Is innovation just making things a little bit better?
Isn't innovation often just figuring out how to make things just a little bit better/little bit easier. That "little bit" is sometimes enough (think DVRs replacing the old VCRs leading to the increase in people time-shifting though it was always possible before; think Apple making listening to music easier by intergrating the entire stack though finding music online and putting it on MP3 players was always possible before.) Of course, many times it just isn't enough and thats why so many products don't really catch fire.
But the lesson is kinda obvious, if you're short of ideas look around to see whats consumers are doing and see if you can think of making it just a little bit easier/faster.