Frugal forward-thinking

Jaideep Prabhu, Professor of Marketing, Judge Business School, University of Cambridge, and author of ‘Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth’, outlines how Western firms can learn from innovation in emerging markets.

Innovation is a major directive at companies worldwide. But these are tough times for businesses, so we can’t rely on the old formula that has sustained innovation efforts for decades: expensive R&D projects and highly-structured innovation processes. For instance, Western firms spent an astounding $550 billion on R&D in 2010. What did they get in return? Not much. The three industries that spent the most on R&D (computing/electronics, healthcare and automotive) struggled to generate a steady stream of groundbreaking innovations, making it clear that money alone cannot buy innovation.

Frugal, flexible and inclusive

In our book, Jugaad Innovation, my co-authors and I argue that the West must look to places like India, Brazil and China for a new approach to innovation that is frugal, flexible and inclusive. We show how, in these emerging markets, jugaad (a Hindi word meaning an improvised solution using limited resources) represents using ‘out of the box’ thinking to achieve dramatic growth by taking a more flexible approach and saving on resources. It also considers how Western companies can adopt jugaad innovation to succeed in today’s hypercompetitive world.

The fruits of jugaad innovation include the $2000 Tata Nano car, $50 Aakash tablet PC, 1 cent/minute mobile phone calls, £500 electrocardiography (ECG) machines (and $1 ECG scans), a $25 water purifier, a $70 fridge that runs on batteries, and more. In the course of our research we learned that the entrepreneurial spirit of jugaad is not limited to India. It’s widely practiced in Argentina, Brazil, China, Costa Rica, India, Kenya, Mexico, the Philippines, and other emerging economies. Brazilians call it gambiarra; the Chinese, zizhu chuangxin; and the Kenyans, jua kali. A resource-constrained and unpredictable environment makes frugal and flexible innovation necessary, even vital. Specifically, jugaad entrepreneurs are resilient, frugal, adaptable, inclusive, empathetic and passionate.

Relevant in recession

But the jugaad mindset, and the innovations that result from it, not only hold promise for the poor in emerging markets. Increasingly, such a frugal and flexible approach has relevance to Western economies that are reeling under the pressures of economic recession and budget constraints.

Unsurprisingly, we have found that many Western firms, faced with resource constraints of their own and recognising the limits of an expensive, rigid and insular approach to innovation, have begun to apply jugaad and its principles within their organisations. For example, GE has applied jugaad to develop radically affordable ECG machines, not only for India and China, but also for the USA and Europe. Other firms applying frugal innovation principles include PepsiCo, Unilever and Renault-Nissan.

Is your company engaged in frugal innovation? It might be time to consider the opportunities and challenges offered by the concept.

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John Carroll - Helping businesses achieve International success. Head of Product Management & International Business, Santander UK