Innovating with the goal of conquering disease and injury is one of humanity's most admirable activities. With the variability of patients and diseases, medical innovation often involves complex interactions between the physicians in clinical practice and the rapid technological change from commercial firms. We apply aspects of interpretative hierarchy theory dealing with self‐reflective processes, particularly observation and description, to analyse these complex and dynamic relationships that foster innovation in medical technology. This systemic approach fixes certain parameters that help reduce complexity, (i) the notion of gain to adequately describe the change of observed technological hierarchies over time, and (ii) a systems description that allows clinical innovation to emerge as narratives. Our view of innovation in medical technology as an outcome of a high and low gain system finds its empirical illustration through the emergence of diagnostic solutions in medical imaging in the past decade. Finally, our research suggests epistemological and practical contributions to support the sound technological innovation in clinical practice with emphasis on selection criteria and holism for different stakeholders including physicians, firm managers and policymakers. Copyright © 2010 John Wiley & Sons, Ltd.