Seth Godin's blog often talks about where successful ideas come from, and in this post talks about bypassing the need to make huge leaps in innovation by synthesizing what we know and have learned from history, using Palm as the cautionary tale.
It's not enough to be aware of the domain you're working in, you need to understand it. Noticing things and being curious about how they work is the single most common trait I see in creative people. Once you can break the components down, you can put them back together into something brand new.
This is why we are constantly doing competitive monitoring and analysis of the products in the industries we work in. At times I feel kind of crazed signing up for betas out there, because the speed at which they appear now is overwhelming. I just have to remind myself that it's ok to spend the time if there's some research value, and then quit.
Whether we're just looking at the landscape from a high level, or deeply investigating and deconstructing how things work, continually expanding or improving domain knowledge is always going to be an important activity for us as designers.