Researchers such as Harvard University's Teresa Amabile explained that employee autonomy is one of the most deciding factors affecting their creativity. "People will be more creative... if you give them freedom to decide how to climb a particular mountain," she wrote in her 1998 article How to Kill Creativity.
But having a strong creative idea flow is not enough. Innovative companies are willing to take risk with radical and highly unorthodox ideas, and are willing to place bets even with less-than-perfect odds of success.
And how are these two related to fear? It's simple. Two years ago, to illustrate this point, I asked someone I had just met in a chamber of commerce reception in Houston if he would give me the keys to his brand new Mercedes E-class so I can test drive it. He looked at me, somewhat annoyed, and said "no!" "Why?" I asked, and he replied: "because I don't know you, and I don't trust you with my car!" Makes sense. Letting me drive his car is a risk that he had no reason to take. "Let me change the scenario a bit," I added: "what if you were hurt, needing to be taken to a hospital, and this is really not where you want to leave your car parked overnight. Would you give me the keys and let me drive it to your home then?" He didn't think twice and immediately said "of course!" "How is that different?" I pressed. He had to think about that for a moment, realizing he gave me two opposite answers to the same question in less than a minute. He finally replied, triumphantly: "Because I didn't have a choice this time!"
Companies "think" and act the same way. When the company's status, financials, and prospects are positive, protected, and safe (or, at least, are perceived to be so), it doesn't take risks. It doesn't have to trust employees enough to let them make mistakes, and it doesn't have to apply resources to crazy ideas. However, when the company is fearful for its survival, when it is one mistake away from bankruptcy, or under attack by predatory competitors or changing market dynamics (or, at least, is perceived to be such)--its executives feel they have no choice. They have nothing to lose. Under this perception they tend to take risks (what alternative do they really have?), trust their employees, provide them with the freedom so critically needed to be creative, and implement those "crazy" ideas.
My own two-year study (From Startup to Maturity) ties the higher level of startup creativity to the focusing fear that startup companies have in common that causes them to trust employees with freedom, and the lower innovation levels of mature companies to the lack of fear perceived by leaders, which causes them to deploy "command and control" management.
So how would this explain why Apple, which has more than $40 of assets for every person on this planet, and which two weeks before the US has reached its debt limit in 2011 had more money in the bank than the US government, be so innovative? Surely this company could not be fearful for its survival enough to feel it "doesn't have a choice but to trust the employees and take risks on their crazy ideas". The answer is that the late Steve Jobs, as described through articles and his Walter Isaacson's biography, believed that the company was on the verge of bankruptcy many times during his two tenures as CEO. It didn't really matter whether the company was at risk or not. What mattered was that he thought it was.
Yes, in many cases when executives perceive that their company is at risk--it really is. In many cases when they perceive their company is safe--it really is. More often than not, executives perceive that the future of the company is safe, when in fact it is at risk. But rarely, as with Apple's Steve Jobs, executives fear for the future of their company, when in fact their company is safe. The perception is more important than reality. This paranoia is helpful. It causes executives to take risks and trust employees with autonomy, and to implement the craziest of ideas. Executives that do not fear for the future of their company, whether justified or not, will prevent creativity. And after all, as Gary Hamel said, "those who live by the sword--
... are shot by those who don't..."
So be afraid. Be very afraid!