April 21 2003 Forbes.com: The Innovation Factor: A Field Guide to Innovation - Forbes teamed up IP consultancy CHI to find the top small companies who are racking up numerous patents to find out how they became so innovative. The result is a great article with many great take-aways and lessons for everyone, regardless of company size. Some of these include:

1) Give people time to be innovative and work on exciting stuff they're interested in
2) Small ideas can make a big difference too! Recognise all good ideas - regardless of what they target
3) Keep people exposed to customers - it allows your employees to empathise with the customer and also to see how their work affects real people
4) Reward Innovation - look carefully at how you reward and motivate your people to innovate - both intrinsically and extrinsically (be especially careful with cash/other monetary based incentives however - they can have some serious demotivating and anti-collaborative effects too - see Imaginatik Research Note - The Perils of Rewards)
5) Capture Ideas!
6) Innovation with Execution is pointless
7) Teach your potential customers to be ready for what you will sell
8) Look for different uses of your current products as a starting point for an infinite number of new possibilities
9) Sometimes, the most innovative products are the things people don't think they need when they come to the marketplace

and there tons more great lessons to be extracted out of this article - a definate must-read!