Strategy+Business has a good article on the "innovation sandbox." The idea is to play around while still having some constraints.
This approach could be called an innovation "sandbox" because it involves fairly complex, free-form exploration and even playful experimentation (the sand, with its flowing, shifting boundaries) within extremely fixed specified constraints (the walls, straight and rigid, that box in the sand). The value of this approach is keenly felt at the bottom-of-the-pyramid market, but any industry, in any locale, can generate similar breakthroughs by creating a similar context for itself.
The article is a bit long, but it's worth the read. The best advice from the whole thing – immerse yourself in the lives of your target customers. Customers sometimes fail to accurately articulate what they want. By understanding them on a deeper level, you can achieve the kind of innovation that provides them a new product or service they didn't even realize they wanted.