There seems to be two ways (at least) to innovate.  I will let you decide which way makes more sense from a business standpoint.   I will not try to influence which way you feel is the better path to innovation.  The first way I call the 'propeller head' way.

In the propeller head method we look for interesting technology.  We then develop new products and ideas from these technologies.  Perhaps we apply these new technologies to existing products.  Once we find interesting applications of the technology we design products or demonstration systems using these technologies.  Products are designed for manufacture and prototypes are made.  Pricing is determined by the Cost of Finished Goods using standard markups.  Marketing creates sales material, and salesmen push the product onto the customers and sales channels.

The Apple I was developed using this method.

The second method I call the 'I just want to make money and I am not sure I really know what my customer wants' approach.  What enables this path is a desire to please and delight your customer.  In this method you first define what your companies and staff strong points are.  You next look at your customer and how they make their purchasing decisions.  You look to see how they are accomplishing their tasks.  You look to see how they are using your existing products.  You look for opportunities with the customers.  You look for new customers.  You look at your competitions customers.  You define your sales channels and explore new ways to distribute merchandise.  You haven't designed anything yet, but at this point you may start getting some ideas of where you could be going.  Before you even start to design you define what the price of the product will be and what the total sales will be.  At this point you can decide if and how you might protect the product with patents or trade secrets. To create patents you know what are the existing IP.   Finally, with this information in hand, you then can then start to define how the product might be implemented and all the drawings and paperwork required to make it.  You can make suggestions on technological improvements and cost reductions because now you have defined your customer.

Do you know who your customer is? ...And how well?

Finally, I want to add, the "I just want to make money..." approach does not have to be some big marketing program.  It could be as simple as watching the step's that production goes through in burning in your existing products.  That might lead to changes in how the firmware boots up.  That is a worthwhile task.