An Enterprise version of Digg, designed to help rank articles on internal blogs and wikis will revolutionize the way that most companies generate innovation.

Before they can take advantage of an Enterprise Digg, companies will have to start implementing Web Office Technology. Web Office technology represents the next generation of tools for knowledge workers. Microsoft’s version is called Office Live, but Microsoft is late to the party, with companies like Google, Flock and Zimbra giving a brief indication of what is possible with these new tools. ( For more examples, see this Web Office Directory. )

As with the introduction of all new technology, Web Office technology will radically alter the way that companies are managed. Or, put another way, to take full advantage of these new technologies, large organizations will have to alter the way that they approach designing their organizational hierarchies, incenting their employees, and, most importantly in today’s globally competitive environment, management will have to change the way they approach generating innovation.

Web Office technology will give every employee the power to communicate with everyone else in the organization in an efficient way. In my essay, “Turning Knowledge Workers into Innovation Creators”, I explain why most companies will eventually set up a series of Blog Types such as Bio Blogs, Client Logs, Product Blogs, Project Blogs, and Expert Page Blogs. In a company of 100,000 people, there will be 100,000 Bio Blogs. For every major Client, there will be a Client Log. For every major Product, a Product Blog.

In this environment, an Enterprise Digg would give employees a structured way to literally vote on good ideas.

In “Turning Knowledge Workers into Innovation Creators”, I have argued that in today’s hyper competitive environment, companies need to generate constant innovation. To accomplish this, I argue that companies need to change the way they treat knowledge workers, elevating their knowledge workers to the powerful roll of collaborators in common goal of generating constant innovation.

What is important to realize is that this requires a very flat organizational structure. No one person is formally in charge of driving the innovation. Instead, the company will have to rely on the spontaneous organization characteristic of any emergent system. The idea here is simple: when individual agents operate in an environment that encourages random interaction, these agents can, spontaneously, generate order. More specifically, these agents can generate predictable outcomes. The example most people are familiar with is the free market economy.

The best way to generate constant innovation is to rely on a self-organizing system, with no one person in charge. In other words, don’t manage people to produce innovation, instead, cultivate an environment where your innovation creators, your people with innovative ideas, can succeed when they try to turn their ideas into reality.

To many people this sounds like a ridiculous notion. Several senior executives have told me bluntly, “Well, that’ll just lead to chaos!”

These old-school managers are wrong. What’s more, in today’s environment of hyper-competition, if they stick to their current dictatorial, micro-management style, these old-school managers will loose on two fronts. First, they will not be able to keep up with competitors that rely on a more open approach to innovation. I’ll highlight proof of that in a minute. Second, these micro-managers will not be able to keep the highly talented people they have hired to work for them.

This second point requires some explanation. Today, more and more people are entering the work force with advanced degrees, such as MBAs, Masters’ Degrees and PhDs. Old-school managers need to realize that these new recruits are at least their intellectual equal. In addition, with tools like Google and Wikipedia, it will not take these young employees long to learn everything they need to complete any specific task. These recent grads have been trained as experts in just-in-time learning. They do not need 5 years of experience to get up the learning curve. Many of them can do it in 5 minutes. When you are managing highly capable people like this, if you are trying to innovate, you must treat them as equal partners. This means providing them with full information, and respecting their input.

Let’s return to the first assertion that old-school micro-managers will not be able to generate innovation at the same pace as companies that rely on a self-organizing systems, with no one person in charge.

Is this true?

Here are two examples to prove it.

The first is Google. Google relies on its engineers to generate innovation. Google even requires that their engineers spend 20% of their time on their own projects.

In a recent Business 2.0 article, Eric Schmidt, Google’s CEO described how Google comes up with new products this way:

Business 2.0 - Does Google have some kind of grand strategic plan for the new products it creates?

Eric Schmidt - Virtually everything new seems to come from the 20 percent of their time engineers here are expected to spend on side projects. They certainly don’t come out of the management team.

Google is a leading user of internal blogs and enterprise Wikis.

The second example is Toyota. It’s an example that Schmidt highlighted in the Business 2.0 article. Toyota’s production lines have a rip-cord. Anyone on the Toyota line can pull the ripcord, and stop production if they come across a problem.

This is a truly massive form of empowerment, and a total decentralization of power. Toyota uses that to decentralization to produce a consistent stream of the highest quality ratings in the automotive world.

Google’s massive grow, especially when compared with Microsoft, and Toyota’s massive growth, especially when compared with GM, are both great examples of innovative companies that are trouncing their competition.

Management of an emergent organization is tricky, because it is not direct management. Instead, manager only have access to oblique tools of control, rather than direct tools of control.

In the case of an Enterprise Digg, setting up categories which Digg categories are included, such as “Innovative Product Ideas” is one of the few oblique tools that management will have. I detail others in “Turning Knowledge Workers into Innovation Creators”, when I list the characteristics of an environment that fosters innovation creators.

Just as central bankers, like Allen Greenspan, are able to control and guide the growth of a whole economy, thorough bubbles and crises, it is important to for managers to realize that they can foster innovation using oblique controls.

And, using the free market as a continuing example, it is also important for managers to realize that too much control stifles growth and innovation.

That’s why most companies will eventually start to use internal enterprise blogs, enterprise Wikis and an enterprise Digg to generate innovation.