Success can make startups stagnant when the radicals become the establishment. Innovation is more elusive when the idea grows into a business, whose managers prioritise profits rather than products.

The temptation to invest in the type of disruption that was the source of their success decreases when the existing product is bringing in big revenues. This is the "Innovator's Dilemma", as Harvard Business School professor Clayton M. Christensen named it in his bestselling book, which "deeply influenced" Steve Jobs, according to the Apple cofounder's authorised biographer.

Image: iStock/Andrew Rich
Image: iStock/Andrew Rich

Australian collaboration software company Atlassian has developed its own method of responding to Christensen’s dilemma. What began life as two university dropouts in a Sydney garage backed by a $10,000 credit card debt has grown into a $6 billion publicly-traded corporation. However the company maintains the reputation for innovation it began with.

Atlassian's head of R&D and resident work futurist Dominic Price is responsible for ensuring the company stays small while scaling.

"I'm never going to get excited standing on stage saying we're 10,000 people or 20,000 people," says Price, a Manchester native now based in sunnier climes of Sydney.

"Customer numbers are great, but as we scaled the business we wanted to find ways of staying small, staying nimble, staying agile and essentially staying relevant. And when you decide to stay relevant you have to accept that your business model is going to change quite frequently."

He says Atlassian stays relevant by embracing inevitability that its business model will frequently change, through a company-wide approach to innovation that helps it stay ahead of the curve while reducing financial risk.

"I'm a firm believer that there's no such thing as the lone genius, that there's not a single person at Atlassian that we all look to for these wonderful ideas and they cascade down from above," says Price.

"Nor do they necessarily come from the most senior people. And that's something that we've embraced, that innovation is something that exists in everyone. My job and my team's job is to create an environment where we give them an opportunity to express that.”

Atlassian has created that environment through three core policies: "Innovate Every Day", "20 Percent Time" and "ShipIt".

Strategies to stay small

'Innovate every day' is a cultural attitude ingrained throughout the company to ensure staff question everything and spark change independently.

“If you don't like something, do something to change it," explains Price. "Find out why it exists, find out what the other options are, what we could do differently, and so we see incremental change, it's a light form of innovation, but an incremental form of change occurs every day in our business.”

This culture gains structure through 20 percent time, the proportion of staff working hours they're asked to dedicate to innovation.

It initially took the form of one day every week, but many teams now prefer an entire week of innovation in every five weeks at work. The activity is constrained to individual teams, who will block out any backlog and abandon their day-to-day jobs to dedicate that time exclusively to innovation.

"In this week you just come up with some random innovative ideas, and try and roll them out, try and implement them," says Price.

"You do that like spring cleaning, because it's for your team. And what it does is it helps our teams keep their radar alert to things that aren't necessarily working well, or the future of we could do to work this way, but when we're twice as big we might want a bit more structure here, we might want to try this.

"It puts the ownership on them to evolve their work practices, and that's really good for slightly more incremental innovation, which is still quite creative but constrained around their team."

[Read next: How to scale up your startup, according to Blippar cofounder Jess Butcher]

The final element is ShipIt, a quarterly event that gives every member of staff around the world 24 hours to do whatever they want with whoever they want.

"The randomness of the ideas that come out of that are truly creative and curious, and they tend to spark another conversation which sparks another conversation which sparks another conversation, and it's the whole motion of try it, rather than prove it," says Price.

"Prove it is a killer to innovation. Prove it says unless you can scientifically give me certainty that there is a return on investment and this won't distract this core business, then I'll never do this. Well that's not innovation, that's what I did yesterday. Innovation is taking this calculated risk and trying stuff, and because there's no recourse, there's no cost of failure, people are a lot braver, so it's true out there innovation.

"The first two forms of innovation we do - innovate every day and 20 percent time - are quite within your team, working with similar people. One of the fascinating things we've found when we do ShipIt, is people seek out to work with people they've never worked with before. In completely random tangential teams to theirs, because you can learn something new. It’s a great way of changing your frame of reference."

The only rule is that at the end they must give a three-minute talk about what they've developed, and vote for the teams whose ideas they like best. The winners get a tacky trophy and a t-shirt, but the real prize is bragging rights, and the development of ideas that can influence others in the audience.

"Whilst the stimulus is in that 24 hours and the three-minute talks, the life of the ideas that get created live on for the following three months, and then ship it comes along again, so this cycle just repeats," says Price.

Proven results

ShipIt has resulted in a number of big products, such as JIRA Service Desk, a hosted helpdesk for resolving customer requests. The initial idea from the presentation was developed over a series of weeks into a prototype model and then the full version of today. They also redesigned the company's onboarding experience for new staff, by drawing directly on the experiences of new members of the team, rather than solely relying on the knowledge of HR professionals

Measuring quantifiable benefits, however, is a more difficult task. Evaluating success by the number of ideas that are incorporated, for example, can lead engineers to only work on safe ideas they know will ship, reducing the risk that is at the heart of true innovation. Instead they measure lead indicators, such as rates of participation and engagement.

"If I see incremental innovation in ShipIt, that tells me something's going wrong, we're being too conservative," explains Price. "If I just see stupid random ideas but people having fun with it, it's purely cultural, it’s just a bit of fun. What I'm looking for is that combination of people trying to scratch an itch and find a new way of solving that problem.

"If I see that en masse, I'm happy. However many ship, I don't care, because some of them end up in other people's roadmaps. A lot of the time we get similar ideas but approached in different ways, and we say to those teams you should get together and find out how you finish that, because the three of you have all approached it differently, I'd love to see what happens when you join forces."