Entrepreneurs are creative people who follow passions and may toy with 101 ideas for a business before starting one. Then come the endless Things That Must Be Done: raising capital, closing sales, hiring staff, securing suppliers. Activities that don't have deadlines, such as inventing, designing, and concocting new products, can get pushed to the bottom of to-do lists. As more time-sensitive and urgent tasks accumulate at the top of those lists, the creative stuff simply falls off.

Unless you're a company president like Paul Budnitz. Budnitz's odd brainchildren are everywhere on the website of his company, Kidrobot. There's Munny--a puffy featureless figure that customers can decorate with fingerpaints, crayons, or ketchup. There's a set of artsy dolls representing the seven deadly sins. Not featured on the site but exhibited by Volkswagen (OTC:VLKAY) is a one-of-a-kind Rabbit adorned with, well, rabbits. The car is a co-creation of Volkswagen and Budnitz, a Yale art school grad, whose company manufactures and sells toys, clothes, and collectibles with an offbeat, urban-pop sensibility.

That Budnitz would start a business like Kidrobot isn't surprising. What's impressive is how much he's kept his hand in product development. It's not like he can afford to sit around brainstorming all day. He arranges financing, works with offshore manufacturers, and manages a staff of 45. But the company still needs him to create. The toy industry's appetite for novelty is voracious, and he invents many of the goods his company sells; he came up with 53 original items last year alone. In making time for blue-sky ideation--despite other demands--he stands out among executives. "I do have to split my energy and do things that I don't want to do," he says. "Definitely, at times, I have spent more energy than I have."

"The excitement that leads to creativity can very often get lost," says Harry Vardis, co-director of the Center for Business Innovation and Creativity at Kennesaw State University near Atlanta. That's bad for organizations; companies need new ideas to thrive. It's also bad for leaders who became entrepreneurs because they enjoyed dreaming things into existence. Staying creative is among the healthiest things a CEO can do personally and for the company.

How does a boss stay creative when the demands of running a company constantly force invention to the back burner? Budnitz insists executives can make time for idea generation. Three years ago, he says, he had to fly to China to salvage his supply chain after an agent he'd hired to pay factories there pocketed the money, shutting down production. Amid the weekslong crisis, Budnitz forced himself to "put all that aside for a while, sit in a room, and think about new toy ideas."

It may help to combine creative thinking with regular activities--such as exercise--that engage the body more than the mind. Researchers believe exercise improves mood, which can help. Jerry Kathman, president and CEO of LPK, a 400-employee brand-design agency in Cincinnati, gets many good ideas during his morning jog. When inspiration strikes, Kathman runs straight back to his desk to make notes.

Travel is another opportunity for creative thinking: Changes of scenery can shake up the mind. Idling in airports and train stations, executives can catch up on e-mail and flip through the latest thriller--or challenge themselves to invent a dozen brand extensions. And airplanes are a favorite incubator. "I do all my best thinking on an airplane," says Kathman. "I've jokingly said I should make my office a tight little space, like a coach seat."

Still, it's not just a matter of time. Leadership requires rapid evaluation of options and decisive action. It forces an executive to have an intense awareness of constraints--budgets, employee skills, capacity--and the financial expectations of others.

Innovation, by contrast, requires a suspension of judgment. To have great ideas, you have to be willing to look at many options--even seemingly ridiculous ones, says Vardis. Innovation experts recommend separating idea generation from idea evaluation: in essence, using a pencil without an eraser. Such mental partitioning is the secret to Budnitz's success. "You can't say, that's a bad idea or that's a stupid idea," he says. "That just shuts you down creatively. We were creating our spring clothing line over the past couple of weeks, and I designed [or co-designed] about 85 percent of it. I made tons of designs for hoodies: the good, the bad, the horrible, the incredibly stupid. We had 200 to 250 designs, just for the hoodies."

CEOs who curtail creativity may do so at a cost to their happiness and their businesses. Contech Electronics, a 26-employee company that makes animal training and control gadgets, launched with a single product: the ScatMat, an electric training mat for pets. During the four years it took for the Victoria, British Columbia-based business to break even, president Erik Djukastein was consumed with sales strategy and cost reduction. He had embryonic ideas for new products but lacked the time and energy to mentally develop them. "Other things seem so much more important when you're in hunker-down mode," says Djukastein. "That can really hit your creative juice engine in the solar plexus." Frustration grew when competitors brought some of his imagined products to market and did well with them.

Leaders can miss out on innovations as long as they view running a company as the hard stuff and coming up with new ideas as the fun stuff--and sacrifice the fun for the good of the business. Billie G. Blair, an organizational psychologist and owner of Leading and Learning, a consultancy in Los Angeles, observes that idea generation may be the CEO's strongest suit, and consequently a company's greatest asset. She recommends that those who are innovators by nature try hard to shift other responsibilities off their plates and make idea generation a big, even the biggest, part of their role. That way, entrepreneurs can work their way back to the lab. For example, two years ago at Contech Electronics, Djukastein hired a president to take over management and finance and rewrote his own job description to refocus on hatching ideas. His new title: president and chief innovation officer. In that role he has brought forth SlugsAway, an electronic slug and snail deterrent for gardeners who don't want to use poison. He could have hired more R&D folks. But why do that when inventing is what he loves?