The themes outlined in the title are key for clusters of the Ukrainian Cluster Alliance (UCA) and their partners in the discussions at the conference on April 28, in which six UCA clusters are participating. This publication outlines the context and selected discussion topics.

How to accelerate innovation and scale it in conditions of increasing turbulence

The full-scale war in Ukraine has become a catalyst for a fundamental transformation of the defense industry and dual-use technology sectors. Ukraine—despite ranking low in pan-European innovation indices and having a de facto dismantled R&D infrastructure over recent decades—has, within just four years, transformed into a unique ecosystem of rapid innovation and technology scaling in a real combat environment.

At the same time, European partners—while holding leading global positions in fundamental and applied research, engineering, and high-tech manufacturing—demonstrate slow adaptation of their defense industries to the realities of modern warfare.

This contrast was particularly highlighted by a recent wave of criticism following remarks by Rheinmetall CEO Armin Papperger, who referred to Ukrainian drone manufacturers as “housewives with 3D printers in their kitchens” and compared their products to “a Lego game.” Large European companies have not скрывают their frustration—they do not know how to respond to Ukraine’s low-cost/high-volume model, where mass, inexpensive, and rapid production is not a “hobby” but a real innovation driver that disrupts traditional defense industry business models. Rheinmetall has since apologized and emphasized its respect, but the core issue remains:

The West has not yet figured out how to integrate this experience into its system.

At the same time, today both Ukraine and Europe are facing the same challenges:

• Fragmented supply chains and innovation ecosystems: Defense industries remain dependent on government procurement, and accordingly, each country is dominated by its own interests, value chains, and ecosystems. A recent visit of UCA clusters to Germany clearly demonstrated how different these systems are—and how complex integration processes appear.
• Dependence on external components: Euro-Atlantic partners struggle to accept Ukraine’s call for a low-cost/high-volume model that is still “innovative.” This is especially true when it comes to substituting critical components such as electronics and photonics. “How can this be combined?” partners ask. The Ukrainian response is:

“China and Russia are already doing it—so we must do it together with you!”

• Lack of R&D and testing infrastructure: For certain types of complex technologies, Ukraine critically lacks modern R&D and prototyping centers. Meanwhile, in the EU, such facilities often appear underutilized. At the same time, there is a degree of skepticism and misunderstanding on both sides about “what should be tested, where, and how.” In particular, Ukrainians often argue that the best testing ground is the Line of Contact (LoC), where real validation happens fastest.
• Limited capacity to scale production rapidly: A number of Ukrainian companies transitioning to serial production face shortages in production culture, skilled personnel, appropriate technologies, and scaling methodologies. However, this is also an issue of investment and access to funding sources.

So, how should these challenges be addressed? What is the role of clusters and business associations in these processes, and which formats of cooperation with international partners are the most effective? These are the key discussion topics of the Dual-Use / Defense session at the forum on April 28.

To prepare for these discussions, let us outline possible directions across three key thematic areas for dialogue between Ukrainian and international partners.

1. Joint Innovation and R&D: From Battlefield Innovation to Shared Innovation Ecosystems

The Ukrainian defense innovation ecosystem today resembles a living laboratory (living lab) of defense innovation. And this is not only about a 1,200 km front line. It also encompasses the entire territory of the country (the largest in Europe!), whose critical infrastructure requires constant protection—both physical and cyber.

On the one hand, this ecosystem remains highly fragmented: hundreds of manufacturing teams compete with each other, SMEs still lack prototyping centers and полноценної research infrastructure, and it is difficult to speak of perfect coordination among the many actors involved in this effort. On the other hand, Ukraine has already developed a rapid cycle from idea to testing of finished products, which in many segments is significantly faster than Western go-to-market models.

This cycle is primarily based on the battlefield learning loop: the front line provides immediate feedback, the developer quickly refines the product, and the user instantly tests its effectiveness in real combat conditions. For European partners, this creates a unique opportunity not only to study the Ukrainian experience but also to integrate it into their own R&D approaches, shortening the path from prototype to deployment.

Key discussion questions in this block:

• What services and conditions currently exist for integrating battlefield feedback into European and joint R&D cycles without compromising confidentiality, quality, or compliance with standards?
• Which formats of joint R&D hubs can realistically bridge the TRL 3–7 gap for Ukrainian and European teams?
• Which models of joint labs, dual-use accelerator programs, and structured feedback platforms can deliver the fastest impact?
• How can the participation of Ukrainian startups and SMEs in existing Euro-Atlantic programs (EDF, EIC, Horizon Europe, NATO DIANA, etc.) be increased, while at the same time adapting these instruments so that Ukrainian interests are clearly reflected as representing the real conditions and requirements of the battlefield?

2. Joint Production Value Chains: From Supply to Co-Production

The traditional model of cooperation — “the EU produces → Ukraine purchases” — no longer works. Instead, a new logic is emerging: Ukraine is strong in integration, assembly, testing, and rapid adaptation, while the EU excels in components, technologies, and engineering. In theory, this creates flexible, distributed value chains capable of quickly responding to changing wartime conditions and the technological pace set by the battlefield. In practice, however, the situation is far more complex.

Particularly critical for Ukraine are segments currently dominated by Chinese and other Asian suppliers — namely electronics (microelectronics, sensor systems, photonics) and composite materials. In these areas, “industrial corridors,” joint ventures, and industrial consortia appear especially promising, as they can combine Ukrainian speed with the depth of the European industrial base. This is also the most effective response to dependence on external components and the risks associated with global supply chains.

Key discussion questions for April 28:

• What new model of value chains is realistic for the Ukrainian–European defense and dual-use sectors?
• How can Europe compete with China in components, where price differences are offset by massive state subsidies?
• How can the transition be made from supply to co-production, joint ventures, and industrial corridors?
• In which segments should Ukraine act as an integrator of finished products and solutions, and in which as a scaler or testing ground?
• Which instruments of EU programs (EDF industrial window, EDIP, ASAP) and bilateral initiatives already support such value chains? Which are still missing but critically needed?

3. Scaling Low-Cost / High-Volume

Modern warfare has fundamentally changed the rules of the game: speed is more important than perfection, quantity often outweighs complexity, and adaptability and resilience are more important than long-term stability. This creates new challenges for the European defense industry, which has historically focused on expensive, complex, and long-cycle systems dominated by large corporations.

The Ukrainian experience demonstrates a different model — distributed production, short logistics chains, modular solutions, and rapid scaling. All of this is driven by SMEs and innovative startups, which have largely displaced state-owned enterprises such as Ukroboronprom in most emerging defense segments. It is clear that this shift is a key source of discomfort for large companies, as mentioned earlier in the publication. Many major defense manufacturers across Western countries are likely experiencing a similar tension today.

At the same time, Ukraine critically needs Western expertise and technologies when transitioning to serial production. In conditions of shortages in skilled labor, standards, and production culture, many questions remain open — not only about innovation, but also about economies of scale. These include how to deploy advanced automation and robotics, implement standardization, drive digitalization, and adopt new investment models, working capital solutions, and rapid scale-up mechanisms.

If, at the first stage, Ukraine demonstrated the ability to quickly develop battlefield-ready solutions, the next stage is to learn how to scale them into serial, sustainable, and export-oriented production.

Key discussion questions:

• How can we jointly build an industry for the mass production of defense solutions?
• Which distributed manufacturing models are realistic for Ukraine, given the risks of war?
• Which automation and digital manufacturing technologies are best suited to shorten the path to a low-cost/high-volume model?
• How can public demand, private investment, and partner-based production value chains be combined into a single scalable model?

The Role of Clusters in the Defense Industry

In this new model, clusters can become the mechanism that transforms individual contacts into sustainable partnerships. De facto, clustering processes in Ukraine have been underway for a long time and are not always aligned with established Western definitions of the roles of business associations. In practice, and considering the classical role of clusters as coordinators of value chains and ecosystems, these functions have long been performed by a range of actors — both public institutions (primarily Brave1) and major business associations (such as Technological Forces, FRU Defense, the League of Defense Companies of Ukraine, etc.).

Just two years ago, it seemed that clustering in the defense sector was happening without clusters themselves. However, their progress has become increasingly visible, and they are gradually emerging as influential actors within the defense ecosystem. Initially, IRON demonstrated strong capabilities in networking, matchmaking, innovation training, and knowledge exchange for its members. Today, within the Ukrainian Cluster Alliance (UCA) alone, up to 10 dual-use / miltech clusters can be identified, some of which are rapidly growing and performing similar functions within their segments and regions. These include Obrii (Horizon) by the Kharkiv IT Cluster, the Dual-Use Cluster (Kyiv), the Association of Innovative Space Clusters, the Vinnytsia Instrumentation Cluster, the Maritime Cluster of Ukraine, and others.

In general—and in a global context—clusters are needed not only as “ecosystem translators” between different logics: Ukraine’s battlefield-driven speed, the EU’s engineering depth, and the requirements of government programs, investors, and end users. At present, at least five key roles of clusters can be identified:

• Aggregation of demand and supply: Clusters collect needs from companies, the Armed Forces, institutions, and investors, translating them into a clear set of technological demands and project initiatives. A year ago, UCA clusters generated up to 40 project initiatives, a third of which had an ecosystem (aggregated) nature.
• Matchmaking and cooperation: Clusters apply structured matchmaking approaches that effectively connect not only members within their own communities but also across international contexts. In the defense sector, this is especially critical for linking Ukrainian manufacturers with European partners in areas such as components, R&D, testing, and production.
• Access to programs and funding: Due to cultural and institutional differences, Ukrainian SMEs often face barriers in accessing long-term European programs. Clusters act as an ideal bridge for entry into EDF, Horizon Europe, EIC, NATO DIANA, bilateral programs, and joint grant mechanisms.
• Transfer between R&D and the market: Thanks to the presence of innovation actors (universities, developers), clusters help bridge the gap between laboratories, testing grounds, the battlefield, and serial production—supporting the scaling of solutions.
• Institutional representation: Clusters are able to speak on behalf of ecosystems, regions, and sectors rather than individual companies, giving them greater weight in negotiations with governments, European programs, and large industrial players.

Thus, clusters can become one of the key instruments of Euro-Atlantic integration in the defense sector. How effectively they are fulfilling this role will become clearer on April 28. Dual-use / miltech clusters from Kyiv, Kharkiv, Ternopil, Lviv, and other regions of Ukraine will participate. The Ukrainian Cluster Alliance also invites its European partners to join the event.

Join the conference on April 28 — detailed program and registration are available via the link.