In a previous post, I wrote about the problems with corporate innovation: rules and processes designed to keep the status quo like decision-making by consensus, general risk aversion, etc.

Since then we've continued helping our corporate clients overcome these hurdles in our corporate skunkworks, innovation, and R&D program, and I thought I'd write a follow-up talking about solutions to those problems that actually work in the real world. We've seen companies both succeed and fail at trying to run these departments so over time we've started to put a list together of the common features of a team and department that succeeds and one that flounders.

Of course, I'm a bit biased, and I think our program is a great fit for many companies. However, there are also success factors that need to exist internally in an organization as well to succeed in driving real innovation, disruptive technology, new products, and changing business models.

Freedom to fail

Your teams need to know that it's okay to fail. Half of ideas are squashed because they're thought to be certain failures. It is endemic in many companies' cultures to avoid the appearance of failure for fear of losing credibility, respect, or even their jobs. New ideas and technology often seem implausible or likely to fail. I remember seeing Airbnb and thinking, "No WAY would anyone ever rent out their home to a stranger!" I was wrong. However, even if something seems destined for failure and does fail, a great leader and team will learn from it and move forward.

Sergey Brin, co-founder of Google and its skunkworks lab GoogleX, famously said, "Even when you go after a more ambitious goal, even if you fail to achieve that one, all the side effects that come along the way can be that much more rewarding and significant in their own right."

There have been countless examples throughout the course of technological innovation where teams have sought to do the impossible or the improbable. These groups need the freedom to fail without consequences from leadership or peers. Another benefit of the freedom to fail is that it also allows you to recognize when you have failed and when it's time to readjust focus and efforts. If you and your team have the freedom to admit that, then it's easier to catch issues early.

The highest performing teams are ones where they don't feel the pressure of reprise from trying something new that they can't guarantee will work.

Top down support from leadership

This goes hand in hand with the freedom to fail. Too often, C-suite execs and VPs either aren't pushing for innovation or they don't understand the value of a skunkworks group. There are many causes and not entirely the fault of leadership. You need to remember that most schools, even today, have executive training in the classical sense. From execs I've talked to, the focus in their education was around finance, negotiation, operations, P&L planning, and strategy. It's important to remember where they're coming from, a skunkworks program is largely an L for a number of years before becoming a product that the company will generate revenue on.

A great example could be something like the Hololens at Microsoft or the self-driving car at Tesla. What these companies understand, which many of us forget, is the importance of the long-game. That's not to say that it's not important to have near-term wins as well (which we'll discuss in a minute), but often times our organizations are set up to only reward short-term successes. We need to adjust for that natural bias and make decisions accordingly.

Nothing will kill an innovation or R&D team/project/individual quicker than having a leadership team that isn't driving them forward and moving obstacles out of their way.

There needs to be a direct line of communication to the decision makers and time allotted for engineers to spend time teaching and developing relationships with execs so they understand what they're supporting.

1 year, 3 year, and 5 year successes

Successful innovation or R&D teams always seem to have a multi-tier map for success. They will have projects spanning the gambit spending equal resources on products that can immediately be commercialized to moonshots whose value likely won't be realized for half a decade. If a team doesn't have immediate successes then often times (regardless of the aforementioned points) grumbling will commence, morale will get low, and progress will be hard to see - internally and externally. If a team doesn't have projects that look far into the future, then nothing disruptive will come of the work. Skunkworks is the most valuable when it is changing the game, going from 0 to 1, as Peter Thiel says instead of just incremental improvements which don't move the needle.

Innovative companies that have carved out their own market have done so not with incremental change. They did it by rethinking their industry, products, and how they operate. In order to do this, your portfolio of projects coming online needs to have Big Audacious Goals and Ideas and not only focus on the easy wins. Without them, you'll just be plodding along - kicking the can down the road. Conversely, if your team isn't able to show some early successes then you'll likely not be around for the day when the Big Audacious Goal and Idea is realized.

It's important to have a balance of products that can immediately come to market along with technologies that are just a vision. Build a pipeline along this progression. The consequences for not being able to see the full board are often failure.