Frugal Innovation

A Global Research Companion

Adela J. McMurray, Gerrit A. de Waal, Adela J. McMurray, Gerrit A. de Waal

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429655272
• Edition: 1
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

Customers are increasingly seeking "low-cost, high-quality" or what is known as frugal products that meet the buyer's needs while reducing the associated cost of ownership. This book examines the developing principles and theories of frugal innovations across the globe. The authors identify frugal innovation (FI) using a multi-method approach to data analysis. They argue that the concept of frugality as a societal/ethical value has undergone several changes and propose a differentiated model of frugal innovations. They address frugal innovations that have never been accessible to the public.

Hands-on case studies across various industry sectors and countries, supported by theory, provide multiple learning opportunities. The authors explore the relationship between FI and digitalisation and technology, and discuss how FI can be applied in the context of contemporary issues such as food security. Further, they articulate the mechanisms by which FI beliefs and values can be incorporated into organisational culture. The final chapters address both ethical and controversial views of frugal innovation.

The book is a valuable resource for students in business courses, for industry professionals wanting to improve their triple bottom line, and for educators wanting to influence and change the mindsets of the younger generations to effectively deal with today's and tomorrow's challenges.

Part I

Conceptual framework of frugal innovation

1 What is frugal innovation?

Timo Weyrauch and Cornelius Herstatt

Introduction¹

Frugal innovations mainly originated in the context of emerging markets. The main idea was to develop products and services that fit these markets’ special needs and requirements and that were cheap enough to give non-affluent customers opportunities for consumption (Hart & Christensen, 2002; Prahalad & Hart, 2002; Wooldridge, 2010; Soni & Krishnan, 2014). In the meantime, frugal innovations have also found their way into developed markets (The Economist, 2012) and are often referred to as reverse innovation (Govindarajan & Trimble 2012; Immelt, Govindarajan, & Trimble, 2009; von Zedtwitz, Corsi, Søberg, & Frega, 2015). Several examples have been written about frugal innovation. For instance, Rao (2013) discusses 30 different frugal innovations. Well-known examples include the Tata Nano (Ray & Ray, 2011; Tiwari & Herstatt, 2014) and the handheld, pocket-sized ultrasound device GE Vscan (Govindarajan & Trimble, 2012).

But what does frugal innovation mean? What differentiates frugal innovation from other innovation types? Publications in the field of frugal innovation often provide definitions that rely on the possible attributes of frugal innovation (for instance, significantly lower costs, ease of use, limited features, and low impact on the environment). Other articles propose a theoretical understanding of frugal innovation and seek to develop frameworks to distinguish frugal innovations from terms such as low-cost innovation, good-enough innovation, jugaad innovation, frugal engineering, constraint-based innovation, Gandhian innovation, or reverse innovation (Bhatti & Ventresca, 2013; Brem & Wolfram, 2014; Ostraszewska & Tylec, 2015; Zeschky, Winterhalter, & Gassman, 2014). Current frameworks and definitions help us to better understand frugal innovation and what it could look like. However, to date, we have lacked criteria for clearly defining frugal innovation. With this chapter, we seek to answer the following question: Which criteria apply that allow us to define frugal innovation?

To answer this question, we chose a multimethod approach. First, we conducted a literature review to identify attributes and characterisations of frugal innovation used in the literature. In step two, we interviewed 45 managers from companies and researchers from different research institutes that deal with frugal innovation in order to capture the term’s practical meaning. By coding the results, we noted that most characteristics attributed to frugal innovation can be subsumed into three categories: cost reduction, core functionality, and performance level. On the basis of this finding, we deduced three criteria for frugal innovation: substantial cost reduction, concentration on core functionalities, and optimised performance level. We propose to characterise innovations as frugal if they meet all of these three criteria at the same time.

By defining these three criteria, our contribution to theory is a more precise understanding of frugal innovation. First, we suggest referring to an innovation as frugal only if all three criteria are met. Thus, these criteria can be used to check whether or not a certain innovation can be characterised as frugal. Second, the criteria help us to better understand why frugal innovations are different and why their development can be challenging: all three criteria must be met simultaneously. This has practical implications: to develop frugal innovations, all three criteria should be considered so as to identify the specific characteristics to make a new product or service frugal.

This chapter is structured as follows. In the next section, we provide an overview of concepts and frameworks that distinguish frugal innovation from other innovation types. We then explain the methodology and outline our results. On the basis of our literature review and interviews, in the “Discussion” section, we deduce three criteria for frugal innovation. Finally, we point out theoretical and managerial implications, discuss potential limitations, and provide recommendations for further research.

Background

Several concepts and frameworks attempt to distinguish frugal innovation from other innovation types. Most are based on literature reviews (for an overview, see Table 1.1).

Cunha, Rego, Oliveira, Rosado, and Habib (2014) examined literature streams in the field of scarcity and product innovation. They consider “frugal innovation” to be product innovation when there is a scarcity of affluent customers and distinguish it from “bricolage”, which is when material resources are scarce, and from “improvisation”, when time is scarce.

Brem and Wolfram (2014) seek to distinguish between frugal innovation and related terms such as frugal engineering, constraint-based innovation, Gandhian innovation, jugaad innovation, reverse innovation, catalytic innovation, grassroots innovation, and indigenous innovation. They introduce a conceptual framework based on a literature review of 363 explored articles. Their framework classifies frugal innovation and the related terms by using the three dimensions: sophistication, sustainability, and emerging market orientation. In their classification, compared to jugaad innovation or reverse innovation, frugal innovation has low to medium sophistication, medium sustainability, and medium emerging market orientation.

Table 1.1 Distinguishing characteristics of frugal innovations

Zeschky et al. (2014) also analyse different resource-constrained innovation types. They distinguish between frugal innovation, good-enough innovation, and cost innovation, conceptualising the distinctions between them. They classify frugal innovation via the criteria “technical novelty” and “market novelty”. In their view, frugal innovation has a higher technical novelty and a higher market novelty than good-enough innovation and cost innovation. Also, in their conceptualisation, cost innovation means the same for less, good-enough innovation means tailored for less, and frugal innovation means new for less. Ostraszewska and Tylec (2015) use a similar conceptualisation, with the criteria the same for less, adapted for less, and new for less to distinguish between cost innovation, jugaad innovation, Gandhian innovation, good-enough innovation, and frugal innovation. In their classification, the GE LOGIQ Book Ultrasound Machine is an example of frugal innovation (new for less), while the city car Tata Nano is an example of Gandhian innovation (adapted for less); elsewhere, the Tata Nano is used as a typical example of frugal innovation (Rao, 2013; Tiwari & Herstatt, 2014; Wooldridge, 2010).

Soni and Krishnan (2014) review the literature on frugal innovation and propose, in their conceptual paper, looking at frugal innovation not as a monolithic entity. They introduce three frugal innovation types: frugal innovation as a mindset or way of life, as a process, and as an outcome in the form of products or services. Their approach aims at a typology of frugal innovation rather than focusing on distinctions between frugal innovation and other innovation types.

Basu, Banerjee, and Sweeney (2013) distinguish between frugal innovation and conventional innovation along four characteristics: driver, process, core capabilities, and location. The driver of frugal innovation is described by what do they need, in contrast to what would be nice to have; the latter relates to conventional innovation. The process is described as bottom-up in contrast to top-down. The core capability is functionality (rugged, lightweight, adaptable, and simple) in contrast to desirability and design. The last characteristic, location, is developing and emerging markets, in contrast to developed markets of conventional innovation.

Further publications create an understanding of frugal innovation by examining principles that underlie frugal innovation and frugal engineering. Kumar and Puranam (2012) identify six principles: robustness, portability, de-featuring, leapfrog technology, mega-scale production, and service ecosystems. Radjou and Prabhu (2014) also present six principles: engage and iterate, flex your assets, create sustainable solutions, shape customer behaviour, co-create value with prosumers, and make innovative friends. Further principles and needed competencies to develop frugal and related innovations are discussed in the literature (Basu et al., 2013; Prahalad & Mashelkar, 2010).

The abovementioned concepts, frameworks, and principles are helpful for us to get a better idea of what frugal innovation means. Prabhu and Gupta (2014) argue that “frugal innovations in products are easily identified by expert examination”. However, it still seems difficult for us to determine what a frugal innovation is. In these concepts, frugal innovation is often related to developing and emerging markets, although frugal innovations have entered developed markets (Govindarajan & Trimble, 2012; Immelt et al., 2009; von Zedtwitz et al., 2015). Accordingly, criteria to determine frugal innovation should be universal and should be independent from the question whether or not it is discussed in the context of emerging or developed markets. Further, the abovementioned distinguishing characteristics mainly focus on special aspects such as technical novelty, market novelty, or the field of scarcity. Using the scarcity field or market novelty and technical novelty for distinction are useful to point out particular differences between frugal innovation and other innovation types. However, by using the distinguishing characteristics depicted in Table 1.1, it remains difficult to clearly define frugal innovation in ways that, first, make it easier to determine whether or not an innovation is frugal and, second, what can be considered the most important aspects in order to develop frugal innovation.

In the literature, frugal innovation is seen as an outcome and as a process. Soni and Krishnan (2014) note that the process is often referred to as frugal engineering, with frugal innovation being the outcome. Brem and Wolfram (2014) have a similar understanding. In contrast, Basu et al. (2013) call the process “frugal innovation” – similar to George, McGahan, and Prabhu (2012), who consider frugal innovation to be a complex process rather than only an outcome. We focus on attributes and descriptions of product innovation and service innovation rather than on processes. However, in our view, our results can also be transferred to processes.

Methods

Our approach is a multimethod approach based on the following four-step procedure: literature review, interaction with practitioners, category building, and deduction of criteria for frugal innovation.

First, we conducted a literature review to capture what is denoted by frugal innovation. We searched two databases, EBSCO Business Source Premier and ISI Web of Science, for relevant articles in the frugal innovation field. We conducted a key phrase search. As shown in the theory, the literature uses the terms frugal engineering and frugal innovation to treat similar issues. Thus, we used the key phrases “frugal innovation”, “frugal innovations”, and “frugal engineering” in the topic or abstract fields.

Our research included publications until October 2014. We found 36 results in EBSCO and 43 in ISI Web of Science. Since 17 articles were redundant, the total number of articles was 62. We searched the articles for definitions and characteristics attributed to frugal innovation. Of these, 34 provided the searched information and we sorted out 28. We subsumed expressi...