As the legend goes, Sir Isaac Newton discovered gravity when he was sitting under a tree and a falling apple hit him on the noggin.  Rubbing the bump on his head, Newton wondered why apples fall to the ground, rather than floating off into the great blue yonder.

The law of gravity was only one of Newton's many discoveries, which were so numerous and varied that many consider him the father of modern science. He had an intense interest in mathematics and nature, which ultimately led him to make important discoveries in the areas of planetary motion, light, and color. He also helped establish the field of calculus. Not a bad résumé, is it?

These discoveries were so significant, it's difficult to imagine where we would be today without them. However, it's also interesting to imagine whether Newton would have been as prolific in today's world. What if he had worked within the confines of a job description, a budget, cost-benefit analysis, a lean or Six Sigma environment, committees, and memos? Not to mention reporting to a division manager, who reports to a chief executive officer, who has to justify her productivity to a board of directors.

Would a modern-day Newton have the freedom to sit and think under an apple tree? I doubt it. Let's look at a more modern discovery, the 3M Post-it Note, for example. Art Fry, a 3M researcher, attended a seminar about an adhesive the company had invented but didn't know what to do with. Fry realized the adhesive's potential application when he used it to make a bookmark to replace the slips of paper that kept falling out of his church choir hymnal.

And guess what, folks! Fry was working within the constraints of a corporation. Engineering and production told Fry that his idea for a permanent bookmark would be too difficult to produce. Marketing said people would never pay for a product like that when they could make no-cost scrap-paper bookmarks. Eventually a division vice president was convinced to test the product with consumers-and the rest is history. 3M is now celebrating the 25th anniversary of Post-it Notes, despite initial reaction to Fry's idea.

Without the vision, enthusiasm, and leadership of people like Fry and Newton, our society would not be nearly as advanced as it is today. However, I wonder how many untold stories there are of good ideas squandered and lost due to oppressive management and energy-draining processes.

Too many business leaders are managing for productivity, force-feeding job descriptions and bureaucratic infrastructure to their employees, telling them to just do their jobs and keep their mouths shut and heads down, or else get hit by the bullets flying over the fox holes. This is opposed to managing for innovation by placing high value on an organization's intangible assets, such as the talent, leadership, and creativity contained in the minds and souls of its people.

Make People a Priority

Sam Walton once remarked, "How does Wal-Mart do it? They always ask, and the answer is always the same: people. Not only the right kind, but interested, dedicated, enthusiastic, and loyal people. That's what makes our company exceptional and what enables us to continually achieve the seemingly impossible."

Walton knew that organizational capabilities, like the ability to innovate or respond to changing customer needs, are key intangible assets that are nearly impossible for competitors to reproduce. It's easy to copy product features, technology, or market strategy, but very difficult to copy the identity and personality of an organization.

Assets such as the skills, talents, and expertise of an organization's people are impossible to touch, yet they are there. They define what an organization is and what it's good at doing, but they are difficult to measure. So managers often pay less attention to them than to plant and equipment, for example. That's a mistake leaders make when they manage for productivity instead of managing for innovation, and it's a mistake that many leaders of big corporations are making today.

For much of the 20th century, innovation was dominated by big companies such as GE, DuPont, AT&T, and IBM, all of which had beautiful, spacious research labs full of engineers creating world-changing innovations. Their company cultures celebrated the power of their people's capabilities. Now, their R&D budgets and investments in staffing, training, and compensation have shrunk-and so has their innovation.

Where is revolutionary innovation found today? It's in small companies that don't have the luxury of big budgets. Out of necessity, they rely on the brainpower, creativity, and capabilities of their people. Big pharmaceutical companies rely more and more on partnerships with small biotechs to develop new drugs. Intel invests hundreds of millions of dollars each year in venture capital to find new ideas. IBM has made strategic alliances a major strategy, and Procter & Gamble gets more than 30 percent of its innovations from outside its organization.

More Than Lip Service

An organization's capabilities are the result of investments in staffing, training, compensation, and communication. It doesn't happen by itself; leaders must make their people a priority to get a return on their human capital. Step up to the plate and put your money where your mouth is! Organizations that make extraordinary investments in their people's education and training often benefit from them in extraordinary performance in a variety of financial results.

Need proof? Bassi Investments, a money management firm based in Maryland, has measured the effect of spending on education and training on the stock prices of 575 publicly traded firms. Bassi created a live portfolio of companies that spend aggressively on employee development and a model to track their performance. The firm's findings prove that companies that invest in training and education outperform those that spend less, and that a higher level of investment in training is a predictor of future performance.

In other words, when your quarterly earnings fall, don't fall prey to the knee-jerk reaction of cutting perks and training or downsizing. It might help performance in the short term, but in the long term it actually hurts.

By contrast, investing in people can't be approached as a short-term solution. Instilling a culture of managing for innovation takes time. It will require a complete overhaul of management structures and processes. The change is like the concentric circles that form as a rock is thrown into a pond. It ripples into processes, structures, and strategies, and eventually grows into organizational capabilities.

Encourage Suggestive Behavior

An organization that's managing for innovation encourages people, takes risks, and isn't afraid to learn from failure. It's easy to celebrate success, but failures provide incontrovertible proof of what doesn't work, and that's invaluable information. If the Titanic hadn't hit the iceberg, many more "unsinkable" ships would have been built after her. The failure of the Titanic actually contributed more to the design of unsinkable ocean liners than a successful voyage would have. So encourage people to take risks, even though they might make mistakes.

One simple way to encourage innovation is a suggestion box. Before our world was wired together, organizations would hang wooden suggestion boxes on the wall to encourage new ideas and innovation. But then the dilemma was what to do with the ideas. It takes time and money to investigate them, and maybe one in ten is worth pursuing. The majority of people, whose ideas are rejected or ignored, become demoralized and don't learn how to come up with better ideas.

There's a better way now. Many organizations have created suggestion boxes on their internal computer networks and invite the entire organization to participate. Employees evaluate and make comments on each others' submissions. Their responses filter the ideas to help management focus on the most promising ones. People get to see feedback from their peers and learn if and when their ideas are taken seriously. If not, they learn the reasons why.

There are examples of open suggestion boxes on the Web, including one at www.whynot.net, where ideas include putting foot pedals on refrigerator doors and making brake lights shine brighter when a driver slams on the brakes. Look it up for inspiration.

Managing for innovation is all about how you look at things. Stop firing bullets over foxholes and start measuring your return on human capital. Take the uncommon path of investing in training and education. Create a culture of inviting suggestions, taking risks, celebrating new ideas, and learning from failure, and your organization will produce uncommon results. The apple doesn't fall far from the tree, after all.