You don’t need a huge R&D budget to be an innovative business. A Booz & Co. research report reveals that the most innovative companies don't have the biggest budgets. Apple, for example, ranked number one in innovation and number 70 in R&D spending.

Research by AchieveGlobal concludes that the key to innovation is mobilizing the entire workforce to innovate from the bottom up, creating new ideas to make both major breakthroughs and ongoing incremental improvements. It's your front-line employees who are closest to the customer, after all. They're the first to know what's working and what isn't. They're also the ones who understand best how they can do their jobs better.

History certainly shows that some of the best ideas can come from employees far from the executive suite. 3M's Post-It Notes were developed from the bottom up, as were Google's Gmail, Google News, Google Translate, Google Froogle and Google Sky. At Toyota, more than 90,000 employee suggestions are adopted each year.

A big idea can percolate upwards from anywhere in the workforce. At a Best Buy store, salesperson Chris Applegate noticed customers' increasing interest in VOIP technology. He designed his own displays for Vonage products and trained co-workers to sell them. The program was rolled out chain-wide. At W.L. Gore, Dave Myers, an engineer working mostly on cardiac implants, had an idea for improving guitar strings. Capitalizing on the company's policy allowing employees to spend 10 percent of their time "dabbling" on their own ideas, he pulled together a team of other dabblers to develop what's now the Elixir strings line. It outsells competitors' products two to one.

Here are seven things to do so your company can innovate from the bottom up.

1. Lead the Way

Let it be known that you want the entire workforce to participate in the drive for innovation. Make your announcement with drama. Tell what you can about existing R&D activities. Identify your focus, whether it's cost savings, improved quality, revenue-generation, process improvements, etc. Explain how the initiative supports the company's goals. Create a memorable name for it.

Working with your management team—and a cross-section of the workforce—plan every aspect of the process: how employees can contribute their ideas, how ideas will be selected for development, how low-cost ways to test their feasibility will be created, the incentives you'll provide, the resources that will be made available, how you'll remove hierarchical barriers to innovation and how you'll communicate progress. Set ambitious but achievable goals that can be measured objectively—like the percentage of sales expected from new products, for example.

2. Create an Innovation Culture

Bottom-up innovation thrives best in a culture of openness, trust and free upward communications. New ideas will bubble up best if you remove the fear of failure and encourage dissent by making it known it's desirable—and safe—to question authority and existing systems. Honor the malcontents and contrarians. Create what India's Tata Group calls a "culture of dissatisfaction with the status quo."

Establish a safe environment for idea-generation at meetings, where every idea gets a respectful hearing and any criticism of the idea has to come with ways it can be improved. Make innovation one of the factors measured in performance reviews.

Businesses like 3M, Google, Best Buy, Amazon and W.L. Gore reap huge benefits from giving their employees free time to work on their own ideas. Making this successful is possible only if management has high trust in the workforce. Being told they're trusted is the sweetest music to committed managers' ears. It improves employee satisfaction, commitment and retention—as well as impressive results.

3. Involve Everybody

Hold planned and impromptu focus group meetings throughout the organization to discuss opportunities to make improvements or solve problems. Cross-cultural groups, it's been shown, provide more new ideas than homogenous ones do. Bring together people from different units and different levels. Mix the analysts with the "creatives" from design and advertising.

Japan's Esai Co. requires everyone in the company to take part in at least one innovation effort. Bridgeway Capital Management also involves the entire workforce in innovation. The employees identify the initiatives they believe should be supported, making selections from a list of projects that include innovation efforts as well as other activities. Honda in the United States brings together people from sales, engineering and development from facilities across North America to spark new ideas.

Boeing mixes Gen Y employees with experienced managers in an innovation program it calls Strategic Workforce Planning. All the participants are volunteers who've agreed to spend 24 hours working together over a three-month span to achieve a particular goal. Participants say the program features a good bit of "reverse mentoring" as the younger employees tutor the others on the new technologies.

4. Jump In With Both Feet

You can demonstrate your commitment to bottom-up innovation—and reap huge benefits—if you guarantee the company will develop ideas the employees create. You also can announce what you'll be spending. The more ambitious the funding level the more involved employees will become.

Shell funded a bottom-up initiative called GameChanger with $20 million. Any employee can present an idea. Those whose ideas appear promising make a ten-minute pitch to a board that awards development funds that average $100,000 but can amount to $600,000,within eight to ten days. Ideas that don't pass muster go on a database open to all so they can be tweaked and improved. The program has been so successful that it's been expanded; anyone outside the company can submit ideas for projects for a joint venture.

There are several lessons here: The program is called GameChanger to signal that its aim is to generate big ideas. Shell provided significant funding. It's open to all employees. Decision-making is fast. No idea is considered a failure and remains open for improvement.