Concept
Frugal innovation is the ability to “do more with less” – that is, to create significantly more business and social value while minimising the use of diminishing resources such as energy, capital and time (Rajou and Prabhu, 2015). Frugal innovation is reducing the extra features or sophistication of products or services; as a result, minimising the product cost. Usually, this refers to removing nonessential features from a durable good, such as cars or mobiles, to sell in developing countries using affordable prices. Frugal products don’t mean cheaper quality, but products with acceptable quality, lower features, and low-end prices.
Background
Many professionals in different industries use the term frugal innovation or engineering. For example, in the 1980s, when multinational companies like Unilever began selling single-use-sized toiletries in developing countries, and when no-name companies sold cheap cell phones in developing countries.
How does it work?
Rajou and Prabhu’s book ‘Frugal innovation’ in 2015 illustrated the key principles for getting frugal innovations (Rajou and Prabhu, 2015)1:
Principle one: engage and iterate
Companies engage with markets and iterate processes to bring greater value to customers. Customer-engaging and validated learning shows how companies can make their innovation process frugal (or cheaper) with more market-focused, cost-effective and agile R&D activities. In short, shifting from “technology push” to dynamic “market pull” can help firms innovate faster, better and cheaper.
Principle two: flex your assets
Today, the world is facing growing resource scarcity and demographic diversity. This new reality is exposing the limitations of mass production. The old model of mass production to increase profitability has become inflexible and wasteful for three reasons: it requires giant, energy-hungry, purpose-built factories; huge inventories to feed these giant plants; and expensive logistical infrastructure to transport goods to thousands of retail stores worldwide. Instead, companies can flex their assets to satisfy the dynamic needs of customers by digitising processes and assets, decentralising supply chains with smaller factories nearby selling points, decentralise of research and development process, focusing on core products and services, simplifying the organisational structure, encouraging open-innovation culture, recruit for a purpose, and so on.
Principle three: create sustainable solutions
This section shows how companies can decimate their consumption of scarce natural resources in their value chain by designing, making and selling products and services with a lower environmental impact. It describes how to implement sustainable practices such as the circular economy (where components and materials are repeatedly recycled) to design and manufacture waste-free products of value to customers. It shows how the sharing economy – in which customers share products as pay-as-you-go services rather than own and consume them – can boost customer loyalty and generate new sources of revenue.
Principle four: shape customer behaviour
This principle shows how companies across many industries can pull, nudge or shove consumers into behaving differently. It also shows how firms can improve brand loyalty and market share by tailoring products to the way customers live and use products. One approach is to give consumers a sense that they are spending or using less because they choose to, not because they have to. In short, customers must truly believe that less is more.
Principle five: co-create value with prosumers (producers and consumers)
Many customers no longer want to be treated as passive buyers or “wallets on feet”; they want to actively take part in the design, production, and distribution of goods and services. By doing so, firms can lower the overall cost of innovation, develop and market products and services faster and better, delight customers with tailored experiences and boost customer loyalty.
Principle six: make innovative friends
This principle shows how GE, for instance, is engaged with a global network of creative external partners (suppliers, universities, venture capitalists, start-ups, tinkerers, and so on) to co-develop frugal products, services and business models more efficiently.
Principle seven: Fostering a frugal culture
This principle discusses how corporate leaders can foster the right culture to embed frugal innovation within their organisations. They can do this by shifting the mindset of all employees at all levels in the organisation, allowing them to create more value with less.
- This post is sourced from my new book- Your Guide To Reach Innovation.
- For more information about the book: https://growenterprise.co.uk/your-guide-to-reach-innovation/
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Final note: the book- Your Guide To Reach Innovation, is an actionable guide to innovation from beginning to end. Enjoy reading the book, and I look forward to your reviews.
Author: Munther Al Dawood
maldawood@growenterprise.co.uk
References:
- Rajou, N. and Prabhu, J., 2015. Frugal innovation, Hachette India.
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