How The ‘Skunk Works’ Approach Rescued eBay

eBay Board member and Silicon Valley legend Marc Andreessen believes that founders of technology companies are the best innovators with their proven track record of bringing concepts to fruition, according to Nicholas Carlson writing in Business Insider. The CEO John Donahoe, while not a founder, has thus built a team of founders and ‘founder types’ through acquisitions. They’ve been given full autonomy to run their own areas while Donahoe himself acts as their in-house consultant.

eBay CEO John Donahoe

eBay CEO John Donahoe

The results are evident. One such ‘acquired founder’, Jack Abraham, came up with the idea of a homepage redesign for the floundering auction site and pitched it to a small group that included the CEO. Instead of spending a couple of weeks developing a plan as he was asked to, Abraham picked the five best engineers he knew at eBay and flew off to Australia for a fortnight to develop a working prototype.

The CEO had warmed to the idea, and the positive response had sent Abraham into a manic frenzy of organizing, recruiting, and planning. He had to move fast, he felt, because he feared that if he did not, eBay’s big-company processes and politics would suffocate his idea before it ever became a prototype.

This prototype became the basis of the new eBay homepage that is being credited with its $50 billion turnaround. Prof. Jag Sheth spoke to Beyond Jugaad last week about the “Skunk Works” approach to innovating within a large company and this seems to be a classic example of a success story.

The interesting point to note is that when Abraham came on board nearly three years ago, there was skepticism about Donahoe’s strategy. No less than And Rabois, an early investor in Abraham’s startup Milo, had this to say to Fast Company:

Historically, the company has been awful at inculcating entrepreneurial talent. Ultimately, what will prove whether they’re really changing the culture is if the people with entrepreneurial backgrounds stay and thrive, or get frustrated and leave.

While Abraham did eventually leave in January last year, one can safely say that Donahoe’s risky bet did indeed pay off. Looking at the snarky comments in that Fast Company article, it seems as if the critics really have been proven wrong after all.


eBay's new popup feed

eBay’s new popup feed

Innovation expert Naresh Shahani of BMGI India says that while examples of the skunk works approach exist, such as Amazon with cloud computing or Seagate’s creation of Scandisk, typically Innovation requires a different culture that successful companies struggle to provide within their existing environments.

On whether this would work in Indian companies, Shahani says “It’s easily doable given that Indian enterprises are still largely family-owned and can thus quickly make the required resources available. However they tend to be risk-averse in going the whole hog with implementation.” Shahani cites the Tata Nano as an example of an Indian innovation that was developed to some extent using this.

Would this sort of thing be tolerated in your company? More importantly, would the finance department re-imburse this sort of adventure – especially if it failed 🙂 ?


Business Insider: You Can Explain eBay’s $50 Billion Turnaround With Just This One Crazy Story

Fast Company: How Jack Abraham Is Reinventing EBay

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