Top-Down vs Bottom-Up
John Spacey, August 29, 2021
Top-down and bottom-up are opposing approaches to thinking, analysis, design, decision making, strategy, management and communication. Top-down begins with the most general, fundamental or high level concerns and progresses towards detail. Bottom-up is the opposite approach that begins with details. The following are illustrative examples of the difference.
AnalysisA top-down analysis of an investment begins with general economic outlook and analysis at the level of a firm's sector and industry. A bottom-up analysis begins with details such as the management of a firm or the features of a product. Both may cover the same detail but progress in opposite directions. For example, top-down may quickly invalidate an investment based on its industry and bottom-up may quickly invalidate an investment based on its management team.
ThinkingTop-down thinking begins with high level information. For example, considering your priorities in life before choosing a career. Bottom-up thinking begins with details such as looking at the average salaries of professions to shortlist high paying careers.
DesignTop-down begins with the high level structure of a design such as the architecture of a building. Bottom-up begins with details such as the interior design of a floor in a building.
Decision MakingTop-down begins with major factors in a decision such as the price you can afford for a car. Bottom-up begins with details such as the color of car you want.
StrategyTop-down strategy is formulated by upper management or uses top-down thinking. Bottom-up strategy is proposed by each team and department with approvals moving up the hierarchy of an organization.
CommunicationTop-down communication flows from upper management down to the working level. For example, a corporate restructuring that is communicated by a CEO. Bottom-up communication flows from the working level up to executive management. For example, a quality problem identified by a quality control specialist that is reported to a manager to a director to the COO to the CEO.
Combined ProcessesProcesses can be both top-down and bottom-up such that both approaches are used strategically. For example, some strategies may flow from upper management downward and some strategies may be suggested by working level individuals and get approved all the way up a corporate hierarchy.
Iterative ProcessesMany processes involve iterations of top-down followed by bottom-up in a repeated process. For example, a shoe designer who begins with a drawing of the shoe who reworks the drawing after investigating the properties of a foam that will be used in the shoe.
Middle FirstIt is common to start somewhere in the middle between top-down and bottom-up. For example, an investor who begins analysis with a firm's business model with progression to their industry and later to details such as debt level.
Strategic ThinkingThis is the complete list of articles we have written about strategic thinking.
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