De-Risking Innovation with Living Labs

The journey from promising technology to market-ready solution is loaded with risks. Will end users adopt your innovation? Does it perform properly in real-world conditions? Can you prove the ROI to buyers?

Living labs provide a proven approach to answering these questions before scaling your solution. By testing your innovation in authentic environments with end-users and stakeholders, you can transform your untested concepts and assumptions into proven and commercially viable solutions to your buyers’ problems.

It can all be done while reducing risks and speeding up your path to market.

What is a Living Lab?

Living labs are essentially innovation ecosystems where new products, services, and technologies are tested and validated in real-world environments with active end users. Compared to traditional R&D practices that occur in research labs, living labs bring innovation into the real world through live communities and contextual situations, where solutions are designed for use.

On a basic level, living labs generally operate with three simple principles. First, living labs emphasize co-creation and user support as end-users become active participants in the testing and validation process. Second, it focuses on real-life contexts versus artificial laboratory settings. This allows innovations to be validated where they’ll be deployed. Third, living labs foster multi-stakeholder collaboration, bringing together researchers, businesses, government agencies, and community members to address complex challenges.

Taking this approach is a significant exit from traditional innovation models. Basic R&D follows a linear path. Researchers develop products/services/solutions alone, companies refine them, and then users engage with the final product. Living labs alter this model by involving users during the refinement stage to ensure feedback and the implementation of minor improvements throughout the development cycle.

The term “living lab” was first introduced in the early 2000s, gaining traction across Europe as a novel approach to addressing challenges that require multiple perspectives and inputs (Source: European Network of Living Labs). Since then, living labs have evolved into a global movement encompassing numerous sectors, aiming to encourage technology adoption and provide real-world environments for deploying solutions in already complex operations. For example, living labs have been valuable for testing smart mobility, agriculture, and building-based technologies; all areas where user acceptance and real-life performances are critical for a solution’s scalability and reliability.

Main Characteristics of a Living Lab

For Canadian startups and scaleups, living labs provide unique characteristics that help to bring tech solutions to market for adoption.

User-Driven Validation

Living labs involve your target users as co-creators, rather than late-stage testers, meaning you’re not just collecting feedback after development has occurred. Instead, you’re creating your solution alongside the end-users who will use it daily. As a startup, this reduces the risk of designing features that nobody needs or building solutions that are unusable by your audience.

Real-World Testing Environments

Instead of working within controlled lab conditions, such as a testbed that doesn’t fully mirror real deployment scenarios, living labs test your solution in the field. Whether you’re creating AI software, IoT devices, or robotic solutions, you’ll discover potential integration challenges, operational disruptions, and usability problems before your official launch, not after. Identifying these problems ahead of an official launch can save your business from wasting resources, allowing you to address these issues first.

Accelerated Market Readiness

The multi-stakeholder environment of a living lab goes beyond just testing. It also provides opportunities for innovators to connect with potential customers, industry partners, and government organizations all at once. For scaleups looking to expand, this means your organization can validate product-market fit, refine your value proposition, and find potential distribution partners all within this ecosystem.

Refinement Opportunities

As your solution is implemented into the living lab ecosystem, it continuously improves through repeated testing cycles. This process evolves your solution based on real data and direct inputs, allowing you to confidently continue forward or make pivots quickly and cost-effectively before committing to a market launch and full-scale production.

The Living Lab Process

Knowing how living labs operate can help your organization integrate this approach into your product development roadmap. Working within a living lab typically follows four interconnected phases to help de-risk your path to market (Source: Healthcare Living Lab Catalonia).

Co-Creation Phase

This foundational step brings together your team, potential end-users, and any relevant stakeholders to define your organization’s current problem and build your testing plan. Instead of building in isolation and hoping market needs are understood, in a living lab, you’re validating assumptions from the start of the project. For startups, this means aligning your solution with real user and partner pain points as you validate for specific use cases. This stage enables you to identify the must-have features required in your testing environment versus the nice-to-haves, and you’ll often discover opportunities you haven’t considered by collaborating with other stakeholders.

Exploration Phase

In this stage, you’ll deploy your prototype or minimum viable product into the living lab environment. Users could interact with early versions of your solution in this real-world environment, giving you insight into how your solution operates in a contextual and unpredictable setting. This phase can uncover multiple opportunities to improve your solution, such as enhanced integration, workflow compatibility, and any advanced technical requirements you may not have considered during early development.

Experimentation Phase

With more refined prototypes, this phase focuses on conducting structured pilot deployments to generate quantitative and qualitative data. During experimentation, you can measure performance metrics, observe user patterns, and assess overall user satisfaction through authentic scenarios.

Evaluation Phase

This final phase organizes learnings across all testing cycles to help inform your go-to-market strategy. By this stage, you’ll have validated use cases, proof of ROI potential, and optimized your solution based on real-world feedback. Users who participate in these stages often become your first advocates and potential customers, invaluable assets for approaching future customers, investors, or partnerships.

Making the Process Work for Your Startup/Scaleup

The advantage of the living lab approach is maintaining flexibility. Not being locked into rigid timelines or complex methodologies allows you to adapt the validation process based on your organization’s development stage, available resources, and market urgency.

For pre-seed or seed-stage companies that are still ensuring a problem-solution fit, focus should be maintained on the co-creation and exploration phases. This is where you can gain the most value with a limited investment of resources. A few weeks of intense user collaboration can save months of building features that no one wants to use. You might also want to cycle through the exploration phase multiple times with low-fidelity prototypes before committing to complete development.

Growth-stage scaleups preparing for Series A or B funding should emphasize the experimentation and evaluation phases for their solution. At this stage, investors want to see proven metrics and documented performance improvements. Plan for three-to-six-month deployments that generate results you can highlight in pitch decks and board meetings. This is also when you’ll need to involve enterprise prospects or channel partners as stakeholders. These participating parties demonstrate actual commercial viability, extending beyond mere technical performance.

Key Success Factors

Throughout your process, maintain open communication loops with all stakeholders to keep up momentum and surface issues before they stall your experiment. At the same time, document everything. Any feedback sessions, performance metrics, observations, and technical challenges should be recorded. With these documents, you can now provide a strong evidence base for any product changes, investor updates, and future marketing claims.

Also, ensure that the success criteria is clearly defined before entering any phase. Have a strong understanding of what questions you’re trying to answer, what metrics are being used, and what objectives are determined to prove a “successful” project. Without this information, testing then becomes an endless series of iterations that consume resources without driving clear decisions.

Lastly, stay disciplined with your project’s scope. Collaborating with stakeholders through a living lab project often brings new ideas and features. Record these, but try not to expand your solution’s offerings during the test. Resist the urge to do so, as you need to complete your objectives first. Afterwards, you can prioritize new ideas based on market fit and your organization’s strategies.

Benefits and Advantages of this Approach

Selling to competitive enterprise customers means that de-risking your solution is key to a successful sale. Living labs help deliver a de-risked solution and other strategic advantages that directly impact your revenues and growth.

Reduced Market Risk

By validating the reliability and scalability of your solution with real users in authentic environments, you reduce the risk of launching or scaling products that fall short of expectations. Living labs help you find and tackle fatal flaws.

Faster Time to Market

Original development cycles are sequential, progressing one step at a time through ideation, building, testing, and refinement in that order. Living labs shorten this timeline by providing consistent feedback loops, allowing you to iterate based on real end-user usage while still in development. This eliminates months of post-launch adjustments. For scaleups sprinting against competitors, faster development can mean the difference between entering the market first or playing catch-up.

Enhanced Product-Market Fit

Collaborating with end-users ensures your solution addresses real needs, not assumed ones. This leads to higher adoption rates and lower churn when scaling your solution. You’ll also uncover adjacent market opportunities and new use cases that can expand or extend into new market segments.

Credibility and Proof

Validated metrics and use cases from living lab deployments provide compelling evidence for sales conversations, partnership negotiations, further funding from investors, and simpler procurement processes. Enterprise buyers and government contracts require higher levels of demonstrated reliability compared to other buyers. Living labs provide a proven success story before officially launching or scaling, which can shorten your future sales cycles.

Application Areas

Living labs are proven to be valuable when designed to provide the contextual environment in which the technology will be demonstrated. The CENGN Living Lab Initiative adopts a sector-focused approach, with each living lab environment targeted toward a particular industry vertical. This focused approach ensures that each lab environment has the right assets, infrastructure, and expertise to align with the requirements and use cases of your technology.

Here’s how these living labs are applied across various sectors:

5G-Enabled Technologies

The 5G Advanced Performance Living Lab offers future spectrum bands that are not yet commercially available to the public, providing an ideal testing ground for 5G-enabled technologies. Startups and scaleups developing edge computing solutions, VR/AR applications, or connected infrastructure can test performances under today’s and future network conditions, enabling them to address any challenges before committing to costly rollouts.

Smart Agriculture

AgTech companies using either of the Smart Agriculture Living Labs get access to real farm environments to test precision agriculture solutions, autonomous equipment, IoT sensor networks, robotics, and more. Doing real-world testing in these labs reveals how weather variability, soil conditions, and farm operations impact a solution’s performance. This testing helps AgTech solution providers validate ROI claims with real yield improvements and resource savings that commonly resonate with the agriculture industry.

Smart Mobility

From autonomous vehicles to connected transportation platforms, smart mobility innovators face complex validation requirements that involve safety, government regulations, and user acceptance. CENGN’s smart mobility living lab offers urban environments and controlled roadway sections, enabling startups and scaleups to test vehicle-to-infrastructure communications, traffic management algorithms, multimodal integration, and more, while ensuring validation of requirements related to safety regulations and potential customer needs. 

Smart Manufacturing

Industry 4.0 solutions, such as predictive maintenance systems, digital twins, and automated production lines, require testing in operational factories to validate their effectiveness. CENGN’s future smart manufacturing living lab enables you to pilot your technology within a working factory environment, ensuring interoperability with legacy systems and demonstrating efficiency gains before further deployments.

Smart Buildings

Building automation, energy management, and occupant wellness tech are enhanced through testing in fundamental commercial, residential, and retail properties. CENGN’s Smart Buildings Living Labs provide real-world environments to understand how smart building technologies are deployed and used in everyday buildings.

Robotics

Whether developing collaborative, service, or autonomous systems, CENGN’s Connected Robotics Living Lab exposes your robot to simulate real-world environments in the University of Waterloo’s RoboHub.

Challenges & Limitations

As you’ve read, living labs offer significant advantages, but anyone signing up for a project should enter with realistic expectations about the challenges.

Resource and Time Investments

Participating in a living lab requires dedication from team members to manage stakeholders, direct testing schedules, and respond to feedback. For early-stage startups, this can strain personnel and extend timelines beyond what was projected. When budgeting, make sure you’re planning for ongoing engagement instead of treating it as a “one-off” because proper validation takes more than a week and often months. If this sounds like a stretch for your organization, testbeds offer shorter testing timeframes for more technical validation testing.

Complex Coordination

Juggling multiple stakeholders with different outlooks, goals, timelines, and priorities can become a bottleneck. Prospective customers may have limited availability, and partner organizations might be slow to approve due to bureaucratic approval processes. Aligning these conflicting schedules requires project management flexibility. This complexity increases when working across provinces or with the government, where approvals are lengthy (Source: Technology Innovation Management Review).

Data Privacy and IP Ownership

Testing in real-world environments with multiple stakeholders raises questions about ownership of data, privacy compliance issues, and intellectual property protection. Startups need to navigate these problems carefully with clear agreements shared upfront. Ensure that the contracts you sign clearly indicate who owns the data created, how it should be used, and what protections are in place for your innovative solution. Luckily, with regards to the CENGN Living Lab Initiative, we and our partners don’t take any intellectual property.

Scope and Scalability: Potential Limitations

While living lab results do provide real-world insights, they may not represent the complete answer. These results are often still contextual. A solution that performs well in a living lab may still require adaptation for market deployment, especially outside of the Canadian border. There are numerous geographic, cultural, and infrastructural differences across each province and international global markets, meaning you’ll still need to validate any assumptions when expanding.

Stakeholder Fatigue

It’s dangerous to see stakeholders involved in lengthy living lab projects drop off or become less engaged, especially if they don’t see any benefits from participating or if the scope is extended. This is a problem because it can destroy your ability to collect quality data. Ensure that you clearly communicate all timelines and expectations to each of your stakeholders before the project begins. Throughout the project, provide regular updates to keep your stakeholders informed and engaged.

Innovating Your Solution with Living Labs

The gap between promising technologies and market-ready solutions is where numerous innovations get stuck. Living labs bridge this gap by providing real-world environments where startups and scaleups can validate, refine, scale, and prove the reliability of their solutions. Each phase of the living lab process enables innovators to prove or disprove any assumptions, refine their solutions, and generate the evidence needed for successful market entry or scaling.

How to Get Started with the CENGN Living Lab Initiative

Are you prepared to take your innovation into a real-world environment? The CENGN Living Lab Initiative makes it simple for Canadian startups and scaleups to access sector-specific labs, expert support, and project funding.

Learn More About the CENGN Living Lab Initiative

About the Author

Being the Content Marketing Lead at CENGN, Richard researches and shares information on emerging technologies such as 5G, IoT, and Artificial Intelligence.

Through his experience in writing and support for technological growth, he’s always interested in sharing how new technologies are shaping the lives of fellow Canadians.

More by Richard Galazzo