Not conceptually difficult, perhaps, but not particularly realistic, either.
What you're talking about is essentially a pre-industrial economy, defined primarily by local craftspeople whose main customers are also local.
I'm not so sure that economic model is viable in a world where huge corporations dominate the means of supply and production.
Just as an example, demand from McDonald's and other fast-food giants basically controls the US beef industry. Ranchers have a hard time surviving unless they either dance to the McDonald's tune, or can tie into a local co-op arrangement that occupies the margins of the beef market.
What sorts of innovation are you looking at? Clothing manufacture? Tool fabrication? Consumer electronics? Machinery? You generally can't even find American-made versions of this stuff anymore, much less something that's the product of some local craftsman.
It might go back to local craftsmanship once things crash... but we're certainly not there now.
Old industries like machinery and textiles are going the way of farming, incredibly productive with only a small number of people required to produce what we want and need.
The innovation and hard work I was talking about includes such things as defining new biological therapies, new paradigms for information technology, innovative energy technology, new products based on advanced materials science etc. Every economic boom we've had in this country has been associated with some kind of innovation and advancement.
The issue of huge corporations controlling the economy is a valid one, but this is exactly where government is supposed to play a role, in making sure that everyone plays by the rules and that the proper rules exist to prevent monopolies and suppression of competition. This is quite different than controlling outcomes, which is what social engineering types of politicians have been trying to do.
Biotech and pharmaceuticals is an example of how our government policies are actually undermining our ability to lead the world and profit from it. We have been the major source of the major advancements in medical technology and biomedicine in the world over the past many decades. We have produced major advances in molecular biology that is the intellectual underpinning of new biological therapies. However, instead of realizing that medicine, biotechnology, medical device development, medical imaging, and pharmaceuticals are a major success area in the American economy, and allowing that sector to grow, our government is suppressing this sector of the economy, and refusing to protect our patents abroad.
In the meantime, the Chinese are sending students and early career researches to the US to learn and take back the expertise of this sector, as they recognize it as an important and growing area. We, on the other hand, are bailing out GM.