Technological superiority is one of the keys to Western military superiority. Thus, it is important for Europe and the USA to be able to access the most innovative technologies available in both the defence and civilian industry. Due to changes in the global strategic environment and the industrial landscape, all involved actors, from defence companies to defence ministries and armed forces, have to rethink their current approaches to innovation. Emerging powers try to close the technological gap to the West while the innovation leadership is shifting from the defence industry to the civilian industry. This paper analyses some of the challenges related to these shifts. A focus is set on the role of the European Defence Agency, its actions and potential to facilitate a sound European approach to handle technological progress to the benefit of European armed forces and thus European security.