Skunk Works

You don’t need Harvard to teach you that it’s more important to listen than to talk. You can get straight A’s from all your Harvard profs, but you’ll never make the grade unless you are decisive: even a timely wrong decision is better than no decision. The final thing you’ll need to know is don’t half-heartedly wound problems—kill them dead. That’s all there is to it. Now you can run this goddam place.

— Kelly Johnson to Ben Rich, on everything he needed to know about running a company.

Early last year, a project I had been working on for a while got canned. Around the same time, I read Ben Rich's memoir of his years at Lockheed's famed Skunk Works division, and I've been turning it over in my mind since then. The history of aerospace development in the United States has many fascinating chapters, but few are as consistently impressive as the half-century run of the Skunk Works under Kelly Johnson and later Ben Rich.

It is striking how similar the organization I was with then and Skunk Works were. Ambitious R&D? Check. Heavily gated by disclosure? Check. Severely understaffed? Check. World class generalists? Check. Isolated from the parent company? Check. It did not end well for us because there were few other crucial ingredients missing from the list, including stable leadership. What makes Skunk Works' story worth examining isn't just the technological marvels they produced but rather the organizational and managerial approach that allowed them to consistently ship aircraft on budget, ahead of time, while their competitors struggled with cost overruns, delays, and mediocre results. In any business that involves creating complex products under challenging constraints, there's much to learn from their experience.

The Model

The Skunk Works began as an applied research division of Lockheed during World War II when the company was tasked with building America's first jet fighter. The official name of the working group was Advanced Development Projects. The pseudonym that stuck came from a popular comic strip of the era, after engineer Irv Culver answered a phone call with "Skonk Works."¹

Alongside a jet fighter, what emerged during those years was a different, clearly effective way of developing advanced technology, when compared to other defense firms. That fighter, The XP-80 Shooting Star, America's first operational jet fighter, was designed and built by a small team in just 143 days. This approach would go on to produce the most innovative aircraft in history: the U-2 spy plane, SR-71 Blackbird (still remains the fastest manned, air-breathing jet aircraft ever built, after being introduced in 1964!), and the F-117 stealth fighter.

Several key factors allowed this small division to consistently outperform much larger organizations.

1. Minimal Bureaucracy

"Kelly's motto was 'Be quick, be quiet, be on time.'"

Kelly Johnson ran the Skunk Works with a set of 14 rules. These rules established an environment of minimal bureaucracy, tight security, and autonomy from corporate oversight.

The traditional defense contracting process involves layers of management approval, extensive documentation, and constant oversight, all of which slow down development and increase costs. Kelly Johnson deliberately stripped away these layers.

When Ben Rich took over after 25 years of Kelly's reign, he faced far more regulatory constraints than Johnson had (EPA, OSHA, EEOC, affirmative action requirements), yet he still fought to maintain the essential independence that made their work possible. As government oversight increased, Rich found himself with "nearly forty auditors living with me inside our plant, watching every move we made." One auditor memorably told him, "Mr. Rich, let's get something straight: I don't give a damn if you turn out scrap. It's far more important that you turn out the forms we require."

Once an organization becomes large enough, process trumps product. The Skunk Works' success was built on constantly resisting this pressure. Bureaucracy should be questioned relentlessly.

2. Small Teams of Exceptional People

"We had a very strong and innovative design organization of about a dozen truly brilliant engineers, working at their drawing boards in a big barnlike room on the second floor of our headquarters building, who simply could not be conned or browbeaten into doing anything they knew would not work."

The Skunk Works operated with remarkably small teams. For their stealth fighter project, they began with just fifty veteran engineers and designers and a hundred or so expert machinists and shop workers. They deliberately hired generalists rather than narrow specialists, people who could approach problems from unconventional angles.

Rich notes that for the F-117 stealth fighter, the one that graces the cover of the book, they delivered the first operational squadron in five years, while McDonnell Douglas took ten years to produce their first squadron of F-18s - and theirs was a conventional design while the Skunk Works was creating revolutionary technology.

In the Skunk Works, I see confirmation of what I've repeatedly encountered: the right team of 10 people can outperform a middling team of 100, especially when shipping is the goal. While this insight permeates Silicon Valley thinking, it merits continued emphasis. WhatsApp, with 32 engineers, managed a platform used by 450 million users. OpenAI, with 500 employees, shipped ChatGPT, ChatGPT Plugins, and GPT-4 within just 6 months.

3. Collocation and Direct Communication

"Kelly's rule was never put an engineer more than fifty feet from the assembly area."

Physical proximity between designers and builders was a fundamental Skunk Works principle. This wasn't just about convenience. It changed how problems were solved.

Rich describes how "our designers spent at least a third of their day right on the shop floor; at the same time, there were usually two or three shop workers up in the design room conferring on a particular problem." This created an environment where "my weights man talked to my structures man, and my structures man talked to my designer, and my designer conferred with my flight test guy, and they all sat two feet apart, conferring and kibitzing every step of the way."

Unlike the streamlined approach of small teams and small orgs, large organizations frequently fracture into isolated silos, leading to multiple engineering teams unknowingly tackling identical problems across different departments. When these parallel efforts eventually collide, energy shifts from problem-solving to internal competition for recognition, ownership, and deployment rights - a wasteful misallocation of talent and resources.

4. Deeply Technical Leadership

"I had never known anyone so expert at every aspect of airplane design and building. He was a great structures man, a great designer, a great aerodynamicist, a great weights man. He was so sharp and instinctive that he often took my breath away."

This is Rich's description of Kelly Johnson. Johnson wasn't a remote manager - he was the chief engineer who could outperform nearly anyone on his team.

Rich followed this model, having served as the propulsion and thermodynamics expert for the Blackbird before becoming the division's leader. They led from knowledge, not just position.

Companies employ both technically informed leaders and purely business-oriented managers. Success can come from either approach, but technical competence often results in quicker, more confident decisions and inspires a particular type of respect from team members.

5. Direct Customer Relationships

A unique aspect of the Skunk Works was their direct relationship with their customers, primarily the CIA and Air Force, without the parent organization in the loop. Kelly Johnson personally briefed generals and agency directors, keeping a direct line between technical decisions and customer needs.

This direct connection allowed them to maintain focus on what mattered most to the end user. When Johnson presented design concepts to the Air Force, he had already internalized their needs and could respond directly to concerns without going through layers of bureaucratic translation.

You need to work backwards from the product and you need to be aware of what your customers need, even if they cannot articulate it. Now that I think about it, who were we building for?

6. Good-enough Over Great

"Perfection was seldom a Skunk Works goal. If we were off in our calculations by a pound or a degree, it didn't particularly concern us."

The Skunk Works embraced a philosophy that 80% efficiency would get the job done, and straining for that extra 20% would cost as much as 50% more in overtime and delays while having little real impact on the aircraft's performance.

This wasn't about cutting corners on safety or quality, but rather about making intelligent trade-offs. They evaluated risks carefully and focused resources on the areas that mattered.

It is always worth asking if a release should be delayed over "just one more feature." One should always be shipping.

Entropy Claims All

The average tenure of an S&P 500 company is 18 years. Organizational performance typically fades after two leadership transitions. Microsoft appears unique with three such leaders, culminating with Satya Nadella, while Google also operates under its third CEO. Intel's heydays were also under its third CEO, Andy Grove.

While a 50-year run is extraordinary, Skunk Works eventually had to give way to entropy. It seems like this was a result of both longer term industry trends and changes in leadership. Some factors that contributed to this change:

1. Increased Regulatory Burden

The regulatory environment changed dramatically between Kelly Johnson's early days and Rich's later tenure. Rich specifically mentions EPA, OSHA, EEOC, and affirmative action requirements that added complexity to their operations. These served important social purposes but they did make the lean Skunk Works approach harder to maintain.

The moment you give in to some oversight of your product strategy to outsiders, you have given away a lot.

2. Industry Consolidation and Budget Constraints

As Rich notes toward the end of his memoir, the aerospace industry underwent significant consolidation, and the number of new aircraft developed declined drastically. In the 1950s, 49 new aircraft were introduced. By the 1980s, only 7 new designs emerged. This reflected both budget constraints and the increasing complexity of modern aircraft.

3. The Rise of Distributed Manufacturing

The B-2 bomber project that Rich describes represents the antithesis of the Skunk Works approach. Instead of a small team building an entire aircraft, the B-2 was manufactured in pieces by multiple companies: "Boeing makes the wings, Northrop makes the cockpit, and LTV makes the bomb bays and back end of the B-2 airplane, in addition to four thousand subcontractors working on bits and pieces of everything else."

This distributed approach was driven by political and economic considerations rather than technical efficiency. When billions of dollars are at stake, the pressure to spread contracts across multiple congressional districts becomes enormous.

The shrinking industrial base and outsourcing meant a loss of highly skilled workforce, including skilled toolmakers and welders, machinists, designers, die makers.

4. Increasing Technical Complexity

Modern aircraft incorporate vastly more complex systems than their predecessors. The F-35, which began development shortly after Rich's retirement, represents this trend. It contains millions of lines of code and integrates systems from numerous suppliers. This complexity makes the generalist approach of the original Skunk Works harder to sustain.

Starting in 1996, Lockheed worked on the F-35 for 20 years before it was introduced.

5. The Rise Of Tech Industry

By the late 1980s, high-tech industries contributed around 5% of U.S. GDP. Defense spending peaked during the Reagan administration's military buildup, reaching about 6% of GDP, before dropping to roughly 3% during the Clinton presidency after the Cold War's end. Even during the Afghanistan and Iraq war years, defense spending accounted for 4% of the GDP. Meanwhile, the tech industry continued its ascent through the 2000s, and by 2019, it contributed around 10% of U.S. GDP.

By the time this book was published, 1996, the rise of Silicon Valley should have been evident. While Ben Rich doesn't comment on it, this parallel development surely affected Skunk Works' competitive environment. Silicon Valley began attracting some of the most technically gifted and ambitious minds in the last decades of the twentieth century. As the tech sector created more value, it could afford increasingly generous compensation packages, with stock options and RSUs offering wealth-creation possibilities that defense contractors struggled to match.

Coda

Skunk Works demonstrates the power of a clear, compelling mission. Everyone involved understood they were working on something vital, something that pushed the boundaries of what was possible. That sense of purpose fueled their commitment and creativity.

Rich² notes near the end of his memoir: "We became the most successful advanced projects company in the world by hiring talented people, paying them top dollar, and motivating them into believing that they could produce a Mach 3 airplane like the Blackbird a generation or two ahead of anybody else."

Perhaps that's the most important lesson: give talented people a clear mission, the resources they need, and then get out of their way.

FOOTNOTES