Bottom-up Innovation and the S-Curve

Researchers from many disciplines have used some form of the “S Curve” (illustrated in the diagram above) to depict grow and maturity in systems. The essence of the S-curve, as applied to organizational development, is that organizations live through three major phases. Phase 1 is the Inception or Formation Phase, typically characterized by an innovative leader that drives the organization with a new idea. Creativity and experimentation abound during this phase because the people in the organization are trying to figure out how to be successful. Once the “formula” for success is discovered, the organization enters Phase 2 – the Growth Phase. As the organization grows and becomes more and more successful, the “formula” for success becomes ingrained into the organization’s culture. Since everything around us tells us that what we’re doing is correct, change becomes more and more difficult. People promoting change are labeled as problematic and are welcomed with the proverbial: “You can not argue with success!” However, to the surprise of some (typically in management), sooner or later the organization’s growth rate starts to decline; doing more of the same thing does not help. As the organization approaches Phase 3 – the Renewal Phase – it is faced with two fundamental options: reinvention or death. The path to death takes many forms. For some it’s an obsessive pursuit of efficiency and cost cutting with little investment on generating new products or services. If it’s 1920 and you’re still manufacturing horse whips while people are buying cars, I don’t care how quality perfect or inexpensive your whips are, unless you reinvent your business, you’re going to disappear. For others, death is the unavoidable consequence of denial; a negation of customer preferences; or a blindness to an emerging need.

Organizations, however, are not destined to die. The organization’s stakeholders can take upon the task to reinvent or renew the organization. What we’ve learned working with companies in the midst of Phase 2 or Phase 3 is that when organizations welcome or develop a culture of bottom-up innovators, the road to renewal becomes, almost, second nature. I say “welcome or develop” because what we’ve found is that creating a bottom-up innovation culture is a responsibility of both the organization’s leaders as well as its constituents.

Most companies come to be because of a top-down innovation culture. It’s the company’s founder or founders who had the great idea; who were willing to risk their time and money to start the enterprise. It’s these entrepreneurs who are driving the innovation effort. Phase 1 is the playground of Top-down innovation; hence, valuing this approach is to be expected. However, if employees accept this framework as the exclusive source of innovation, as the company moves towards Phase 2, they will become accomplices to the eventual company’s demise. Unless founders and leaders are bombarded with ideas, they will come to conclude that the workforce has none. Unless the founders and leaders are challenged with alternate perspectives, they will come to believe that theirs is the only perspective there is. Unless the founders and leaders see evidence of leadership in the ranks, they will come to believe that leadership only resides on the top. So, developing a bottom-up innovation culture cannot be left, exclusively, to the company leaders.

There are some organizations where this learning has already occurred. Having lived and realized the importance of bottom-up innovation, leaders make it a point to put in place policies and practices that welcome innovation from the ranks. However, in many other organizations, we see a destructive self-fulfilling prophecy taking place: since management is still immersed in the Top-down approach to innovation with which it started, front-line employees limit themselves to following; and since front-line employees limit themselves to following, management concludes that Top-down innovation is the only viable option available.

Granted, this is a tough environment to work in; and it takes guts to break this vicious circle. However, understand this: for leaders to accept, welcome, and eventually promote a bottom-up innovation culture, the cycle has to be interrupted someplace, and unless there is evidence to do so, this interruption is unlikely to come from the top! The unfortunate reality is that in these cases, the value of bottom-up innovation has to be learned by its leaders; it has to be evidenced by what the leaders see and hear in the ranks of their teams; it has to be realized in their minds as a consequence of what they experience in their daily life. And it’s our job, as bottom-up innovators, to create the evidence for its case.

There’s a second aspect that relates bottom-up innovation to the S-curve. We’ve discovered that an army of bottom-up innovators are the best early warning system for organizations approaching the peak of Phase 2. Recall that as you approach Phase 3, everything around you looks great! Sales are up; market share is up; you’re growing left and right. Unless you have multiple channels to the world, you’re likely to miss that new development that appeared in magazine X, or that late-night news clip on channel WXYZ, or the new consumption trend neighbors of District Y are engaging in. Bottom-up innovators help fill that role. They become tentacles to the market, an extended radar screen that detects opportunities and threats, many times way before the marketing or research departments do.

A final word of caution for those of you working in a “Bottom-up friendly” innovation environment: once your company reinvents itself, you’re back to Phase 1. This means that all the temptations of a Top-down exclusive world will resurface. Just because your organization is amenable to Bottom-up innovation today doesn’t mean it will always be. The delicate balance between Top-down and Bottom-up innovation needs to be constantly nurtured by all. An old quote by an unknown source comes to mind: there is plenty of room at the top – but no place to sit down.