Lead markets: Web 2.0 – The essence of demand-driven innovation

This article is taken from the new Science|Business report, “Innovation – The Demand Side”

YouTube, MySpace – those are some of the hottest properties on the Internet these days. They’re second-generation Web services, often called Web. 2.0, that the users themselves define: uploading their videos, news, opinions or anything else they feel compelled to share with the wider world.

They may also be the working definition of demand-side innovation, with much of the services and software spurred from the ground up by customers rather than suppliers. It’s made for entrepreneurs, says David Audretsch, director of the Institute for Development Strategies at Indiana University in Bloomington, Indiana.

“Generation Y prefers the entrepreneurial lifestyle,” he says. “These are people who deal with the entire world, where they see these opportunities and aren’t afraid to make them happen.”

Some of the technologies under the umbrella of Web 2.0 open up a wide set of possibilities to create “many-to-many” conversations between developers and designers on the one hand and users on the other, says Richard Lester, founding director of the Industrial Performance Center at the Massachusetts Institute of Technology.

They create the possibility of enhancing the potential for ‘interpretative innovation’, which is what happens when developers and producers enter into the life of consumers, he says.