Engineers, Marketers and Innovation
First, let me say that I am ably suited to answer this question, since I am both an engineer (undergraduate) and a marketer (graduate degree). I've worked in the technical trenches and, frankly, left them as quickly as possible, and worked in a number of marketing roles since my MBA. I left the engineering world because it necessarily demands a level of specificity and exactness that I find boring and tedious, and demands attention to detail that I sometimes lack.
So, let's talk about engineers first. What traits are associated with engineers, and does their education, focus, attitudes and skills position them well for innovation? Most engineers I know are very interested in solving problems, which suggests they have a proclivity for innovation. However, the focus on getting to a solution quickly, and detailing a solution exactly, often hampers them from bigger picture or disruptive innovation. Engineers and accountants like things in black and white - no shades of gray. Innovation often happens and requires some ambiguity for success. Engineers like to build things, which again indicates a proclivity for innovation, especially prototyping. However, they are often more entranced by once concept or idea than they are the process, which narrows their thinking and focus too early. Good engineers can be excellent problem solvers, but don't often think of themselves as "creative" and too often don't have good understanding of market needs and trends.
The market needs, trends and opportunities should come from marketing, if the marketers are doing their job well. Unfortunately, as narrowly defined as many engineering jobs are, marketing suffers from the reverse - a too broad definition. Today marketing can mean public relations or PR, Marketing communications, trade show management, conferences and events, product management, social media and a host of other capabilities. Marketing has become too far flung, and to a certain extent has lost sight of the base purpose of marketing - to identify segments and customers who have needs, and understand how to fill those needs effectively. If marketers fill that function, then they are innovative in nature, because they want to know and understand customer needs. Too often marketers are more worried about the copy on a new ad, or who will be at a tradeshow, and they fail to understand customer needs and develop scenarios about the market of the future.
So, what often happens is that marketing is too distracted to do what should be it's primary job - understand customers and develop potential product and service ideas. Engineering and product development shows up and doesn't get much insight into actual customer needs, so the engineers go off to explore interesting new technologies that may, or may not, be important to customers. Neither, and both, are at fault.
Engineers should demand that marketers do a better job of defining near term customer needs and emerging customer requirements or markets. Without that insight, it is difficult to build interesting new products. Engineers on the other hand need to be more ready to engage the market with rough, fast prototypes, and work to an iterative model. If there is an issue in most firms, it's that we all have become too far removed from the customer, and fail to understand their wants and needs.
In my mind, that's marketing's job, to discover the needs and translate them into specific opportunities for engineers to build.