From Demand for Innovation to Innovation from Demand

In a knowledge-based society, where science and technology play a central role for the growth of economies and the competitiveness of firms, demand takes center stage in the innovation process. It's not a contradiction, but a consequence of the dynamics of knowledge and skills. In a recent international conference organized by the KITES center of Bocconi University and titled "Demand, Innovation and Industrial Dynamics", European and American economists and business scholars have acknowledged the fact that today industrial and consumer demand has become a major source of innovation and launched new strategic challenges to firms. Until recently, demand was thought to play role either as incentive for R&D spending or as pull factor for new products. Only in specific industries, such as in design, sports and entertainment, demand actively participated in introducing new products. Now the active role of demand has migrated to many other industries as well, including microelectronics, software and medical devices, scientific instruments and lasers.

The active role changes according to the characteristics of the user. An industrial user is increasing involved by suppliers in the development of new productions and in strategic alliances aimed at innovation. Often, the user turns into a veritable innovation, introducing new products on the market that then compete with those developed by the supplier. Also the consumer is more and more involved in the launch of new products, by supplying original ideas, advice and feedback to producers. And whole communities of users, such as in open source software or on the Internet share information, modify products, and develop new applications.
Why is this happening? Because in the knowledge society, scientific and technological developments have not only led to major developments in supply, but have also generated new affordances and liberated new capabilities for innovation, thus opening new possibilities for accumulation and deployment of knowledge on needs, preferences, and applications on the part of users and consumers. If experience and knowledge developed by demand is ever more important for the supply of new products, these remain firmly in the hands of users and are not easily appropriated by suppliers. That's why demand has become so crucial for innovation.

In the KITES symposium, another emerging phenomenon having and impact on US and EU industries was highlighted. There are numerous cases of industrial spin-offs that arise from demand factors in ICT and other high-tech sectors. The new firms created by spin-offs marry advanced technology with a profound knowledge of applications and have a great success on the market.

Summing up, new challenges await innovative firms operating on the demand- or the supply-side. They must be able to integrate knowledge of various kinds and from various sources arising from different contexts along the value chain, and combine productive efficiency with innovative effectiveness through strategic openness, active involvement of various players possessing relevant knowledge for innovation, absorption capacity and modularity of skills.