How do you build a team/company culture that celebrates innovation?

You need to truly embrace failure as a positive outcome.  Obviously nobody wants to fail, but if you are going to take risks to innovate, you are going to have to allow for failure.  When an initiative fails, you need to openly state that this is part of the innovation process, that the team isn't at fault and that you learned X,Y and Z from that initiative which will lead to improvements in the strategy/product.  It's much easier to do this if you set up initiatives as experiments and manage expectations as the initiative goes through it's paces.  

The way you accomplish this is fundamentally by leading by example and not just talking to talk. Innovation is a hot buzzword that a lot of executive teams like to use, but when time to put into practice, sometimes get frustrated or nervous by the increase of empowerment of their teams. you have to implement a strategy that focuses on top down and bottom up adoption and evangelism to really begin building the culture of respect and commitment, which are the core foundations of innovation