Google has a highly innovative company culture, one I try to model in my own business. One way they encourage innovation is by allowing employees to pursue pet projects on company time. Many terrific Google services, like the toolbar and desktop search, were created in this way; check out up and coming innovations at http://labs.google.com.
The reason I bring this up? Don’t be afraid to let your staff try new ideas. They have a different perspective than you, which means they’ll bring up ideas you might otherwise miss. Some will work, some will fail – but your willingness to innovate will set you apart from your competitors.
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This is a good point Wendy. The challenge is to find the space (real and imagined) that this innovation can take place. Take a look at something called The Maverick Challenge by Bill Taylor, a co-Founder of Fast Company. Here is a quick synopsis: (http://blog.fastcompany.com/archives/2006/10/06/take_the_maverick_challenge.html))
You may be familiar with it already, but it basically presents the notion that the only way companies can survive today is through constant, thoughtful and meaningful innovation.