Boost creativity by letting employees choose what they work on
The success or failure of some companies ultimately comes down to whether they are sufficiently creative or not. For video game developers such as Valve, for example, failure to come up with new ideas and produce new video games would indicate their failure as an organization. In these cases, a hierarchical structure with top-down control tends to lead to predictability and repeatability - the opposite of creativity.
In Valve's flat organization, where there are no bosses or managers, employees have the freedom to choose whatever they want to work on. This allows them to maximize their creative potential. By not having to follow any orders, their creativity is not limited.
Focus on hiring the most creative, innovative people
This seems obvious, but a big part of Valve's success is due to their emphasis on hiring the best people. This is specially important in this model because creative employees will be very busy, carrying out their ideas, but workers who lack creativity will struggle to find something to work on. And they will not have someone telling them what to do, since it's a flat organization with no managers.
Let employees come up with their own ideas
Employees are free to work on whatever projects they find interesting. They do not have to follow any specific orders or guidelines.