"All organizations," management consultant Peter Drucker said, "need one core competency: innovation." Every company wants to stand out, to be ahead of the curve. But there's often a misconception that being innovative means generating a lot of new ideas.

Innovation goes beyond just coming up with new ideas. The foundational key to success in becoming an innovative company is to create a culture of innovation—an environment that encourages creative ideas and innovation on an ongoing basis. If you seriously want your business to innovate, you have to establish innovation as a strategic imperative. You do this by making innovation one of the top items on your leadership agenda—not just once or twice when you first announce it, but consistently. This gets the message out that innovation isn't just a management pep talk but a true commitment.

You also need to clearly define what innovation means for your company. Are you looking for insights on improving customer service? Are you soliciting ideas on how to break into new markets? Do you want people to focus on trend spotting? Idea generation needs guidance, and if you don't guide people on what you need, you may get a stream of ideas that aren't aligned with your strategic goals.

Having innovation as a core strategy throughout your company creates a sense of urgency. Without it, pursuing innovation is a directionless and haphazard path. You can protect your time and investment by first laying the foundation for a culture of innovation.

Start with an assessment of your readiness to embark on an innovation journey. What are the core strengths you can capitalize on? What weaknesses do you need to address? Professors Jay Rao and Joseph Weintraub designed a handy assessment to measure a company's innovation quotient. The assessment analyzes 54 key elements to help you determine how conducive your company's current culture is to innovation. The Situational Outlook Questionnaire is another instrument that can help you assess your readiness for innovation.

Your Leadership Style

Your behavior as a leader can make or break innovation. A recent survey revealed that only 43 percent of employees think their boss is open to unique ideas and opinions. As the leader, you're often the one to hear a new idea first—and the one who decides if the idea offers promise.

So it's important to analyze your behavioral patterns. Consider what aspects of your daily leadership style might block innovation:

• Do you often dismiss others' ideas offhand because you're pressed for time?
• Do you immediately look for the reason an idea won't work rather than remaining open to exploring its possibilities?
• Do you ask for new ideas but not use them?

If you regularly shoot down or shelve ideas, people will stop coming to you with ideas. And while it's not possible to embrace every idea that employees submit, it's important to get back to people to let them know that your reasons for shelving the ideas aren't flimsy. For example, it may be due to a lack of resources or bad timing. Communicating with people reinforces that you respect them and appreciate their effort, and ensures that they won't stop offering new ideas.

Another innovation killer is confusing people with conflicting messages, such as asking people to come up with new ideas, while at the same time pushing them to focus on short-term objectives. Confusion can breed inaction—pretty soon, employees stop developing new ideas. Instead, they play it safe by focusing only on short-term goals and quick wins.

Avoid this by allowing employees some unstructured time. Give them the time to experiment with new technologies, explore new ways of doing things or meet with others informally to discuss newly minted ideas.

“Innovation," Steve Jobs said, "comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realized something that shoots holes in how we’ve been thinking about a problem. It’s ad hoc meetings of six people called by someone who thinks he has figured out the coolest new thing ever and who wants to know what other people think of his idea."

Make some space for people to tinker with innovation. Set up processes for employees to share ideas at any time of day, on weekends and during off hours if they so choose. Brainstorming and collaborating on new idea creation doesn't have to happen only in face-to-face meetings. Make available digital brainstorming and collaboration tools such as Yammer, MindMeister or GroupMap, to name a few. Some of your employees' best ideas may surface in a more organic work environment.

Your Workplace Climate

The climate in your company is a composite of the prevalent values, norms, attitudes, behaviors and feelings of the people in your company. In a nutshell, a company's climate is "how things are done around here." One of your chief tasks as a leader is to establish the right climate so people are inspired and encouraged to innovate. Here are a few things you can do that will have a powerful influence on people's willingness to share their ideas:

1. Eradicate fear. Fear is an innovation crippler, so create an environment where people feel free to take risks. This means people feel safe to propose novel ideas that aren't ridiculed, no matter how crazy they sound. It also means you tolerate mistakes, and failures aren't penalized. View them as innovation lessons.

2. Encourage bottom-up innovation. Do away with the notion of a top-down approach to innovation. As Seth Godin puts it, "Ideas spread horizontally." Solicit ideas for improvements in every facet of your business. Don't just rely on the select key employees who are viewed as "innovative thinkers"—ideas can sprout anywhere, so invite everyone to contribute. Google, for example, expects every department in the company to innovate. Forget the organizational chart when you invite people to meetings—invite anyone who has a skill or talent related to a project you're working on and give them an opportunity to provide some input. Don't allow more aggressive or senior staff to shoot down an idea before all the potential benefits, not just the downsides, are explored.

Visit employees at their cubicles to encourage them to come forth with any ideas they have. When an idea is suggested, jot down some brief notes and acknowledge all contributions. Use idea management software to capture, review and implement ideas from across your workforce.

3. Provide autonomy. Give people more freedom to decide how they'll do their job, when they'll do it and where they'll do it. All you're interested in is the result, not the process. If you hire the right people, you can do this. Clearly state the results you expect from each employee and how you'll hold them accountable, then give them the breathing space they need to do their jobs. This is what CultureRx founders Cali Ressler and Jody Thompson refer to as ROWE: Results-Only Work Environment.

Research on the organizational climate for creativity and innovation proves that freedom is a key component. In a climate where independent thinking and behaviors are encouraged, people make more contacts and give and receive information freely, they discuss problems and alternatives, they plan and take initiatives, and they make decisions. The opposite climate promotes passivity and anxiety. This is when people are rule-bound and feel hemmed inside rigid boundaries. Think about removing hurdles, cumbersome processes, and unnecessary policies and procedures that slow everyone down. These are innovation shackles. (For more information on this, see my article "Stupid Workplace Rules That Destroy Employee Morale.")

Your Talent Pool

Have processes in place for hiring the right people for innovation. The traditional interview process may not serve you well for spotting these talented individuals. Lisa Bodell, a globally recognized innovation leader and futurist, has developed 14 interview questions to help you hire your next innovator. Consider, as well, using a screening tool for innovation.

Numerous studies have shown that diversity is a key driver for innovation; a diversity of backgrounds, experiences and viewpoints is essential for generating new ideas. For instance, some team members may be particularly talented in the brainstorming phase of idea generation. But a multitude of ideas needs be narrowed down so you can select the ones that have the best potential, and this requires a different set of abilities. Finally, concepts need to be transformed into reality. The person who's adept at brainstorming and pumping out ideas may not necessarily be the right person for the execution phase, which is the most important one of all. Google co-founder Sergey Brin put it best: "But the fact is that coming up with an idea is the least important part of creating something great. It has to be the right idea and have good taste, but the execution and delivery are what’s key.”

A tool that could aid in the way you approach the innovation process is the Myers-Briggs Type Indicator. It will help you gain some insights into people's personalities so you can harness the personality differences in order to have a mix of idea generators and implementers on your team.

You should also include innovation as part of the performance review process. Rate people on their ability to generate ideas that increase efficiency or save time. Tie the results to a reward system that clearly incentivizes idea generation. Above all, rate managers on how they lead innovation. For example, how receptive are they to new ideas? Do they create and nurture an environment that supports creative thinking by everyone on their team? Do they respond quickly and decisively to capture a new opportunity, or do they sit on it and let it go by? Do they encourage people to challenge the status quo? Do they pioneer out-of-the-box thinking?

It's also worth developing some benchmarks for gauging the success of your innovation initiatives. You can do this with the introduction of innovation metrics designed specifically for your unique situation. If you need help getting started, check out "A Beginner's Guide to Innovation Metrics," provided by Strategos, a company founded by Gary Hamel, a professor at the London Business School.

Innovation will help you compete for the future and is essential for the sustainability of your company. “The innovation point," engineering professor W. Arthur Porter says, "is the pivotal moment when talented and motivated people seek the opportunity to act on their ideas and dreams.” Help these ideas and dreams come to fruition by growing a company where innovation can flourish.

Bruna Martinuzzi is the founder of Clarion Enterprises Ltd. and the author of two books: Presenting with Credibility: Practical Tools and Techniques for Effective Presentations and The Leader as a Mensch: Become the Kind of Person Others Want to Follow.

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