Incremental and Disruptive Innovation
If you were to think of innovation as a spectrum, on the most conservative end of the spectrum is incremental innovation. Really, on the MOST conservative end of that spectrum are concepts like product roadmaps and next product releases. Incremental innovation is simply the next version of a product or service - the most likely next release or product. As you proceed along the spectrum you'll come to concepts like breakthroughs - these can represent a distinct change in a technology or service or business model from the existing solution. Finally, as you edge ever closer to the most radical end of the spectrum, you'll come to the disruptive ideas - ideas that significantly change an industry or a marketplace, and force competitors to adjust their view of the world.
Incremental ideas are fairly easy to acquire. Folks in your business are walking around with them right now, all the time. They are natural extensions of existing products and services. Breakthroughs are the ideas that Michael Keaton made famous in the movie Nightshift. Do you remember his tape recorder where he would record great ideas like "feed the tuna fish mayonnaise"? Breakthroughs often combine two concepts that were not thought of as practical or relevant to combine. You hear these ideas every day as well, and quickly reject them because they often don't appear realistic on the surface.
Disruptive ideas are those that would cannabalize your existing products or markets, or radically change your market or industry. These are the ideas that people in your teams toss out ocassionally and everyone chuckles nervously, because anyone within the industry would be crazy to do them, due to the destruction of the infrastructure or investment. However, anyone outside the industry would be very likely to do them to enter and disrupt the market and force the existing providers to adjust. This is also why truly disruptive ideas almost always come from outside an industry. It's simply too hard to disrupt your own industry, due to the investments and existing product portfolio. But, with the right combination of products and services and business models, you might disrupt another market or industry.
Use the automobile industry as an example. No matter how innovative the market gets around transportation, the industry is going to provide a solution that has an engine and four wheels. They can't think any other way. So an idea like a more efficient gas engine or hybrid is a natural for these guys, and a big stretch is to a fuel cell engine. Someone like Dean Kamen, or a light airplane designer or some other team outside of the automotive industry, will be the ones who ultimately disrupt this market.