Frugal innovation is the process by which complexity, production, and cost of a good are reduced. It essentially implies the removal of nonessential features from a durable good, such as a car or phone, in order to sell it in developing countries, where the purchasing power of people is comparatively low as compared to people from the developed countries. It also implies increasing the durability of the product to sell it in developing countries, and the distribution of these products is done through reliable unconventional channels. Cutting on cost does not necessarily mean compromising the quality of the product, but it simply means offering maximum performance at good quality and cheap prices.
Rise of frugal innovation
The history of such innovations can be traced back to the appropriate technology movements in the 1950s. Although initially only big firms or corporations resorted to this technique of frugal engineering, it is increasingly becoming common among small and local firms in recent times. The concept has gained popularity in the South Asian region and especially in India as most of the South Asian countries are developing countries. India remains at the core of exploring the potential of frugal engineering. According to the US Department of Commerce, India has learned to conduct R&D in highly resource-constrained environments and has found ways to use locally appropriate technology.
Some of the steps taken by Indians to promote frugal innovation include delivering a talk at TED Global by Navi Radjou in 2014. Then 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 prepares the managers to deal with the great changes that lie ahead of us by explaining the principles, perspectives, and techniques behind frugal innovation. To promote innovation methodology to enterprises adopting digital solutions, Jaideep Prabhu in 2016 went for collaboration with Ignitho Technologies.
Benefits of frugal innovation
The benefits provided by frugal innovation are immense. In a world where resources are scarce and demand for such resources is increasing with each passing day, frugal innovation provides a technique and method to convert limitations into resources. It helps in converting any kind of limitations- be it financial, institutional or material- into an advantage for any company by developing a new technique to use them. Frugal Innovation Index has been developed by Fraunhofer IAO to assist the companies and assess their potential for frugal innovation. The aim of the Frugal Innovation Index is to measure, assess and increase the capability of the companies to be frugally innovative by using a simple questionnaire. The Index consists of the following two questions to help management in understanding their frugal innovation potentiality:
- The first question that the questionnaire asks is, “What is the potential for my company to successfully develop frugal products and services?”
- The second question that the questionnaire seeks to find an answer to is, “What measures need to be taken to achieve this potential?”
present day world and frugal innovation
Since frugal innovation is a technique that gives due regard to the value creation of customer’s needs, it is likely to sustain in the constantly changing world order. While taking into account the needs of the emerging markets, the companies involving in frugal innovation should not forget to take into account the difference between value perceptions in urban and rural regions. India is a country with wide urban and rural disparity and for any product to be successful. Companies will need to ensure that they are advertising different products in different areas. India is such a diverse country that any product can be best delivered by studying the needs of the local population and such modifications are the need of the hour in a country like India because no standardized product can be said to be best suited to the needs and aspirations of the people in this country.
Today, emerging markets account for 36% of the global GDP. Some calculations show that they will represent a US$30 trillion opportunity by the year 2025. By then, leaving the EU, the US, and Japan behind, India, China, and other Asian countries will represent the lion’s share of global middle-class consumption. Thus, here comes the importance and potential of frugal innovation. People in emerging countries have less purchasing power, but at the same time, they give due regard for the quality of the product. People in emerging markets are more likely to compromise on the fanciness of the product rather than its quality. Hence, we can say that frugal innovation provides a promising future in emerging or developing markets or countries.
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To conclude, we can say that frugal innovation is a growing trend and it is much more than simply designing the product in a new way as it requires a completely new mindset by filling in the voids that can turn limitations into opportunities, revisiting the way in which the company is organized and how it delivers it products on a vast scale. – Achal Suchak
