Frugal innovation – Rethinking product design

Downsizing:
Doing more with less and creating more value with minimal use of resources.

Many experts define frugal innovation as “doing more with less” or, more generally, as the affordable use of products and services developed under conditions of scarce resources. Frugal innovation is a product, service, or solution that is possible despite financial, human, technological, and other resource constraints, and where the end result is less expensive than competing offerings (if available) and that meets the needs of those customers who do so otherwise they cannot be served due to their disposable income.

Frugal innovation refers to the process of creating simple and affordable solutions to complex problems, often with limited resources. Frugal innovations are typically born out of necessity and aim to serve the needs of people who are often overlooked by traditional innovation processes. Frugal innovation can involve rethinking product design, simplifying production processes, and finding new ways to deliver products and services to customers. The goal of frugal innovation is to create high-quality solutions that are cost-effective and accessible to a wide range of people.

Frugal innovation is about bringing value to more people at a lower cost. It’s a mindset of simplicity and extremely low cost without sacrificing the quality of the user experience. It’s about forgoing the extras and delivering high-quality, simple, robust and less resource-intensive products. Frugal innovations are unconventional because they target the lower and middle levels of the economic and social pyramid.

Frugal innovations originally emerged in the context of economic development in emerging countries. The guiding idea at that time was to develop new, simpler products and production methods by downsizing existing products and production methods, which fit the characteristics of these cultures and markets and can also be manufactured in the respective consumer country.

In combination with design thinking, the development of products aimed at people who live and work in developing or emerging countries can be carried out very well and efficiently. Emerging markets such as India, China, Africa and Brazil have meanwhile become leading regions for economical innovations. Globally active companies operate their own innovation and R&D centers especially in these markets and fall back on the local ideas of the economical engineers and developers there.

The concept of frugal innovation is currently being adapted, adopted and practically used in the developed markets in the sense of sustainability, climate and circular economy with success and great approval as a new paradigm in art, science and economy. Frugal innovation has become an important concept that has become of great importance to multinational companies, SMEs, NGOs and governmental organizations.

The work of Navi Radjou

Ever since Navi Radjou published his legendary book “Jugaad Innovation” (see below) in 2012, interest in frugal innovations in industrialized countries has exploded. Business leaders and policy makers in the US, Europe and Japan are keen to understand how to do more with less. This has led them to fundamentally rethink how they operate, build and deliver products and how they create more value for themselves and society while caring for the environment.
Navi Radjou identifies the best practices of frugal pioneers in the US, Europe and Japan across all sectors including manufacturing, retail, financial services, healthcare and education. Navi Radjou describes companies in industrialized countries that are already reaping the benefits of economical innovation. Pioneer companies such as Aetna, Fujitsu, General Electric, GlaxoSmithKline, Pearson, PepsiCo, Renault-Nissan, Siemens and Unilever are striving to anchor economical processes and, above all, to establish an economical mindset in their organizations. According to Navi Radjou, in order to achieve cost efficiency, speed and agility, companies must redesign their innovation engines in the direction of economical innovation.

Companies are currently facing increasing pressure from cost and environmentally conscious customers, employees and governments to design and manufacture affordable, sustainable yet high quality products.
Frugal innovation is therefore currently not just a groundbreaking corporate strategy, but more than a strategy: it describes a new way of thinking that sees the scarcity of resources as an opportunity and not as a burden.

Key Features

  • Offers “good enough” performance (not better)
  • The target group are customers at the lower end of the market
  • Uses a low-cost business model
  • Achieves a significant reduction in overall costs
  • Focused on core functions
  • Is user friendly and very easy to use
  • The purchase price is very affordable for many customers in the market
  • Is sustainable and eco-friendly, ecological, low environmental impact, low carbon footprint
  • Is highly scalable, large quantities possible, increase in profit through large volumes

Economical innovations are changing value chains and redesigning products. It offers simple, functional solutions with few resources, especially for consumers who are short on funds.

Frugal innovation is much more than developing a cheaper version of an existing product. It requires a whole new mindset, diving deep to understand the real needs of consumers at the bottom of the pyramid and finding gaps there that can be converted into business opportunities.

The reverse innovation concept

If an innovation has its origins in the developing countries and prevails on the markets there and then reaches the developed countries from there, it is also referred to as a “reverse innovation”. The ability to frugal innovation is therefore a prerequisite for reverse innovation.

Disruptive low-end innovations in developed markets

According to Clayton Christensen, frugal innovations are so-called “low-end disruptions”.

Disruptive low-end innovations use those market segments to enter the market in which the products currently offer more performance than is actually functionally necessary and more than consumers actually want or need. There, the frugal new providers then implement a classic bottom-up strategy (while a top-down strategy begins with entry into the top price segments of a market, i.e. the luxury segments).

Low-end disruptors initially serve the lower ends of the low-margin market. The companies already active on the market there usually give up this (lower) part of the market without a fight. They do not want to compete for business with very low margins or simply they can no longer produce profitably at these prices.

Literature

© 2023 Innovator’s Guide / E.W. July 16, 2023