Frugal innovation refers to the process of reducing the cost and complexity of a commodity and its production. It involves doing away with the nonessential features from an item and selling it in developing nations (Agarwal and Alexander, 23). According to the Hindi mindset, Jugaad is used to mean, making do using the available resources to solve problems and which to some extent implies a given level of improvisation. In the context of business, frugal innovation means taking to the market, innovative products despite the limitation of resources. The process leads to functional products of great value, without frills, and good quality that are cheap to the customer.
The aspect of frugal innovation does not just mean redesigning products, but involves rethinking about the entire process of production in business and application of models to make things better (Radjou, 1). Firms need to cut down costs for them to acquire more customers and at the same time accept small profit margins that make them gain volume. There are various ways through which costs can be reduced including contracting out the ever much work by companies. Bharthi Airtel Company in India that sells phone calls is able to offer services at a low cost by contracting the network operations to the Erickson firm, management of transmission towers to independent company and business support the IBM.
The other way of saving money is through the use of the existing technology innovatively. For instance, TCS firm has designed a method of using mobile phones to connect television sets with internet. Mass production techniques also help to reduce costs like in healthcare. This involves designing machines that are multipurpose and that can be used to serve many patients simultaneously (Agarwal and Alexander, 23).
For firms to successfully become frugal innovators they need to apply the following principles. The first one involves keeping it simple. Solutions should not be created to impress the customers but should be made widely accessible and easy to use (Radjou, 1). The second one is about firms not reinventing the wheel and involves leveraging the resources that already exist and assets that are available including the use of mobile phones to provide clean energy or pop stores that offer mobile banking services. The other involves thinking and acting horizontally. Many firms have scaled up vertically through centralized operations in big warehouses and factories. However, it would be agile for them to scale out horizontally through supply chains that have smaller distribution and manufacturing units. A good example for this is the use of Dabbawalas in Mumbai which involves special boxes that are used to deliver food on bicycles and other simple modes of transport. About 5,000 of them can deliver over 200,000 food boxes in a day (Karl, 1).
Some existing examples where the above principles are being applied in business include the Nano car by Tata motors. Unveiled in 2008 the car retails at US$ 3,000 and is equipped with bare essentials only (The Economist Special Report, 1). It is meant to be used domestically replacing the motorcycle and scooter as it can carry more people. Healthcare institutions are using low cost technology. GE is being used in Bangalore and Hyderabad leading to the introduction of breakthrough products including the electrocardiogram and computerized portable machine for ultrasound in a backpack.
Frugal innovation in business involves making do and at the same time making things better. It involves improvisation, making improvement and avoiding unnecessary features in products leading to products of great value, without frills, and good quality that are cheap to the customer. Some examples include connecting television sets to internet, the Nano cars, M-Pesa and M-Kopa services in Kenya.
India and china are the two countries who have embraced the tradition of frugal innovation. The two countries have various ways in which they have demonstrated that the technology is possible based on how they have come up with cheap products that serve many people owing to their costs. The Indians take frugal innovation as the primary and distinctive contribution towards management thinking (Agarwal and Alexander, 23). Referring to the tradition as jugaad, which means making do using what is available and without giving up, they have succeeded in solving the problems that face a good percentage of the population including the inability to afford the products that are made out the more-for-more business models. More-for-more models require the use of many resources to be able to come up with a product, a good example being the iPhone brand of phones which few people can afford.
From the country is the Mac 400 device that is a less fancy, hand-held ECG (electrocardiogram). This device is a masterpiece of frugal technology as it reduces the multiple buttons that exist in the conventional types to just four. Innovation has also replaced the bulky printer with tiny gadgets that are used in the portable ticket machines. The whole machine has been changed into a small item that can be carried in a small backpack and can either use the mains or a battery to power it. The process has reduced the price from $2,000 to just $800 (Radjou, 1). The cost per student involving the ECG test has also been reduced to $1 for every patient.
Some 200 miles on the eastern part of the country is the Tata consultancy services (TCS) firm in Chennai which produces water filters. The filter is a low tech device that uses husks from rice to purify water. The husks form one of the most available and common product in the country. The product is robust, cheap and portable providing large families with abundant bacteria-free water supply. The production initial cost is $24 and a $4 later expense of acquiring a new filter after few months of service.
Compared to India, china is as good in terms of formulating many frugal ideas. In the country, for instance, is Mindray firm which specialize in the production of cheap medical items including the ECG devices (Karl, 1). They also produce the rechargeable battery that has reduced the cost of using lithium-ion batteries through the use of cheap raw materials and designing production method that uses ambient temperatures instead of in the heated dry rooms that are very expensive. The process has seen the cost from $40 to $12 for every piece staging their competitive strength to the nickel cadmium batteries that are less powerful.
The Chinese people have also made other distinctive contributions towards the use of frugal innovation. The first one involves using flexible networks that are either powered by personal methods or by the Guanxi. This process has increased flexibility and reduced cost. The Li & Fung, a company based in Hong Kong is the pioneer and works with a network of more than 12,000 firms from over 40 countries (The Economist Special Report, 1). The company operates customized supply chains towards the vast network of its associates making it possible to keep an eye on order and quality fulfillment. Another firm is the Danchangjiang which produces motorcycles in the Guangdong province by working with hundreds of suppliers of spare parts.
Agarwal, Nivedita, and Alexander Brem. "Frugal and reverse innovation-Literature overview and case study insights from a German MNC in India and China." Engineering, Technology and Innovation (ICE), 2012 18th International ICE Conference on. IEEE, 2012.
Karl, Moore. The best way to innovation?: An Important Lesson from India" https://www.forbes.com/sites/karlmoore/2011/05/24/the-best-way-to-innovation-an-important-lesson-from-india/#29a83e7a2861
Radjou, Navi. "The Genius of Frugal Innovation" http://ideas.ted.com/the-genius-of-frugal-innovation/ (Links to an external site.)Links to an external site.The Economist Special Report. "First break all the rules": The charms of frugal innovation http://www.economist.com/node/15879359
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