By now most of us have heard how Google is planning layoffs and other cutbacks given the current economic situation. If you haven't, you can find the info in this Wall Street Journal article. What I find most interesting is that they are significantly pulling back on their famous 20% rule, which basically enabled any employee to spend 20% of their time on their own pet projects. It was stated that the reason they are pulling back on these projects is because this system has not been able to produce any big new revenue streams to reduce the company's reliance on ad revenue through searches.
Many companies are finding themselves in a similar situation. Often, this type of program is started in an effort to encourage innovation. The prevailing thought is that if people are given lattitude to do whatever they are passionate about, then creativity and innovation will flow. What is missed in this approach is that one of the things people are most passionate about is solving problems. Think about the satisfaction people get when they solve a really tough problem. Think about the creativity that is necessary to find a way around an "insurmountable" roadblock. The best thing a company can do to foster creativity and innovation is not to say "Do whatever you want", but to say "If we can find a way to deliver this benefit in such a way that we achieve x,y, and z corporate goals, we will become the market leader."
Once your organization truly knows what innovation goals will ensure success, THEN you can leave people alone to do their thing. Magic will happen if you do this. Magic will not happen if you give people a blank piece of paper to do whatever they want, and then hope they will do something you will find to be of value. Remember, people are passionate about solving problems that will be useful to the organization. If you provide the right consumer centric problem, you'll be amazed how much creativity and innovation will follow.