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, when selling the products, reliance on unconventional distribution channels. When trying to sell 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. While frugal innovation has been associated with good-enough performance, in some sectors such as in healthcare, frugal innovation must offer maximum performance without compromising on quality.
Principles
1. Do more with less.
Don’t default to asking for more. Think about what you already have in a new way to create even better solutions.
- Find opportunity in adversity.
Reframe the problem. Take something that is a threat or seems like adversity and turn it into an opportunity.
- Think and act flexibly.
Be improvisational rather than rigid.
- Keep it simple.
Complexity can cause problems. More choices are not necessarily better than fewer.
- Include the margin.
Know your customers and include them in your problem-solving process. “Can we ask them what they need and go beyond that and really observe them and walk in their shoes?” she said.
- Follow your heart.
Be passionate and use that to move ideas forward.
Disadvantages:
1) The old technologies and techniques are left behind and it becomes a challenge to protect them.
2) Many rituals may get lost.
3) People have to change their lifestyle in order to get compatible with it.
4) People’s way of thinking changes.
Uncertain commercial returns
Much research is speculative and there is no guarantee of future revenues and profits. The longer the development timescale the greater the risk that research is overtaken by competitors too.
Competition
An innovation only confers a competitive advantage if competitors are not able to replicate it in their own businesses. Whilst patents provide some legal protection, the reality is that many innovative products and processes are hard to protect. One danger is that one research-driven, innovative company makes the initial investment and takes all the risk only to find it is competing with many me-too competitors riding on the coat-tails of the innovation.
Availability of finance
Like other business activities, R&D has to compete for scarce cash. Given the risks involved, R&D demands a high required rate of return. That means that for businesses that have limited cash resources, the opportunity cost of investing in R&D can be very high.