Some good insight on innovation (which includes reference to a book on the same topic) from a CEO that is often cited as one of the leading example of how to lead such efforts (A. G. Lafley, Procter & Gamble):
Changing the Game With Innovations - Interview - NYTimes.com
Q. You’re putting a lot of emphasis on outside voices. What about internal innovation?
A. The first thing we did was open the internal innovation architecture. We worked on getting engineers and biochemists to work with marketing, and we got people from our different businesses to work with each other.
Each of our businesses used to do its own research. But our core technologies span businesses. We can manipulate surfaces, for example, be they kitchen counters or blouses or hair.
Gil Cloyd, our chief technology officer, and I have set up what we call communities of practice. These are networks of nanotechnologists, of biochemists, of people who specialize in packaging, and who work for all the businesses. And we have regular innovation reviews, where we move ideas and best practices around our 22 businesses.
Q. And yet only half of your product innovations succeed. Why isn’t the rate higher?
A. I don’t really want it to be. Human nature is such that, if we push our people to drive the batting average up, they’ll try to hit more safely, take a shorter swing, go for the singles instead of home runs.
But we try to set milestones that innovations must meet at every step along the development process. As soon as they miss one, we allocate the resources to another product moving through the funnel. That’s another difference from the old days, when P.& G. let bad ideas go too far.