Frugal Innovation

Nokia 1100

Frugal innovation is the process of reducing the complexity and cost of a good and its production. Usually this refers to removing nonessential features from a durable good, such as a car or phone, in order to sell it in developing countries. Designing products for such countries may also call for an increase in durability, and unconventional distributions channels. Sold to so-called ‘overlooked consumers,’ firms hope volume will offset razor-thin profit margins.

Rising incomes in developing countries may also drive frugal innovation. Many terms are used to refer to the concept. ‘Frugal engineering’ was coined by Carlos Ghosn, the joint chief of Renault and Nissan, who stated, ‘frugal engineering is achieving more with fewer resources.’ Frugal innovation isn’t solely the domain of large multinational corporations. While General Electric may win plaudits for its $800 EKG machines, cheap cell phones made by local, no-name companies and no-frills wire frame eyeglasses are equally good examples of frugal innovation.

In India, the words ‘Gandhian’ or ‘jugaad,’ Hindi for a stop-gap solution, sometimes are used instead of ‘frugal.’ Many frugal innovations hail from India, which the US Department of Commerce has singled out for its innovative achievements saying in 2012, ‘there are many Indian firms that have learned to conduct R&D in highly resource-constrained environments and who have found ways to use locally appropriate technology…’ The ChotuKool is a tiny refrigerator sold by Indian company Godrej; it eschews the traditional compressor for a computer fan. The Jaipur leg, also developed in India, is a low cost prosthetic ($150 to manufacturer), and includes some clever improvisations such as incorporating irrigation piping into the design to lower costs. Designed to appeal to the many Indians who drive motorcycles, the Tata Nano was developed by Indian conglomerate Tata Group and is the cheapest car in the world.

Mobile banking solutions in Africa, like Safaricom’s M-Pesa, allow people access to basic banking services from their mobile phones. Money transfers done through mobiles are also much cheaper than using a traditional method. While some services can be accessed on a mobile alone, deposits and withdrawals necessitate a trip to a local agent. Designed for developing countries, the Nokia 1100 is basic, durable, and–besides a flashlight–has few features other than voice and text. Selling more than 200 million units only four years after its 2003 introduction, it is the best selling phone of all time. In Africa, several companies including SABMiller and Diageo, following in the footsteps of local home brewers, have made beer more affordable by using sorghum or cassava in place of malting barley and reducing packaging costs by selling kegs not bottles. In some Philippine slums, solar skylights made from one liter soda bottles filled with water and bleach provide light equivalent to that produced by a 55 watt bulb and may reduce electricity bills by US$10 per month.

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