. That's the winning formula. There are no quick wins there. It is rare to see a quick win because you must adapt it to the operating environment. A lot of discussions and communications, for example, sound like: why can't we just use something like an iPhone? It is obvious because the iPhone is not as rugged, robust, and doesn't work in all these environments. You must take out the technology in there that is remarkable and put it into the situation right now. We're working, for example, with the Air Force on the next generation survival radio for pilots. I remember General Goldfein had this view that the future next generation survival radio must be like an iPhone app for the pilot. The downed pilot can just push the app and the system knows where he is. I think it's a great vision and doable. At the same time, for that next generation survivor to operate in, the environment that a downed pilot is in, must be able to talk to satellites, must have encryption, must have the right capability, and must have the right power management scheme. That's where we must excel.

Hondo Geurts 10:25
You've seen a tremendous transformation of the industrial base -- we like to call it an industrial network. Over the almost four decades that you've been in the industry, Elbit America is kind of in no man's land – a great situation. Others say it's too big to get small business set aside and too small to be and the prime take-all kind of thing. How do you view the makeup of the industrial base? Is it right? Or have we kind of consolidated too much and lost some of that? The “fast enough to be nimble, but big enough to scale”? And do you have any ideas how we could better balance out the industrial network so that we've got performers from small to mid to large?

Ranaan Horowitz 11:15
That’s a great observation, Hondo. I think that what we deal with at Elbit America only a handful of other middle-sized companies in the defense industry deal with -- and I worry about that. I think that, on one hand, consolidation and the big primes allow them to make more investments and to bring more resources to bear in what they are doing it. Some of them are doing that as well. On the other hand, these very small companies don't necessarily have the scale to really bring that capability. So, I think the there's a significant role for companies like Elbit America that has the flexibility and the other hand, the scale to bring that together. The Department of Defense and the services must do more to reach out to companies like Elbit America and get us involved. I know there's an ongoing forum and Hondo, you probably know better than me on that, where the six top CEOs are invited for discussion with the Deputy Secretary of Defense. I think it must be a much, much broader reach. We need to make sure that the medium companies are involved and engaged. I think that the department is pushing very hard for an open system architecture. I think that's a tool that needs to be used to bring additional players into the mix. I have yet to see that this is happening. In some cases, it is the army that has done, for example, on the striker to be able to bring a new turret provider not through the OEM -- I'd like to see more of that. I'd like to see more opportunities for medium companies to come in and bring capabilities working directly with the government. I think we can do this effectively, creatively and more affordably. So, I think that needs to be part of an overall industrial base policy that preserves the role for these meter companies like Elbit America that can bring innovation to scale at a much more affordable, quicker pace.

Hondo Geurts 13:34
Another thing a lot of folks forget when you look at mobilization, if we must really scale up, that it is hard to do only through one, two, or three companies. If you look at World War Two, part of our strength and mobilization was all these smaller mid-sized companies, you add 10% to all of those companies is much easier than trying to double the size of a big prime. So, I think I think you're right, we really need to pay attention to that, particularly if we're going to train scale up. You know, you've mentioned your background from Israel. They've got a very robust tech scene and there there are learned you can maybe bring forward of how the larger Elbit integrates with startups and the other kind of innovative elements of the ecosystem in Israel.

Ranaan Horowitz 14:28
Yeah, absolutely. First, something very positive is happening here -- irrespective of the startups. Something that with the Army, SOCOM, and Marine Corps is the whole effort to leverage soldier and warfighter touchpoints. Basically, one of the unique things in Israel is the closeness between the user and the engineers. You can have an engineer that works during the week, and then, on the weekend, going on reserve duty in the Israeli Air Force and using the equipment that he or she is designing or maintaining – a great closed loop. We've seen some nice work with the Army and others where they really leverage the soldier touch point very effectively. So, I think that's a good way to look at what they're doing. I think, again, Israel has the uniqueness of this geographical closeness, the fact that people serve in the military and then go to do startups they understand the mission. I think they leverage the lessons learned to do more of the things like create these forums for a more direct interface between the user, the mission, the startups in the companies, I think there's something that needs to be done. Something that I've encouraged the Air Force to restart doing. For several years, there's been a very good forum where we exchanged stuff, they stopped doing it once COVID happened, I encouraged Andrew Hunter to restart that effort. I think the other services need to look at that. How do we bring together a discussion regarding potentially doing warfighting exercises, even at the classified level, bringing industry in the military to work together and startup. So, I think that interaction is probably the magic in Israel that allows them to move much quicker because the closed loop is there. And the technical people, the engineers, understand the mission and understand what the warfighter is trying to achieve.

Lauren Bedula 16:49
So, while on the topic of Elbit’s global footprint as Hondo mentioned, Elbit America's parent company is Elbit Systems based in Israel. So, you've gone through the process of standing up certain structures to oversee the US side and still maintain a significant global footprint in terms of business as our global landscape. Globalization is evolving and changing, and we're trying to shore up critical technologies and capabilities. Can you tell our listeners a little bit about this process of having a foreign parent and an allied company and running a business in the US? I know we have listeners from allied countries who are interested in starting businesses here in the US.

Ranaan Horowitz 17:28
Absolutely. So, as I mentioned before, we have started our first SSA, basically at the beginning of 1991 or 1992. So, we're more than three decades of what's called foci mitigation experience with the SSA board, and, about a year and a half ago, almost two years after when we purchased Spartan and the sonar buoys from the US Navy, we established a proxy board to manage that. So, we understand the structures from both sides. I think I think several things I would say one is our strategy has always been a long-term strategy. I think the success of us, or let's say companies like Elbit, is a long-term strategy. We just in less than four years invested three quarters of a billion dollars to buy companies in the US. We bought the night vision business from Harris, and 2019, and as I mentioned, we bought Spartan as well. So, a long-term investment. This week, we're taking ownership of a new facility, we constructed the Greenfield facility in Charleston, South Carolina, where we're going to build artillery systems for the Israel Defense Forces, but also, we'll do the command post integrated infrastructure for the US Army. So, we're making investment I think, number one is there's no quick wins. You got to be there for the long term, you got to be there for the investment. You've got to hire the right people. We have 3500 people. Some people have different perception, but we have about 15 people that came from Israel, in this entire 3500 people. And most of them are involved in a foreign military funding business for the Government of Israel. So, it's a US led workforce. It's a US workforce investing, they're investing in a partnership, investing in relationships and long-term relationships either way, you know, like the relationship Hondo and I have for years but with many other people in the industry and the government is very, very key. I don't think it's different than any other place. I mean, you establish yourself, you establish the trust and the confidence you build and invest in the long term. I think that's the secret sauce that we've been able to build on for many, many years.

Lauren Bedula 19:51
And you've set a great example for other companies and founders who are thinking through growth. We want to maintain competition to go from a small to a medium to a large. So, I think that's a great example. And along the lines of the international or global focus, how are you as a CEO thinking about international business right now? Is your strategy changing as we battle near peer competition?

Ranaan Horowitz 20:14
Yeah, so there's several aspects to it. One, I think that the US has to do more leveraging in building relationships with partners and allies and leveraging that capability. I think that countries like Israel, but also many others, have a lot of capabilities in technology, capacity, or ability too. I think the model that was built up is good, I think we need to extend it. It doesn't have to be the same category, but we've been promoting another category of countries like Israel that can be allies and can do things together to promote that. So, I think that's one thing that we have to integrate into the industrial base: collaboration. I think the militaries are collaborating in a very effective way. I think from an industrial base perspective, there's a lot of room to improve on how we collaborate with other countries and not from a demand perspective. So Elbit overall operates in many countries. Elbit has seen a significant increase in demand as a result, especially for the conflict in Ukraine, for countries all over the world. The Abraham Accords opened a lot of opportunities in the Middle East which was wonderful to see. It's remarkable. I mean, for the first time in my life, about a year ago, I was in Dubai, and flew from Tel Aviv to Dubai. So that was quite an experience to be there and to see how the world is changing. I think one of the challenges that we have, for example, as you look at some of the partnerships how do we now start thinking about leveraging the growing capability Elbit has in the UK, for example, we have over 600 people there and a lot of significant efforts and programs in the US, Australia, and Canada? And how do we play in that new ecosystem that talks about the US and its close allies? In this case, the Quad or the Five Eyes, or all that. I think that's something that we're really thinking about how to do effectively. I think there's room for DOD to open the dialogue for more companies to explain how we can serve the national security interest in doing that, because I think right now, a lot of what we know is more from public domain from public publications, rather than really a dialogue with DoD, how does the US want to leverage those capabilities?

Hondo Geurts 22:53
I'm struck by the conversation of closing the distance between engineer and operator and acquiring and creating an ecosystem of trust. And what I hear, and I also believe, is we've got to do the same thing on this industrial network and create this common understanding, common knowledge base and the relationships and the networks. Do you think industry is open to doing that collaboratively? Or do you worry that the competitive pressures work against trying to get some common level of knowledge and trust?

Ranaan Horowitz 23:33
I think that that's a good perspective on that. I think there are, of course, some limitations around it, I still think that there's way more that we can do without creating competitive issues. I think that needs to happen. I think we can do that. Leveraging organizations like Vance or AIA or NDA, to be the facilitator of that is good. But we must enable it. I think the key there is the participation of the real influencers and decision makers in these forums. And it's something I worry about the last few years; we've seen less participation from key decision makers and key influencers in the middle tier and DOD in these kinds of forums. And if they participate, instead of showing up for about an hour and then leave and having the same criticism for some of the executive leaders in our industry, I know have formed a lot of different relationships in good dialogue and partnership through some of those conferences, where people make the time to show up and to participate and engage. So, I do think there's some concerns about competitive issues, but I think it's doable if it's really treated right in the right people and decision makers show up fit for real discussion.

Hondo Geurts 25:01
Yeah, I think too many times we let that on either side, either your intercompany competition or fear of getting, you know, some sort of conflict of interest gets in the way of just talking to each other. In my experience, if you get the right folks in the room, have the right discussion, then you can, everybody can go take that and use it however they think is best. But we're way too worried about talking as opposed to actually talking and getting benefit out of that.

Lauren Bedula 25:32
And you mentioned BENS, and I know you've been a member for about 10 years now, which is fantastic. Can you talk a little bit about why organizations like BENS play an important role as an outlet for collaboration? Or what could we be leaning more on organizations like BENS for?

Ranaan Horowitz 25:51
First, I think organizations like BENS have a key role in what Lauren was started with, which is how do you promote in a broader audience, the understanding of national security and the needs and why it's important? How do you create this, this common sense of mission and the importance of that? So, I think BENS has to do that because it's not just people from defense, it's mostly people who have other interests and other engagements. So, I think that's very good. Opening that dialogue can be done by an organization like BENS can do so for some time, I haven't talked to General Votel recently about that, but I've tried to see how we can create maybe more partnership between BENS and maybe some of the other organizations to really facilitate that kind of dialogue -- direct dialogue with the warfighters. There's a lot of discussion right now on China and the Indopacific. What about creating a forum where we get some of the operators, some of the people that are doing the actual work and create a situation where we bring industry and stakeholders to have a dialogue that can be unclassified, or even a limited classified dialogue of what are the real issues? How do we address the real issues? I think there's room to do a whole lot more of that, to really create that innovation and leverage and put us in a better position.

Hondo Geurts 27:20
We've talked a lot about process, but some of the bigger things, at the end of the day, almost all of this comes down to people and talent. And I think we're seeing some struggles, over the past couple of years, of getting the talent flow into national security that we used to have. I'm sensing that has been shifting around a little bit. But what's your sense as a CEO of how do you keep the 3500-some talented folks you have motivated and recruit new folks? Is that getting harder? Is it getting easier? What's the sense from your standpoint?

Ranaan Horowitz 28:00
The competition for talent is not going to go away. I've read some articles recently that because of layoffs in the tech industry, suddenly everybody thinks it's going to get easier. I don't think it is, I think it's going to get harder. I think that we just have a limited workforce that we all are trying to attain. What are we doing about it? Want to gain the sense of mission? To explain why it is different? Why are you making an impact? Why is this important? The second thing is how do you maintain the family environment? I think I mentioned to you guys before that I continue to do, for the last two and a half years, a weekly audio message to the employees and I record it myself. And we distributed because I am working hard for people to stay connected with me, to hear my voice, and to have that belonging -- a sense of belonging to the mission and to what we do. I think that's very important. We're doing other things as well. We're partnering with universities. We have a partnership that we're working with Texas A&M there by the way of building a new engineering campus in Fort Worth -- which I'm delighted about. We're working closely with them on at Auburn in Alabama, we're looking at Georgia Tech in Georgia, at Virginia Tech in Virginia -- we're really working with the universities to really bring people early on to get them excited about doing that. I think we need to do that. I think we will continue to have competition on pay and so forth. And the reality is if a company like Google wants to take somebody away from us, they'll be able to take it away. They can pay more; they can give them more stock options. We're trying to create a differentiated environment that's different. It's built on mission, family environment, ability to impact long term perspective versus just worth them and try to get the best.

Hondo Geurts 30:04
So, as you do that, and you reflect on your remarkable career, how did you approach who helped you? You know, go from knucklehead Army infantry guy to suddenly now in a high-tech firm and make that transition. And when you when were you flicked back what, what was the most important things you saw there and then lessons you'd give to other folks coming up through the ranks on how to approach your own development and challenge their own boundaries.

Ranaan Horowitz 30:35
I will start all the way back to when I was in the army. So, I was, again, in a technical role. And I have a direct relationship with a mythical Major General Major General Israel Tal, who's the father of the Merkava tank, who was really a mythical figure. One of the things that he did for me was just enabling me as a young lieutenant and then a young captain, he backed me up, he gave me permission to do things, even though he was known as a ruthless leader and manager. So, just doing that was one thing. In Elbit, I recall Josef Ackermann, who was the president and CEO for about 13 years. And a lot of what I learned from him is just the balance, still the ability to do business in a way that is pleasant, that is balancing both the work and the personal life and caring for people. We tried to do the same thing here. You know, one of the things I give credit to, for this, is to Tom Kennedy from Raytheon. I learned from him back then, Raytheon had some roles for young people coming in to be in a technical role, or a chief of staff role for the present CEO. And we started doing that. For the last, I would say, eight years. And we bring in an individual, a high potential individual, to work with me for two years. And we make sure it's only two years. And we now have a successive set of people that work with me, that I was able to develop a relationship. And each one of them, as a result ended up being promoted, understanding the bigger picture, tried to do more of that. So, do some of the mentoring and do some of the connection. Make sure that you talk to people, open the door and do that. I think that's what I've seen success for me personally, and what we're trying to impart on people in our organization.

Lauren Bedula 32:41
And so as a business leader, I know we have many listeners thinking through demands around talent, like you talked about, and COVID really threw a wrench into things, especially as we think about remote work and showing up which the defense industrial base has a little bit more of a tricky situation when it comes to security sensitivities in the like. Any advice to business leaders or team leaders thinking through getting folks to come back to work or how you're thinking about hybrid environments?

Ranaan Horowitz 33:07
Boy, a complicated issue. And we, like many others, are still struggling. I think that on one hand, I think it's real and understanding that it's very hard to maintain a family environment and to maintain the sense of mission and the closeness if you do it all virtual and remote. We're seeing some cracks in that. So, we're trying to bring people back in. On the other hand, I think the flexibility that hybrid is providing to the individual and the companies is awesome. And I think we need to find a way to maintain it. So, we're trying to find what the right mix is. How do we do that? One of the things that I think is important for us, and I think we have not done as well, up until now. We want to bring people back to the office, we need to give them a good, pleasant experience in an environment, and we can't do it. You know, I don't know if we have any more of those. But you used to have in our facility some of the old metal Air Force issued desks. I don't think we have any more of them. But it always comes to my mind. How do you want to get people back into the office when you have that kind of environment? So, we're investing more in the net we're investing in the environment to make it pleasant to make it usable and find the right balance.

Lauren Bedula 34:30
Thank you. I've been so curious about that. I know so many of us are thinking through what that'll look like going forward especially with regards to Tallinn. You've had so many great and specific ideas for us today and your story is such an inspiring one. I like this idea of creating forums for interfacing and exchanging demand signals and making sure we're working closely together across the defense industrial base where it's partnering on the private sector side but ultimately with a mission for the warfighter. Thank you so much for joining us today.

Ranaan Horowitz 34:58
It was a pleasure, Lauren and Hondo. It was great to share some thoughts with you and thanks for what you're doing.