In the TED talk entitled “creative problem-solving in the face of extreme limits” Navi Radjou defined frugal innovation as “the ability to create more economic and social value using fewer resources. Frugal innovation is not about making do; it’s about making things better.“
Indian people call it Jugaad, a Hindi word that means finding inexpensive solutions based on existing scarce resources to solve problems smartly.
The word Jugaad was popularized in the book Jugaad Innovation, where Jaideep Prabhu defines it as “frugal, flexible, and inclusive approach to problem-solving and innovation.“
In this article, we’ll use frugal innovation and “Jugaad” as synonyms.
Aspect
Explanation
Concept Overview
Frugal Innovation, also known as jugaad innovation or jugaad thinking, is an approach to innovation that focuses on creating cost-effective and simple solutions to address complex problems, especially in resource-constrained or emerging markets. It emphasizes doing more with less, leveraging constraints as opportunities, and prioritizing affordability and accessibility in product or service design. Frugal innovation often results in products that are simpler, affordable, and more sustainable.
Key Principles
Frugal innovation is guided by several key principles: 1. Resource Constraints: Acknowledges that limitations in resources, such as financial, material, or infrastructure, can drive creativity and innovation. 2. Simplicity: Prioritizes simplicity in design, avoiding unnecessary complexity. 3. Affordability: Aims to make products or services accessible to a wide range of users, especially those in low-income or underserved markets. 4. Sustainability: Focuses on sustainable practices and minimizing environmental impact. 5. Rapid Prototyping: Embraces a quick, iterative approach to prototyping and development.
Examples
Notable examples of frugal innovation include: 1. Tata Nano: Dubbed the “world’s cheapest car,” Tata Nano aimed to provide a low-cost transportation solution for the Indian market. 2. Mobile Banking: Services like M-Pesa in Kenya revolutionized banking for those without access to traditional banks. 3. Solar Lanterns: Affordable solar-powered lanterns bring light to off-grid communities. 4. Telemedicine: Telemedicine platforms provide medical consultations in remote areas. 5. Reusable Sanitary Products: Innovative, reusable menstrual hygiene products for low-income women.
Applications
Frugal innovation is applied in various sectors and industries: 1. Healthcare: Developing low-cost medical devices and telemedicine solutions for underserved populations. 2. Agriculture: Creating affordable farming tools and practices for smallholder farmers. 3. Education: Developing low-cost e-learning solutions and educational content. 4. Energy: Providing affordable and sustainable energy solutions for off-grid communities. 5. Consumer Goods: Designing products for price-sensitive markets.
Benefits
The approach offers several benefits: 1. Accessibility: Frugal innovations make essential products and services accessible to a broader population. 2. Cost Savings: It reduces costs for both producers and consumers. 3. Sustainability: Emphasizing resource efficiency contributes to environmental sustainability. 4. Market Expansion: Companies can enter new markets and expand their customer base. 5. Social Impact: Frugal innovations often have a positive social impact by addressing pressing societal challenges.
Challenges
Challenges in implementing frugal innovation include maintaining quality while reducing costs, navigating regulatory hurdles, and ensuring scalability and sustainability. Companies must also understand the unique needs and constraints of the target market.
For some people, frugal innovation might sound in a way as the art of improvising. However, frugal innovation or Jugaad has three key ingredients:
Inexpensive but not cheap
Frugal innovation is about finding smart solutions with limited resources.
As those solutions are inexpensive, many associate frugal innovations with “cheap” or of scarce quality. Instead, frugal innovation creates solutions that work well at a low cost.
Thus, passing those economic advantages to the final customers.
It’s not an art; it is a mindset
Thus, frugal innovation isn’t the art of improvising. Instead, that is a process of channeling creativity to develop and market an idea with limited resources.
Even though many see limited resources as a drawback, in reality, in the frugal innovation model, the limited resource is what makes those applying the frugal innovation framework able to find smart solutions.
Jugaad is also about the informal economy
In the western world, it’s easy to think about an economy as a set of official data that uncovers how the real world works.
In reality, the real world, especially in emerging economies, is as much (if not more) driven by informal processes as formal ones.
The Nano car from Tata Motors is often cited as an example of frugal innovation.
However, this car which was thought of as an inexpensive version for the Indian market has stopped production as of May 2018.
This is the listing price of the Nano in Indian Rupee:
M-KOPA: the home solar solution that comes in a box
As specified on the website:
Customers buy the solar home system on an affordable M-KOPA payment plan, with an initial deposit followed by daily payments for up to one year. After completing payments, customers own the product outright.
The most interesting part though isn’t only the product itself, but the alternative business model used to allow anyone to purchase one.
How do you pay for it? The cost of $200 would be too expensive for Kenyans, which is the market that this product targets.
Therefore, you pay with a simple deposit of $25; then you make daily micropayments of 45 cents using the mobile phone. Why is this special at all?
Well, those micropayments are made via a mobile payment system that is itself the result of frugal innovation.
The gStakes talk to each other and to the gLink base station over a proprietary radio link. The gLink connects to the Internet over your Wi-Fi network, or uses the cellular telephone network (and requires a low cost subscription). You can access your data from our secure servers over the Internet, whether on your computer, smart phone or tablet. Set-up is easy, and the gStakes are simple to move at any time.
Be-Bound
As specified on Be-Bound:
It optimizes data and expands mobile and IoT coverage to reach 95% of the population worldwide, using pre-existing networks
Our frugal innovation allows you to do more with less, and presents three major advantages :
No additional infrastructure costs, no investment required.
Easy to deploy on existing networks (already operational in several countries).
Connect more people immediately, even in untapped areas.
Creative problem-solving in the face of extreme limits
From Navi Radjou TED there are a couple of critical aspects of frugal innovation.
As Navi Radjou pointed out, you take what’s abundant to deal with what is scarce. In short, abundance in some areas can be used to deal with scarcity in other areas.
Take the Be-Bound case above; it uses existing technologies available to most of the population to bring connectivity.
Frugal innovation often opens up a new and smarter business model based on “more with less” instead of the “more for more” existing business models in the western world are often flawed and carry many hidden costs for society. As Navi Radjou points out:
This more for more model is running out of gas, for three reasons: First, a big portion of customers in the West because of the diminishing purchasing power, can no longer afford these expensive products. Second, we are running out of natural water and oil. In California, where I live, water scarcity is becoming a big problem. And third, most importantly, because of the growing income disparity between the rich and the middle class in the West, there is a big disconnect between existing products and services and basic needs of customers.
Key takeaway
As the western world dominates the global economy, we give for granted that the process, methodologies, and business models we adopt are the best possible.
However, what we like to call the “Third World Country” can teach us way more about innovation and sustainable business models than we might like to think.
In this article about frugal innovation, we’ve seen how alternative business models, based on limited resources, can create smarter solutions than the traditional ones we see in the western world.
Key Highlights
Frugal Innovation Definition: Frugal innovation, also known as Jugaad, is the ability to create more economic and social value using fewer resources. It involves finding smart and effective solutions to problems by making the most of limited resources. This approach is not about compromising quality, but about making things better within constraints.
Three Key Ingredients:
Inexpensive but Not Cheap: Frugal innovation creates solutions that work well and deliver value at a low cost, benefiting customers economically.
Mindset, Not Art: Frugal innovation is a structured process that channels creativity to develop and market ideas using limited resources effectively.
Inclusive Approach: Frugal innovation acknowledges the informal economy’s significance, particularly in emerging economies, where informal processes are as influential as formal ones.
Examples of Frugal Innovation:
Nano Car: Tata Motors’ Nano car is cited as an example of frugal innovation, designed to provide an affordable vehicle for the Indian market.
M-KOPA: This solar home solution enables customers to purchase the product through an affordable payment plan, with daily micropayments using mobile phones.
gThrive: A technology solution involving gStakes and gLink for data connectivity, especially beneficial in areas with limited resources.
Be-Bound: Optimizing data to expand mobile and IoT coverage, connecting more people without additional infrastructure costs.
Creative Problem-Solving Approach:
Frugal innovation leverages abundance to address scarcity. It employs existing resources to tackle areas with limited availability.
It challenges the conventional “more for more” business model prevalent in the Western world, offering “more with less” through smarter solutions.
Navi Radjou emphasizes that the “more for more” model is facing challenges due to economic constraints, resource scarcity, and income disparity.
Key Takeaway:
Emerging economies and their frugal innovation practices provide valuable insights for creating sustainable and innovative business models.
Alternative business models based on limited resources can often lead to smarter and more efficient solutions.
Frugal Innovation is an approach to product or service development that aims to create high-quality solutions with minimal resources, catering to the needs of underserved or resource-constrained populations. Frugal innovation emphasizes simplicity, affordability, and accessibility, leveraging constraints as opportunities for creative problem-solving. It involves rethinking design, production, and distribution processes to deliver cost-effective and sustainable solutions that address specific challenges or gaps in markets. Frugal innovation is prevalent in emerging economies but has also gained traction in developed markets seeking efficient and inclusive solutions.
– When developing products or designing services for resource-constrained markets or communities. – Particularly in understanding the principles of frugal innovation, such as affordability, accessibility, and sustainability, and in exploring techniques to implement frugal innovation, such as user-centric design, modularization, and value engineering, to create solutions that meet the needs of underserved populations, overcome resource constraints, and achieve inclusive growth in sectors such as healthcare, education, and agriculture.
Reverse Innovation
Reverse Innovation is a strategy where innovations originally developed for emerging or low-income markets are adapted or scaled for higher-income or developed markets. It involves identifying novel solutions or business models in resource-constrained contexts and repurposing them to address similar challenges or opportunities in different settings. Reverse innovation challenges the traditional flow of innovation from developed to developing countries and fosters cross-pollination of ideas and practices across diverse markets and contexts.
– When adapting products or replicating business models for new market segments or geographic regions. – Particularly in understanding how reverse innovation facilitates knowledge transfer, market expansion, and competitive advantage, and in exploring techniques to leverage reverse innovation, such as localization, customization, and co-creation, to capitalize on emerging market insights, diversify revenue streams, and drive sustainable growth in global business expansion or market entry strategies.
Frugal Engineering
Frugal Engineering is an engineering philosophy that emphasizes simplicity, efficiency, and cost-effectiveness in product design and development. It involves optimizing product features, materials, and manufacturing processes to deliver high value at low cost, without compromising quality or performance. Frugal engineering applies principles of resourcefulness, ingenuity, and user-centric design to create innovative solutions that meet the needs of diverse users, especially those in resource-constrained environments.
– When streamlining production or improving product affordability in engineering projects or manufacturing operations. – Particularly in understanding how frugal engineering fosters innovation, sustainability, and competitiveness, and in exploring techniques to apply frugal engineering, such as value analysis, design for manufacturability, and lean production, to reduce costs, enhance efficiency, and increase customer value in product development, supply chain management, and manufacturing processes.
Bottom of the Pyramid (BoP) Approach
Bottom of the Pyramid (BoP) Approach is a business strategy that targets low-income or underserved populations as a viable market segment for products and services. It involves developing affordable and accessible solutions tailored to the needs and constraints of BoP consumers, leveraging economies of scale, localization, and inclusive business models to create shared value and sustainable impact. The BoP approach seeks to address social and economic challenges while unlocking new market opportunities and fostering inclusive growth.
– When entering new markets or expanding market reach with inclusive business models or social enterprises. – Particularly in understanding how the BoP approach fosters market development, social inclusion, and sustainable development, and in exploring techniques to implement the BoP approach, such as market segmentation, co-creation, and inclusive value chains, to build resilient business ecosystems, foster community empowerment, and drive economic development in emerging economies or marginalized communities.
Jugaad Innovation
Jugaad Innovation is a term derived from Hindi meaning “frugal innovation” or “improvisation” and refers to the practice of creating innovative solutions using limited resources or unconventional methods. Jugaad innovation emphasizes flexibility, adaptability, and quick iteration to solve problems and seize opportunities in dynamic and uncertain environments. It is characterized by a mindset of resourcefulness, resilience, and rapid prototyping, enabling individuals and organizations to overcome constraints and achieve sustainable outcomes with minimal investment.
– When responding to market disruptions or navigating resource constraints in entrepreneurial ventures or project management. – Particularly in understanding the principles of jugaad innovation, such as agility, resilience, and inclusive design, and in exploring techniques to apply jugaad innovation, such as frugal prototyping, agile development, and collaborative problem-solving, to foster creativity, accelerate innovation, and drive positive change in startups, social enterprises, and grassroots initiatives.
Affordable Innovation
Affordable Innovation is an innovation strategy focused on developing solutions that are accessible and affordable to a wide range of users, especially those with limited financial means. It involves designing products, services, or technologies that deliver essential functionalities or benefits at a fraction of the cost of traditional alternatives, without sacrificing quality or performance. Affordable innovation aims to democratize access to critical goods and services, improve living standards, and foster inclusive growth and development.
– When expanding market reach or addressing affordability barriers in product development or social entrepreneurship. – Particularly in understanding how affordable innovation enhances accessibility, inclusivity, and social impact, and in exploring techniques to implement affordable innovation, such as frugal design, inclusive pricing, and collaborative partnerships, to bridge the affordability gap, empower underserved communities, and create shared value in sectors such as healthcare, education, and financial services.
Lean Startup Methodology
Lean Startup Methodology is an approach to entrepreneurship and innovation that emphasizes rapid experimentation, validated learning, and iterative product development. It involves systematically testing assumptions, gathering feedback, and adapting strategies based on customer insights and market feedback, aiming to reduce waste, mitigate risks, and accelerate time-to-market. The lean startup methodology is characterized by its emphasis on agility, customer-centricity, and continuous improvement, enabling startups and enterprises to innovate more effectively in dynamic and uncertain environments.
– When launching new ventures or scaling innovative projects with limited resources or uncertain market conditions. – Particularly in understanding how lean startup methodology fosters agility, resilience, and customer focus, and in exploring techniques to apply lean startup principles, such as MVP testing, pivot strategies, and growth hacking, to validate business ideas, minimize investment risks, and optimize resource allocation in entrepreneurship, intrapreneurship, and corporate innovation initiatives.
Inclusive Design
Inclusive Design is a design approach that aims to create products, environments, and experiences that are accessible and usable by people of diverse abilities, ages, and backgrounds. It involves considering the needs and preferences of all users throughout the design process, incorporating principles of diversity, equity, and inclusion to ensure that everyone can fully participate and benefit from the designed solutions. Inclusive design emphasizes empathy, diversity, and participatory design methods, enabling designers to create more equitable and sustainable outcomes for all users.
– When developing products or designing environments with universal accessibility or user diversity in mind. – Particularly in understanding how inclusive design enhances usability, diversity, and social impact, and in exploring techniques to implement inclusive design, such as user research, co-design workshops, and accessibility standards, to create products and services that are inclusive, equitable, and user-friendly for people with diverse abilities, needs, and preferences in sectors such as technology, transportation, and urban planning.
Social Innovation
Social Innovation is an approach to problem-solving that seeks to address social, environmental, and economic challenges through innovative solutions and collaborations. It involves developing new ideas, models, or interventions that create positive social change and sustainable impact, leveraging resources, networks, and technologies to empower communities and transform systems. Social innovation spans a wide range of sectors and domains, including healthcare, education, environment, and governance, and often involves cross-sector partnerships, co-creation, and participatory approaches to address complex societal issues.
– When tackling social or environmental challenges or promoting community development through innovative initiatives. – Particularly in understanding how social innovation drives systemic change, community empowerment, and collective impact, and in exploring techniques to foster social innovation, such as design thinking, systems mapping, and stakeholder engagement, to mobilize resources, catalyze collaborations, and scale transformative solutions in social entrepreneurship, nonprofit organizations, and public-private partnerships.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.
According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).
That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
Sociologist E.M Rogers developed the Diffusion of Innovation Theory in 1962 with the premise that with enough time, tech products are adopted by wider society as a whole. People adopting those technologies are divided according to their psychologic profiles in five groups: innovators, early adopters, early majority, late majority, and laggards.
In the TED talk entitled “creative problem-solving in the face of extreme limits” Navi Radjou defined frugal innovation as “the ability to create more economic and social value using fewer resources. Frugal innovation is not about making do; it’s about making things better.” Indian people call it Jugaad, a Hindi word that means finding inexpensive solutions based on existing scarce resources to solve problems smartly.
A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.
Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
