It doesn’t have the most glamorous of names, but bottom-up innovation can bring results.
Businesses have traditionally set direction from the top down, with executives communicating which areas and products the company will go into or produce.
There’s nothing intrinsically wrong with such an approach; after all, it worked for Apple. Not everyone has a Steve Jobs as their leader though¹. Moreover, top-down innovation can burden those in charge of business direction with needing to be extremely versed at a multitude of things: knowing their business, knowing what their customers want and knowing what’s required to move forward.
Executives will be the first to say that they don’t necessarily possess all those qualities. Not to mention that when it comes to boards and upper management, there’s historically been a conformity of thought and lack of diversity that can be harmful for innovation². Businesses are fighting to correct these imbalances, but it will take time.
While organisations can innovate in other ways, such as the establishment of innovation labs, partnering or investing, these methods can face an uphill battle when it comes to implementation, particularly when the employees tasked with their integration are struggling to keep up with their everyday workload.
With bottom-up innovation, ideas can come from all levels of the business and even from customers themselves. Proposals can be crowdsourced internally or externally, be incentivised, the result of competitions or simply take the form of a suggestion box. The main point is that their conception or direction isn’t entirely from the executive suite.
In an age of digital transformation, it’s important to innovate to remain competitive. Innovation isn’t something to set and forget, it must be ongoing, a continual process of improvement and/or reinvention. That’s a lot of pressure to put on a business and its corporate strategy.
Bottom-up innovation should, by its nature, be more holistic. By sourcing input from a range of different people, companies benefit from a BXT approach to transformation.
BXT, which stands for Business, Experience and Technology, is the method that PwC uses when it approaches the business challenges of today. By viewing a problem through a variety of lenses, digital transformation can gain value from the perspectives each area of expertise brings. In many ways, bottom-up innovation uses this same framework, and there are many benefits from its use.
In 1993 Starbucks was beginning to move further afield from its home base of Seattle. It was a coffee shop in the traditional sense, doing most of its business offering hot beverages to cold and sleepy people on cold winter mornings. An employee from one of ten Starbucks stores in California’s warmer clime saw the opportunity to expand the repertoire and pitched to HQ the idea of cold coffee blends³. The Frappuccino was born and with it, a whole new business line that enabled Starbucks to make money year round, attracting an entirely new customer base at the same time.
There are many stories of bottom-up innovation that play out this way. Sometimes it is employees that can bring a unique perspective to a business problem. After all, they’re the ones interacting with customers, hearing about pain points or observing behaviours that could be capitalised on.
PwC’s 2017 Innovation Benchmark Report found that “frontline employees can often see problems and solutions more clearly than their cost-conscious managers.” Further, the benchmark found that around two-thirds of innovative companies state that “bringing in employees with fresh thinking and establishing innovative behaviours and cultures are the most critical success factors for innovation, well above other criteria, such as increasing the innovation budget or establishing a clear business model for innovation.”
Employees bring their unique viewpoint as workers within the business, but they’re also customers themselves, with an understanding of what appeals and what doesn’t.
There are a range of other positives that a bottom-up process brings to business aside from the innovation itself.
One benefit is in employee engagement. IBM, for example, created iFundIT, to harness the value of staff in determining where the IT department would spend development money. Employees were given US$2,000 each to crowdfund projects their colleagues came up with. When a project reached US$25,000, it went into production.
Interestingly, while iFundIT resulted in many successful projects and has since been monetised as a platform others can utilise, it was the change in culture that was remarked upon by the then head of IBM’s CIO Lab. The program allowed employees to actively involve themselves in solving problems and have more fun in their roles4.
Google also banked on the involvement of its employees in projects of personal interest. Its now famous ‘20% time’, gave Googlers a day out of their working week to focus on programs of their own. While no longer in place at Google, it resulted in some of Google’s biggest products, such as Gmail (initially seen as too far outside a search engine’s remit) and AdSense, which allows people to monetise their websites with ads5.
This leads nicely to a second benefit: when trying to get digital transformation off the ground, employee buy-in can be critical to the success or failure of the business objectives. If staff have themselves been part of the process of creation, and are thus invested in its success, implementation issues can be much easier to navigate.
Banks and fintech also understand the importance of encouraging employee innovation when it comes to keeping talent from leaving to pursue projects elsewhere. Financial services firm J.P. Morgan has an innovation program in which employees can ultimately develop their own fintech business6. Global insurance company AXA runs a participative innovation program with a hackathon to develop executive-approved employee ideas7.
Yet another benefit of grassroots innovation is found in the approach. Asking for executive permission to innovate may be rebuffed for monetary, scope or resourcing concerns. Yet an employee probably understands best how their idea will solve a problem and often, exactly how to prove it.
Australia’s Commonwealth Bank provides an example of this. Its Cardless Cash banking option comes from an internal business case development competition. The employee that came up with the idea had already determined the capability of existing bank systems to support the invention, even before entering.
As Michael Harte, CBA’s chief innovation officer told CIO Magazine8, “staff can design things at very high speed, very low cost and with very low risk. They can bring those forward, we can try them out, experiment with them, get them built in an agile manner and scale them. This is an extraordinary competitive capability.”
PwC itself has benefited from non-traditional innovation processes with Airtax, an app which simplifies the BAS and income tax lodgement process for sole traders and individuals. Initially floated by a staff member as a new client segment solution, its use then parlayed into an internal efficiency mechanism allowing for larger product growth in the general income tax consumer market.
The goal with any innovation is to remain relevant and ultimately, improve business profitability. Customer feedback is always valuable but customer innovation and involvement in the creative process can be even better.
After years of neglecting innovation, Lego found itself in a precarious situation in the early 2000s, down US$800 million and 30% in sales9. One of the ways in which it climbed back to become one of the biggest toy producers in the world was to start interacting with its customers.
Lego launched a crowdsourcing platform, inviting fans to submit ideas and vote on which it should make10. Winning concepts would net their suggestor 1% of the product’s sales. The program generates four new Lego creations a year, which Lego says don’t even need a marketing budget – fan excitement drives the sales. Dell has a similar concept in its IdeaStorm site, which allows the computer technology company to interact with customers and hear suggestions for new products or existing product tweaks.
Pooling the right experts from your business to gain a range of perspectives is one way to gain more knowledge but pooling ideas from customers can have the same effect. General Electric tried this by opening up patents to inventors in the public and, with crowdsourced product design platform FirstBuild, now owned by GE Appliances, is considering new products from anyone that wants to pitch an idea11.
Your employees might just be the best asset to innovation you didn’t fully realise you had. While the inclination may be to steer the ship from the top, encouraging a culture of experimentation, giving genuine consideration to ideas that come forward from those on the ground could lead to amazing results.
Businesses that haven’t tried innovating from the bottom up might want to accelerate and even formally recognise its value to inspire participation.
The benefits are numerous, not just to product but to the culture and company itself. With people in the room who are not all coming at a problem from a particular angle or with similar constraints, it is at least guaranteed to get conversations diverging from well-trodden ground.
So, why not raise a glass to a working from the ground up next time you want to innovate?
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