Tata Nano

When less is more: Frugal Innovation

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‘Frugal Innovation’ is one of the 2013 mega-trends we identified but we felt it was worthy of a closer look. So what’s it all about? In essence, it’s finding creative ways to do more with less. Typically this has referred to innovation in situations or markets where resources are scarce – using the constraints placed on you to inspire (or enforce) an innovative fix or an improvised solution. Often this approach can be seen in action on the streets of countries such as India, China and Brazil where many still live in poverty and entrepreneurs have developed creative solutions to common problems such as the inspiring story of this ‘Solar Bottle‘.

From humble beginnings the idea has gained traction in the corporate world – and those same emerging markets are leading the way. Corporate examples of ‘Frugal Innovation’ include:

  • ChotuKool: targeting rural Indians this refrigerator, priced at about $69, uses a thermoelectric chip that maintains a cool temperature on a 12-volt DC current or external battery. It’s unconventional opening minimises heat loss and power consumption. ChotuKool was awarded the 2012 Edison Award Gold prize for Social Impact
  • M-PESA: in a country where the nearest bank can be many miles away millions of Kenyans rely on M-PESA, a service that enables them to save, spend, and transfer money using their cell phones without having a bank account and also gives them access to micro-financing
  • Tata Nano: Tata set out to build a car that could be sold for just 100,000 rupees (about $1,800), putting it within reach of ordinary Indian families who had until then had to rely on motorbikes for transport. To achieve this they had to rethink the whole manufacturing process, and the result was the Nano, the cheapest car in the world today. The company is now looking at creating cheap flat-pack housing…

But this way of thinking is no longer just a preserve of poorer nations, it is becoming ever more relevant in the developed world. As austerity bites and both consumer and government spending falls in much of Europe and North America, the old innovation model of trading people ever upwards seems broken and a more radical approach to innovation is needed. Equally companies are starting to see that resources previously considered infinite, such as water and oil, are becoming both scarcer and more expensive, and the ‘Frugal Innovation’ model offers a solution.

However, for most people innovation involves adding a benefit to an existing product, so how can you start to apply a frugal approach to innovation challenges you might be facing? With ‘Frugal Innovation’ the key principle is subtraction, not addition; so start by taking away elements that seem key to a product, try to figure out what you’re got left and then identify what new benefit this could deliver. It’s not easy, and requires a real shift in mindset, but this approach not only has the potential to save you (and your customer) money, it also moves you beyond the easiest – and most obvious – solutions, to genuinely game-changing innovation.

Peter Löscher, CEO of Siemens and a pioneer of the concept of ‘Frugal Manufacturing’, summed it up in this way “Scarcity of resources is not an impediment but an enabler (of innovation)”. We agree and believe such approaches can help companies in both developed and emerging markets innovate cheaper, faster and better, helping minimise resource and maximise value.

‘Frugal Innovation’ is an approach which has to potential to unlock very powerful, and radical, innovation ideas that move beyond redesigning products to involve rethinking entire processes and business models. This can be challenging for business but the results will be a pipeline of frugal solutions that not only delight price-conscious customers, but also attract the growing group of wealthier consumers who value ideas that are both smart and sustainable.



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