Frugal Innovation Read online

  Praise for Frugal Innovation

  GAPPAA.ORG

  ‘Frugal innovation is a global phenomenon of increasing importance to corporations and governments around the world. Radjou and Prabhu, in their latest book, show how this revolution is unfolding in the West. India, where many innovations have evolved out of necessity to “do more (and better) with less”, can be an important global partner to co-create frugal solutions that benefit all humanity.’ – Nandan Nilekani, Co-founder, Infosys, and former Chairman, Unique Identification Authority of India

  ‘“Doing more with less” has been the de facto cultural norm in developing economies for ages. These winds of frugal innovation are now blowing westwards in the VUCA (volatile, uncertain, complex, ambiguous) world, a phenomenon very powerfully captured by Radjou and Prabhu in their new book. Not only do the authors provide a compelling case for “frugal innovation” but more importantly provide simple-to-understand and practical mechanisms to deploy this strategy in organizations.’ – Vineet Nayar, Former CEO, HCL Technologies, and Founder, Sampark Foundation

  ‘Emerging markets have shown that successful innovation must lead to improvements in quality, reduction in cost, making products and services that are easier to use, and be scalable. These concepts are being increasingly embraced by global companies as they seek growth outside their traditional markets and customer segments. This book is an excellent addition to the authors’ earlier work on innovation in emerging markets, showcasing how Western corporations too are adapting to evolving consumer needs.’ – Chanda Kochhar, Managing Director and CEO, ICICI Bank Limited

  ‘Long practised in developing nations out of sheer necessity, frugal innovation is now becoming a strategic business imperative in developed economies, where consumers demand affordable and sustainable products. The flow of industrial knowledge has thus become a two-way street, where the North and South, East and West learn from and exchange with each other. No business leader in the 21st century can ignore the paradigm shift fully described in this book.’ – Carlos Ghosn, Chairman and CEO, Renault-Nissan Alliance

  ‘Established companies in advanced economies are often technology- rather than market-focused, leading to over-engineered products and bloated R&D budgets. In today’s changing world, this approach is no longer tenable. Corporate leaders need to drive culture change and install frugal innovation processes in their organizations as well as along their value chains to create “more with less”. Structured process frameworks for the same exist and numerous helpful case studies are highlighted by Radjou and Prabhu. Frugal Innovation is an excellent book that convincingly demonstrates how the world economy has become a real two-way street.’ – Dr Wilfried G. Aulbur, Managing Partner, Roland Berger India

  ‘The business models of the future would have to simultaneously address economic, social, and environmental objectives which would be made possible through imbibing the principles of frugal innovation. India is the birthplace of jugaad (frugal) innovation but Western enterprises have incorporated it into their DNA and are leaving Indian enterprises behind. Indian companies clearly cannot afford to be complacent and urgently need to adopt the techniques and processes outlined in this book as frugal innovation is becoming the basis for competitive advantage for enterprises of the future.’ – Amit Kapoor, Honorary Chairman, Institute for Competitiveness, India, and Editor-in-Chief, Thinkers

  ‘Frugal Innovation provides a refreshingly new paradigm for big companies who have thus far been saying “our offerings are global, our costs cannot change dramatically, our margin gates are frozen, so let’s wait for consumers’ incomes to catch up”. India’s consumers are waiting to be served, collectively rich but individually poor, and won’t settle for “less for less”. Radjou and Prabhu’s clearly laid out “better for less” approach will help companies square this circle and grow explosively.’ – Rama Bijapurkar, author of A Never-Before World: Tracking the Evolution of Consumer India

  ‘As innovative products like new radios, kitchen appliances, TVs and phones came to market in post-war years, marketers kept adding features to innovate… until the consumer was confused. What exactly is the benefit of a clock which has a radio? The authors credibly argue for a “better with less” approach to innovation. Read this book to learn how to deliver greater value to customers with less!’ – R. Gopalakrishnan, Director, Tata Sons Limited

  ‘Through the comprehensive set of case studies they offer in their new book, Radjou and Prabhu demonstrate that frugal innovation is one of the most critical emerging models of value creation for both businesses and the customers they serve. In a hyper-competitive, resource-constrained world, the companies that will succeed are those that can develop and market new solutions that are resource-light and cost-effective without sacrificing quality. Frugal Innovation provides an essential blueprint for how to approach this business imperative the right way.’ – Indra K. Nooyi, Chairman and CEO, PepsiCo, Inc.

  ‘Frugal Innovation distils years of thinking and experimentation into an effective and innovative how-to guide for companies large and small. It should be required reading for executives who want to get to market faster and more efficiently while delivering what customers want.’ – Beth Comstock, Senior Vice President and Chief Marketing Officer, GE

  ‘Frugal Innovation offers valuable insights for business leaders everywhere who are facing a familiar challenge: how to do more with less and generate sustainable value for customers, shareholders and society. To stay relevant in an increasingly digital world, organisations must embrace a frugal approach to innovation in order to increase productivity and agility, create competitive advantage and ultimately fuel growth.’ – Pierre Nanterme, Chairman and CEO, Accenture

  ‘Radjou and Prabhu’s Jugaad Innovation challenged the top-down Western approach to innovation by offering an agile, bottom-up model. Frugal Innovation moves this further and faster forward. The practical roadmap and numerous cases in this book find the beat of the new customer-led world order – where velocity, synergy, empathy and involvement come as standard. The future will be about doing more with less, and here we see how.’ – Kevin Roberts, CEO Worldwide, Saatchi & Saatchi

  ‘Radjou and Prabhu show the benefits of viewing resource limitations as an opportunity. In our increasingly resource-constrained world, consumers are demanding affordable, high-quality products that are environmentally friendly and socially inclusive – and numerous innovators are already obliging them. Frugal Innovation insightfully articulates how Western companies can evolve to capture opportunities presented by the burgeoning “do more with less” economy.’ – Dominic Barton, Global Managing Director, McKinsey & Company

  ‘In a world of budget cuts where we all strive to do “more for less”, Radjou and Prabhu provide real practical examples of how we can all learn the lessons of frugal innovation. They successfully draw out the wider social and environmental benefits of frugal innovation and the concept of “prosumers” in a way that is both engaging and practical. A great read.’ – Iain Gray, Chief Executive, Innovate UK

  ‘An excellent and bang-up-to-date primer on how to do innovation cheaply, quickly, flexibly and with close attention to users and customers – approaches which are, perhaps surprisingly, diametrically opposite to the ways in which so much innovation is organised today.’ – Geoff Mulgan, CEO, NESTA

  ‘Frugal innovation is an idea whose time has come. Downward pressures on cost and the need to use resources sustainably demand this new approach to innovation. In this seminal book, Radjou and Prabhu explain clearly how frugal innovation works and illustrate their case with a host of practical examples from companies around the world. They have captured the wave of the future.’ – Sir Michael Barber, Chief Education Advisor, Pearson

&n
bsp; ‘Frugal Innovation offers a compelling path forward for small and large companies striving to cost-effectively develop products and services of high quality that deliver real value to customers.’ – Jennifer Tescher, President and CEO, Center for Financial Services Innovation

  ‘Frugal innovation is a critical business strategy for companies to prosper in a world where customers are both value-conscious and values-oriented. It challenges Western companies to create high-quality products that are affordable and sustainable as well as desirable and meaningful for end-users.’ – Carol L. Cone, Global Chair, Edelman Business + Social Purpose

  ‘Radjou and Prabhu offer a clarion call for leaders in mature organisations to rethink and reinvent their fundamental approach to innovation by drawing upon the smarts of their people rather than the riches of their organisations. Frugal Innovation shows how established companies can stay relevant by learning to think and act like challengers again.’ – Liz Wiseman, Thinkers50: Top 10 leadership thinker and author of Wall Street Journal bestsellers Multipliers and Rookie Smarts

  ‘The certainties of rising consumption in the 20th century are gone. Austerity, aspiration, personalisation and planetary limits all demand that we take a new approach to business. But what should it be? Radjou and Prabhu paint a vivid picture of how business can blend values and quality to deliver the personal and social balance that 21st-century consumers want.’ – Mike Barry, Director of Sustainable Business (Plan A) at Marks & Spencer

  ‘With the cost of R&D increasing year on year, it is important for pharmaceutical companies to keep a focus on ensuring positive returns from investment in R&D and innovation. To be successful requires R&D to be organised differently, in ways that simultaneously improve both effectiveness and efficiency – an approach we at GSK are taking. Frugal Innovation is a timely book that provides insightful and practical guidance to firms trying to do more with less.’ – Stephen Mayhew, Head, R&D Strategy Development, GSK

  ‘At Thinkers50 we have been following the development of the ideas of Radjou and Prabhu for some time. They are exciting because they challenge many fundamental assumptions about how and why companies innovate; and they are important because frugal innovation is an idea of and for our times. This book will accelerate the re-invention of how we understand and practise innovation.’ –Stuart Crainer and Des Dearlove, founders, Thinkers50

  ‘Health care may be the global sector most urgently in need of Radjou and Prabhu’s insights in Frugal Innovation. Aging populations and surging demand for affordable services confront health-care leaders everywhere with a stark reality: innovation must be harnessed to create massive, sustainable improvements in health delivery systems without crippling economic growth. Frugal Innovation sets forth a compelling roadmap for delivering better care at lower cost for more people.’ – Molly Coye, Managing Director and Chief Innovation Officer, UCLA Health

  ‘Frugal Innovation is a tour d’horizon of a changing economy. The authors make a compelling case for a feedback-rich economy that is restorative and regenerative rather than extractive, heading for the “upcycle”. There is real economic and business advantage to be had through a system change approach, and the authors are to be congratulated for their stimulating guide to the future.’ – The Ellen MacArthur Foundation

  ‘Frugal Innovation is a must-read for corporate leaders around the world facing pressure to create high-quality products using limited resources. Radjou and Prabhu convincingly show that it is possible for companies to “do better with less”.’ – Tango Matsumoto, Corporate Executive Officer, EVP, Head of Global Marketing, Fujitsu Limited

  ‘Businesses have to innovate in an increasingly resource-constrained environment. Addressing clients’ pain points and dreams in a frugal way requires a focus on simplicity and agility. This book gives many suggestions on how to do this well.’ – Sophie Vandebroek, Chief Technology Officer, Xerox, and President of Xerox Innovation Group

  ‘Frugal Innovation holds important insights for companies across sectors wishing to do more with less. The book is of great relevance to the financial services industry and banks like Barclays that are working with new technologies and start-ups to help customers manage their finances better.’ – Elisabetta Osta, Managing Director, Design Office Information, Insight & Innovation Team, Barclays Bank

  ‘In Frugal Innovation, Radjou and Prabhu show how the lessons from developing countries are starting to make a real impact on the innovation processes of established companies in the West. This book nicely describes these transformations and some of the difficulties encountered, and lists practical solutions for companies who want to do more innovation with less, no matter where you are in the world.’ – Henry Chesbrough, Faculty Director, Garwood Center for Corporate Innovation at UC Berkeley’s Haas School of Business, and author, Open Innovation

  ‘Frugal Innovation proposes a breakthrough approach to solving some of the most complex issues of our global economy as it empowers human beings to use their creativity to generate economic and social value while preserving the environment. A must-read for thought leaders and practitioners worldwide.’ – Bruno Roche, Special Adviser to the G20 French Presidency Mission on Social Justice and Globalisation, and Chief Economist, Mars Incorporated

  The

  Economist

  FRUGAL INNOVATION

  How to do better with less

  Navi Radjou and Jaideep Prabhu

  GAPPAA.ORG

  First published in India in 2015 by Hachette India

  (Registered name: Hachette Book Publishing India Pvt. Ltd)

  An Hachette UK company

  www.hachetteindia.com

  First published in 2015 by Profile Books Ltd in association with THE ECONOMIST

  PROFILE BOOKS LTD, 3 Holford Yard, Bevin Way, London wc1x 9hd

  www.profilebooks.com

  GAPPAA.ORG

  This ebook published in 2014

  Copyright © The Economist Newspaper Ltd, 2015

  Text copyright © Navi Radjou and Jaideep Prabhu, 2015

  Foreword copyright © Paul Polman, 2015

  Navi Radjou and Jaideep Prabhu assert the moral right to be identified as the authors of this work

  All rights reserved. No part of the publication may be copied, reproduced, downloaded, stored in a retrieval system, or transmitted in any form or by any means without the prior written permission of the publisher, nor be otherwise circulated in any form of binding or cover or digital format other than that in which it is published and without a similar condition being imposed on the subsequent purchaser.

  The greatest care has been taken in compiling this book. However, no responsibility can be accepted by the publishers or compilers for the accuracy of the information presented.

  Where opinion is expressed it is that of the author and does not necessarily coincide with the editorial views of The Economist newspaper.

  While every effort has been made to contact copyright-holders of material produced or cited in this book, in the case of those it has not been possible to contact successfully, the author and publishers will be glad to make amendments in further editions.

  Print ISBN 978-93-5009-985-8

  Ebook ISBN 978-93-5009-986-5

  Hachette Book Publishing India Pvt. Ltd

  4th & 5th Floors, Corporate Centre,

  Plot No. 94, Sector 44, Gurgaon - 122003, India

  To all the frugal innovators out there who are every day making the world a better place for everyone.

  GAPPAA.ORG

  Contents

  GAPPAA.ORG

  Foreword by Paul Polman, CEO, Unilever

  Preface

  1 Frugal innovation: a disruptive growth strategy

  The rise of the frugal economy

  Doing better with less

  Unusual frugal competitors

  Conclusion

  2 Principle one: engage and iterate

  A costly and rigid R&D model

  A market-focused, agile R&D model

&nbs
p; Back-end innovation: improving execution agility

  Recommendations for managers

  Conclusion

  3 Principle two: flex your assets

  The rise of frugal manufacturing

  Creating a frugal supply chain

  A frugal services revolution

  Frugal organisations

  Recommendations for managers

  Conclusion

  4 Principle three: create sustainable solutions

  Essential – not optional – sustainability

  The rise of the circular economy

  Widening the sharing economy

  From the circular to the spiral economy

  Recommendations for managers

  Conclusion

  5 Principle four: shape customer behaviour

  Three contradictions of contemporary consumption

  Shaping consumers’ energy use

  DIY health care

  Socialising education

  Breaking (bad) financial habits

  Recommendations for managers

  Conclusion

  6 Principle five: co-create value with prosumers

  The rise and rise of the prosumer

  The rise of the horizontal economy

  Empowering and engaging prosumers

  Multiple customer roles

  Conclusion

  7 Principle six: make innovative friends

  The hyper-collaboration imperative

  Six ways to hyper-collaborate

  Getting hyper-collaboration right

  Conclusion

  8 Fostering a frugal culture

  Evolutionary change

  The “what”: bold commitment and dynamic goal setting

  The “how”: adopting disruptive business and mental models

  The “why”: the foundation of change management

  Conclusion

  9 Conclusion

  Acknowledgements

  Notes and sources