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Dion Hinchcliffe uses the term Product Development 2.0 to describe a concept that embodies the use of Web 2.0 concepts such as harnessing collective intelligence, users as co-creators, and turning applications into platforms, into the product development process.
This informal term, which according to Mr Hinchcliffe will be more widespread in 2007, illustrates a process for building highly competitive online products by: leveraging of mass user contributions, providing open architectures for others to build on as they like, and even handing control over key product decisions directly to users.
Using the techniques and technologies that have emerged in just the last few years, companies can give to the customers the tools and motivation to tweak, tune, refine, and contribute to their products and services.
Dion Hinchcliffe argues that
the new process is a fundamental shift for a business to turn over a large part of its product development to its users, becoming more of a mediator and facilitator than a product creator or owner. This is the shift of control from institutions to individuals that the apparently relentlessly democratizing force of the Web has begun exerting on the business models of organizations of every description around the world. As more organizations figure out how to apply Product Development 2.0 to their individual offerings, they will reap significant competitive advantage over those not harnessing the Web to directly connect to customers and begin a rapid and never-ending innovation cycle.
The author provides an extensive table of examples; both in terms of what older style product development did vs. what this new style is doing. He also mentions some companies that use the Product Development 2.0 process successfully.
Source
Dion Hinchcliffe’s blog: Product Development 2.0