The ability to be creative and innovative in a society influenced by stress, lack of time, and other factors, harnessing the technology available in today's knowledge society is key towards increasing the overall productivity of a future European society. Whilst technology enables new value-chains, product and service development increasingly need to focus on true user needs in order to be successful in today's increasingly global and competitive market. New R&D and innovation methodologies need to be developed to meet the challenge of addressing those needs. This paper examines the need for involving the user and other stakeholder organisations into the innovation process, analyses the key issues regarding regional innovation, and presents a basic concept of Living Labs as a multi-contextual R&D methodology addressing those issues. The proposed Living Labs methodology contributes to the coming challenges of mass-deployment of ICT solutions as a mean to further develop the society involving the citizens. It brings the users/consumers/citizens into the system of innovation, thereby leveraging on a larger mass of ideas, knowledge and experiences etc and substantially boosting the innovation capability.