Probably the greatest hindrance to innovation is fear. When a business encourages or tolerates a culture of fear, it's basically dramtically reducing it's creative and innovative potential.
Because the very nature of innovation implies doing something not done before, its very nature means that it has a good possibility that it will fail. Failure should be a part of the everyday cost of doing business and an accepted part of the culture.
The major reason being that people must be comfortable in an atmosphere where they are free to fail. If they are free to fail they then know that they are free to fly! The release of people from fear gets their creative juices flowing and makes them want to create something or add to something that will greatly enhance a specific product or service.
We need to make it clear that it is the fear of trying new things that needs to be gotten rid of. This doesn't mean that somebody should be allowed to take advantage of the company by not trying to do their best. It means that when you remove the fear of failure, people won't want to take advantage or employees will - through peer pressure - make sure that they are performing to the fullest of their abilities.
That's a great side benefit of innovation: It brings standards and expectation much higher throughout the company and instills pride in the people working there. As a result they will self-manage without even being prompted to.
Don't get in the way of your employees by intimidating them, but get rid of every obstacle that hinders them from being released. Then get out of their way and give them all the credit.
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