At the height of the second world war, US aerospace giant Lockheed entrusted Clarence “Kelly” Johnson to lead a crack unit of engineers on a series of top-secret projects for the government. Over the next three decades, Johnson’s Skunk Works division designed and built a series of advanced aircraft, including the U-2 and SR-71 Blackbird high-altitude reconnaissance planes, which the CIA used to spy on its Communist foes in the cold war.
These innovators pushed the limits of what was technically possible, working to incredibly short schedules and strict budgets. Their feats earned Skunk Works a near-legendary status in the engineering world.
The team exhibited many of the key characteristics of modern enterprise agility. Operating away from the prying eyes of Lockheed management, Johnson used memorable mantras, including “keep it simple”, and applied 14 rules and practices. His aim was to inspire the focused and responsive approach required in pursuit of the maximum competitive advantage over a rival – or, in this case, America’s numerous enemies.
But, as many would-be imitators in business have since discovered to their cost, it’s not easy to duplicate the Skunk Works formula successfully. Even household names have tried and failed to do that.
Xerox – a copier company by more than name – followed much of the Skunk Works playbook when it set up an R&D facility in Palo Alto, California, in 1969. “The goal was to come up with radical new ideas in the centre of computer science and technology, far away from Xerox’s east-coast headquarters,” explains James Hayton, professor of innovation and entrepreneurship at the University of Warwick. “And, lo and behold, it came up with some brilliant, brilliant technology.”
Its computing innovations included a user interface featuring multiple windows and graphic icons. Unfortunately, such advances were too far ahead of their time for the operating companies, which weren’t interested.
It’s a daunting precedent for any firm thinking about replicating the Skunk Works model today. One of them is Hyox, a liquid hydrogen manufacturer that has created a Skunk-like facility in Toronto to develop its alternative fuel. Glenn Martin, the firm’s co-founder and chief architect, is familiar with the potential pitfalls of this approach.
“I worked on manned space systems at the McDonnell Douglas Phantom Works in the 1980s, including the lifeboat programme for the International Space Station,” he says. “While the work was exciting, we lacked an inspirational leader like Kelly Johnson. I didn’t experience that level of entrepreneurial energy until I met Elon Musk and started working with SpaceX.”
Not a plug-and-play option
John Clegg is chief technology officer at Hephae Energy Technology, a startup specialising in geothermal power generation. He believes that many business leaders who think they’re following the Skunk Works model “simply say: ‘OK, let’s create a Skunk Works. We’ll put these people in a separate location and see what they come up with.’ They don’t really understand how it’s done.”
Clegg continues: “I was once put in charge of a team with the task of developing the technology for an autonomous well-drilling robot. We moved into a different building to work on the project. We developed the tech within two years, but it took four more to commercialise it. That was because we, working as a separate organisation, couldn’t draw on the same manufacturing team, sales people and customers as the rest of the company.”
It’s worth examining precisely which ingredients made the original Skunk Works a success. First, there was the man himself. By the time his division was conceived at the height of the second world war, Kelly Johnson was already a highly respected aircraft designer and had become a senior executive at Lockheed.
Second, there was his decision to separate his team physically from the wider organisation – initially inside a circus tent erected on the site – and to ban his fellow Lockheed executives from visiting. This was possible only because of Johnson’s power within the firm and the top-secret work he was undertaking.
Lastly, Johnson insisted on – and was granted – absolute authority within Skunk Works. This gave him the freedom to implement a range of now-familiar techniques for creating an agile business. It featured a small, hand-picked team of elite professionals; close cooperation among different disciplines; and minimal bureaucracy.
Crucially, the team’s members knew that failing fast wouldn’t be a career-limiting move, according to Paola Criscuolo, professor of innovation management at Imperial College Business School.
“Kelly Johnson was obviously a fantastic leader and a very creative engineer, so that cannot be discounted in explaining the success of Skunk Works,” she says. “But the 14 rules he put in place were important.”
One of these was as follows: “A very simple drawing and drawing release system with great flexibility for making changes must be provided.” The implied instruction here was to test any given design frequently for flaws and, if any come to light, stop working on it, quickly adjust the plan to solve them and then move in the new direction apace.
This ‘fail fast, learn fast’ approach was particularly important, given that Skunk Works was often operating on extremely tight schedules. Criscuolo notes that “Johnson had to build his very first jet fighter in only 180 days”.
Integrating with the whole
Skunk Works did have a significant and fortunate advantage over virtually all of its would-be imitators: it already had a big-spending customer – Uncle Sam – eagerly awaiting his products, so Johnson never had to concern himself with developing a business model or a marketing strategy.
Any business leader thinking about establishing a modern-day Skunk Works in their organisation would do well, then, to consider some key questions first. For instance, how would the firm separate radical innovation from business as usual and then integrate any outputs from the standalone R&D unit back into the central operation? And is there an inspiring leader with a proven record in the relevant field available in the organisation to take charge of such a unit?
Another important consideration is whether the company can foster an effective working relationship between that leader (Hayton uses the term “champion”) and the corporate leaders (“sponsors”).
“Just like Johnson was at Lockheed, the champion must be good at self-advocacy and be well connected across the broader enterprise,” Hayton argues. “The right person will have the ability to influence others and the social and emotional intelligence to understand how the whole organisation works. On the other hand, the sponsors must understand the nature of the risk they’re taking with a Skunk Works and its importance to the long-term health of the wider business.”
Then there’s the small matter of developing an agile culture inside the innovation unit. This can be aided by choosing the most appropriate people to work in it – those who enjoy operating with relative autonomy, for instance – and perhaps, as in the cold war, by giving them a specific goal and a tight schedule in which to achieve it.
The unit’s location is an important consideration too, especially if it requires more highly skilled people than the wider business has at its disposal, observes Andrew Gaule, CEO at innovation consultancy Aimava.
“If you’re seeking to innovate in oil exploration, for instance, you probably should be doing that in Houston or Aberdeen, because most of the experts are in those cities,” he says. “If you want to develop electric vehicles, your ideal site is more likely to be in Silicon Valley or Shenzhen.”
Gaule argues that any leadership team that’s tempted to establish a Skunk Works should treat it as one of a whole range of tools available to a company seeking to enable agile innovation. “You should also have a corporate venture team in place,” he says. “You should be investing in funds or managing a startup ecosystem and you should be encouraging innovation in your core business as well.”
One key lesson that businesses should learn from the Skunk Works model can be drawn more from the experiences of Johnson’s imitators, according to Criscuolo. “The general impression is that they fail,” she says. “But the problem is that failure is a necessary part of the process when you’re trying something new.”
For Martin, the most important insight he has taken from Johnson’s story and applied to Hyox is that every member of the leadership team must have the same attitude to innovation if the required hard-driving, agile culture is to be maintained. “That, more than any other factor”, he says, “is crucial.”