From the Ground Up

After our class discussions thus far regarding innovation, I found myself very curious to learn about more concrete examples of how innovation is working for businesses today. I managed to come across this interesting and applicable article on BusinessWeek.com (that, by the way, has an entire section of their homepage dedicated to the topic of innovation). Below is a link to the video accompanying the article that gives a great overview of the gist of the story.  (I can’t embed it.)

Trickle Up Innovation

The article highlights the fact that some companies, such as GE, have innovated their product development cycles essentially in order to combat the recent recession and shrinking retail sales mainly in the United States. As the article describes, companies are

…creating entry-level goods for emerging markets and then quickly and cheaply repackaging them for sale in rich nations, where customers are hungry for bargains. The term for this new approach is trickle-up innovation.

This is anything but the typical process of product development employed by companies. Usually, a company will develop a product for the rich nations who demand the innovation, and then sell the products second-hand to developing markets. At first glance, this seems like a relatively simple form of innovation. Is the reason some companies have difficulty with innovation simply because they think too hard about it? As vice-chairman of GE states in the article,

Often, the trap is thinking that innovation is about making the next iPod of BlackBerry. But maybe it’s a simpler, lower-cost version of those. The innovation in all of our businesses now is bringing costs down.

Might this strategy be extended to work for other companies as well in order to combat shrinking retail sales in well-developed markets?

What is even more interesting about this article is how GE was able to come up with this reverse product development strategy. One year ago, a global project manager in the GE Healthcare division had just finished up with testing of a new product aimed at the Chinese market. Upon returning to her offices in the states, she began to tell her other customers about the project. Surprisingly, she found that these customers had a high level of interest in and need for the product. As a result of this, she was able to spread word to higher-level executives in her division who in turn began to form focus groups deciding whether or not it would be feasible or logical to adopt this lower-cost product for the United States.

This article also caught my attention because it clearly demonstrates the opinion that Gary Hamel articulated in one of our readings. He states,

Decision-making will be more peer based; the tools of creativity will be widely distributed in organizations. Ideas will compete on an equal footing. Strategies will be built from the bottom up.

Clearly, the trickle-up innovation that GE has employed was developed by a non-executive, not forced upon her, and was entirely feasible because of the way in which the upper-level executives handled her suggestion. In this fashion, her innovative way of manipulating the product development strategy has laid the foundations for a new strategy that GE as well as other companies are beginning to employ.

Therefore, it seems to me that innovation is something that cannot only be forced, especially from the top-level management downward. Although, I do acknowledge the important role that the highest level management plays in fostering a culture and attitude conducive to innovative thought. However, I think that once there is pressure to innovate and be different, this type of atmosphere actually stifles innovation. Innovation appears to be a function of the corporate culture and the flexibility it allows for its workers to take out-of-the-box ideas and run with them, within reasonable bounds. What do you think?

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3 Responses

  1. I think that a lot of companies do think too hard about innovation. When I was answering the questions for today’s assignment on The Wire I even looked up the actual definition of innovation, and this is what I found:

    –noun
    1. something new or different introduced: numerous innovations in the high-school curriculum.
    2. the act of innovating; introduction of new things or methods.

    I never realized that the definition was so simple. I always assumed it meant some lavish technological introduction that had a huge impact on an organization. Businesses need to realize that even small changes can be innovations and can stand as the necessary starting point for further advancement.

  2. What a thorough and interesting post! I really enjoy the thoroughness of your writing week in and week out.

    I think it is also to differentiate between invention and innovation. Invention I think of as the creation of new technology. Innovation is the multi stage process of developing and executing changes, often based on inventions, but sometimes on more incremental, borrowing insights.

    I think the book chapter on the environment hinted at this by discussing reproducing vs innovating (was that the term?) in terms of new firms. But the same incremental vs radical, or exploiting vs exploring dynamic runs through all of this and seems like one of those inescapable truths that all of us need to remember.

  3. I agree with you Jordi that a distinction must be drawn between invention and innovation. To me, invention seems to be fueled through R&D efforts of an organization, while innovation cannot be attained through this function. Despite their differences, they both have the ability to profoundly affect either the functioning or purpose of an organization.

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