A recent email from Harvard Business School does a nice job of summing up the efforts of its faculty to discover what companies can do to increase their capacity for innovation. Some of these findings have already been written about in this blog, while others are new. Here’s how the researchers suggest managers can do a better job of creating and managing innovative ideas:

1. Prizes make a difference. Today, the best-known prize for innovation is probably the Ansari X Prize, which offered $10 million for the first privately funded manned spacecraft that could break through the earth’s atmosphere within two weeks. There are other X Prizes now being offered for designing fuel-efficient cars, reaching the moon, and sequencing the human genome. But skeptics claim that these prizes don’t spur people to create things they wouldn’t have created anyways-they just reward existing behavior.

Josh Lerner and Tom Nicholas, both of Harvard Business School, and Liam Brunt of the Norwegian School of Economics, set out to find out if prizes really matter. The team looked at a series of awards given by the Royal Agricultural Society of England during the 19th century. The Society offered dozens of awards for the invention of new farming equipment and techniques. By analyzing databases from the British Patent Office, the researchers found that the number of patents and patent renewals shot up in various specialties the years that prizes were awarded. Interestingly, it didn’t matter if the prize was cash or a medal-the effect was the same.

2. Encourage baby steps. Teresa Amabile of Harvard looked at the process that drives the creative spark. She asked more than 200 knowledge workers to keep journals for three years, recording those instances where they felt they were most successful and most frustrated at work. She found that steady incremental progress toward a meaningful goal did wonders to motivate people, even if the fruits of that labor weren’t yet visible. She suggests that managers set clear, achievable goals, allow employees freedom in how they try to reach those goals, and try to remove distractions or time pressures. Together, these steps will help create an environment where creativity can turn into innovation.

3. Let people choose their work environment. Some people prefer working in a competitive environment, while others prefer to work on a team. As reported earlier on this blog, Harvard’s Karim Lakhani, with?Kevin Boudreau from London Business School, let about 250 computer programmers choose if they wanted to compete against others or work on a team. Another 250 were randomly assigned to one setting or the other. The programmers were then asked to solve a difficult engineering problem. Those who got to choose their work environment did, on average, twice as well as those who didn’t. Letting them choose their work environment had more of an impact on performance than offering a $1,000 to those who excelled on the test. incentive for excelling on the test.

4. Give up control. In some situations, say Harvard’s Carliss Baldwin and Massachusetts Institute of Technology’s Eric von Hippel, it’s the buyer or consumer who’s in the best position to innovate, not the manufacturer. They use rodeo kayaking, where competitors modify their boats and other gear to better perform stunts, as an example. Competitors who came up with successful innovations eventually started building kayaks for others. Later on, established kayak manufacturers started selling their own versions.

In order for this sort of innovation to thrive, the researchers say there must be a passionate community of users who are ready to experiment, and the cost of doing so must be low enough to encourage it. In the case of open-source innovation, where a group of users come together to create something new, the cost of communication must be low enough to make it easy to collaborate.

5. Encourage cross-cultural ties. Roy Chua, of Harvard, believes that creativity is not necessarily about coming up with something totally new. Instead, he says, “most often it is about connecting ideas to create something different. If you have a multicultural social network, you are more likely to receive ideas that are different.” Chua surveyed a group of media professionals about their social networks, and then asked each to brainstorm about the future of the newspaper industry. A group of outside judges ranked the ideas based on how creative they were, and it turned out those professionals with ore multicultural social networks came up with more creative ideas. Chua conducted a similar experiment with college students, surveying their social networks and asking them to come up with a new advertising campaign for a fruit drink. Those with more contact with different cultures came up with more creative ideas.

How do you get your own creative juices flowing? What can companies do to become more innovative?

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