“Success in the global economy is increasingly determined by firms’ ability to respond innovatively to the changing views and needs of customers and users – the demand-side of the market. So far, the way in which market demand facilitates innovation has received less attention in European policy formulation than the private and public funding of R&D and expenditure on education, which typically represent supply-side policies. For this reason, it has become important to ensure that European innovation policy places sufficient emphasis on market demand and the needs of users. This requires that we take a fresh look at all available policy measures that are important in this respect…not to underestimate the importance of supply-side policies, but to point out the need to broaden the prevailing policy perspective.” [1]
Background
User-Driven Innovation has become a priority for companies and for governments. Within the past year, the national governments of Denmark and Finland, as well as European-level policymaker groups have lifted the topic of user-driven innovation to the top of innovation policy agendas.[2]
A Description of User-Driven Innovation
User-driven innovation has been catalyzed by increasing global competition – and the challenge of developing exclusive knowledge and skills to remain internationally competitive. There is a need to change the way of thinking and the approach to innovation in order to develop solutions which are tailored to specific consumer values. Levering skills in the creative (e.g. design, etc.) and human sciences (e.g. sociology, anthropology, psychology, ethnology, etc.), and further developing the area of marketing science, can help to change the thinking.
To sustain a competitive edge, more focus must be given to developing meaningful consumer experiences and meeting users’ needs…and not simply those explicitly stated in market research – but rather those latent user needs which can be revealed by alternative analytical methods, and by the users themselves.
User-driven innovation can be characterized by:
· more direct involvement of the user/consumer in the innovation process – either through observation processes, toolkits, user panels, or letting them do it themselves
· a strategic focus on consumer pull – producing what sells, rather than selling what is produced
· revenue-enhancing activities (vs. cost-cutting activities) by developing solutions that better meet consumer needs – investing more skills, energy and resources on understanding consumer needs and developing solutions that are more specifically targeted to meeting these needs (often resulting in increased product introductions)
· use of multiple skills and perspectives in the innovation process – adding ethnologists, anthropologists and designers to the scientists, engineers and business specialists
The Rationale for Action
There are two primary reasons which have prompted the prioritization of user-driven innovation as a priority thematic area within Nordic Innovation Policy:
1. The low innovation “hit rate”: 96% of all innovation projects do not reap returns; it is increasingly difficult to compete on price and technology-driven innovation.
Academic research and company experience has shown that levering ‘user-driven innovation’ approaches increases innovation ‘hit rates’ and levels of competitiveness. Although most companies already rely on and use user-driven innovation processes, there is not a well-developed, systematic method nor broad-based support for helping companies to further develop skills in this area - for developing a concept for user innovative (or “design”) thinking. In various interviews, companies themselves have expressed the need to have a better-balanced approach to product development – not having a ‘one-sided’ focus on technology; however, they do not know how to make this transition.
The world leaders with regard to user-driven innovation apply a multidisciplinary approach, combining for example engineering skills with design, anthropology or other relevant approaches. This fact is important for the structuring of the work with user-driven innovation, making networks between different competencies necessary – also across national borders. The Nordic countries currently possess strongholds within different relevant areas, and could benefit from pooling available skills and strongholds through a structured cooperation in this field.
2. The recognition that innovation policy needs to address both the supply and demand sides of innovation.
In this region, as in other regions, innovation policy has generally focused on the scientific and technological drivers of innovation. However, the largest numbers of companies do not innovate based purely on these drivers. Rather, companies innovate based on advances in design, processes and an understanding of consumers needs COMBINED with advances in science and technology. Whereas much has been done to systematically support companies in conducting process innovation (typically by management consulting companies) and technical innovation (typically by public policy measures), little has been done to support companies in conducting user-driven innovation.
Countries in this region will not gain global competitiveness based on technology alone. Innovation driven by an understanding of users’ needs, values, and even users’ own expertise in product development, is also an integral part. Innovation is comprised of several parts: technological feasibility, business viability, and consumer desirability – working in concert (see figure below). Innovation policy and activities should reflect all of these components. That is not to say that more focus should be spent on supporting user-driven innovation at the expense of technology-driven innovation, but rather that more effort should be made in developing a balanced view of innovation, as well as developing a more balanced portfolio of innovation policy support measures.
[1] from the discussion note to the informal meeting of the competitiveness ministers, Jyväskylä Finland, July 10-11, 2006
[2] see Creating an Innovative Europe, Report from the Aho Group and Putting knowledge into practice: A broad-based innovation strategy for the EU, European Commission, September 13, 2006 (COM(2006) 502 final)
[3] see Understanding User-Driven Innovation, Nordic Council of Ministers (TemaNord 2006:522)
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