Living Labs: A New Development Strategy
K. Feurstein; A. Hesmer; K.A. Hribernik; K.-D. Thoben and
1.1 Introduction – the Living Lab Concept
With estimates showing that as much as 85% of the problems with new products originate from a poor
design process [Ulrich and Eppinger 1995]; enterprises carrying out product development are under
constant pressure to improve their design processes to stay competitive in increasingly demanding
markets. Simultaneously, the necessity for a quicker and more cost-effective development of products,
services and applications in the majority of these businesses is also rising. Moreover, a significant
number of well-developed technologies are lacking a sufficiently marketable application or service –
only 15% of product development time is invested in products which reach the market [Bauer 2004]. In
striving to achieve fast return on investment (ROI), developments are often based solely on
technological possibilities, not on the actual needs of customers. A result of this practice, only 18% of
the innovations brought into the market prove sustainably successful [Innovation Network Austria
It follows that in order to reduce risks in the product development process, customers and other
stakeholders need to be more directly integrated. One concept for such integration is that of Living
Labs. It is a systemic innovation approach in which all stakeholders in a product, service or application
participate directly in the development process. It refers to a research and development (R&D)
methodology in which innovations are created and validated collaboratively in multi-contextual,
empirical real-world environments. The individual is in the focus in his or her role of as, for example, a
citizen, consumer or worker. In Living Labs, collaborative Information and Communication
Technologies (ICT) provide the basis for targeted customer-centred development. Given new
possibilities to participate in emerging value networks, he or she can act as much as a producer than as
In regional or virtual sites providing such co-creative Living Labs services, technology evaluation and
market validation infrastructure is provided in an open manner to actors within the targeted sectors.
The concept directly involves consumers into the development of new products (including applications
and services) by providing bilateral access, on the one hand, of the consumer to the new and emerging
products, and on the other of the developing enterprises to customer feedback. This ensures a highly
reliable evaluation of the market, resulting in a significant reduction of technology and business risks.
In combination with scientific evaluation methods, the approach is particularly attractive to SMEs,
micro-organisations and start-ups, who typically have problems acquiring sufficient venture capital
unless the market attractiveness of ideas, concepts, products and services can be reasonably
To summarise, Living Labs are collaborations of public-private-civic partnerships in which
stakeholders co-create new products, services, businesses and technologies in real life environments
and virtual networks in multi-contextual spheres.
This paper describes the Living Lab approach and shows the advantages generated with the integration
of all elements of the value chain within a Living Lab. Moreover, best practices regarding suitable
methodologies for Living Labs are presented. Subsequently, the relevance, advantages and chances of
networking multiple Living Labs is discussed. The authors conclude with Chapter 4 highlighting
further research needs related to the Living Lab approach and the networking of Living Labs.
1.2 Elements of a Living Lab
The following sections describe a set of elements required by implementations of the Living Labs
1.2.1 Participation and Context
The participation not only of the potential customers but also of all other stakeholders along the value-
chain can be seen as the foremost required element for the successful operation of a Living Lab.
According to [Niitamo et al. 2006] a Living Lab needs to bring access to state-of-the art technology not
of only one kind but often of competing technologies delivered through different business models.
Open cooperation with vendors is crucial including both SMEs and larger firms. The Living Lab site
must also ensure the participation of those organisations that either utilize products and services, or are
candidates for their utilisation along the vertical dimension of the value-chain.
The ability to bring public interest into the Living Lab is imperative to cater for long-term systemic
innovation operations. Especially in Europe, public regional organisations are often responsible for the
implementation and operation of innovation systems. According to [Niitamo et al. 2006] it follows that
these organisations should be directly involved in the operation of Living Labs. The operation of the
Living Lab furthermore provides the opportunity to utilize it from a content and application perspective
in order to improve their public sector operations.
The core advantage of the Living Lab concept over traditional user-centric methodologies is its multi-
contextual sphere in which product and service development and evaluation takes place. The ability to
interact with the users in that space is what distinguishes the Living Lab approach from other supplier-
customer partnerships, or previously seen cross-disciplinary approaches. The evaluation in the daily
life context and the fact that users are involved in all stages of R&D and all stages of the product
development lifecycle, not just at the end phases as, for example, in more classical field trials or user
testing of products can be seen as the novel aspect of the Living Lab approach [Ballon et al. 2005 p. 9].
A mapping of the various aspects in comparison to the Living Lab approach is described by Prof Otto
Scharmer (MIT, CKIR) as shown in Table 1.1.
Table1.1: Participation and Context of Innovations [Scharmeras cited in Eriksson et al. 2005]
Single and Controlled
Contexts Multiple and
Experimentation Living Lab
Low: Observation Traditional Empirical
Whereas traditional empirical social science research demonstrates a low level of observation, and
traditional lab experimentation (such as usability labs) high observation in a single and controlled
context, Living Lab experimentation strives for the same level of observation in an organic, multi-
contextual space. This means that customers participating in a Living Lab are observed across many
aspects of their lives, such as their roles as citizens, workers, at home, travelling, and so on. Whilst the
level of observation is high, the use of collaborative ICT in sites employing the Living Labs approach
strives to keep obtrusiveness at a minimum. This constitutes the human centric approach of Living
Labs conceiving of the citizens within civic society as a potential source of innovation.
From a business perspective, it is useful to perceive Living Labs as providing a set of distinct services
to their customers. In this view, the customers are, for example, SMEs, industry, research or public and
civic organisations. The services offered by the Living Labs can be decomposed into to a core set of
co-creation services supported by services for both integration and data preparation.
The core service of the Living Lab, as discussed above, is to facilitate the co-creation of a product,
service or application. This co-creative product development process can be decomposed into four
phases – Product Idea, Product Concept, Product Development, and Market Launch (adapted from
Reichart 2002), as illustrated in Figure 1.1 below.
Figure1.1: Product/Service Development Process
Each process phase enables co-creation with different methods and tools. Furthermore, the Living Labs
can be employed to create output in terms of new product or service ideas independently of material
input. The ideas generated in the Living Lab can be distributed by the Living Lab provider for example
via an idea pool or patent marketplace.
A full Living Labs service offering not only requires product and service development and evaluation
methodologies but also a mechanism for the integration of the customers’ product or service into a
Living Lab to provide it to the users. The efficient, transparent and smooth integration accomplished by
the Living Lab provider is the key for trust and convenience of the customer. It also can work as a first
product/service testing depending on the level of development (market launch testing).
To fulfil the customers’ expectations regarding the results and to reduce the complexity of the
evaluated data, the Living Lab provider offers a standardised data preparation. The great advantage of
the standardisation is the comparability with the results within other Living Labs in the network and the
confirmation of the expected output in the run-up to the usage of the Living Labs.
There are many different methods which can be used to involve the user in the development process of
a new service or product. Based on the four phase product/service development process shown in
Figure 1.1, methods can be allocated to the phase(s) they are most appropriate for. The methods used in
the process can be divided in more traditional research methods on the one hand and ICT enabled
eCollaboration methods such as online interviews, web-based conjoint analysis, virtual product testing
and user toolkits on the other hand.
As mentioned above the Living Lab concept is characterized by the “users as innovators” approach.
This means that “the basic idea is not about using the users as ‘guinea pigs’ for experiments it’s about
getting access to their ideas and knowledge” [Eriksson et al. 2006]. Therefore it is necessary that the
researchers use methods that allow an interaction or co-creative approach between the consumer and
the researcher over the whole development process.
The examined Living Labs of the study are listed in Table 1.21. In order to get an insight in the existing
Living Lab initiatives best practises are identified and the different methods used to involve the user
within these Living Labs are elaborated. Since the Living Labs are very heterogeneous and have a
different focus it is difficult to compare them. The results give an overview on the existing methods
and thus the methods that will be available in a network of Living Labs.
Table1.2: Examined Existing European Living Labs
Labs Industry Partners (Main Players)
Mobile City Bregenz Mobilkom Austria
Testbed Botnia Ericsson, TeliaSonera
Mobile City Bremen Deutsche Telekom, Microsoft, TNS Infratest
Freeband Philips, Ericsson, KPN, LogicaCMG, Lucent, Yucat
Kenniswijk Dutch General Directorate of Telecommunication and Post
(DGTP), Kenniswijk BV
Cantabria Atos Origin, Fujitsu, Vodafone, CRV
CASST, Ireland O2, Vodafone, Telcordia, Lucent/Bell Labs, Ericsson
Arabianranta, Finland Art and Design City Helsinki Ltd (ADC Ltd) Helsinki City
This study will lead to a platform of methods used within the Living Labs as a service for companies
that are going to implement a Living Lab in their research and development (see Figure 1.2). Currently
there are several research efforts going on to develop new methods within the Living Labs to better
interact with the end-user especially with the new Information and Communication Technologies. Thus
the platform of methods will grow within the next years.
Figure1.2: Methods Used Within Existing Living Labs
In the Product/Service Idea generation phase the traditional method of interviewing users (orally,
written, telephone) is the most widespread method within the Living Labs. Besides focus groups,
empathic design and customer suggestions are widely used within the Living Lab initiatives. And still
some participants of the study also mentioned that they use customer complaints or story telling to
generate ideas for new products or services.
1 The following descriptions are taken from the Description of Work of the CA CoreLabs Project.
(oral, written, telephone)
_Idea Generation with
_Market Intelligence Services
_CAPI (Computer Assisted
_CATI (Computer Assisted
_CAWI (Computer Assisted
with Lead Users
_Dynamic Social Network
_Virtual Prototype Tests
(oral, written, telephone)
_Idea Generation with
_Market Intelligence Services
_CAPI (Computer Assisted
_CATI (Computer Assisted
_CAWI (Computer Assisted
with Lead Users
_Dynamic Social Network
_Virtual Prototype Tests
The user involvement of the Product/Service Concept generation phase within the Living Labs is
characterized by user design as it is the most adopted methods. The concept “tests with lead user” is
also a widespread method in the Living Lab within the product development. Ethnography, identified
as a good method to interact with the user, is seldom used in the Living Labs so far.
Within the Product/Service Development phase the most adopted methods are usability tests with the
participating user and workshops with costumers. Dynamic social network logging as well as virtual
prototype tests and product testing is adopted by some Living Labs.
A quarter of the reviewed Living Labs stated that they are conducting usability tests in the Market
Launch phase. The traditional methods like test markets and product tests to validate products before
they were launched dominate the usage of methods in the market launch phase. Moreover usability
tests are used within living labs. The relatively new methods of eye tracking and time motion studies
are only adopted by one of the existing Living Labs.
The Living Lab concept takes up the new possibilities to interact with the user that arises with new
Communication and Information Technologies. Thus the evolving eCollaboration methods, e.g. user
toolkits, logging, Experience Sampling Method (ESM) seem to be highly appropriate methods for the
existing and emerging Living Labs. Mulder and Velthausz  also state in their article about two
Dutch Living Labs that “the increasing number of mobile devices, sensors and consumer electronics
that are equipped with all kinds of (wireless) networking capabilities, enable a complete new
generation of context aware and pro-active applications”.
There are several methods that involve the end-user to a certain degree into the development process of
new products or services (see Figure 1.2). However, there are no fixed guidelines to which methods
can be used in which phases of the development process, as this always depends on the specific goals
of the project.
1.3 Networking Living Labs
Beyond the implementation of individual Living Labs, a networked approach to the concept offers a
number of significant benefits. The following sections discuss both the advantages which can be gained
by adopting such a networked approach as well as the challenges which need to be faced in order to
effectively realise it.
1.3.1 Advantages of networking Living Labs
As described above, the core advantage of the Living Lab concept over traditional methodologies is the
multi-contextual sphere in which innovation services are offered. By adopting a networking approach
to Living Labs, a significant extension of this sphere can be achieved.
A network of Living Labs primarily facilitates the extension of the multi-contextual across dimensions
such as regional attributes, language, cultural particularities and sectorial specialisations. A networked,
co-creative Living Lab approach provides developers with immediate feedback about the possible
acceptance of their product from specific communities in specific regional settings. Regional attributes
relevant to the innovation, product development and market uptake analysis are for example the type of
region (urban, suburban, rural, remote, maritime, etc.), level of development, climatic conditions and
A further significant dimension can be found in the cultural particularities of the individual regions.
These are also key to understanding the customers’ product and service needs and wishes. A networked
Living Labs approach offers a fast and reliable mechanism to enable the localisation of products to
specific regions and also a competitive way to deploy products customised to the requirements faced in
the diverse social and cultural environments. This is especially relevant to both the global market and
culturally and linguistically diverse markets such as can be found in Europe.
According to [Niitamo et al. 2006], a regional, national or continent-wide network of Living Labs can
strengthen the opportunities to integrate social innovations with technological innovations on a wider
scale that contributes to socio-economic dynamism, conclusively incorporating regional, national or
Europe-wide global competitiveness, growth and job creation. Such networks of Living Labs are large-
scale experimentation platforms for new service, business, technology, or even market and industry
creation within ICT.
Thus, by implementing a network of Living Labs across a regionally and culturally diverse set of
individual labs, a significant extension of the multi-contextual sphere can be achieved. A further
benefit to the context of such a network can be found in the sectorial specialisations each of the regions
brings into the network – experiences with different emerging Living Labs in Europe show that
different regions focus on specific topics for Living Labs, which generally coincide with regional
development policy or core regional industry sectors. Some examples are the specific initiatives for
Living Labs for mobile ICT solutions (Mobile City Bremen in Germany, Mobile City Bregenz in
Austria or the CASST Centre in Ireland), Ambient Intelligence (Kenniswijk in the Netherlands) or
living environments (PlaceLab/House_n, MIT, USA).
Besides the improved contextual spectrum described above, bringing together different stakeholders in
a networked Living Labs approach better makes use of investments made within the individual
participating regions. Double investments into similar research infrastructure can be avoided and
centres of excellence for specific sectors or technologies can be established within Living Labs. One
example of such a complimentary investment is a network of Living Labs on the basis of test bed
infrastructure for mobile applications and solutions. This complementarity of infrastructure in a
networked Living Lab furthermore allows services to be co-created in one Living Lab, the validation of
the product or service concept to take place in another, or even multiple Labs, and the deployment of
the service to take place in a selection of regions in which the previous processes proved most
This leads to further benefits of networking Living Labs beyond the extension of the context sphere.
By offering a broader base for co-creation and market analysis activities, customers are guaranteed
better, more differentiated and more comparable feedback. Products and services can for example be
co-created either specifically for one regional market, analysed across a number of different cultural
backgrounds or targeted at a wider market. By offering customers an access point to the network from
their own home region, for example SMEs can thus more easily approach markets otherwise not
accessible to them.
1.3.2 Challenges in Implementing Networked Living Labs
As described above, a networked approach to Living Labs offers significant benefits as opposed to
insular solutions. However, a number of practical challenges need to be taken up to implement a truly
functional network of Living Labs. These challenges are specifically related to integration, and require
cooperation across three individual layers, as described in the following.
The heterogeneous infrastructure found in different living Labs poses a significant challenge to the
cooperation between individual Living Labs. As stated above, effort is required in order to link
together the infrastructures found at the individual sites. The ultimate goal of this activity is to enable
an entrepreneur or SME operating, for example, in a rural Living Lab to contract the co-creation of a
service in their local region, have validation services carried out in multiple additional regions and
finally deploy the service in selected target markets without being concerned with interoperability
issues, while at the same time making best used of the regional competences and resources. Here
standardisation and certification play a big role, and need to be addressed to provide a marketable
Living Lab service offering.
1.3.4 Methods and Tools
It is obvious that there exists a plethora of methodologies, methods and tools used in the individual
emerging and mature Living Labs. Which methodology, method or tools is best used in which
environment, under which circumstances is, however, has not been fully and systematically analysed at
this point in time. In many cases, the decision to use a certain methodology, method or tool within a
specific Living Lab seems to be arbitrary and based on specific regional developments rather than on a
methodological selection of best practices in the field. Thus, a clear structuring of the methods and
approaches used in Living Labs is required in order to gain an overview of what is used and to what
extent. Furthermore, a coherent toolset has to be built up on the basis of selected best practices in order
to be used in a network of Living Labs. Here, the real challenge is not to take stock of what is available
and what is successfully employed in the different Living Labs, but rather to disseminate this
information into the different Living Labs, train the stakeholders in the region to understand and use
new methods and tools in order to allow later a comparison of the results throughout the network2.
In order to make a network of Living Labs reality, the political will of regional and national
stakeholders has to converge in order to allow a successful endeavour. Actions are required to
understand political goals and the vision which the individual regional Living Labs follow. The goal is
not to harmonise the political goals but rather to integrate them in order to allow the build-up of focal
points in specific regional Living Lab research, thus enabling complementarities of the political visions
by utilizing the cultural and social diversity in order to ensure a global competitiveness of individual
1.4 Conclusions and Future Research Needs
As stated in the introduction, new strategies need to be adopted to both improve the design process of
new products and services, and simultaneously achieve a better relation of product development time
and successfully marketed products. The networked Living Labs approach discussed in this article
represents a systemic innovation strategy which promises to meet those requirements. However, there
remain several significant challenges to research in the field of Living Labs before operational
networks of Living Labs can be successfully implemented. The three most important are described in
the previous chapter – these are challenges related to the integration of infrastructure, the alignment of
methodological aspects and the convergence of policy factors.
With respect to methodological aspects, the key factor of differentiation regarding Living Labs in
comparison to other forms of co-operation, such as clusters or virtual breeding environments, is the
involvement of the users. As stated in [ISTAG 2005], “the real challenge may lie in involving users in
a sociological sense, that is to say, by taking into account the micro-context of their everyday lives”.
Significant research effort must be allocated to the development of both methodologies and supporting
tools which enable such integration in the most unobtrusive fashion possible. Natural, effective and
timely interaction with the users must be made possible throughout the sites of a network of Living
Labs. Especially research regarding the use of technological platforms such as Collaborative Working
Environments (CWE) for the support of co-creative processes must receive a high priority. Such an
environment will be required to easily and efficiently support mass collaborations within the
communities located in the networks of Living Labs – integrating all stakeholders, be they citizens,
enterprises, public and civic organisations or research organisations.
A further challenge with regards to integrating members of the society into Living Lab research and
development is to be found in creation of methods and business models for the stimulation of
individual users to participate. As private persons become a source of ideas and innovations, an
appropriate rewarding and incentive mechanism needs to be put in place which simultaneously secures
pay-back to all the actors involved whilst adopting fair and suitable mechanisms for the handling of
IPR (Intellectual Property Rights) and other ethical issues. According to [Niitamo et al. 2006], research
is furthermore required in order to create comprehensive models and methods by which experiments
can be analysed and values measured. Examples of emerging new approaches are e.g. the Experience
Clip method as outlined in [Isomurso et al. 2004].
One example of activity seeking to address these challenges and establish a network of Living Labs is
the European Network of Living Labs initiative, which is currently being driven by the European
Commission. So far, the activities conducted by the European Commission in order to integrate and
harmonise RTD developments in Europe have been highly successful. Europe owns the largest internal
2 The harmonization of methods & tools in the European Network of Living Labs is described in Chapter 3 “Living
Methodologies: Understanding the Social Dynamics of Innovation”.
market in the world and the decision to enable the growth of the EU with the integration of the New
Member States (NMS) has been highly successful. This can be especially seen in the fields of
European enterprises and the European influence on standardisation (e.g. the Global System for Mobile
Communications, GSM). However, the major hurdle to be overcome remains a lack of understanding
about how the societal and cultural differences found throughout Europe affect research and business.
Whilst the European Research Area (ERA) activities have mainly focused on understanding and
overcoming research barriers, the business sector has so far mainly been influenced by administration
and trade agreements. Here, Living Labs offer a unique possibility to strengthen European regions by
enabling their cooperation in conducting systemic innovation. Several Living Labs can currently be
found in Europe enabling especially entrepreneurs, start-ups and SMEs to access high-technology
infrastructure and resources, whilst offering a unique possibility to validate products and services. In
this context, a European Network of Living Labs can be considered a basis for the creation of a single
European innovation system, leveraging the lingual, cultural and regional diversities found in the
Union for the development of new products and services with the aim to strengthen the European
innovativeness as well as global competitiveness, growth and employment.
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