All innovations result in change – either in a process or in a product or in a service. Attempts to make changes to process, product or service result in a positive or negative outcome depending upon the success or failure of the innovation. The outcomes also affect the performance of people who led the innovation (change). In most companies, the downside of a failure is more than the upside for a successful innovation. The fact that innovations inherently have higher uncertainty, discourages people to propose, lead or be part of an innovation project.
Let us continue to think about innovation as something that results in a positive change. Who can make large changes in a country? – The Prime Minister (Or the President). Who can make a large change in a state in India? Chief Minister. In your profession, where can YOU make changes freely without asking your boss? Obviously in the area that you control (There are some exceptions, which I will cover in my next post). Now let us take a different example – Think about your house. Who can make a large change in your house? You (or may be your spouse)! Who can make a large change in the room of your teenage son or daughter? They themselves can but you cannot (won’t)! The authority to make changes typically lies with the lowest person who unambiguously owns it and not with the higher or highest person. (There are a few exceptions though). This above explains why your daughter won’t be able to make changes in your house.
If you agree with the above, do you think innovation that results in change, can ever be bottom-up? No, innovations are always top down!
Innovations are top-down but it doesn’t mean they have to be CEO led
Innovations are top down doesn’t mean that necessarily must led by the CEO. In fact, if you observe carefully, you will find that almost none of the innovations are CEO led! As explained above, managers can lead innovations in the area that is under their control or influence. Senior managers who have a larger area of control or influence can take decisions of a larger change (innovation) that needs collaborations across different functions and may result in innovations that have larger impact. Lower the person in the hierarchy making changes (innovations), smaller (incremental) is the change (innovation) likely to be.
The area of influence is not always the geographical area or a team. An individual who owns a process can drive innovations in his process.
We need to remember that any change – big or small – will need permission of the person who owns the area and feels the change to be important. Hence even incremental innovations are top-down. Just like a mountain range has many peaks (though one may be tallest), organizations have several functions, geographies, products and business units, each of which is led by a person at the top, who can drive or allow innovations.
What is bottom-up innovation?
In the literature, bottom-up innovation is used for bottom-up sharing of ideas, which is not easy to achieve. It needs an environment where anyone in the organization can potentially share his/her ideas with other people in the organization across levels. Front-end employees interact more closely and frequently with customers and other stakeholders. They run (and use) the key organizational processes and know the related problems, issues and bottlenecks. All this gives them an edge to think of new ideas. It is essential for the organization to have its people share their ideas with others. On the other hand, people at senior levels have far more exposure to the external world and emerging technologies. If these two inputs – ‘problems and ideas to solve them’ and ‘knowledge about emerging technologies’ converge, innovations are likely to happen more effectively.
If employees freely share their ideas with others, senior managers will be able to select the ones they are convinced about. All managers (every top) should therefore create channels to invite and receive ideas from others – employees, customers, suppliers and partners. Remember the work on any idea begins only if the owner of that area is willing to take risk (means the person finds cost-benefit-risk favorable!)
Why everyone at the top is not innovative?
From the above discussion one could arrive at a conclusion that since innovation is top-down and considering that all managers are perched at one of the tops, everyone can drive innovations.
Unfortunately, all managers are not equally innovative because of the varying levels of risk appetite. Risk averse managers avoid taking decision on riskier ideas. They instead push the decision upwards and as a result even incremental innovation get stifled. Higher the manager moves in the pyramid, more is the required courage for him to approve risky/innovative ideas. Unfortunately, organizations processes promote people who avoid experiments (i.e. innovations) as failures jeopardize the revenue or defect targets.
Why managers quit to start their own companies?
There are situations when the person at the top doesn’t give a clear Yes/No. In such cases, managers, who are passionate about their idea and have a higher risk appetite start implementing it themselves. If the person at the top gives a clear No, a few managers, who are very passionate about their idea and have a higher risk appetite, leave the organization. Some end up starting their own venture as the new venture takes them right at the top where they get full authority to implement the ideas which their bosses had earlier declined.
I alluded to a few exceptions in the above post and that is what I will discuss in my next post using my interpretation of the ‘Theory of constraints’.