LET GO AT THE TOP

Because skill guilds constrain…

…(and defend) an organization, it is often far easier to start a new organization than to change a successful old one.

This is a major reason why the network economy is rich in start-ups. Starting new is a less risky way to assemble an appropriate new set of competencies than trying to rearrange an established firm, whose highly intertwined bundles resist unraveling.
In a rugged economic landscape, about the only hope an established company has for adapting to turbulent change is by employing the “skunk works” mode, which reflects another biological imperative. Computer simulations of evolution, particularly those run by David Ackley, a researcher at Bellcore, demonstrate how the source for mutations that eventually conquer a population start at the geographical fringes of the population pool. Then after a period of “beta testing” on the margins, the mutants overtake the center with their improvements and become the majority.

At the edges, innovations don’t have to push against the inertia of an established order; they are mostly competing against other mutants. The edges also permit more time for a novel organism to work out its bugs without having to oppose highly evolved organisms. Once the mutants are refined, however, they sweep rapidly through the old order and soon become the dominant form.

This is the logic of skunk works. Hide a team far from the corporate center, where the clever can operate in isolation, away from the suffocating inertia of success. Protect the team from performance pressures until their work has had the kinks ironed out. Then introduce the innovation into the center. Every once in a while it will take over and become the new standard.

Economist Michael Porter surveyed 100 industries in 10 countries and found that in all the industries he studied, the source of innovations were usually either “outsiders” or else relative outsiders–established leaders in one industry making an entry into a new one.

 

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This is a blog version of a book of mine first published in 1998. I am re-issuing it (two posts per week) unaltered on its 10th anniversary. Comments welcomed. More details here.
-- KK