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.
The three key ingredients of frugal innovation
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.
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.
