Great Business Ideas: Leading “top-down” innovation

Great Small Business Ideas to Start: Leading “top-down” innovation

Direct action should be taken by senior management to harness the knowledge and ideas of employees to ensure consistent and high-quality innovation.

The idea

The word “innovation” conjures up the image of a process that is spontaneous, unpredictable, and unmanageable. The innovation literature abounds with stories of serendipitous discoveries and independent-minded champions doggedly pursuing an idea until they hit the jackpot. Often—as the stories stress—inventors worked in secret against the will of management. The archetypes of such innovators are Art Fry and Spence Silver, the 3M chemists who turned a poorly sticking adhesive into a billion-dollar blockbuster: Post-It notes. In these cases, innovation proceeded in a bottom-up fashion, with ideas and the drive to see them through originating in labs or marketing outposts—not from the top of the organization.

However, to ensure consistent and high-quality innovation, the role of management is vital. Senior management should take significant and direct action, using information and knowledge. The commercial development of the credit card is an example. In 1958, a research group at the Bank of America called the Customer Services Research Department, with the remit to develop potential new products, created the first credit card. This development was augmented later by seven bankers at Citibank who added further key features, including merchant discounts, credit limits, and terms and conditions.

This development did not occur in response to a market need: it emerged because people within the banking business used their knowledge and information. This included market-sensing abilities, understanding of customers, information and forecasts about economic and social trends, experience with similar product ideas (such as installment loans), and knowledge about new developments in technology. A period of major innovation within the financial services industry followed, including ATM machines and the growth of internet banking.

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This type of innovation is markedly different from bottom-up innovation:

  • Senior management support was essential: they set up the unit, helped to develop its features, and gave it the support needed to take root and grow.
  • The senior management role was significant early on in the process, creating the right conditions and providing support and momentum.
  • Information was at the heart of this top-down innovation.

Harnessing information and tacit knowledge is an essential part of ensuring that the innovation process starts, continues, and delivers success.

In practice