3.5.4 Frugal innovation

Course subject(s) Module 3. How: Stakeholder engagement and gender dimension

What do we mean by frugal innovation?

Frugal innovation is a rather new global phenomenon. It is usually defined as stripping down and/or re-engineering products and services, to offer quality goods at very low prices to the people in who are at the “Bottom of Pyramid”.  A recent comparison of product prices has shown that frugal innovations can lower the price of a product between 50% to 97% (Rao, B. C., “How disruptive is frugal?” published in 2013). In a way, frugal innovation can be considered as responsible innovation since in delivering innovation for people in emerging economies, the dimensions of RRI can be applicable (diversity and inclusiveness, anticipation and reflection, responsiveness and adaptive change, openness and and transparency, environmental sustainability, social sustainability).  However, note that frugal innovations are not necessarily responsible innovations particularly when the RRI dimensions are not incorporated.

But there are also broader definitions of ‘frugal’. If you look in the dictionary, frugal is defined as “economical in use or expenditure; prudently saving or sparing; not wasteful; entailing little expense; or requiring few resources”. From an economic perspective, frugal products and services seek to minimize the use of material and financial resources in the complete value chain with the objective of substantially reducing not just the price point, but the complete cost of ownership/usage of a product; while fulfilling or even exceeding pre-defined criteria of acceptable quality standards.
Frugal innovations often – considering the clients – should be able to cope with everyday conditions like dust, heat or power failure.  So, the design – and the mindset of the designers-  has to take this into consideration. It has to serve users who face extreme affordability constraints, in a scalable and sustainable manner.

Take note! Frugal does not mean a poor-quality, off-the-mark, improvised solution!

In the next video, the concept of frugal innovation will be explained in more detail by Prof. Cees van Beers.  This is important going forward, because designing (new) technologies and services for economically disadvantaged populations requires a different mind-set than traditional high-technology innovation.

Remember when watching the video:
Frugal Innovation requires a deep knowledge of the market, its opportunities and threats, which is only achieved with a narrow relationship with the stakeholders. 


Frugal innovation and stakeholder engagement

Frugal Innovation requires a deep knowledge of the market, its opportunities and threats, which is only achieved with a narrow relationship with the stakeholders.
The following quote from the article Serving the World’s Poor, Profitably  by Prahalad, C.K. and  A. Hammond, 2002 underlines the need for this hands-on stakeholder engagement:

Having young managers spend a couple of formative years in BoP markets would open their eyes to the promise and the realities of doing business there. To date, few multinationals have developed a cadre of people who are comfortable with these markets.

Hindustan Lever is one of the exceptions. The company expects executive recruits to spend at least eight weeks in the villages of India to get a gut-level experience of Indian BoP markets. The new executives must become involved in some community project — building a road, cleaning up a water catchment area, teaching in a school, improving a health clinic. The goal is to engage with the local population.

To buttress this effort, Hindustan Lever is initiating a massive program for managers at all levels — from the CEO down — to reconnect with their poorest customers. They’ll talk with the poor in both rural and urban areas, visit the shops these customers frequent, and ask them about their experience with the company’s products and those of its competitors.

In addition to expanding managers’ understanding of BOP markets, companies will need to make structural changes. To capitalize on the innovation potential of these markets, for example, they might set up R&D units in developing countries that are specifically focused on local opportunities.

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Responsible Innovation: Building Tomorrow’s Responsible Firms by TU Delft OpenCourseWare is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Based on a work at https://online-learning.tudelft.nl/courses/responsible-innovation-building-tomorrows-responsible-firms/.
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