Demand Driven Innovation

Demand Driven innovation is one of the six themes to be looked into by the European Creative Industries Alliance. Just like internationalization, spill-overs and service innovation it’s been taken care of by the ECIAP-consortium and does not feature concrete actions.

What is demand driven innovation
The term ‘demand’ is used here to refer to what businesses often call ‘consumer voice’: consumer wants, needs and preferences for goods and services. Demand refers to the desire or preference to purchase an affordable product or service (as opposed to unconstrained preferences or desires). Preferences may be obvious or hidden; demand can be private or public, and can come from consumers, other businesses or government. Government demand to business can be either for its own use, or for collective consumption through public services such as education and healthcare.

Largely driven by the unknown possibilities of technology, the role of the user in innovation processes has moved beyond market research. Many organisations now work directly with users not only to test prototypes, but also to exploit the users’ own ideas for improvements. Recent work in the UK has also highlighted the growing importance of user-led innovations. The Internet has facilitated communities of users to work together to design and develop new products and services, and modify existing ones.

Demand from users can influence innovation through three main mechanisms:

  • Market-mediated – through consumer and business markets, which rewards innovative activities by firms.
  • Co-ordinated – and expressed through the political (governmental) or non-profit arenas.
  • Directly – through user modification and engagement – a growing trend that has been described as ‘democratic innovation’ or user-led innovation.

The role of demand in innovation
The role of demand in innovation is likely to differ depending on whether the relationship between on the proximity between the consumer and producer. Demand can influence innovation through several routes:

  • Providing a market to sell goods (incentives).
  • Traditional market research information and testing, in particular ‘average’ users’ reactions to specific goods and services.
  • Traditional market research information on user preferences in general (including data on current preferences from trends in sales) and potential preferences.
  • Users and producers engaging with each other throughout the innovation process.
  • Early-adopter users providing information to others who later adopt the product, thereby actively creating markets for new products or services.