This 26 October, Andy Smith, President, Halldale Media, Andy Fawkes, Editor, MS&T, Rick Adams, Editor, CAT, and Marty Kauchak, Halldale Group Editor, completed a wide-ranging interview with Daniel Gelston, Group President of CAE’s Defence & Security Group. The interview content is provided in entirety below.
MS&T: Thanks for taking time to meet with us. We’re aware you’ve been group president since this 24 August. Tell us some of your group’s major strengths that you have observed at this early point in your tenure.
Dan Gelston (DG): First, I appreciate the opportunity to meet with all of you. I see trends in the market space, based on the mission pivot, primarily from the US leading but then from NATO, and the Five Eyes [Australia, Canada, New Zealand, the United Kingdom and the US], all following in concert off our 2018 US National Defense Strategy. As you’re aware, we’re pivoting as an alliance from a counterterrorism (CT) posture to one focused on a potential peer-versus-peer threat. It fundamentally means we’re moving away from an actual ‘hot war’ where bullets are flying against CT targets, to a focus on CRIKT (China, Russia, Iran, North Korea and terrorism in descending order of priority). That means we’re hopefully not going to be in a hot war anytime soon with China, Russia and the like. Defense departments around the globe are going to pivot from one of the two things they fundamentally do – either fight a war or practice to fight a war (i.e. training and simulation). There’s going to be that pivot back to a more traditional, Cold War peer-versus-peer environment. To prepare for a potential conflict we’re going to be focusing on training heavily again, versus just the active, real-world feedback we’re getting from fighting the CT fight.
As I thought about that, the last time my job was specifically focused on training was when I was on active duty [US Army] at Fort Knox, Kentucky on 11 September. That was the last time we had a major national security strategy shift, in 2002, away from peer-versus-peer, to a CT, asymmetric threat. Twenty years later we’re shifting back. That puts a primacy on training. There’s no question: the more you sweat in training, the less you bleed in battle. Having been in a training posture and having been overseas and in live engagements in warzones – Afghanistan, Iraq and associated countries – I know that all too well. I have many of my ‘brothers in arms’ still serving actively, so it’s very important for me to provide the support to that shift in training, to prepare our forces, both US and our allies, going forward.
When I think of that, there is no better company positioned to do that and lead that training from industry than CAE. We are the largest pure play and arguably (I’m a little biased) that we are the best in the business when it comes to training and simulation. And not only the need for training, but when you look at multi-domain operations (MDO) the National Defense Strategy and our allies have laid out as the future of warfare, you need to do training all the more. When you are taking space, sea, air and land, wrapped in cyber in this multi-domain environment, the future of how we will fight is a lot harder to do in real terms, with real assets. I think the Navy’s first major MDO exercise with real assets isn’t until 2024. At some point we’ll also need to pay ‘the COVID-19 bill’, putting more pressure on budgets already under stress. Because of the pivot strategy, you need to train more because it is MDO – which is very expensive and time consuming. This all leads to simulated training environments. I believe CAE is the leader in that realm. I am excited to help take them to that next level, because our mission requires it, our countries need it and our forces absolutely have to have that realistic sweat in training, so they don’t bleed in battle. I think our company is positioned perfectly for that. There will be some announcements in the near future which will prove we have some great wins and initiatives going on, particularly in that digital immersion, synthetic environment that can take all the domains together to provide a realistic training environment for our forces.
“We are accelerating a trend that we were going to realize anyway.”
MS&T: We’re still in the grips of a persistent Covid-19 pandemic. How is CAE responding to the pandemic to meet your customers’ training services and products requirements?
DG: It’s a reality. Even if a vaccine comes sooner rather than later, it will be an aspect of the future of our business, even if it is Covid or some derivative thereof, going forward. It has had an impact. I am happy to say that as a defense business, being a vital part of the industrial base, particularly here in the US, we have continued operations. It has been somewhat more limited on the impact to my business, but you can see across CAE, on the commercial side tied to the airlines, it has had an impact on utilization. Our utilization at some of our training centers, Dothan, Alabama and Tampa, Florida, for example, have had a bit of a downturn, but nothing too drastic. It has provided us with a lot of opportunities, again, when you think of synthetic training. It lends itself to an altered training environment, where students may be in quarantine when they arrive for two weeks. Our solutions at many of our training centers, and where we are actively providing training on base to personnel in uniform, are bringing the preambles for training, all of the mission workup, the preparation and study, in mobile format. We’re putting content on iPads, so students around the world in quarantine for several weeks can start consuming that. They can carry those iPads with all that training wherever they go, as they move into the fully realized training environment. Our simulators, both at the virtual reality level and the higher end, full flight simulators, for instance are devices we can work 24/7, and they are working 24/7 – another advantage of simulators. These also provide the advantages of breaking up the utility, the usage, of these machines to respect social distancing, to have limits on the number of people in the room – beyond wearing a mask. These are things you cannot do in live training at all times. We are accelerating a trend that we were going to realize anyway, moving to simulation, the synthetic environment for a multitude of reasons – accessibility, cost effectiveness, and others. It’s all the more necessary to have that training simulation brought to the students versus the student having to go the training with many others. With that acceleration, it lends to the strengths of our company, seeing we’re really the largest pure play in this regard.
We embarked as of a few years ago, on a major research and development effort into digital immersion. Being a technology leader, we set aside C$100 million to do exactly this – it lends quite nicely to the strengths of our company. Something that probably would have taken 10 years for customers to get to, there’s an immediate need for it, now.
"Classic physical training is going to be reduced due to cost, and the time frame as well, as we need to train in the multi-domain."
MS&T: You mentioned a probable pandemic bill to pay – mirroring US Defense Secretary Esper’s warning this May to expect decreased, near-term US defense budgets. We’re hearing several pronouncements in US allied and friendly nations. How will all of this decreased spending impact CAE’s short-term business model?
DG: It is a reality. Defense is the largest portion in most countries’ discretionary budget – and it is a large part of the US’s discretionary budget. You know the bill will come due. If you think simulation versus real planes, tanks and ships – you name it – operating, certainly there’s a cost-effectiveness in the per hour calculation of training. A trend we were all moving to as an industry, anyway, is going to accelerate as O&M [operation and maintenance] budgets are going to be reduced. Classic physical training is going to be reduced due to cost, and the time frame as well, as we need to train in the multi-domain – which is even more expensive and harder to coordinate – this is literally coordinating all the services together. If we can accurately simulate that synthetic environment and tie it together in a secure network, you can get that training experience a lot cheaper and a lot faster. This is arguably the best way, that we can see, to keep our men and women in uniform prepared for something that hopefully does not happen, but if it does, a peer-versus-peer conflict, we’ll be prepared to win that! And understanding the limited defense budgets, we need to do it to the best of our abilities in a synthetic environment, that is timely and much more cost effective than spending resources to train in the live, physical world.
MS&T: While in the short-term many nations may reduce their defense budgets, there is the reality the military services must also continue to modernize and recapitalize their weapons platforms and systems. How is CAE’s business model responding? Please also provide a few of the recent or emerging S&T enabling programs CAE has won or is interested in pursuing.
DG: I’ll continue on theme of the digital immersion in the synthetic environment. We’ve been downselected for a contract called SOCOM [US Special Operations Command] Special Operations Forces’ Global Situational Awareness program. This provides a common operating picture, a single ‘ecosystem’, if you will, for practice, training, planning and final execution at multiple echelons of Special Operations Command. It gives them a single picture drawn from data all of the domains – space, sea, air and land – wrapped in a cyber blanket. That is going to allow a decision maker to first train and then move into the planning and execution realm, having a much better understanding, much better situational awareness – thus, the name of the contract – to make certain the OODA [observe–orient–decide–act] loop is as accurate as possible for mission success. Ultimately you are going to insert AI into that loop. It will never make the decisions for the human. We’re seeing that hybrid, that minotaur-, centaur model – half man- half machine, be the most effective. AI can analyze from all of those data sources in MDO, coming back to a single operations center, and recommend a most probable course of action, a most deadly course of action – three or four courses of action analyses with appropriate percentages of success completion, casualties’ effectiveness and other things to that effect – to help accelerate that OODA loop. We expect, in the next week or two, to hear a final down select, the final awardee. We’re up against some pretty impressive companies including Palantir. I’m bullish and look forward to giving you, in the not too distant future, some great news that we have won that.
At the same time in the UK, there’s the Single Synthetic Environment initiative. The British see an even greater concept for the synthetic environment beyond just military training, planning and exercising – they see it for the entire country’s operations. We work with [General] Sir Richard Barrons very closely and he has an amazing vision for the future of the UK. You can immerse yourself as a leader, whether you are military, political or maybe medical, in the synthetic environment to train and prepare for and build courses of action for anything from natural disasters, to pandemics, military confrontations, natural disasters, economic downturns, and famines – you name it. They will use the synthetic training environment to model everything they do as a country and be prepared for what comes next. We’re at the lead, ready to win another follow-on contract for that work. We’re also looking to closely tie what we’re doing in Orlando with the US military [Synthetic Training Environment]. That work is a little more advanced in the contracting and budgeting process but has more of a focused vision in training. I think we’ll eventually expand to what we’re doing in the UK, which is not quite as far along with contracting and budgeting but has a much bigger vision of what the synthetic environment can do. Tying those two together would meet the mission needs of a variety of customers in the US and internationally.
“That is the nexus, what the future is going to be.”
MS&T: MS&T is also interested in the convergence of C4I and simulation. Your background contains a lot of senior leadership experience in C4I. Do you think that is why you are in this position – to do that strategically at CAE?
DG: If you look at my military background, I was initially a branch detail officer. The first few years I was on the front line in armored cavalry in the DMZ. I switched to intelligence and was awarded a Master’s degree in Strategic Intelligence at the top secret/sensitive security information (TS/SSI) level. I spent my early industry career focused on the CT fight, from an individual contributor up to a major manager at BAE Systems. I then moved from becoming a user of C4ISR into a provider of C4ISR, primarily with a mix of communication and surveillance equipment. That gave me a great balance of understanding the mission needs of the front line and, back in the US, at the mission command centers, the Pentagon for instance, then as a technology provider at a sub-tier level, particularly coming out of L3Harris. They were the lead, classified communications (C2) provider, with us sitting on every major platform. In some ways, I had better insight on the overall picture, particularly of our platforms’ capabilities in C4ISR than even some platform providers, and in some instances, even the government itself – very stove piped – but everything needed the C2, everything needed the classified communications. I was ‘read on’ to all the future platforms and had a good understanding and insight, into all of this. Bringing that to CAE is key, because I have a key understanding of what that next generation is and, in particular, the mix of autonomy versus manned platforms. In all of the [MDO] tiers and areas of operations, we really are moving to manned-unmanned teaming, MUM-T as it referred to, and Loyal Wingman concepts, where a manned platform is sitting outside the ‘red’, contested bubble of a future peer-versus-peer fight with unmanned assets being controlled, and moved into the red bubble and taking on the real threats.
So how do I take a business that has been primarily focused on platform-manned training, and one we did an amazing job with, over decades? That is never going to go away. But it is going to be less about the singular platform and more about the networked, multiple platforms within a tier, and we’re getting there now, to multiple networks across MDO’s multiple tiers, with multiple platforms on each tier, all coming back to a coordinated C2 center. And finally, not only is it just manned training, but it is hybrid training, training that minotaur-, centaur model, where it’s half automated, half AI and half autonomous, and half human interaction. That is the nexus, what the future is going to be. We need to be out ahead of that as a training lead, and tied to all of these platforms, particularly, in a bundled approach, because acquisitions are moving a lot faster – the sixth-generation fighter, if you will, for the US Air Force. This is happening so much faster than your traditional acquisition cycles. Of course, they will not be of much use to anyone if you can’t train on them – on the autonomous and manned options and, most importantly, how they work together with our current platforms. That understanding that I bring coming out of my background is pretty key to make the decisions on the investments, the partnerships and customers now to be prepared for this new generation of training and what it is going to be. It is not going to be just platforms, but in our adjacent space we are growing into. We started with the AOCE acquisition. I can’t take credit for that, but it was a brilliant move because it is more about the mission support training, not just platform, but coming back to the mission planning and wrapping it all together. In many cases it takes a clearance, so they gave us access and entre to TS/SSCI-level work. It’s going to be more of that focus – the ‘glue’ that brings it all together in the mission training and support area, along with the leverage we have from the legacy platform provider of training, the best in the world I will tell you. This is primarily in the air tier, but certainly ground and naval as well, and as we expand into cyber – that glue that brings it all together, as the networks will also bring it all together – and finally space – still nascent, but we’re making heady moves there as well.
MS&T: Those joining the military in any country are going to be digital natives and they are going to be gamers. We’ve seen it in the UK, and I am certain in other countries during the pandemic lockdown, where British Army reservists, without talking to anyone, put together gaming technology to support their own distributed collective training. This whole generation joining the military is also used to discovering content, develop games, and network and socialize with people. How is a big company like CAE able to best leverage and support the new generation of warfighter when many of them already know what to do?
DG: I may be a bit of a ‘tweener’, hopefully able to bridge the gap, having had enough exposure to the millennials and the next generation, that have grown up, like my three girls, surrounded in a world where you can ask Alexa any question you can ever imagine and you get an answer just like that – immersed in that digital environment. This is versus a lot of my mentors, for whom training was truly the physical experience. You are dead on. The focus here is moving toward the virtual reality (VR), the augmented reality (AR) and we’re working with it now – there is no question about that.
I’ll give a maintenance example. We have young E-3s doing tank maintenance on the M1A series Abrams tanks, on propellers – you name it – and this even carries over into our medical business, where we have surgeons who can’t come out of Afghanistan or Iraq to do training, so we bring the training to them. We can ship a much more mobile platform, not some huge, massive device on huge hydraulics. It’s is something that can be mailed – a set of goggles, a set of tensors for your hands and maybe a chair, where you can reenact the whole -10 level maintenance on the jet turbine on an Abrams tank, and they can practice that and get tutelage from somebody that is not standing next to them, perhaps in another country, walking them through the steps. I did this on my field visits to CAE sites in Arkansas and Tampa. The AR is sometimes even more amazing. If you are in a pilot seat, for instance, you have a physical recreation you can touch below you, but the VR is above. If you are practicing, you can have synthetic enemies flying at you and see all of that. That connection is amazing. The E-3 born after 9/11, who grew up with smartphones and other technologies, are absolutely at ease in this training environment. Not only does it save money, not only can you bring it to wherever they are in the world – sometimes in a war zone or a pandemic situation when you cannot get trainers to them – all you have to do is mail or ship them some basic components of a VR trainer and train them remotely. I see this as a great advantage for the mission, certainly a benefit to the customer and something we can provide that not only applies to a war environment where you don’t want instructors sitting if bullets are flying, or even in a pandemic. It’s only for my business but for CAE Healthcare’s business as well, where they are working to train doctors in a very similar situation, perhaps with even a ‘virtual body’ on which they are practicing triage or an actual surgery – you don’t need to send in people to Iraq or Afghanistan, but they can train from afar. It’s amazing to see the comfort level as you pointed out – it’s second nature.
“I have a pretty aggressive target for growth between now and 2025.”
MS&T: You’re aware Halldale has editorial interests beyond MS&T, in civil aviation with CAT and safety critical training. Tell us some about some opportunities your defense and security business have to better enable the flow of lessons learned, technologies and other attributes among the sectors.
DG: My business is called defense and security. We’ve spoke about defense, but security is a big piece of it. A hot button topic now is security training – particularly in the US, there’s a lot of tension about training law enforcement and more appropriately handling situations. The better you can better immerse people in a real-world training simulation, particularly VR can give you that, the better they are in an unfortunate situation, where adrenaline is pumping, and maybe there are knives and weapons present and being used, and they need to make the right decisions. We’re looking at the obvious adjacent spaces in the defense-homeland security realm. I am going to be bidding my first major IDIQ [indefinite delivery/indefinite quantity] contract with US Department of Homeland Security shortly – it’s going to be for TSA [Transportation Security Administration]. There’s a lot of natural carryover where traditionally CAE D&S has been focused on just on defense, but I am also working closely with Heidi Wood, the newly announced president of our healthcare business. I have some entre into some different contract vehicles that will bring in a very similar virtual training capability into the medical realm, that will help train people with triage, practicing operations where you don’t have to bring in cadavers or maybe an unfortunate animal to practice on – you can do it in the virtual world.
Networking is also going to be key. That’s an area that started with training and now we’re growing into networking, because it all has to have glue connecting it together in a secure network, particularly on the defense side. There also concern of ‘spying eyes’. One of the advantages of working a synthetic environment if your networks are secure, you can practice courses of action and nobody can see you. If you are doing physical training with planes, tanks and ships, it is pretty hard to hide that, particularly with overhead assets. It’s an area maybe for ‘inorganic’ growth. I have a pretty aggressive target for growth between now and 2025 for the business. I understand a portion you always want to buy is the ‘organic’ growth, but the inorganic is certainly a piece of that. You can imagine the networking piece and the cyber piece, in particular, is something I am looking very hard at, to augment what we already have. The networking-cyber experience and knowhow in security also makes you so much more modular. You can take your solutions, particularly the synthetic, and transport them to DHS, healthcare and maintenance training – you name it. You can tailor the model to addressable markets.
MS&T: On the topic of big data, some, including myself, say if we started to better measure training and we knew it was effective, then we could better design training. We know you have products and initiatives going down that line. AI and machine learning certainly come into this. Do you see this of interest to CAE as a new market, to take, for instance, the data the whole US Army generates and help the service train more efficiently and effectively?
DG: Big data goes hand-in-hand with machine learning and AI. There won’t be much learning of the machines if they don’t have a lot of data to learn from. That’s a huge advantage you see in all the disruptive companies. Tesla’s big advantage it has, arguably, is they have been collecting data on its cars since the Model S came out in 2012 – just a massive leap for them, particularly with their autonomous driving capabilities. You see it with Netflix and their ability to recommend based on browsing history, machine learning-driven, big data to increase viewership. That’s a huge piece for us going forward. We have it to a degree. For instance, when I go to our Dothan learning center, it’s pretty incredible. Each student carries a chip with them. Whether it is a simulator, or even let’s use the advantage of the live flight in our Grob airplanes, they insert the chip and they are getting three feeds for their entire live flight, sitting next to the instructor, flying the plane. There’s a camera on the two of them and their interaction. There’s a camera behind them showing what they see on all of their gauges. And there’s a feed of all the actual data – altitude, RPMs and others. Everything is recorded and fused in real time together. The instructor can also hit the button for learning points. As soon as they go into a hot wash after the flight, we have basically an AR set of screens with all those data feeds, all that data, fused in time. This allows the instructor to go, for example, to ‘Mark 1’ at 1 minute: 39 seconds, to see in one view, a student looking in the wrong direction, another view of what was going on and what the student was looking at, and then all the data feeds for that immediate feedback for the pilot. It is really powerful. And then there’s the notion of taking that to the next level, taking greater amounts of data and comparing them to every other pilot in that scenario, and having that machine learning provide specific responses, success rates and where you need to be to further tailoring that training. That’s a big piece of it.
But we don’t have to have every solution home grown. It takes too long, takes too much money. We really do believe in following the US customer in open source architecture. And that’s a key of our USSOCOM situational awareness solution. We want to be the integrator and provide the ecosystem solution. That doesn’t mean every solution is a CAE born and bred solution. We want to take the best of what’s available. As this technology is moving so quickly, you think of the App store, where Apple opened up a structure for all that capability and creativity to come in – but they are the ones providing and maintaining that ecosystem. That’s what we want to be for training purposes. That’s how you get the combat multiplier for big data, you don’t try to do it all yourself, you understand as an integrator you don’t have all the answers, and you need to open up to world to provide the best solution for the customer. That is my intent. Only about five percent of our revenues come out of APAC now. That can be significantly expanded.
“Only about 5% of our revenues come out of APAC now. That can be significantly expanded.”
MS&T: We’ve seen shifting alliances in recent years. China with its Silk Road. Lots of activity in the Middle East with new alliances. Obvious changes in Iraq, Afghanistan and Syria. Brexit and the rift with the EU. Rifts between the US and NATO countries. Have you noticed in the training business any reluctance among traditional partners of the US to train together? Conversely, are their new players looking to train with the US because of these rifts?
DG: I refer back again to the 2018 US NDS that prioritizes intercountry alliance training – it has to be a coordinated fight. No nation has the budgets or capabilities anymore to go it alone – and this includes the US, especially after I referenced earlier, that massive pandemic debt. In some ways being a Five Eyes partner in Canada, we’re that ‘friendly cousin’ versus the ‘big brother’ who sometimes you know you need, but still chafe at a bit. And I understand that, being a US citizen and incredibly proud of my country, and especially working for multinational companies – Cobham, Smiths, BAE Systems and now a Canadian company. I see that as an advantage – they get access to the cutting-edge training, the capability, the alliance, whether it’s NATO or the Five Eyes. It’s easier to work with a Canadian company than one in the US. At times there may be some political frustrations or related things. We’re certainly seeing new partners. We’re in the final stages to set up the NATO jet training center in Greece. You’re looking at all NATO countries and Partner countries accessing that training. Our competitor is Elbit from Israel. We’re looking at some innovative ways to provide the world-class training that the Greeks need, but maybe also include some of those new types of partnerships that we would be interested in, not just NATO, but in countries friendly to NATO. We also see that in APAC (Asia Pacific). APAC is an area I strategically have identified a significant amount of potential growth. We’re underweighted. Only about five percent of our revenues come out of APAC now. That can be significantly expanded. But when you look anywhere from Australia and New Zealand in the Five Eyes, and obviously partners in Japan, Korea, Singapore and Taiwan there are opportunities. We have the training center in Brunei – so there are opportunities on that front. We have enlisted the Asia Group as a consultant to develop deeper ties and foster those relationships in APAC. These would take me years to do with an indigenous capability, where they already have those connections.
MS&T: We’re reporting much more on Asia Pacific. We have an article coming up soon on India, and specifically flight simulation in that nation. We’re pushing in that direction, too!
A question on internal CAE dynamics. CAE is unique in so many ways. Your work is in the military and airline sectors. You’ve talked about AR/VR technologies, big data and the medical sector. How do you mesh all of this together across all of CAE’s businesses, and draw out the best from each one?
DG: CAE’s epicenter is in Montreal. I have the second largest location in Tampa. We have a ‘firewall’ to do classified work in the headquarters of that US company inside the SSA [special security agreement] protection, much like BAE Systems also has at its headquarters in Tampa. Our Tampa site obtains about 60% engineering and operations content from Montreal. Even if it is a classified application, we get to leverage all of that investment and expertise, much of which is coming from the commercial side – especially all of that data integration and all of that other amazing activity Nick [Leontidis, Group President Civil at CAE Montreal] is doing. I get to take advantage of that and all of the cost and time synergies, and bring it down to Tampa, and add on any classified content we can only do there as an SSA company, and have truly the best offering, not only in capability, but in cost competitiveness, to our more classified military customers. That’s been a long-standing advantage of ours, to leverage that fantastic business Nick has, which has such a dominant position on the commercial side and integrate it into my military offerings. And now we’re looking, in return, because we’re getting some customer-funded IRAD, for lack of a better term, in some of the synthetic environment opportunities, we talked about SOCOM, SSE and the Synthetic Training Environment in Orlando, that we return that goodness to our commercial partner in Nick’s business. And you see that in TRAX Academy and RISE. The more virtual it is, the easier it is to flip between commercial and military applications and add that on top through software versus doing hardware changes. Where I am particularly excited, and I don’t think we’ve taken enough advantage, are the synergies between healthcare and defense. I think the largest healthcare system in the US is run by Veterans Affairs – it is fundamentally military. Every single soldier, Marine, airman, sailor and Coast Guardsman, gets some level of triage medical training to be able to support their combat buddy who may have been shot next to them on the front line. They are the first one who is going to apply that aid. Providing that virtual training makes it so much easier to bring that training to the troops, instead of the troops having to come to you. This is an amazing area that I can help leverage with our contacts and contracts and bring in the capabilities of healthcare. When I stand up an augmented headquarters in Washington, DC, I look forward to adding a demonstration facility. The digital immersion and training business lends itself to an interactive demonstration center, also bringing the commercial and healthcare capabilities there, with their human patient simulators and other products.
MS&T: We appear to be at the end. It’s been fantastic hearing your thoughts about the present and future. We look forward to keeping our very excellent relationship with CAE, and now, you. Thank you so much for taking time to meet with us.
DG: Thanks for your time and I look forward to meeting all of you in person.