Frugal innovation or frugal engineering 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 selling them, reliance on unconventional distributions channels. Sold to so-called "overlooked consumers", firms hope volume will offset razor-thin profit margins. Globalization and rising incomes in developing countries may also drive frugal innovation. Such services and products need not be of inferior quality but must be provided cheaply.
Several US universities have programs that develop frugal solutions. Such efforts include the Frugal Innovation Lab at Santa Clara University and a two quarter project course at Stanford University, the Entrepreneurial Design for Extreme Affordability program.
Variety of terms
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."
In India, the words "Gandhian" or "jugaad", Hindi for a stop-gap solution, are sometimes used instead of "frugal". Other terms with allied meanings include "inclusive innovation", "catalytic innovation", "reverse innovation", and "BOP innovation", etc.
Spotlighted in a 2010 article in The Economist, the roots of this concept may lie in the appropriate technology movement of the 1950s although profits may have been first wrung from underserved consumers in the 1980s when multinational companies like Unilever began selling single-use-sized toiletries in developing countries. Frugal innovation today isn't solely the domain of large multinational corporations, however, as small, local firms have themselves chalked up a number of homegrown solutions. While General Electric may win plaudits for its US$800 EKG machines, cheap cell phones made by local, no-name companies and prosthetic legs fashioned from irrigation piping are also examples of frugal innovation.
The concept has gained popularity in the South Asian region, particularly in India. The US Department of Commerce has singled out this nation for its innovative achievements saying in 2012 that "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..."
Frugal innovation is not limited to durable goods such as the GE US$800 EKG machine or the US$100 One Laptop Per Child but also services such as 1-cent-per-minute phone calls, mobile banking, off-grid electricity, and microfinance.
- ChotuKool fridge
A tiny refrigerator sold by Indian company Godrej, the ChotuKool may have more in common with computer cooling systems than other refrigerators; it eschews the traditional compressor for a computer fan. (It may exploit the thermoelectric effect.)
- Jaipur leg
A low cost prosthetic developed in India, the Jaipur leg costs about $150 to manufacturer and includes some clever improvisations such as incorporating irrigation piping into the design to lower costs.
- Mobile banking
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.
- Nokia 1100
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 has made it the best selling phone of all time.
- Sorghum beer
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.
- Solar light bulb
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.
- Tata Nano
- Fontanella-Khan, James (May 19, 2011). "Supply chain: ‘Frugal engineering’ heads push into manufacturing". Financial Times. The Financial Times Ltd. Retrieved June 21, 2012.
- Bellman, Eric (Oct 20, 2009). "Indian Firms Shift Focus to the Poor". The Wall Street Journal. pp. A.1.
- Bhatti, Yasser Ahmad, Khilji, Shaista E and Basu, Radha. 2013. Frugal Innovation. In S. Khilji & C. Rowley (eds). Globalization, Change and Learning in South Asia. Oxford, UK: Chandos Publishing.
- Shibulal, SD (Fri, May 13, 2011). "Emerging economies: outside-in and inside-out". livemint.com. HT Media. Retrieved June 24, 2012.
- Bhatti, Yasser (March 19, 2012). "About Frugal Innovation Research". Frugal Innovation Portal. Said Business School, University of Oxford. Retrieved Nov 19, 2012.
- Crabtree, James. "More with less." FT.com. May 19, 2012.
- For Santa Clara University's lab, see "About Frugal Innovation". Santa Clara University. Retrieved June 20, 2012.
- For Stanford University's course, see "Hasso Plattner Institute of Design at Stanford: Entrepreneurial Design for Extreme Affordability". Stanford University Institute of Design. Stanford University. 2010. Retrieved June 20, 2012.
- Nirmalya Kumar, Phanish Puranam (2011). India Inside. Harvard Business Press. p. 114. ISBN 9781422142400.
- Platt, John (February 2010). "Introducing Gandhian Engineering". The Institute. IEEE. Retrieved June 20, 2012.
- "Asian innovation". The Economist. The Economist Newspaper Limited. Mar 24th 2012. Retrieved June 20, 2012.
- Bhatti, Yasser Ahmad and Ventresca, Marc. 2012. The Emerging Market for Frugal Innovation: Fad, Fashion, or Fit? (January 15, 2012) Available at SSRN: http://ssrn.com/abstract=2005983
- Kelland, Kate (Wed Jun 20, 2012 9:05am EDT). "Analysis: Healthcare sees emerging future in frugal innovation". reuters.com. Thompson Reuters. Retrieved June 20, 2012.
- "First break all the rules: The charms of frugal innovation". The Economist. The Economist Newspaper Ltd. Apr 15th 2010. Retrieved July 6, 2012.
- Woodward, David. "Plain and simple". Director Magazine. Director Publications. Retrieved July 6, 2012.
- Magnier, Mark (February 8, 2012). "India group's prosthetic device a boon for thousands of amputees". Los Angeles Times. Retrieved June 24, 2012.
- Tiwari, Rajnish and Herstatt, Cornelius (2012): "Assessing India's lead market potential for cost-effective innovations", Journal of Indian Business Research, Vol. 4 Iss: 2, pp.97 - 115
- "U.S. Commerce Secretary John Bryson Visits Jaipur Foot". US Department of Commerce. March 28, 2012. Retrieved June 24, 2012.
- Lahiri, Tripti (June 6, 2012). "Q&A: Why the West Needs ‘Jugaad’ Creativity". WSJ's Indiarealtime blog. Dow Jones & Company Inc. Retrieved June 23, 2012.
- "The power of mobile money". The Economist. The Economist Newspaper Limited. Sep 24th 2009. Retrieved June 23, 2012.
- For transferring money with only a mobile, see "Send (Transfer) Money". Safaricom. Retrieved June 23, 2012.
- For paying bills with only a mobile, see "Pay Bill". Safaricom. Retrieved June 23, 2012.
- For necessity of visiting an agent when depositing money, see "Deposit Cash to Your Account". Safaricom. Retrieved June 23, 2012.
- For necessity of visiting an agent when withdrawing money, see "Withdraw Cash". Safaricom. Retrieved June 23, 2012.
- Virki, Tarmo (Thu May 3, 2007 3:51pm BST). "Nokia's cheap phone tops electronics chart". reuters.com. Thompson Reuters. Retrieved June 20, 2012.
- Herrman, John (OCT 19, 2010). "The Most Popular Phone in the World". gizmodo.com. Gawker Media. Retrieved June 23, 2012.
- "Beer in Africa: From lumps to lager; The race to slake a continent’s thirst". The Economist. Mar 24th 2012. Retrieved August 12, 2012.
- "SABMiller strives to make beer affordable in Africa". reuters.com. Thompson Reuters. Tue Mar 13, 2012. Retrieved August 12, 2012.
- ORENDAIN, SIMONE (December 28, 2011). "In Philippine Slums, Capturing Light In A Bottle". NPR. Retrieved June 20, 2012.
- Meredith, Robyn (Thu, Apr 19, 2007). "The Next People Car". Forbes. Yahoo! - ABC News Network. Retrieved June 6, 2012.
- Devex Impact, Devex and USAID.
- Research group on Frugal Innovation, Frugal Digital.
- Center for Frugal Innovation, Hamburg University of Technology, Institute for Technology and Innovation Management.
- "Marketing Innovative Devices for the Base of the Pyramid", Hystra. March 2013.
- Madrigal, Alexis. "The No-Name Companies Selling More Phones Than Samsung, LG, and Apple Combined." The Atlantic. SEP 16 2011.
- Mashelkar, R.A. (2009), Breakthrough designs for ultra-low-cost products, TED Talks
- "Frugal innovations", Nesta.
- Radjou, Navi, Jaideep C. Prabhu, Ahuja, Simone. "Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth." San Francisco, CA: Jossey-Bass - Random House India, 2012. Print.
- Tiwari, R. and Herstatt, C. (2012): Open Global Innovation Networks as Enablers of Frugal Innovation: Propositions Based on Evidence from India, Working Paper No. 72, Institute for Technology and Innovation Management, Hamburg University of Technology.
- Tiwari, R. and Herstatt, C. (2011): Frugal Innovations for the 'Unserved' Customer: An Assessment of India's Attractiveness as a Lead Market for Cost-effective Products, Working Paper No. 69, Institute for Technology and Innovation Management, Hamburg University of Technology.
- Tiwari, R. and Herstatt, C. (2011): India - A Lead Market for Frugal Innovations? Extending the Lead Market Theory to Emerging Economies, Working Paper No. 67, Institute for Technology and Innovation Management, Hamburg University of Technology.
- Tiwari, Rajnish and Herstatt, Cornelius. 2012. Frugal Innovation: A Global Networks' Perspective. Die Unternehmung (Swiss Journal of Business Research and Practice), Vol. 66, Issue 03 (2012), pp. 245–274