Archive for 'Frugal Innovation'
Michael D. Moberly December 4, 2014 ‘A blog where attention span really matters’!
Has frugal innovation been oversold? If so, should the west’s conventional entrepreneurial community and its stakeholders, often portrayed as consisting of university research, biotech, incubators, venture capitalists, SBIR’s, and quick witted management teams now relax? These two, much paraphrased, questions were posed to readers in an article in The Economist (March 24, 2012) aptly titled ‘Asian Innovation: Frugal Ideas Are Spreading From East to West’.
Oh contraire! Those inclined to characterize frugal innovation as merely representing a new ‘flash-in-the-pan’ simplistic business model that will likely never gain sufficient traction in western economies to become viable, are encouraged to re-think that position. Frankly, I do not sense frugal innovation, conceptually or practically, will become subordinate to business start-up convention and fade from western business lexicon. Those who convey it will may not have taken the time to understand it or perhaps are themselves stakeholders in retaining existing conventions.
It’s short-sighted to characterize frugal innovation as merely a business start-up model which befits (a.) simplified products or services, (b.) work force demographics frequently associated with developing countries, (c.) limited availability of or access to start-up capital, (d.) investor returns in single vs. double or triple digits, and (e.) subordinate to western conventions.
Interestingly, in The Economist’s Schumpeter column (March 24, 2012) titled ‘Asian Innovation’ it’s noted that numerous universities are in somewhat of a ‘scramble mode’ to design and integrate in academia, courses focusing on frugal innovation. This suggests the fundamental principles and concepts of frugal innovation are variously resonating in the west insofar as accommodating the dual visions and/or requisites of (a.) do-ability and work ability, and (b.) attracting – reaching a broader range of prospective entrepreneurs whose innovation does not require substantial and immediate infusions of investment.
To be sure, frugal innovation represents a principled, but less structured path for developing and hopefully commercializing practical innovations that initially target consumers at the so-called ‘bottom of the pyramid’. Not infrequently, initial frugal innovations can be ratcheted up to attract consumers in successively higher brackets of the global pyramid.
Numerous advocates and practitioners of frugal innovation in the East, as The Economist’ article points out, imagine a time when particular Western products, upon removal of gratuitous frills, will lead to such substantial cost savings that frugal ideas will (eventually) come to dominate the innovation process. While car seat warming western consumers have clearly not arrived at that point, the interest embedded in prospective entrepreneurs to pursue alternative paths to innovation commercialization, absent many of the conventional hurdles and/or constraints, particularly those having to do with securing substantial investment are attracting some well deserved interest.
“Reverse Innovation” a book written by Vijay Govindarajan and Chris Trimble, and “Jugaad Innovation” by Navi Radjou, Jaideep Prabhu and Simone Ahuja are seminal guides to frugal innovation. And, as a demonstration that the concept of frugal innovation is not wholly dismissed by the multi-nationals, Mr Govindarajan (Dartmouth’s Tuck Business School) is known to have advised General Electric on frugal innovation and co-authored a very worthy article with its CEO, Jeffrey Immelt.
Michael D. Moberly November 17, 2014 ‘A blog where attention span really matters’!
‘One cannot solve a problem with the same mindset that created it in the first place.’ (Albert Einstein)
Frugal innovation is much more than a mere twist to a previous strategy. In fact, frugal innovation transcends the much clichéd paradox of ‘doing more with less’. Frugal innovators generate business and social value (intangible assets) through more effective – efficient use of limited and/or scarce resources.
Frugal innovation is now expanding at a time when companies are more receptive to commitments to ecologically enlightened consumers and governments to create products and services synchronized with (a.) affordability, (b.) sustainability, and (c.) quality.
Frugal innovators embody a strong sense of managerial flexibility that do not characterize resource constraints or evolving preferences of consumers as being singularly insurmountable or necessarily incapacitating. Instead, frugal innovation advocates view these circumstances as potential opportunities – paths for growth. In other words, minimal/scarce resources can serve as catalysts for frugal innovators to resolve such challenges through their proclivity to be innovative.
Frugal innovation, the secret weapon of emerging markets…
Carlos Ghosn is credited with coining the term ‘frugal engineering’ having been inspired by Indian engineers’ ability to innovate cost-effectively (and swiftly) under extreme resource constraints. Emerging market countries such as India, China, Africa, and Brazil are representative breeding grounds for frugal innovation.
In these countries, creatively minded entrepreneurs are innovating in resource-constrained environments to create ‘frugal solutions’ that deliver more value to customers at lower cost. Innovators accomplish this by assuming a distinctive mindset called ‘jugaad’ which is a Hindi word meaning an ‘innovative fix or an improvised solution born from ingenuity and cleverness’ that enables…
- recognizing opportunities in adverse circumstances, situations, and then
- concocting (frugal) solutions using minimal resources.
Examples of frugal innovation include…
- M-PESA is a service that enables millions of Kenyans to save, spend, and transfer money using their cell phones without having a bank account…
- SELCO provides solar energy at very low prices to over 125,000 households in remote Indian villages, debunking the myth that poor people can’t afford clean technology…
- an Argentinian farmer with dual challenges of scarcity of land, and skilled labor, and successfully dealt with both by subcontracting his farming work to networks of small firms, and scaling up his ‘asset-light’ business model to boost his agricultural output without adding more resources or tangible assets.
Shifting the west’s corporate mindset…
In the West, when management teams face significant challenges and/or lack resources to fully execute a project, there may be a tendency to surrender too quickly. In the end, frugal innovation is not merely different way of innovating or new way of operating a business rather, it’s about fundamentally shifting one’s managerial – operational mindset.
Inspiration for this post is ‘Reverse Innovation” a book written by Vijay Govindarajan and Chris Trimble, and “Jugaad Innovation” by Navi Radjou, Jaideep Prabhu and Simone Ahuja
Michael D. Moberly September 5, 2012
Is frugal innovation being oversold? If so, can Western companies relax now? Two relevant questions posed in an aptly titled article ‘Asian Innovation: Frugal Ideas Are Spreading From East to West (The Economist, March 24, 2012).
At this point, anyone who perceives frugal innovation, and, I include intangible assets in this milieu, as merely being another ‘flash-in-the-pan’ business mania are not only mistaken, in my judgment, they’re in for a very rude awakening. Innovation, frugal or otherwise, is a concept, a philosophy, and a process that has acquired much warranted attention, in the last half decade, spurred in part by several key articles and now books, not the least of which was The Economist’s special report on frugal innovation in April, 2010.
Again, in The Economist’s Schumpeter column (March 24, 2012) titled ‘Asian Innovation: Frugal Ideas Are Spreading From East to West’ it’s noted that numerous firms, as well as universities, are now in somewhat of a ‘scramble mode’ to develop programs in (frugal) innovation. In large part, that’s because the principles and fundamentals of frugal innovation are finding relevance insofar as meeting the dual (requisite) visions of (a.) do-ability, and (b.) being within reach of prospective innovators! Translated, frugal innovation represents a principled, yet not overly structured path for developing practical innovations that initially target consumers at the so-called ‘bottom of the pyramid’. But, with guided strategic planning, such innovations can be further developed and/or enhanced to find consumers in successive brackets of the (global) pyramid.
To be sure, advocates and practitioners of frugal innovation in the East, as The Economist’ article points out, reimagine that Western products, upon removal of unnecessary frills, will lead to such substantial cost savings that frugal ideas will (eventually) come to dominate the innovation process. I’m confident, as others, we have not arrived at that point. However, the interest of prospective innovators to pursue alternative – unconventional paths to innovation absent many of the traditional hurdles and/or constraints, particularly those having to do with finding a target market and securing substantial investment are indeed attractive.
“Reverse Innovation” a book written by Vijay Govindarajan and Chris Trimble, and “Jugaad Innovation” by Navi Radjou, Jaideep Prabhu and Simone Ahuja (addressed previously in this blog), are certainly relevant and experienced guides to frugal innovation. And, as a demonstration that the concept of frugal innovation is not wholly dismissed by the multi-nationals, Mr Govindarajan (Dartmouth’s Tuck Business School) is known to have advised General Electric on frugal innovation and co-authored a very worthy article with its CEO, Jeffrey Immelt.
A special thanks to The Economist magazine and its various articles addressing different facets of frugal innovation.
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Michael D. Moberly September 4, 2012
Simply stated, frugal innovation provides functional solutions to innovation in environments with few resources and little means, especially, emerging market countries.
Frugal innovation is best described, in my view, as a process of skilled intellectual, relationship, and structural capital emerges and merges insofar as discovering new business models, reconfiguring value chains, and/or redesigning products to serve, often times ‘bottom of the pyramid’ users where there are affordability constraints, but in a scalable and sustainable manner.
Frugal innovators identify institutional voids and resource constraints to create more inclusive markets (Bhatti, 2011). Of course, the key word here, again, in my view, is ‘inclusive’, based on outcome (product, service) relevance and attractivity to emerging market countries and users.
Frugal innovation is different from conventional innovation primarily because the paths and strategies (tracts) to develop innovative products and/or services are geared toward, again, the bottom versus the top of the proverbial consumer pyramid. At the top of the consumer pyramid of course, lie the primary sources of purchasing power, which some assume, inevitably produces a trickle-down effect.
A ‘local phenomenon’ is how frugal innovation is often characterized, because it is perhaps best suited for emerging market countries in which entrepreneurs must make the most of what they actually control, in my view, which is their intellectual, structural, and relationship capital. And, even though it may not be consistently called that, frugal innovation is structured around developing innovation to solve problems at the most practical level, and in a sustainable manner.
In the West, conventional ‘top down’ innovation and marketing approaches, by design, at least initially, target high end clientele. Too, western practices largely use traditional, some characterize as archaic, business and distribution models that are reliant on the abundance of non-sustainable resources, which in turn, elevate product design, development, and manufacturing costs. Collectively, advocates of frugal innovation say, this makes numerous science and technology innovations unaffordable for the bottom of the pyramid (BOP) consumers.
Frugal innovation of course, as it was initially conceived, is found (practiced) primarily in emerging market countries and purposefully targets BOP consumer markets. Depending of course on the innovation actually developed, i.e., a product and/or service, ideally progresses to successive levels of users, presumably those higher on the proverbial consumer pyramid.
Too, in actual practice, pure frugal innovators are less apt to characterize the absence of regulatory oversight or resources in emerging market countries, as representing insurmountable or stifling hurdles, rather as leverage points to mitigate the necessity, as is incumbent in the West, for significant influx of investment (for R&D). Again, ideally, frugal innovators are likely to achieve their initial profitability from the BOP consumers, wherever they may be.
There are multiple dimensions to frugal innovation which I believe we would be well advised to become familiar. For example, they’re not just limited to cost, manufacturing, or distribution issues. Rather, the main theme to frugal innovation which GE’s Jeffrey Immelt is known to apply, is that it is a ‘simplification in all aspects of process and outcomes’!
(This post was inspired by the work ofYasser Bhatti, a Higher Education Commission doctoral scholar at the Said Business School, University of Oxford.)
Comments to my blog posts are encouraged and respected. While visiting my blog I also encourage you to browse other topics (posts) of interest which may be relevant to your circumstance, which I welcome your inquiry at 314-440-3593 or firstname.lastname@example.org
Michael D. Moberly June 26, 2012
Frugal innovation is, according to Navi Radjou, Dr. Jaideep Prabhu, and Dr. Simone Ahuja, authors of ‘Jugaad Innovation: Reigniting Innovation in the U.S. and Beyond’…
much more than merely stripping out cost, it essentially prompts individuals to re-think the entire production process as constituting a reversal of most contemporary product design approaches and/or methodologies!
In their, many say, revolutionary book, the word ‘frugal’ is replaced with the Hindi term ‘Jugaad’ which means an innovation, i.e., an improvised solution born from ingenuity and resourcefulness when faced with scarce resources.
As the authors point out, ‘Jugaad innovators’ are most notable for possessing mindsets that encompass multiple (and simultaneously held) attitudes, practices, and abilities, each of which is conducive to seeking and developing opportunities under adversity by…
- doing more with less (resource constrained circumstances)
- thinking and acting flexibly
- keeping things simple
- always including the margin, and
- following one’s heart.
But, let’s be clear, ‘frugal innovation’ commences, like most innovative endeavors, with an idea. The difference is, frugal innovation is conducted under frugal, and, some would say, adverse circumstances with little or no seed capital. My experience suggests, frugal innovation will produce a compliment of intangible assets. Those intangible assets will usually take the form of intellectual, structural, and relationship capital, which in many instances are proportionately comparable to the output of corporate and/or university sponsored R&D initiatives in which there are generally, sufficient resources committed and innovation development conditions are anything but frugal.
As is frequently typical with many new initiatives, some espouse the view that frugal innovation is a ‘tricky skill set for western innovators to emulate’. That’s because, that argument goes, a requisite to being a successful and frugal innovator, is having grown up in an environment where frugality is the primary, if not the only, option available to hopefully bring one’s innovative idea to fruition.
Needless to say, I don’t fully agree with that perspective. Instead, I am very confident, in fact I know a substantial number of ‘western creatives’ who would find frugal innovation an especially attractive concept and strategy, perhaps even more so during this extended economic downturn in which funding and sources of capital are tight, to say the least.
Regardless, wherever a creative initiates/conducts their ‘frugal innovation’, success will be varyingly dependent on having access to an operational platform in which the tenants of ‘frugal innovation’ are already integrated and linked to processes and structures whereby they can develop, test, and assess their idea (innovation) in not just a frugal, but a well managed environment coupled with the right amount of stewardship and oversight.
So, in my search to find an existing and preferably already operational U.S.-based company, that applied ‘frugal innovation’ principles, I became acquainted with a firm in Atlanta called Qwerkstation.com.
As it turns out, Qwerkstation was developed by Latanya Washington as a social workstation for entrepreneurially oriented individuals to explore and develop their ‘creative side’ by turning ideas into actual innovation. Querkstation is a web-based platform in which individuals can truly observe and engage in ‘frugal innovation’ practices. During Qwerkstation’s development phase, Washington’s expertise in software allowed her to capitalize on the open source movement in software production from which she selected particular web application components and distinctively reconfigured them to literally create Qwerkstation.
As readers know, open source software development has been a boon to entrepreneurs for turning ideas into robust applications and digital products without the necessity of hiring software engineers which would all but negate the tenants of frugal innovation. The operational practices Washington adheres to, coupled with the digital functionalities she has embedded in Qwerkstation, collectively work in her favor by (a.) minimizing overhead costs, and (b.) better meet the needs of her target consumer, all-the-while operating in a genuinely frugal innovation manner.
Washington recognizes that frugal innovation has had a significant effect on her overall business processes and perhaps most importantly, outcomes, which I find to be valuable and sustainable competitive advantages, i.e., intangible assets. Frugal innovators and creatives’ who engage Qwerkstation Washington believes, need to be highly focused and efficient, probably more so than in comparative companies with large capital reserves and ample resources.
It’s certainly my sense, at this point, that Qwerkstation is very much a global version of ‘frugal innovation’ which is not only an attractive, but very worthy first step to the innovation process.
(This post was inspired by the book ‘Jugaad Innovation’ authored by Navi Radjou, and Drs. Jaideep Prabhu and Simone Ahuja and the work of Latanya Wasington who founded Qwerkstation.com)