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Companies often run into situation where employees are too focused to meet the quarterly goals and annual targets that they often fail to notice and take advantage of key market opportunities, which if pursued would result in a significant competitive advantage for the company in the longer term.
technology company pours millions of premium dollars in Research and Development (R&D). Apart from a handful of companies most R&D initiatives do not result in any significant business benefit. The reason is not the lack of ambition or effort on the R&D team’s part, but the issue lies with the company not taking advantage of the discoveries and breakthroughs uncovered by the R&D department.
Kodak is somewhat of a clichéd example but never the less it’s eventual demise accurately reflects the points highlighted about. Kodak was the company that invented digital cameras yet failed to take advantage of the opportunity. When Steve Sasson, an engineer at Kodak Eastman, presented the prototype digital camera back in 1975, the company’s marketing and business departments did not appreciate it. Part of the reason was that the digital camera was viewed as a threat to their existing business lines. Eventually companies like Sony, Nikon, Canon and Samsung took advantage of this opportunity at the expense of Kodak.
This scenario is common across almost all established businesses where a new product or service is viewed as a thread to the existing business lines and is not further explored.
There are two major contributing factors to the scenario.
1. R&D Initiatives Are Incremental in Nature
Most of the R&D initiatives are evolutionary rather than revolutionary in nature. Part of the problem is the focus on near term gains rather than having a long term vision.R&D teams that produce results which can be pushed out to the market in the next iteration of the existing products are more likely to success within their peer group. This takes the focus away from what can be done to truly disrupt the existing line of products and services a company offers.For most companies the R&D department in essence is just an extension of their market reactive selves and is not truly autonomous.
2. Not Taking Advantage of the Discoveries
Discoveries which just incrementally enhance the existing products and services of a company are most likely to be pushed to the market. Breakthroughs and discoveries which fundamentally change the nature of a company’s products or services are considered too risky and never see the light of day.
Once a company achieves success, its desire to develop and disrupt its existing line of products and services is diminished. A much stronger desire to maximize its current profits presides over the company. And this is where the problem lies.
The conjunctive impact of the above two factors contribute towards incumbency. The companies are under the false impression of being at the cutting edge of research and development in their fields when they are merely spending dollars on incremental linear changes.
This is where Skunks Works thinking can be extremely useful.
What is Skunk Works?
Clarence Leonard “Kelly” Johnson pioneered this methodology at Lockheed Martin in June 1943. Kelly Johnson and his Skunk Works team designed and built the XP-80 (Prototype version of P-80) in only 143 days, 7 days before required.
As Peter Diamandis and Steven Kotler elaborate on this concept in their book Bold: How to Go Big, Create Wealth and Impact the World, there are three main ingredients to facilitate Skunk Works:
To truly innovate it is necessary for the innovation team to be detached from the rest of the organisation. This way the team can autonomously function and focus on initiatives that will truly disrupt and push forward a companies core business.Isolation is one of the key requirements for Skunk Works, as isolation stimulates risk taking, encourages original ideas and acts as a counter-force to organisational inertia.
2. Rapid Iteration
Rapid iteration is the practice of quickly trying out ideas or “experiments” and increasing the knowledge gained from results. This way the team can get an almost instant feedback on their minimum viable product or service without having to spend large sums of money and time on developing a well polished product that nobody wants. It also allows the team to incorporate the feedback from customers into the next iteration of the product.
3. Big Goals
Skunk Works ventures are created to tackle hard problems. The aim is to achieve difficult goals. Business as usual activities and operations are not a good for for going skunk unless the idea is to fundamentally disrupt the existing processes.
The combination of big goals, isolation and rapid iteration results in a fostering environment which allows the team to be autonomous and be able to master the skills required to deliver purpose driven big goals.
- Link to the 14 Rules of Skunk – Kelly’s 14 Rules & Practices
- Kelly Johnson’s biography – Clarence “Kelly” Johnson: Architect of the Air
- Peter H. Diamandis and Steven Kotler – Bold: How to Go Big, Create Wealth and Impact the World
- Lockheed Martin’s Skunk Works