Frugal innovation

Frugal innovation or frugal engineering is the process of reducing the complexity and cost of a good and its production. Usually this refers to removing nonessential features from a durable good, such as a car or phone, in order to sell it in developing countries. Designing products for such countries may also call for an increase in durability and, when selling the products, reliance on unconventional distribution channels. Sold to so-called "overlooked consumers", firms hope volume will offset razor-thin profit margins. Globalization and rising incomes in developing countries may also drive frugal innovation. Such services and products need not be of inferior quality but must be provided cheaply.

In May 2012 The Financial Times newspaper called the concept "increasingly fashionable".

Several US universities have programs that develop frugal solutions. Such efforts include the Frugal Innovation Lab at Santa Clara University and a two quarter project course at Stanford University, the Entrepreneurial Design for Extreme Affordability program.

Variety of terms

Many terms are used to refer to the concept. "Frugal engineering" was coined by Carlos Ghosn, the joint chief of Renault and Nissan, who stated, "frugal engineering is achieving more with fewer resources."

In India, the words "Gandhian" or "jugaad", Hindi for a stop-gap solution, are sometimes used instead of "frugal". Other terms with allied meanings include "inclusive innovation", "catalytic innovation", "reverse innovation", and "BOP innovation", etc.

At times this no frills approach can be a kind of disruptive innovation.

History

Spotlighted in a 2010 article in The Economist, the roots of this concept may lie in the appropriate technology movement of the 1950s although profits may have been first wrung from underserved consumers in the 1980s when multinational companies like Unilever began selling single-use-sized toiletries in developing countries. Frugal innovation today isn't solely the domain of large, multinational corporations, however, as small, local firms have themselves chalked up a number of homegrown solutions. While General Electric may win plaudits for its US$800 EKG machines, cheap cell phones made by local, no-name companies, and prosthetic legs fashioned from irrigation piping are also examples of frugal innovation.

The concept has gained popularity in the South Asian region, particularly in India. The US Department of Commerce has singled out this nation for its innovative achievements saying in 2012 that "there are many Indian firms that have learned to conduct R&D in highly resource-constrained environments and who have found ways to use locally appropriate technology..."

Notable innovations

An Indian woman using her Nokia 1100

Frugal innovation is not limited to durable goods such as the GE US$800 EKG machine or the US$100 One Laptop Per Child but also services such as 1-cent-per-minute phone calls, mobile banking, off-grid electricity, and microfinance.

ChotuKool fridge

A tiny refrigerator sold by Indian company Godrej, the ChotuKool may have more in common with computer cooling systems than other refrigerators; it eschews the traditional compressor for a computer fan. (It may exploit the thermoelectric effect.)

Foldscope

The Foldscope is a tough origami microscope assembled from a sheet of paper and a lens. Developed by a Stanford engineer, it is designed to cost less than US$1.

Jaipur leg

A low cost prosthetic developed in India, the Jaipur leg costs about $150 to manufacture and includes some clever improvisations such as incorporating irrigation piping into the design to lower costs.

Mobile banking

Mobile banking solutions in Africa, like Safaricom's M-Pesa, allow people access to basic banking services from their mobile phones. Money transfers done through mobiles are also much cheaper than using a traditional method. While some services can be accessed on a mobile alone, deposits and withdrawals necessitate a trip to a local agent.

Nokia 1100

Designed for developing countries, the Nokia 1100 was basic, durable, and–besides a flashlight–had few features other than voice and text. Selling more than 200 million units only four years after its 2003 introduction made it one of the best selling phones of all time.

Sorghum beer

In Africa, several companies including SABMiller and Diageo, following in the footsteps of local home brewers, have made beer more affordable by using sorghum or cassava in place of malting barley and reducing packaging costs by selling kegs not bottles.

Solar light bulb

In some Philippine slums, solar skylights made from one liter soda bottles filled with water and bleach provide light equivalent to that produced by a 55 watt bulb and may reduce electricity bills by US$10 per month.

Tata Nano

Designed to appeal to the many Indians who drive motorcycles, the Tata Nano was developed by Indian conglomerate Tata Group and is the cheapest car in the world.

See also

• Navi Radjou
• Jaideep Prabhu
• Appropriate technology
• C. K. Prahalad
• Disruptive innovation
• Reverse innovation
• Small is beautiful

In the media

In 2014, Navi Radjou delivered a talk at TED Global on frugal innovation.

In 2015, Navi Radjou and Jaideep Prabhu coauthored the book Frugal Innovation: How to Do More With Less' published worldwide by The Economist. The book explains the principles, perspectives and techniques behind frugal innovation, enabling managers to profit from the great changes ahead.

External links

• Frugal Innovation Hub, Virtual gathering place for individuals and organizations from around the world who want to learn about frugal innovation, share best practices, and network.
• What Frugal Innovators Do, Harvard Business Review. December 2014.
• 4 CEOs Who Are Making Frugal Innovation Work, Harvard Business Review. November 2014.
• Frugal innovation: A new approach pioneered in the Global South, Ideas for Development.
• Innovation for everyone, Renault Nissan.
• Devex Impact, Devex and USAID.
• Research group on Frugal Innovation, Frugal Digital.
• Center for Frugal Innovation, Hamburg University of Technology, Institute for Technology and Innovation Management.
• "Marketing Innovative Devices for the Base of the Pyramid", Hystra. March 2013.
• Madrigal, Alexis. "The No-Name Companies Selling More Phones Than Samsung, LG, and Apple Combined." The Atlantic. SEP 16 2011.
• "Frugal innovations", Nesta.
• Radjou, Navi, Jaideep C. Prabhu, Ahuja, Simone. "Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth." San Francisco, CA: Jossey-Bass - Random House India, 2012. Print.
• Tiwari, R. and Herstatt, C. (2012): Open Global Innovation Networks as Enablers of Frugal Innovation: Propositions Based on Evidence from India, Working Paper No. 72, Institute for Technology and Innovation Management, Hamburg University of Technology.
• Tiwari, R. and Herstatt, C. (2011): Frugal Innovations for the 'Unserved' Customer: An Assessment of India's Attractiveness as a Lead Market for Cost-effective Products, Working Paper No. 69, Institute for Technology and Innovation Management, Hamburg University of Technology.
• Tiwari, R. and Herstatt, C. (2011): India - A Lead Market for Frugal Innovations? Extending the Lead Market Theory to Emerging Economies, Working Paper No. 67, Institute for Technology and Innovation Management, Hamburg University of Technology.
• Tiwari, Rajnish and Herstatt, Cornelius. 2012. Frugal Innovation: A Global Networks' Perspective. Die Unternehmung (Swiss Journal of Business Research and Practice), Vol. 66, Issue 03 (2012), pp. 245–274