20% time is a beguiling idea. Productivity is a function of passion; and nothing fuels passion like ownership. The problem with 20% time stems from the blurring of organisational focus and the diffusion of collective action that results from it.
So ... the problem remains: How to harness the passion of self-ownership, and steer it so that it is directed in line with the driving force and focus of the entire company ... so the group retains it's focus, and the individual retains his (or her) sense of ownership.
I can well imagine that the solution to this strategic challenge is going to be idiosyncratic to the business or industry in question ... but for many types of numerical software development, there is a real need for good tools and automation, so why not make a grand bargain: give employees some (limited) freedom to choose what they work on, but mandate that it should be in support of (well advertised) organisational strategic objectives.