**Abstract**

It is widely acknowledged that small and medium-sized manufacturing enterprises (SMEs) are important in terms of enabling national and regional economies to form strong industrial sectors that provide jobs and generate value and welfare for society. The need for these companies to increase their competitiveness and become integrated into national and international production chains has also been acknowledged. In this sense, innovation, of any sort, is desirable for manufacturing SMEs, as this substantially improves their possibilities for growth and development. In any case, innovation is a complex process that must be properly managed, with a holistic vision that allows a full understanding of its implications and reduces the risks involved. This chapter applies systems thinking to innovation processes in manufacturing SMEs, with two main contributions: first, it proposes an innovation model for SMEs in the dairy sector, based on the systems approach theory; second, the case study of the model's implementation, through a framework for innovation management, in a Mexican SME in the dairy sector with an innovation project for its production processes.

**Keywords:** innovation, SMEs, innovation management, systems approach, dairy industry
