"Frugal Innovation" The new masters of management.
(From 'Jugaad' To Frugal Innovation)


Vijay Prakash Gupta
CMD, Modinagar


Emerging countries are no longer content to be sources of cheap hands and low-cost brains. Instead they too are becoming source of innovation, producing breakthroughs in everything from telecoms to car making to health care. They are redesigning products to reduce costs not just by 10%, but by up to 90%. They are redesigning entire business processes to do things better and faster than their rivals in the West. Forget about flat—the world of business is turning upside down. Just as Japan's quality circles and just-in-time delivery were part of a new system called "lean production", so the emerging world's reverse innovation and frugal production are part of a new approach to management.

This new management model pushes two common thoughts beyond their prior limits: that the customer is king, and that economies of scale can produce essential reductions in unit costs. Companies are starting with the necessities of some of the world's poorest people and redesigning not just products but entire production processes to meet those needs. This can involve changing the definition of a customer to take in all sorts of people who were formerly expelled from the market economy. It means cutting costs to the bone and eliminating all but the most essential features of a product or service.

Look at the untouched markets first and then make products that mingle technology and low pricing. That's not 'jugaad', but Frugal or Reverse Innovation. And India's showing the way to the world.

Forget the US/ Germany/ Japan, the Indians are also setting the pace.

Emerging markets are evolving in to centers of innovation in fields from low-cost healthcare devices and wind power to micro finance and electric cars, mobile phones, creating and developing simple products that can significantly impact a consumer's life not just in the blooming power economies but also in the India.

Indian firms export many in sourced services, but primary focus is domestic consumers, who demand cheap, not fancy, goods. "Frugal innovators" oblige.


The over all progress of the country lies in the areas where the new generation technologies are bit difficult to access. There is a huge market lies in rural India, which the enterprises can easily grab if they are ready to invest in frugal innovation. To attain complete development in the country, the enterprises should innovate to develop products and services that really matters for the under-penetrated markets.

Frugal innovation is a new management philosophy, which integrates specific needs of the bottom of the pyramid markets as a starting point and works backward to develop appropriate solutions which may be significantly different from existing solutions designed to address needs of up market segments. 

Meaning of Innovations

India needs innovation to accelerate its growth and it needs innovation to make growth more inclusive as well as environmentally sustainable. Innovation is the process of creating something desirable that prevalent expertise says is not possible.

Innovation encloses the following:-

* Involves thinking in a different way, imaginatively and insightfully
* Enables solutions/ inventions that have an impact on social and economic importance
* Fulfills unmet needs, not met by usual products/processes/ institutional forms
* Moving beyond R&D to mean innovative applications of old technologies, up-to-the-minute processes & structures, organisational creativeness & more…

An innovation can be a product like the Nano a modern car that costs less than one lakh rupees. An innovation can also be the way of doing things differently to produce results that are very desirable but cannot be obtained by 'business as usual'. Conducting eye surgeries to the same standards as the best in the world but at a very small percentage of the cost is one example.

Providing access to mobile phone services to hundreds of millions of people in the country at a fraction of the cost at which they are provided in rich countries is another.

Frugal Innovations in India

Frugal innovation is not just about redesigning products; it involves rethinking entire production processes and business models. Companies need to squeeze costs so they can reach more customers, and accept thin profit margins to gain volume. Three ways of reducing costs are proving particularly successful.

India can be the test hold for all kinds' innovations across the world. There are many other innovations which happen in India for India. From an ultra-low-cost mobile phone and a cycle charger to go with it, to a $35 tablet PC, there's no end to what India can consume.

India needs more 'frugal innovation' that produces more 'frugal cost' products and Services that are affordable by people at low levels of incomes without compromising the Safety, efficiency, and utility of the products.

The country also needs processes of innovation that are frugal in the resources required to produce the innovations.

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Source: E-mail January 9, 2011


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