Significant funding resources were devoted to Germany's technical and theoretical knowledge bases to improve the capabilities of the Reich for the future.
The Heer.
In early January, Oberkommando des Heeres published their latest doctrinal field manual covering how commanders should phrase their own intent towards their mission from higher headquarters, now called the commander's intent. This was a statement of how the particular headquarters envisioned their fight, which would in turn guide how those subordinate commands approached their own portion of the mission. The annual spring and summer war games would provide further refinement of this doctrine as it was applied throughout the Heer and was updated through the end of the year. Further tactical command doctrine would be refined and issued by July.
The year of doctrinal improvements did not focus solely on orders issued by commanders. The employment of artillery, to include anti-tank and anti-aircraft varieties, in the defense needed to be refined as heavier artillery joined the ranks of the Heer. It was a truism to say that combat was a series of cycles, with forces going from offensive to defensive operations and back again; a unit attacking into some area would be expected to be prepared to defend it during a reorganization or consolidation phase. The training of calling for fires (from infantry and armor units) and responding to those calls for fires (for the artillery) absorbed a portion of the expenditures for training and research throughout 1937. Towards the end of the year, this progressed into defensive planning as it had been demonstrably shown during the previous war (and during the on-going conflict in Spain) that defending as stoutly as possible caused significant casualties as warfare became ever-more mobile. Flexibility in combat was the key, and fighting withdrawals to exhaust the enemy was seen as more beneficial to preserve combat power.
Panzers on exercise, 1937. The Panzerkorps would continue to use the PzKpfw.Is and IIs for exercises to keep their front line units fresh for any outbreaks of fighting.
The final focus area for doctrinal work focused on developing some sort of guidance for the employment of mechanized forces. As the Heer's Panzerkorps grew, applying them--both generally and at the decisive point of action--was problematic at best. The early organization of two full brigades of panzers and only one brigade of motorized infantry combined with a brigade of pioneers seemed like a good idea at the time. Lessons learned in the war games, however, time and again showed that having so many tanks with so little integrated infantry support was unwise. In late 1935 to early 1936, this had resulted in the reorganization of the Panzer-divisions to one brigade each of tanks, motorized infantry and pioneers, with a future expansion of self-propelled artillery when they became available. Despite the apparent dissolution of combat power, the ability of the Command, Control and Communications (C3) elements to exert their power at the decisive point was far better than before, which actually increased their efficiency. The doctrinal improvements would not be codified in the Field Manuals until after the end of the year.
The old Panzer IIs which had once formed the backbone of the Panzerwaffe were sufficient for training the crews that would go on to the Panzer divisions, but insufficient for actual combat duty in a role envisioned by Guderian. What Guderian sought with the development proposal was an armored fighting vehicle that could perform a scouting or reconnaissance mission with enough force to deal with small pockets of resistance and fast enough to escape combat if needed. A request for proposals was issued on 12 January and sought designs of either wheeled or tracked vehicles similar to the Leichter Panzerspahwagen or the Panzerkampfwagen II. The design was also to be equipped with a 20mm autocannon and an Mg151 machine gun. Cross-country mobility was highlighted, necessary for the primary mission of reconnaissance or screening. This RFP for the latest Light Tank returned several designs, and the Heereswaffenamt selected the offering from Büssing in October of the same year. The vehicle was assigned the designator Schwerer Panzerspahwagen, and was an 8-wheeled vehicle family with both the weapon stations but also built as a mobile command post version.
The alterations in the Heer's employment of the infantry with regards to combined arms led to the development of a new suite of arms destined for the Queen of Battle. At an unveiling ceremony held in honor of the end of the Battle of Verdun, the latest developments of infantryman kit, support weapons, anti-tank and light artillery were shown to the Fuhrer, as well as the demonstration of a new weapon for the growing panzerwaffe: self-propelled artillery, which was just beginning development.
The Kriegsmarine.
In mid-February, the Kriegsmarine unveiled the latest unterseeboote: the Type IX. A clean-sheet design (and not simply a larger version of the Type VIIC as some have said), the Type IX carried completely new torpedoes, a more efficient engine and a more durable double hull. The Kriegsmarine also funded theoretical research in nautical and submarine engineering, hoping to enjoy better returns on investment for future naval design projects.
The funding provided for training the Kriegsmarines' heavy surface combatants resulted in modifications to their tactical employment and resulted in well-drilled and motivated crews. This training had extended to the light surface combatants, the light cruisers and destroyers, as well. Raeder had rationalized that it made little sense to only train and work with the heavy units when the destroyers would be filling important roles in commerce protection and sanitation of the Baltic against enemy (Soviet) submarines. This training was combined with getting crews to improve their use of detection equipment, either their own 'Mark 1 eyeballs' or the spotting scopes and experimental radar sets. While the crews improved their employment of their heavy units, commanders attended higher level training at Marineoperationsschule Bremerhaven to work on their decision making processes.
Final submissions for Oberkommado der Kriegsmarine's naval bomber competition were submitted in late April, and in November, the Kriegsmarine selected a modified Dornier Do17. This synthesized the development costs (given that the Luftwaffe was also deploying the aircraft as their tactical bomber) but restricted the availability of the airframes as they were competing with the Luftwaffe for copies.
With the development of the airframes completed, figuring out how best to employ them could commence. Top priority was given to training both the aircraft crews in their flight profiles as well as the ground crews in getting the airframes prepped, repaired and loaded for operations. Important to their deployment was recognizing, identifying and targeting the appropriate warships during combat. This training would continue into 1938.
The Luftwaffe.
The Luftwaffe had also funded significant theoretical research. Given how rapid the development of the air forces had been in the recent decade, ensuring that keeping engineers pursuing ever better designs was the only way they could perceive that the Luftwaffe could assist in winning any future wars. Cooperation between the Soviets and the Germans had taken the Germans across much of Russia; given that each officer sent had been a trained intelligence officer, they all saw the same thing: if Russia was to be invaded, long range and aircraft capable of multi-role missions would be required if only to make the job of the logistical tail easier.
The final design for the Luftwaffe's Bomber A initiative was unveiled on 1 April. The Heinkel He 177 'Greif' would have a crew of 6, was 22 meters long with a wingspan of over 31 meters. It could carry nearly 6000 kilograms of disposable stores, but concerns regarding the aircraft's power plant plagued the project for years, preventing any official adoption of the aircraft beyond prototypes or developmental airframes.
When Goering began to complain about the lack of aircraft manufacturing and how Schacht was not allowing the 'appropriate' expansion of the Luftwaffe, Frick and the Army stepped in quietly, encouraging Goering to recognize his predicament. They could not eliminate Goering entirely--he was too important to Hitler for them to remove him suddenly--but if he continued to complain, then Frick and Canaris could make his life increasingly difficult. Goering, for his part, was mollified with the arrival of submissions for the Luftwaffe's new multi-role fighter designs: with the Messerschmitt Bf109G model chosen on 28 October.
Industrial and Engineering Research.
The Heereswaffenamt together with the Forschungsamt approved funding in February for a new machine which could improve the ability of their signals intelligence sections to decypher enemy communications. The device they sought would be able to deploy out to the various Army command headquarters, a key requirement that would prove the most difficult to meet, but overcome when it was delivered in December.
By April 1937, German agriculture and industry began making strides in improving yields and efficiency. The minister in charge of industry, Hjalmar Schacht, encouraged these developments because--despite opposition to the violations of the Versailles Treaty--he wished to see Germany regain her place amongst the Great Powers. It also maintained the benefit that more manpower would be released from agricultural needs for service in the military. Other solicitations encouraged industry to develop better oil refining techniques and production of all classes of military supply. The improvements into the supply situation carried over into research regarding logistical distribution and accountability, though it would not be finished in 1937.
One of the most important research initiatives of the Reich was that of continued development of RADAR. A US Navy acronym of RAdio Detection And Ranging, German scientists from the firm GEMA in Germany led by Rudolf Kühnhold demonstrated a workable prototype, and with encouragement from the Rocketry and Luftwaffe research directorates, the Army Weapons Office granted full funding on 4 December. This was an outgrowth of theoretical research into the system, which had wrapped up in early April.