Risk Taking Is Acceptable to Management
Management must recognize the risk/reward relationship and find organizational mechanisms for handling it. And it must communicate a clear understanding that reasonable risks are acceptable, since they are the handmaidens of progress. On the innovative front, two methods are available for dealing with risk: diversification and cheap failures. They can and should be used in concert.

Diversification allows companies to spread risk over many rolls of the dice, as opposed to betting the company on a single roll. For example, if one hundred individuals are taking calculated risks on innovative ideas, experience generally shows that some will be total failures, others will roughly break even, and some others will be very successful, producing a net positive outcome for all one hundred ventures. Because one can never know in advance which ideas will be winners and which will be losers, having a diversified "portfolio" of ideas in play makes sense.

Cheap failure is the second method for dealing with risk. A cheap failure is a project or experiment that is terminated with the least possible outlay of resources—-just enough to tell managers that "This isn't going to work."

You can download excellent powerpoint slides on Marketing Strategy and Marketing Management HERE.

New Ideas and New Ways of Doing Things Are Welcomed
The worst environment for creativity is one that is unwelcoming to new ideas. "Why bother to come up with new ideas," people ask, "when management shoots down everything?" Some senior managers are so bound up with the status quo that they have no enthusiasm for anything that's new or different. "We've been successful over the years by doing things this way, so why should we change?" An organization with this attitude is heading for trouble.

In fairness, management is compelled to shoot down good ideas when (1) those ideas lack a strategic fit with the business, or (2) the organization lacks the resources to pursue them. In these cases, however, management has a responsibility to communicate its reasoning to employees.

Information Is Free Flowing
Information can stimulate thinking, which leads to idea generation. Here's why. As explained earlier in this book, many creative ideas are formed at the intersection of different lines of thought or technology. For example, Harold is working on vehicle steering systems; Maude is an expert in electromechanical applications. When these two communicate and share information, they get an idea for an electronic steering system that hasn't yet been considered.

In hierarchical firms, information is often hoarded as a source of organizational power. Information flows are controlled and channeled through the chain of command. People must demonstrate a "need to know" to have access to certain information. This control impedes the catalytic function of communication and limits opportunities for different pieces of information to intersect and combine in people's minds. For example, if Harold and Maude are not able to communicate directly with one another, their new idea may not form.

Managers can encourage the free flow of information in many ways: through e-mail, the physical co-location of team members, joint work sessions, and regular brown-bag lunches. This topic is explored further in the section "Enriching the Physical Workplace."

Employees Have Access to Knowledge Sources
Just as employees must have free-flowing lines of communication between one another, so too they need access to sources of knowledge—both inside and outside the organization. That knowledge is often the raw material of creative thought.

Some companies have developed elaborate knowledge management systems to capture knowledge, store it, and make it easily available for reuse. These systems help ensure that what was learned by someone in Unit A doesn't have to be learned anew by someone in Unit B. Lee Sage has described DaimlerChrysler's Engineering Books of Knowledge (EBOKs), a knowledge management database containing technical data, lessons learned, and best practices that is made available to the company's engineering community. The purpose of the EBOKs, according to Sage, is to capture the expert knowledge of technical employees and use it to improve engineering productivity, speed new product development, and avoid repeating past mistakes.' Consulting and tax accounting companies use knowledge management systems in similar ways.

Another way to help employees tap sources of internal knowledge is through the creation of communities of interest. A community of interest is an informal group whose members share an interest in some technology or application. The group might be a dozen engineers from different operating units who share a common interest in adhesive applications. It might be a group of managers interested in benchmarking techniques. Whatever the interest may be, newsletters and periodic meetings held by these communities provide opportunities to share knowledge and spark the imagination.

External knowledge is equally important as a stimulant to innovation. External knowledge invigorates and adds vitality to organizations. Employees access that knowledge when they have opportunities to attend professional and scientific meetings and to visit customers and benchmarking partners, and when outside experts are brought in to share their know-how via lectures and workshops.

Good Ideas Are Supported by Executive Patrons
Organizations need people in high places who will champion good ideas and provide them with moral support and protection as they travel the bumpy road toward commercialization. Leifer and colleagues observed a form of executive patronage in each of the radical innovation projects they studied. They concluded, for example, that IBM's silicon germanium computer chip project would not likely have survived without the implicit protection of two senior IBM executives, who over a period of years provided under-the-table resources to keep that project alive. They observed the same at General Electric, where a now-successful digital x-ray technology would have died on the vine had it not been for the backing of two high-placed executives—one being then-CEO Jack Welch.

If you had a great idea, would anyone in senior management have the interest and the courage to act as its patron? Would that person provide protection and resources?

Innovators Are Rewarded
Creativity will not flourish in the absence of a reward system that encourages individuals to stretch beyond the bounds of normal work. Creative energy is quickly dissipated and must be replenished somehow. Rewards serve this purpose. Rewards can be based on the following:

• Recognition: Acknowledging individual or group achievement with a plaque or public announcement
• Control: Allowing an individual or group to participate in decision making or giving the individual or group the resources needed to carry out a project
• Celebration: For example, acknowledging a successful new-product launch by throwing a party
• Rejuvenation: Providing time off or away from the task

Source of Reference:
Harvard Business Essentials, Managing Creativity and Innovation, HBS Press. You can obtain this fine book here