AS GENERAL manager of Palo Alto, Calif.-based design and idea fi rm IDEO, Tom Kelley sees possibilities. His firm has developed a number of novel solutions, such as a collaboration with Cleveland, Ohio-based developer Forest City to design human-centered cities. The company has also worked with Bethesda, Md.-based Marriott International to identify opportunities at its Towne-Place Suites extended-stay hotels. Kelley's observations are chronicled in two books, The Art of Innovation (Doubleday, 2001) and The Ten Faces of Innovation (Doubleday, 2005). MFE sat down with Kelley to get his thoughts on vision, leadership, and developing new solutions.

MFE: How do you define vision?

TK: There are two kinds. One is the quest kind of vision where the end goal is known—as in, 'We're going to knock the leading brand off the top rung.' People respond really well to a quest because everyone can work toward that goal. The other kind of vision is about the team or the process where you assemble the smartest people to work on a particular problem. That's a goal you chip away at. It's not as glamorous as the quest, but it can be equally powerful.

MFE: What are the biggest mistakes leaders make when trying to encourage innovation?

TK: Over-constraining the problem. If you want a breakthrough innovation, you have to be willing to rethink everything. Tom Watson of IBM used to say, "We have to be prepared to change everything except our values."

MFE: If you could give only one piece of advice for driving innovation on a corporate level, what would it be?

TK: Try, in every possible way you can, to create an idea-friendly environment. If you try to figure every single thing out before you air your ideas, you just self-edit and don't bring out stuff. More companies are setting up systems to capture ideas from people throughout the organization. They realize that not all of the ideas have to come from the top—and that even half-baked ones should be listened to. You [also] can't be quick to judge—and keep the devil's advocate under a tight reign. Once you create that kind of environment, ideas will bubble to the top because people feel their ideas are welcome.