In this video, Anjali Joshi, Director of Product Management at Google, discusses the Company's policy of allowing employees to devote 20 percent of their workweek to pursuing innovative ideas.
As Joshi mentions, it is not a strict policy of time-keeping, but more of an informal policy that signals to employees that it is ok to undertake other projects. In this way, the 20 percent guideline perhaps serves more as a cultural encouragement in what might otherwise be a stifling big-company environment, rather than necessarily producing direct results (which would require other factors).
Also, apparently Google's approach isn't new: 3M introduced a 15 percent rule long before Google's 20 percent, and apparently the Company credits that guideline for producing innovative products, including the famous Post-It Notes. There's an interesting interview with Geoff Nicholson, a former senior executive at 3M, in CFO Innovation Asia. Nicholson makes a key point that's often overlooked in our risk-averse business culture:
An important message that is repeated constantly to 3M employees is, "If you have a good idea, do it. If you fail, nobody will beat you up for it; no one will be going around, measuring the success of your ideas." For companies that are not prepared to fail, Nicholson suggests that they forget about innovation. His reason: “Innovation is a risky business and you are going to fail sometimes.”