BDN Op-Ed on "Bottom-up Innovation"

Here's a guest editorial, written by Terry Porter, on bottom-up innovation that was published in the Bangor Daily News...

Maine businesses are facing challenges they never faced before. Even beyond the severe economic downturn that has affected many or most Maine companies, businesses must also cope with a marked underlying shift in business climates. We have all experienced how the pace and intensity of competition are accelerating worldwide due to the rise of information technology, globalization, speed of new product and market development, increased customer choice and knowledge, outsourcing, and many other factors. These changes have erased many traditional boundaries of business and they affect all of us.

Today’s business environment demands a different approach, a way to build in capacities for flexibility, innovation and change. To survive and grow, businesses need a steady stream of new initiatives that respond quickly to changes in the marketplace, address immediate threats from local or distant competitors, and may be implemented without major retooling of the company’s infrastructure. Fortunately, the needed resources are right at hand.

Quite often, it is the company’s own employees who sense changes and new opportunities early on, and come up with adaptive ideas and responses. Smart managers are recognizing the value of these efforts and are building bottom up innovation into company routines. For example, Westinghouse recently revised its innovation strategy by delegating some of their middle managers and their teams away from normal activities, to exclusively seek out new markets and technologies. By the same token, Best Buy has bet that local niche-market strategies can improve sales growth, and has revised its marketing strategy to reflect this belief: “the retailer believes that bottom up insights could have an outsize impact on sales growth.”

A wave of new research is helping to build our knowledge of how companies can successfully implement bottom up innovation, meaning ideas and initiatives that originate in local contexts and are championed to the attention of top managers. I have conducted research that surveyed hundreds of middle and line managers in three retail companies, to try to understand how bottom up innovation works and what can be done to enhance it. Each store in my study was an independent facility, under overall company jurisdiction of course, with a store manager and a number of department managers. By comparing store-to-store and company-to-company patterns in the responses, I arrived at some interesting findings.

First, I found that the quantity of new initiatives originating with middle and line managers varied significantly across the sample, but that there were traceable patterns within each company. Overall the level of initiatives was low, suggesting this approach is not widely being implemented yet, or that it was not an important aspect of these employees’ jobs. Most important, I found that greater levels of initiative development were associated with a combination of middle managers’ perception of company support for this activity, and their own attitudes towards the importance of bottom up innovation. It was the cumulative flow of initiatives that I was testing, not their quality or how many were eventually ratified at the top, since the best ideas can more readily be pruned from a steady stream rather than an intermittent one.

These results indicated that there is no “one best way” for a company that wishes to adopt a bottom up innovation strategy. Each localized site in which the company operates is likely to be unique, and local employees not only know the action in their own backyards best, but they also tend to respond to cues from their local manager. Companies themselves have a great influence on the realization of bottom up innovation, through their policies, certainly, but even more so through the culture they instill and encourage. It seemed to be the values and attitudes of middle managers that made the largest difference in new idea generation, over and above what managers said or wrote in their policy statements.

Some very practical suggestions emerge from this research for managing bottom up innovation in today’s volatile and fast-paced marketplaces. First, managers should be sure that everyone understands the importance and value of bottom up initiative development. They should also provide education and ‘incentivize’ local idea generation, but customize it to match the culture and channels that already exist in their company. Other ideas include providing time and resources for employee innovation, and encouraging communication with all stakeholder groups to obtain the best information possible about local changes.

Bottom up innovation is a powerful tool for ongoing competitive advantage in today’s fast-paced marketplaces. I believe that Maine businesses of any size and location should consider developing and utilizing this strategy. Many companies are already doing so, and it is hoped that these findings will help their efforts to be even more successful.