Innovation is a complicated activity. And innovation takes investment. However, firms need to balance their investments in on-going products, which provide the cash to keep the firm afloat, and future products, innovations, to keep the firm in business in the future.

The innovation process includes the generation and collection of ideas; refining and culling the ideas; deciding where to invest, where to license; nurturing the ideas that match your business; and ultimately, productizing those innovations.

Trap: Allocating too much money to innovative projects and neglecting the on-going business. You need both.

"Managing innovations, standards and organizational capabilities," L. Martinich, Proceedings of the 2002 IEEE International Engineering Management Conference.

Abstract
Innovations and new product development provide the fuel for economic growth and the source for competitive advantage. Managing software innovation requires one set of organizational capabilities at the innovative, entrepreneurial phase and another set at later phases. Some early phase capabilities, such as flexibility, inherently conflict with some later phase capabilities, such as repeatability. The capability to manage both discontinuous, disruptive innovations and continuous, incremental innovations provides a sustainable competitive advantage. Technology managers who understand the phases of innovation, the critical role of standards and the various and sometimes conflicting capabilities needed to manage both new and mature product development, can better compete in today's rapidly changing environment. This paper describes a capability framework for managing both innovations and mature technology, grounded in both the literature and in the experience of successful and unsuccessful practices in start-up and mature software companies.

Winning through Innovation: A Practical Guide to Leading Organizational Change and Renewal Charles A. O'Reilly III, Michael L. Tushman, Harvard Business School Press, 2002

The Innovator's Dilemma, Clayton Christensen, Collins Business, 2003

Innovation: The Attacker's Advantage, R. N. Foster, New York: Summit Books, 1986