You are dealing with multiple issues. Not only are you looking for a new core business but a means of leaving your dependency on government contracts to access the commercial/industrial market. In facilitating this shift in strategy, I have found that companies are most successful when concentrating on two core strengths: technology and distribution linkages. In this case, distribution includes vendors, co-contractors, other military supplier relationships. Bring these resources into your confidence.
This strategy shift is not a short term exercise. The brainstorming should start with a complete exploration (without critique) of your technology options: particularly, are there products (not services) that can be generated; did products result from your contract work (or that in conjunction with others) could have commercial applications; are your engineering services of potential value to the commercial market. Once the list is generated, only then should you begin to evaluate the potential of each. The resources, experience and expertise needed to implement can always be assembled to build on the core.
Creativity and innovation often demand a change in the corporate culture. Do not allow the naysayers to short circuit the imagination. The role of the facilitator is to ensure that the process remains vital and productive and that all available resources are brought into the exploration. Good luck.