Frugal Innovation: A New Paradigm For Business!


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

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