First and foremost you must foster an environment where new ideas are encouraged and rewarded. Middle management must be agents of positive change and transformation by learning to listen to their staff for new ideas. General Patton used to say that the morale of your troops comes directly from the morale of their leaders. Therefore, the attitudes of the top will filter down throughout the organization. You must ensure that the "clay of middle management" is not hindering your innovative efforts.
To jump start your organization's innovation revolution, hold a simple contest. Let everyone suggest ways to make the company more efficient. Limiting the exercise to "efficiency" will reduce the ridiculous suggestions of free massages and such. Make it clear that the winning idea will receive a prize (cash, vacation time, whatever). Now, here's the trick, make sure the winner is from the lowest rungs of the corporate ladder. If you pick an idea submitted by a manager then your next contest will have fewer entries.
Your second contest can focus on another aspect of your business. The idea is to keep a narrow scope for each competition to minimize the silly suggestions that simply waste time. Remember to select the majority of your winners from the line worker level so that they maintain ownership of the process. Make sure to host one contest every month, at minimum, to make this a new aspect of your corporate culture.
After you have run these contests for a few months, your employees will come to work looking for ways to improve the company. Your staff will find better ways to do their jobs and will recommend their new methods in the hopes of winning a cash prize. You can hold a separate contest for managers, if you like, but you should raise the bar for them. While your staff are focusing on making their own jobs better or easier, your managers can focus on departmental level issues and so on up the ladder.
Once you have established a corporate culture that rewards new ideas you are on the road to a innovative business.