According to Scott Berkun, author of "The Art of Project Management" and software industry veteran, allowing employees to innovate is about saying "Yes". (full interview here):
SN: One of the things I've been wondering about is
the idea of “source of innovation” within a company. Do you think it's
actually possible to create an environment in which innovation occurs?
SB: Oh, that's a really good question. I think that
you can create an environment, and it's very simple. I think that
whoever has power over a budget, and whoever has power over what
features are included in a product or go up on the website, they enable
innovation by saying “yes.” That's really the fundamental thing that
they have to be willing to do. When someone shows up with an idea —
“Hey, why don't we change the navigation system from this older design
to this new design I've been thinking of? Can I get some money to go
and prototype this?”— all that has to happen is the person with power
says, “Yes, I will give you a week to go and prototype that and we will
review it when you have the prototype, and then we'll consider actually
making those changes.” And once everyone witnesses the person in power
saying “yes” to a new idea, then they'll be comfortable bringing
another idea, or a third idea. And then all of a sudden, you have an
environment that is very receptive to new ideas and innovations, as
opposed to the more common complaints about environments, where new
ideas are like wanted men: They're shot down pretty quickly.
In software, we talk about saying "No" by default to keep interfaces simple and intuitive. This is an interesting contrast.