If you want to encourage innovation inside of a larger company, go read http://w...

If you want to encourage innovation inside of a larger company, go read http://www.amazon.com/Winning-New-Products-Accelerating-Proc.... You'll get a lot of ideas and some very practical advice for addressing that problem.

Basically what it comes down to is, "Start with lots of ideas, and have a rigorous process for making most of them fail fast with a minimal allocation in resources."