Published On: May 8th, 2018By
In a recent whitepaper, we delved into the topic of innovation and execution ceilings. Innovation ceilings represent the highest reaches of our imagination, while the latter limits our creativity to our ability to produce the work.
We’ll explore these two concepts a little further in a two-part series, which compares different work strategies to increase innovation and great output. The following case study introduces the Innovation Colony model – an approach that gathers the most independent thinkers within an organization to focus solely on developing a disruptive idea, while being open and collaborating with the larger team.
Skunk Works has evolved to describe any general business approach for separating small innovation teams away from the rest of an organization, enabling them to work more flexibly, independently and confidentially. This approach became a very popular method for organizations looking to develop innovations in the second half of the 20th century.
Creativity can be inhibited by the inherent nature of the execution ceiling that exists within the Skunk Works approach. This can prevent an organization from reaching its innovation potential and subsequently developing a successful new product.
In many ways, Skunk Works teams operate like modern-day start-up companies. They are responsible for both innovation and execution. However, smaller start-ups have some advantages over medium and larger-sized organizations (including those that have Skunk Works teams operating) when it comes to disrupting markets with their innovations.
Smaller start-ups aren’t constrained by needing to execute with their existing products and services like larger established organizations are. They can focus on disruption and aggressively chase market share, rather than having to also worry about defending their entrenched market position.
In today’s highly competitive business environment, disruption is both a constant threat and an opportunity.
In the 20th century, organizations could largely survive by making incremental improvements to their products and services. Now they are more vulnerable than ever to disruptive innovations, particularly those brought on by technology. There are numerous examples of companies that have fallen victim to disruptive innovation – Kodak, Blockbuster, and Blackberry, just to name a few.
To survive and thrive, 21st century organizations need to develop a culture of continuous disruptive innovation and improvement.
This is a major change in thinking from 20th century business practices, where these activities tended to be controlled and executed by separate organizational entities like Skunk Works.
To disrupt like a start-up, you need to maximize your organization’s creativity and innovation potential. That potential can’t be constrained by your execution ceiling. That’s where an Innovation Colony approach is likely to deliver better results because it is solely focused on innovation.

Innovate as a Colony

“Innovation Colony” is a term coined by software, consultancy and educational entrepreneurs Trevor Owens and Obie Fernandez in their 2014 book, The Lean Enterprise: How Corporations Can Innovate Like Startups. Innovation Colonies are an autonomous entity within an organization, rather than operating separately to it.
There are other key differences between Innovation Colonies and Skunk Works:
  1. Where Skunk Works teams must execute the ideas they come up with, an Innovation Colony is responsible solely for developing innovations. This encourages innovation idea boundaries to be pushed, rather than be limited by execution constraints. It enables larger and potentially more disruptive ideas to be developed and nurtured.
  2. Members recruited for the Innovation Colony tend to be the most creative, independent, and driven people in the organization, not necessarily the smartest or most pragmatic people (who may be more suited to separate execution roles). Having the right people in the Innovation Colony raises the organization’s innovation ceiling potential to new heights.
  3. The activities of the Innovation Colony aren’t secretive. Collaboration and openness with the rest of the organization is encouraged. Indeed, it is necessary so that the innovation and execution functions work productively together to carry out their respective roles. This also helps the innovation culture to become part of the organization’s DNA.
  4. The members of the Innovation Colony typically give up a potential of their salary in exchange for equity in the ideas they are developing. This encourages an entrepreneurial spirit in the Innovation Colony. It recognizes the fact that many of the most successful disruptive innovations in recent times have been developed by start-ups (who obviously have equity in the ideas that they develop).
In a sense, the equity helps the Innovation Colony members become motivated intrapreneurs for the larger organization.
From the organization’s point of view, that’s better than the potential alternative: its talented, creative people become frustrated by the bureaucracy that often exists in larger organizations and leave to start up their own venture instead. In that scenario, they become an external entrepreneur and a competitor. Their creative, disruptive ideas could potentially threaten the future success of the organization they left.
There are several recent examples of this happening, even in a seemingly innovation-friendly environment like Google. The company is famous for encouraging innovation through initiatives like “20% time” (where designated staff members can spend 20% of their time working on developing their own projects that could potentially benefit Google). This initiative has led to success stories like Google News, Gmail, and AdSense.
However, the Google staff who developed these ideas didn’t have any direct equity in their future success. The company has had plenty of creative people leave and take very successful ideas with them to launch their own start-up ventures over the years. High-profile examples include Kevin Systrom (Instagram), Ev Williams (Twitter), and Dennis Crowley (Foursquare).
It would have been better for Google if these people had been more motivated to stay at the company to exploit these disruptive ideas. They each obviously had very high innovation ceilings, and an Innovation Colony approach could have ensured that this wasn’t inhibited in any way. That’s because the execution function is separate from ideation in the Colony approach.
While the Innovation Colony is a relatively new approach and is still in the early days in terms of its implementation and results, companies that are trying it include noted innovators like Adobe and Disney.

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