I take it the next step would be for individuals to become more specialized in a colony?? .
Indeed.
One of the best known examples of colonies, still living in our present day is alga Volvox. Flagellated single cell individuals form colonies, that move by flagellum propulsion. The cells that are in one pole of the colony specialize in directing movement, using photo sensible spots. The ones in the opposite pole specialize in reproduction. A very common pattern, to be found in most animals, though algae are not in the line of animal evolution, but plants!
To find more about Volvox, see this Wikipedia page
Volvox - Wikipedia
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