In the article I demonstrate some of the possible ways by which counterfactual im⁠agination can lead people to innovation and the creation of novel and valuable solutions. I start with adopting the broad definition of counterfactuals, by which counterfactual imagination is understood as the ability to imagine alternative states of affairs which can relate to the past, present or future. I explain how counterfactual imagination differs from other sorts of imaginative and creative thoughts, pointing out that counterfactual types of thinking (...) always rely on facts and involve a change in some features of the actual world, leaving other such features unaltered. I also show that the concept of counterfactual imagination can be useful when we aim to describe the very earliest manifestations of imaginative capacities in children, which can be seen in their make-believe games. All the mentioned characteristics of counterfactual imagination are further used to examine how what if and would be sorts of thinking and imagining might influence people’s creative performance. I conclude with the suggestion that—if guided properly—counterfactual imagination could be a truly valuable mental tool for innovation. This demonstration is partly influenced by Ruth Byrne’s multi-faceted analysis of counterfactual imagination, mainly from her book, The Rational Imagination: How People Create Alternatives to Reality. (shrink)