frugal innovation - sorgham beer

In the early months of 2013, buzz about a new business strategy started circulating. Word had it that companies like Renault-Nissan had discovered a “secret” groundbreaking business paradigm that enables them to generate more business.

Introducing Frugal Innovation

This new strategy known as Frugal Innovation, is the ability to generate more business and social value while significantly reducing the use of scarce resources. It’s about solving – and even transcending – the paradox of “doing more with less”. (Insead Knowledge).

According to Wikipedia, this type of innovation can involve removing nonessential features from a durable good, such as a car or phone, in order to sell it in developing countries.

By employing this process, companies can reduce the complexity and cost of their productions. In essence, frugal innovation is based on the notion that resource scarcity can be a growth opportunity.

For the eco-conscious, this strategy is also known as “green” innovation. Unilever, a company that produces health and well-being products is a company that believes in practicing this strategy. Its CEO, Paul Polman, recognizes that at our current rate of consumption, by 2030 we would need two planets to supply the resources we need and to absorb our waste. Polman has set an objective for Unilever to double its revenues by 2020 while reducing its environmental impact by 50 percent.

One of Unilever’s most popular frugal innovation developments include offering individually-wrapped or small packs of soap and shampoo to cost-conscious customers.

By creating “frugal” solutions, companies can reach new customers in emerging markets in developing countries such as India, Africa, China and Brazil. As an example, the engineers at Siemens from all over the world, notably in Europe, India, China, Brazil, and the US have collaborated together and a created a solution for those in developing countries who have limited access to clean water: a low-cost, energy-saving, waste water treatment method. (Ivey Business Journal).

Go Frugal with the Jugaad Mindset

frugal innovation - sorgham beer
Frugal beer: SABMiller made beer more affordable by using sorghum instead of barley

What sets frugal innovation apart from other said groundbreaking business strategies is that it brings an entirely new mindset to companies that choose to develop frugal offerings.

In order for this strategy to work, western organizations need to shift to the Jugaad mindset. This mindset involves a coming up with a creative or innovative idea as a quick way of solving a problem. This type of improvised work-around method is the solution to having a lack of resources. As Carlos Ghosn, CEO of Renault-Nissan explains “In the West, when we face huge problems and we lack resources, we tend to give up (too) easily. Jugaad is about never giving up!”

Frugal Innovation: A New Business Paradigm
Frugal Innovation: The Key to Penetrating Emerging Markets

Related blog posts:
Definition of innovation: Some best ones
Innovation and creativity work together

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