Frugal innovation

Frugal innovation is innovation that generates considerably more business, while significantly reducing the use of scarce resources. It is ability to do more with less. It is also called “Juggad” innovation.

Carlos Ghosn, CEO of Renault/Nissan came up term “Frugal engineering”, which he describes as, “Frugal engineering is achieving more with fewer resources.”

For examples, as usual I will start with group I work for- Tatas.

Then group chairman Ratan Tata wanted to design a car for lower middle class Indians, a car that will be affordable for customers of two wheelers. Outcome was car called Tata Nano, the “ Rs. one lakh car”, a car which large segment of Indians could afford. Nano, a frugal innovation, was result of lot of other innovations by Tata Motors to keep cost low.

nano

There are plenty of examples from India like Jaipur foot, heart surgeries at Narayan Hrudayalaya, cataract surgeries at Aarvind Netralaya, Godrej Chotu Kool fridge etc.

We will see two examples from Africa, which I found quite interesting.

M-Pesa is mobile-based money transfer service, provided by African telecom operators Vodacom and Safaricom. This innovation is interesting because mobile services providers are providing service, which is usually provided by banks.

pesa

This innovation was then conducted in Afghanistan, where Vodafone and local mobile provider Roshan used M-Pesa service pay salary to policemen in Afghanistan. Under earlier system, salary was paid through officials, who used to keep significant amount with themselves, and balance was paid to policemen. The policeman never knew his actual salary. With M-Pesa, policeman got his full salary for first time- he thought he got 30% hike, and secondly Afghan Govt discovered that 10% of police force was “ghost”, they were just names on payroll to pocket salary.

Roshan-Telecom-customers-can-pay-their-cable-bills-of-Herat-Cable-Network

Second example is that of beer made by companies like Diageo/SABMiller. In order to compete with local brewers, they decided to replace barley with local sorghum. This helped in reducing the price of beer, making it affordable to those who went for country liquor. The entire supply and distribution chain was redesigned to ensure that product reached places where local brewers sold their product. The beer was branded as “safe beer” and Diageo/SABMiller managed to get excise duty waived off, as “safe beer” saved life of people, who otherwise face risk of losing life in hands of unscrupulous sellers of illicit liquor.

beer

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