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.
In May 2012 The Financial Times newspaper called the concept "increasingly fashionable".
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.
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.
At times this no frills approach can be a kind of disruptive innovation.
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.
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.)
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 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.
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.
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.
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.
Designed to appeal to the many Indians who drive motorcycles, the Tata Nano was developed by Indian conglomerate Tata Group and is the cheapest car in the world.
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
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