Demanding Innovation: Lead markets, public procurement and innovation

“Innovations are the product of the creative interaction of supply and demand. However, in focussing on how to increase the supply of innovative businesses, policymakers have lost sight of the importance of demand,” argues Luke Georghiou in a “Provocation” essay published on the NESTA website.

The essay elaborates Eric von Hippel’s concept of the ‘lead user’ into a wider notion of ‘lead market’.

“We should not throw away the benefits of the support we give to innovation through grants, incentives and advice, but complement it with efforts to create ‘lead markets’ – demanding consumers (including the public sector) who give innovators an early customer base from which to develop their products or services and diffuse them ahead of global competition.

In addition, this focus on demand for innovations will give us a tool to tackle one of the UK’s most pressing problems – how to increase the productivity and effectiveness of our public services. Outside of the defence sector, the public sector has lagged behind consumer and industrial sectors in innovation, and yet they have the potential through their purchasing power and the regulatory powers of government to transform the markets for innovations.”

NESTA’s “Provocations” are extended essays by key thought leaders working in innovation. They aim to foster debate and new ideas, and showcase thought-provoking work on innovation.

Luke Georghiou is Professor of Science and Technology Policy and Management at the University of Manchester and Director of PREST, a large innovation research centre within the Manchester Business School.

Download essay (pdf, 229 kb, 32 pages)