The Innovative On-demand Bus system is developed and the result of field tests show that the system is valid for different city types. On-Demand Bus is a Demand Responsive Transit service that provides transportation to users only after they have reserved their seats, the service vehicles will not travel if there is no reservation. The developed system is based on the scheduling algorithm which emphasizes punctuality and lower energy consumption. The scheduling algorithm is determined to be valid by the computational simulation and by real field tests. On-demand Bus is an existing technology and it runs in various cities all over the world, but the high running cost is a problem. The high running cost arises from two reasons, the computer system and the cost for operators. The "Innovative" On-demand Bus can resolve this problem by the cloud-computing technology. This technology provides the On-demand Bus service through the Internet, so the local government officers do not have to purchase and maintain the large-scale server. Any vehicle in the world can be part of the On-demand Bus service by using the Communication device. This paper will show that the running cost of the introduction of On-demand Bus service can be lowered to one-tenth of the existing On-demand Bus System, since the developed scheduling algorithm can automatically update the schedule in reservation. In effect, the local government does not have to employ the operators because the customers who can operate mobile or personal computers reserve by themselves.