Like other corporate leaders, chief information officers (CIOs) constantly strive to increase efficiency, implement best practice and deliver increased performance. Their goal is to make the business model work better. They seek to improve profitability through efficiencies of scale and cost reductions.

But there are limits to cost saving. In a global economy, competitors in lower-cost countries can beat you at that game. The best way to create value is to innovate your way ahead of the competition. You need to find new business models that create temporary monopolies where yours is the only show in town. You can do this by harnessing the creative power of your greatest asset: your people. The goal is to turn them into opportunistic entrepreneurs who are always looking for new ways of doing business.

A copy-machine operator at Kinko’s, a chain of copying and document services stores, noticed that customer demand for copying dropped off in December. People were too preoccupied with Christmas presents to do much copying for the office. So he came up with a creative idea: allow customers to use Kinko’s colour copying and binding facilities to create their own customised calendars using personal photos for each of the months. He prototyped the idea in the store and it proved popular.

The operator phoned the founder and chief executive of Kinko’s, Paul Orfalea, and explained the idea. Orfalea was so excited by it that he rushed it out as a service in all outlets. It was very successful and a new product – custom calendars – and a new revenue stream were created.

This kind of creative energy should be the goal for every organisation. How can you make all your staff into creative entrepreneurs? How can you energise people to see problems not as obstacles to success but as opportunities for innovation?

To build a truly innovative organisation you need to have a vision, a culture and a process of innovation.

Paint the vision

Start by painting a vision that is desirable, challenging and believable. If you can do this there are big gains for the organisation. Staff share a common goal and have a sense of embarking on an adventure together. This means they are more willing to accept the changes, challenges and difficulties that any journey can entail.

It means that more responsibility can be delegated. Staff can be given more control over their work. Because they know the goal and direction in which they are headed, they can be trusted to steer their own way.

People will be more creative and contribute more ideas if they know there are unsolved challenges that lie ahead. They have bought into the adventure so they are more ready to find routes over and around the obstacles on the way.

Vision statements should be short and inspiring. They should avoid vague cliches about outstanding customer service. The vision should not be restricted to today’s type of business; it must set a goal that gives employees enormous freedom in finding ways to achieve it. The pharmaceutical giant Glaxo SmithKline has a mission ‘to improve the quality of human life by enabling people to do more, feel better and live longer’. They do not define their mission in mundane terms of drugs or medicines or markets but in inspirational terms of helping people do more, feel better and live longer.

Just painting the picture is not enough. It quickly fades from view if it is not reinforced constantly. Great leaders take time to meet staff. They illustrate the vision, the goals and the challenges; explain to staff how their role is crucial in fulfilling the vision and meeting the challenges.

Empowering

You cannot deliver change on your own. The best source for the idea-generation and creativity needed for innovation is the team. To turn them into entrepreneurs who are hungrily looking for new opportunities you first have to empower them.

The purpose of empowering people is to enable them to achieve the change through their own efforts. They need clear objectives so they know what is expected of them. They need to develop the skills for the task. They need to work in cross-departmental teams so they can create and implement solutions that will work across the organisation. They need freedom to succeed. And when you give someone freedom to succeed you also give them freedom to fail.

People want to understand and agree what is expected of them. The scope of their freedom and responsibility must be agreed. They need training, coaching, reinforcement and encouragement. They need support in acquiring creative problem-solving skills, and encouragement to be brave enough to come up with radical innovations. Above all, by giving people trust, support and belief, you will empower them to achieve great things.

Overcoming fear

People are anxious about change. Change is uncomfortable. Change means winners and losers. It is natural that people will prefer to stay in their comfort zones rather than risk an embarrassing or costly failure. You should spend time with people encouraging them to undertake risks and reassuring them that those risks are necessary and worth taking. Fear of failure often inhibits people from pushing themselves to new limits. You have to show that doing nothing has its risks too; that staying in the corporate comfort zone is a dangerous option. You have to reassure them they will not be punished for taking risks, for worthwhile failures. Of course, taking risks means taking calculated risks not wild risks. Every employee who is undertaking a risky initiative needs freedom, but they need mentoring and guidance too.

Once again, communication is the key. Informed people do not fear change. As Dick Brown, former chairman and chief executive of EDS, put it: ‘People are not afraid of change. They fear the unknown.’

Using innovation techniques

Can creativity be taught or is it a rare talent possessed only by a few gifted individuals? The answer is that every one of us can be creative if we are encouraged and shown how to do it. We were all imaginative as children, but most people have their creative instincts ground down gradually by the routine of work. With proper training, people can develop skills in questioning, brainstorming, adapting, combining, analysing and selecting ideas. They can be the innovative engine your organisation needs.

Finding creative solutions is a process that can be built into the culture of the organisation. This is done by techniques, methods, workshops and a pervading attitude of encouragement for crazy ideas.

The goal is to change the organisation; to achieve a metamorphosis from a routine group of people doing a job to a highly energised team of entrepreneurs constantly searching for new and better ways of making the vision a reality. We want to use creative techniques to drive innovative solutions to reach the goal. But just encouraging innovation is not enough. You need to initiate programmes that show people how they can use creative techniques to come up with new solutions. People need training to learn the skills and develop the confidence to try new methods.

Innovation involves the generation of many ideas in response to a given issue or challenge. The ideas are then whittled down to the most promising. The key is to move rapidly to prototyping the best ideas.

Businesses that are fast to market carry out quick pilot tests rather than spending months in paralysis by analysis. For new products, innovation projects go through a number of evaluation gates to test feasibility, attractiveness and payback. Those that pass are given more funding.

The innovative organisation

Leading innovative companies such as Google, Apple, 3M, Virgin, eBay and Nokia set an inspiring vision, empower their people, allow time for innovation and prototyping and have a restless curiosity for the new and adventurous. They see technology as an enabler for innovation and new business models rather than as a way of improving efficiency in the current model.

Innovative organisations are constantly trying new products, new processes, new business practices and new partnerships. Their people share open, questioning, empowered and entrepreneurial cultures.

The leaders of these organisations know that innovation is the only way to remain agile and ahead of the competition. After all, it is the innovation of today that becomes the best practice of tomorrow.

Paul Sloane was managing director of Ashton-Tate and chief executive of Monactive. He is the founder of Destination Innovation, which helps organisations improve innovation. His book, The Leader’s Guide to Lateral Thinking Skills, is published by Kogan Page.

Best practice - Ten steps to creating a truly innovative and entrepreneurial organisation:

* Paint an inspiring vision.

* Build an open, receptive, questioning culture.

* Empower people at all levels.

* Set goals, deadlines and measurements for innovation.

* Use creativity techniques to generate a large number of ideas.

* Look outside for ideas

* Review, combine, filter and select ideas.

* Prototype promising proposals.

* Manage risk and accept failure.

* Kill off the unpromising projects and quickly roll out the successful ones.