Western militaries must adapt to the evolving role of the private sector, leveraging commercial technologies and firms to gain a strategic advantage and redefine economic warfare in modern conflicts.
“It’s the economy, stupid.” So said James Carville, an advisor to Bill Clinton’s presidential campaign in 1992, and many peacetime politicians since. But it is also an idea that has kept military planners and wartime leaders awake at night. War has always been big business. But the business of war is changing. Western militaries need an urgent mindset shift, akin to the integration of cyber or space into their plans, concepts, and doctrine, in how they conceptualise the role of the commercial sector and the mobilisation of private firms in support of operations, especially in times of interstate conflict.
North Atlantic Treaty Organization (NATO) and national-level policy and doctrine talk a good game about the importance of leveraging all diplomatic, information, military, and economic (DIME) levers in pursuit of strategic advantage, both above and below the threshold of warfighting. But the reality is that Western militaries and governments have not needed—or proven able—to think deeply about how best to integrate economic warfare or industrial mobilisation into military strategy and operations since the end of the Cold War. Discretionary wars in Iraq and Afghanistan, focused on counterterrorism and counterinsurgency, did not require large-scale mobilisation and redirection of the commercial tech sector beyond traditional defense primes. Nor did they see campaigns to subvert and impose costs on the industrial ecosystems of adversary nations to undermine their military capacity for reconstitution, innovation, and adaptation, or to degrade their will-to-fight.
Now, though, the economics of defense are back in vogue. As war continues to rage in Ukraine, Europe’s attention is now firmly fixed on rearmament, and on the fraught question of how governments can honour a new NATO pledge to spend five percent of gross domestic product (GDP) on defense and security while still funding public services, managing debt, and averting a tariff war. But while the size of defense budgets dominates headlines, far less attention has been paid to how those resources are used, on what, and by whom. Or, crucially, to the evolving role of the private sector in preparing for, deterring, and winning wars in the 21st century. The commercial tech sector is becoming not just a supplier and enabler for global militaries, but increasingly a battleground for competition and conflict in its own right—and so, NATO allies must think differently about the economic dimension’s relation to the military instrument if they are to secure strategic and operational advantage.
The Private Sector’s Role in Enabling Militaries
The private sector’s role in equipping and enabling military power is enduring but rapidly evolving. Traditional defense industries remain vital to arms production and, therefore, to national competitiveness and deterrence. But the locus of innovation has shifted toward multinational, non-defense firms that develop dual-use technologies and services. This shift reduces the ability of defense ministries to act as dominant buyers and market shapers, particularly in relation to global tech companies rather than legacy arms manufacturers. It also brings a new set of challenges, from procurement reform and sovereignty concerns to limited leverage over foreign suppliers. At the same time, however, opportunities can be found in harnessing this change, including economies of scale, access to cutting-edge technologies, and novel financing models.
Prototype Warfare and the Collapse of Traditional Procurement
Technological change is accelerating this shift. One clear example is the rise of software-defined capabilities in defense, which require contractors to work with real-time operational data to patch, update, and continuously refine artificial intelligence (AI) models and weights, software tools, and uncrewed systems. But this dynamic demands much closer and more responsive collaboration between military end-users and the commercial teams that help them adapt and prevail in operations—an accelerating cycle of constant end-user feedback and iterative improvement and adaptation, both technical and tactical.
Militaries are racing to learn the lessons of Ukraine and adopt concepts such as ‘prototype warfare’. Ukrainian brigade commanders now have access to an online marketplace via an app, on which they can order innovative new tech directly from suppliers, cutting out the usual procurement process. This gives troops in the field the chance to experiment with novel bits of kit that could serve their battlefield needs; the app then captures immediate feedback to help suppliers tweak their designs and to financially support tech start-ups, enabling those with the best ideas to scale. Seeking to emulate some of this thinking, US Defense Secretary Pete Hegseth has announced plans to allow tactical units across the US military to experiment with 3D-printed or commercial-off-the-shelf drones without requiring headquarters approval. This move follows Marine Corps units already working with commercial suppliers to rapidly prototype and develop new concepts for battlefield drone use.
These developments mark a step-change in how militaries procure and employ technology. No longer is buying equipment a distant process, completed years before frontline troops ever see it and mediated through byzantine acquisition systems. Instead, commanders are working directly with suppliers to co-create solutions to immediate operational problems, cutting feedback and delivery cycles from years to mere weeks or even days. Defense-industry relations are therefore moving out of back-office procurement bureaucracies and onto the battlefield itself, closer to the warfighter.
When Commercial Power Becomes Operational Power
At the same time, there is also a growing role for commercial entities in the direct prosecution of defense operations. Most obviously, this includes the influential role of private military or security companies within many global conflicts—perhaps the best-known example being Russia’s former Wagner Group and its operations across Ukraine, the Middle East, and much of Africa.
Beyond non-state armed groups, commercial entities are increasingly active in public-private partnerships and coordinated actions in cyberspace or outer space. Multinational tech companies like Microsoft have played a vital role in actively protecting the cybersecurity of Ukraine, as well as influencing United Nations discussions on cyber norms and “digital diplomacy.” Companies such as SpaceX, Starlink, Maxar, and ICEYE have also provided vital support to Ukrainein terms of space-based connectivity and intelligence feeds. But Kyiv’s consequent reliance on Elon Musk has raised difficult questions about the influence private individuals can wield over how, when, and where a country like Ukraine fights, with Musk having threatened to turn off access or previously denied use of his services by Ukrainian forces operating in and around Crimea.
Economic Competition as Active Conflict
The shift in the locus of innovation to commercial entities, many of them multinational, and many focused on dual-use digital tech, adds further impetus to age-old efforts by competing nation-states to access or steal each other’s sensitive technologies or to subvert and sabotage each other’s military industrial bases. China has been especially active in seeking to exploit ties with US and European businesses or universities, to buy up key nodes in supply chains (including for critical minerals) and to mount cyber-attacks or acts of corporate espionage to acquire tech or threaten the economic security of open democracies. Russia, too, has conducted a growing arson and sabotage campaign across Europe to target firms supporting Ukraine, and even reportedly planned assassinations of company executives.
But commercial entities are not simply passive victims or targets in this age of intensifying geopolitical and geoeconomic competition. They are also becoming vocal and important actors in their own right, with agendas that may, at times, diverge from the interests and value sets of nation-states. This challenges the primacy of the state within international affairs, with the largest multinational firms, especially those involved in tech and AI, now able to bring to bear far more resources than small or medium-sized governments might mobilize on many issues.
States may still claim a monopoly on the legitimate use of force, but the growing direct and indirect involvement of private actors in defense and security operations challenges that assumption in the Western tradition of warfare. Governments on both sides of the Atlantic must therefore move beyond simply “command and control” of their armed forces and consider how to “cohere and collaborate” with commercial players—including firms headquartered abroad, whose priorities may not align neatly with any one nation’s security interests and who are not easily compelled into actions aligned with state goals in the manner, say, of China’s military-civil fusion, especially outside of wartime.
Space is a good example of militaries starting to address this trend: the United Kingdom’s (UK) National Space Operations Centre has established a Commercial Integration Cell to bring in industry players alongside military operators, and NATO published its first-ever Commercial Space Strategy in February 2025. The new draft European Union (EU) Space Act, unveiled in June 2025, similarly seeks to raise cybersecurity standards for commercial space operators, conscious of the increasingly vital role these play in providing dual-use services to governments, militaries, and critical infrastructure sectors.
But there remains a long way to go and tough questions to answer. How much can militaries truly rely on commercial operators when the latter are beholden to shareholders and boards and may be headquartered overseas? How to manage the entanglement of military, dual-use, and civil/commercial assets, and avoid unintended consequences or accidental escalation (e.g., if a hostile nation wrongly views a private firm’s activity as part of preparations for some state-sponsored attack)? How to coordinate and deconflict with industry when they sit outside of military chains of command and may have different incentive structures, threat assessments, or priorities? And how to address political, legal, ethical, or security concerns about commercial involvement?
In this context, the neat distinction between public or private actors’ roles in war and warfare is being eroded. Geopolitical competition, crisis, and conflict are increasingly playing out in, over, and through the commercial sector. This demands moving beyond thinking about the commercial sector’s role in supporting the military, to instead also consider the military’s role in supporting the commercial sector.
States face an urgent need for greater alignment between the military and economic instruments of power—a challenge, when militaries typically lack the relevant financial or policy levers and when finance ministries are understandably focused on other pressing issues such as promoting growth or fixing ailing public services.
From Economic Security to Economic Maneuver
There is similarly a need to think beyond defensive economic security into more proactive, even offensive, economic warfare. This means rebuilding statecraft and competences not just using the familiar diplomatic and economic policy levers (e.g., sanctions, export controls, strategic purchases of critical raw materials, etc.) but also military ones that have gone unused for decades (e.g., blockades, sabotage, cyber-attacks, or direct action against an enemy’s industry or to stymie access to global supply chains).
Furthermore, militaries need to start thinking about maneuvers in the marketplace, just as they plan and prosecute joint operations across land, air, sea, cyberspace, and outer space. Of course, this doesn’t demand a new “commercial domain” in a formal doctrinal sense. What matters, though, is the shift in mindset to elevate and integrate commercial considerations—and the pursuit of advantage through private-sector engagement—into operational thinking, just as militaries have had to do over the past two decades with cyber and space. Those two new domains evolved from being seen as peripheral to vital; from being enablers of air, land, and sea to being warfighting domains in their own right.
In an age of prototype warfare, the agile use of commercial relationships should be seen as a form of maneuver; an integrated part of joint action, not just a precursor to it. This means warfighters working hand-in-glove with innovators; procurement managers acting with a wartime urgency and sense of mission; and business leaders planning how they’ll contribute to crisis response or a war economy. NATO’s adversaries are wielding their military, technological, and industrial strengths and waging campaigns to subvert the private sector and our ability to mobilize it in pursuit of security goals. Taking the lessons of modern military maneuver into the marketplace can help deter and defeat them.
About the Authors: Ruth Harris and James Black
Ruth Harris is executive director for national security and data science at RAND Europe, the European arm of RAND, a non-profit research institute.
James Black is deputy director of the defense, security, and justice research group at RAND Europe.
Image: DC Studio/shutterstock
