In my previous post, I compared the efficiency of two approaches to corporate innovation: “bottom-up” and “top-down.” The former approach relies on ideas that are first generated by a company’s employees and then channeled up to the company’s senior management. The latter focuses on problems formulated by the company’s leadership which then moved downward for employees to find solutions to these problems. Available data suggest that the top-down approach (exemplified by an open innovation service provider InnoCentive) is significantly more efficient than the bottom-up (exemplified by an external innovation portal Idea Storm operated by Dell).

And yet, despite what numbers say, the bottom-up model of innovation remains very popular. Why? First, its popularity is fueled by a widespread belief that innovation must harness a collective wisdom of the whole organization. Second, sticking to this model allows the company’s leadership adopt a hands-off approach to innovation process. It’s so easy to announce an open season for ideas and then claim that the culture of innovation is taking root on the ground. Compare that to the time and effort needed to formulate the company’s innovation strategy, align it with the corporate strategic goals, identify key problems to be solved and articulate criteria for successful solutions–all what is required by the top-down approach.

I want to be very clear: I’m not against the bottom-up model of innovation as such. In innovation-mature organizations it can be remarkably successful. My point is that this approach doesn’t work well for organizations that are at the very beginning of the innovation journey. That said, I see at least three (reasonably simple) ways to improve the efficiency of the corporate “idea generation” process.

1. Define what innovation means for your company

The lack of ideas isn’t a problem for the majority of organizations; quite to the contrary, they’re usually awash with suggestions from their employees. The problem is that these employees, especially at the lower steps of the organizational ladder, often have only a vague understanding of the strategic goals of the organization; consequently, their ideas are likely to be misaligned with the organization’s real needs.

To overcome this problem, each company must clearly define what innovation means specifically for it; accomplishing this in the format of an Innovation Charter is usually a good idea. This definition should include the areas of desired innovations (product development, business model innovation or operational improvements), time horizons, target customers, the expected size of the market and so on. These parameters will serve as a “mold” that would shape the creative energy of the company’s employees into ideas that really matter to the organization. Yes, the number of suggested ideas is likely to drop, yet those that make the cut will have higher value.

2. Create a pool of ad hoc innovation experts

 For practical purposes, just defining what innovation means for your company isn’t enough. People in the R&D may have a great technical insight, but they’re likely to struggle with creating a solid business case. At the same time, marketing people may come up with a great idea for a new product, but will have problems with articulating precise technical specs.

To overcome this problem, a pool of ad hoc experts can be created bringing together people from all departments involved in innovation activities: R&D, manufacturing, marketing, legal, finance, etc. The name of the experts (with the area of their expertise) could be placed on the company’s intranet, and every employee will be able to contact them should the need for a particular expertise arise. Again, this will result in improved quality of ideas going upward for review.

3. Create a separate Innovation Fund

The reality of large organizations is that their R&D budgets for the next year are usually drafted no later than the Q3 of the prior year. That means that new projects will lack immediate funding and have to wait for at least a few months to get paid for, at which point their utility may already be questionable (not to mention the detrimental effect of this delay on employee morale). Of course, funding may come from interested business units, but they already have a full load of their own stuff. To make room for “newcomers,” business units will have to kill their existing projects, something that I personally never witnessed in real life.

To solve this problem, a separate Innovation Fund can be created to pay for projects that fall outside the regular budgeting process. The amount of money in this Fund could be annually adjusted to reflect the company’s appetite for additional projects, but it must be fixed for the current fiscal year, meaning that the Fund will not become a “rainy day fund” to cover the company’s short-term financial emergencies (as sometimes happens to “innovation money”).

I doubt that the proposed three steps will ever make the bottom-up model of innovation superior to the top-down approach, but I do believe that they will increase the efficiency of the corporate “idea generation” process.

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