Transcript

Welcome to the next lecture in this week. This lecture is on ‘Frugal Innovation‘. We have discussed cost innovation, what is gender innovation and some introduction to reverse innovation. What the word frugal innovation might be new for you, what is frugal innovation? Frugal means reducing the complexity of the product, reducing the cost to some extent and make the product affordable to many people, and make the product usable for the specific need. There’s certain frugal innovations those have been carried out in our country. The common name that we have in India is Jugad, Jugad Innovation that is not an english word but it is very commonly used when we say frugal innovation. Now, What is frugal innovation?

In general the study of innovation has been subject to various paradigmatic shifts in recent decades, what are these shifts? These shifts are from open to closed, from producer to user, from profit driven to social. Frugal innovation is a transition between these paradigms. Now profit driven to social from open to closed innovation, we have frugal innovation that can cater all these needs, how does this happen we’ll just discuss. In past what has been happening a lot of ideas come that goes through a funnel and in a market only a few ideas are commercialized, but these ideas which were ignored or which didn’t make to the final this also has a great potential in them, but these ideas are taken out. In this what happens in open innovation model the ideas which were not taken before are now taken to the market and they can again with some improvisation go to the final end-user. So, this is a scenario that is happening from closed to open innovation. Now, what is frugal innovation? I’ll take some examples here, you can read about these innovations, this is Mitticool refrigerator, India, this is drip irrigation methods that is in Taiwan, this water purifier that again India. This is a refrigerator that is made just of clay. It is directly out of it this refrigerator is made it has certain benefits, it runs without electricity, it is a modern design, it keeps your food, your vegetables, fruits, milk, water etc., naturally cool. It is easy to use and the best part of this is the health benefits. The hydro fluorocarbons which are there in the general the gas in the refrigerator those are not here, but this was just a innovation that was done by a pot maker, a generally pot maker he just came up with this idea and develop this refrigerator. Now, this is a full-fledged product that is being sold in India.

Another example, may be this drip irrigation Drip Irrigation method. That is one of the methods taken by the people or the poor farmers in Taiwan. You can read about them in the links given below. This is a water purifier in which water purifies when it passes through certain steps. So there’s certain granular sieving of the water and in the end we get the completely purified water so, what is this ? So, water is cleaned within a span of a few minutes through granular sieving which is later followed by active carbon ultra filtration, then this machine is equipped with anti-joke mechanism. This person who developed this machine is basically a mechanical engineer and it can filter around 90,000 liters of water in six months. This water can be used for many purposes like daily use, other than drinking and cooking. So, this is a water purifier that can be used where, we have very dirty water. So there are few examples of innovation that didn’t had a great scientific background, that didn’t have all the calculations or for scientifics all the research behind them, but these have really worked. So, this kind of innovation is known as frugal innovation.
Now, for the definitions Frugal innovation first definition is:

Product Oriented – frugal innovation is characterized by low price, compact design, use of limited raw materials, or reuse of existing components, ease of use, use of cutting edge technology to achieve lower costs. When I say lower cost we should be mindful that frugal is not cheap it is just reducing the cost but keeping the performance level equivalent. I will discuss this in the coming slides. Next is Market Oriented – frugal innovation refers to those innovative products and services which are developed under conditions of resource constraints. Criteria Oriented – innovations are frugal if they simultaneously meet the criteria of substantial cost reduction, concentration on core functionalities and optimized performance levels, the same thing which I just said.

Bottom of Pyramid

What is bottom of pyramid? When I have a pyramid, it is a pyramid can be organizational pyramid which I discussed in the first week, this pyramid is the number of people. When I say bottom of pyramid, bottom of pyramid has maximum number of people in it, and if I say this as the purchasing power pyramid. Maximal number of people, fairly rural, underserved, informal, economy inefficient. A little competitive competition is there at the bottom it has around 1 billion dollars of the purchasing power per day. Lower middle class, rural poor, all those people lie in this level of the pyramid. In the top level people cannot afford expensive products, in the middle level people can also afford some kinds of products, but at the bottom level people need some different kind of innovation other than the regular innovation so that the product is affordable as well, and as well the performance that they get should be equivalent. So, bottom of pyramid approach is used in fugal innovation. It is said that more than 60% of population, untapped, easy to approach, and very low competition is here.

Barriers in Bottom of Pyramid markets

But there’s certain barriers in bottom of pyramid markets like higher distribution costs. Due to poor infrastructure in the remote areas the distribution costs is higher. Certain other barriers are there, such as scattered villages that is service costs is high for durables, difficult to penetrate plus 5% remost villages, small-scale growers are decentralized they don’t have a central place to discuss and to employ the modern technology, uncertain cashflow bottom of pyramid cannot pay up front or poor, lack of knowledge and local trust, mismatched prioritiesclean water versus cell phone the priority should be to put in an order. Clean water is much more prioritized thing than a cellular phone. Local knowledge and Trust that is microfinance is required, low margin and high volume difficult to achieve in these cases. So there’s certain rules for frugal innovation which I’m not covering in this lecture. There’s six key principles of frugal innovation that I have put in the link, that I have given in the references of this PowerPoint presentation. So, though you should definitely read the process of frugal innovation and some of the examples of frugal innovation are also covered in the laboratory demonstration in this course.

How to decrease the distribution cost in agriculture products

Now, how to decrease the distribution cost certain tips can be there for those. The distribution cost in agriculture products can be decreased by getting the local input that is the raw materials can be local, organized suppliers in groups, coca-cola in Uganda and Kenya for its juice organizes these small farmers and give them training which are close to them. Walmart in India to make cold storage. Use technology for delivery if possible. Use existing network of distribution post office etc. Then you will see the key factors of frugal innovations you’ll find that teamwork or making small councils like or collaborating with the close neighbors that is very important. So that helps you to have a synergy. Synergy in a way you can have the common order for your raw materials, you can have a common innovative product that you develop together and you can just use it chance by chance. So, a certain benefits of those.

Fugal innovation compared with cost innovation

So, fugal innovation when compared to cost innovation, incontrast to cost innovation frugal innovations are not re-engineered solutions but originally developed products or services for very specific applications, like mittocool like the specific application those are covered in the laboratory demonstration, and these are also in resource constrained environment. Frugal innovations are based on new product architectures and are often quite disruptive. There can be certain examples for this for example. For example, If a stationary product is made portable a frugal innovation may reach an entirely new customer group, but they are an innovation towards functionality not cost. For example, this portable solar panels, solar panel were first designed for the large areas. Now, we have portable solar panels, people are using for polar panels on their back, and they are using small electricity supplied to supply pesticides, to supply this to spray pumps from using some electric energy in that, so their small innovations those happen, so frugal innovation can help in that direction.

Cost Innovation:

So, what is cost innovation. In cost innovation, this is cost efficiency that means the lower cost is in this direction, and this is customized in innovation. So, when we lift the trade-offs of the curve the cost innovation happens that is it is having efficient cost and customization of the product is also high, but in frugal innovation what happens, suppose we have performance here, and we have cost here, mind it this is cost the cost is increasing here increasing cost. So, the product here would be cheap we have cheap product here, that is low cost and low performance, but the standard products which are being used are here. Standard products which are high cost and high performance. What is frugal innovation intended to do ? It has to be practiced to get the high performance products but it has to be low-cost. So, this is frugal, so this is increasing cost.

Frugal vs Cost vs Reverse Innovation

Also, I would like to cover some more details on the cost innovation, versus frugal, versus reverse innovation. So, frugal is understood as I believe cost you understand, reverse innovation , reverse engineering that is also known as reengineering is redesigning the existing products in such a way that we can just eliminate the unnecessary parts and take in the only necessary functions to develop new products. So, that is generally like the products those are in the developed countries, those are reengineered to produce the lesser cost products in the developing countries. So, those things are happening. So, when I say the differences between these three, they can be differentiated with certain criteria number was in novelty of the solution, in novelty of the solution, in frugal innovation that the technical novelty is the medium to high, the market is from medium to high. So, this is ChotuKool or the Mitticool refrigerator again. In cost innovation, the novelty is low, the market is low, but the only cost is reduced. In the reverse innovation the technicality can be low to medium and market can be low to high. For example, this is a re engineered chair that is developed in with a low cost for the use of the people in the poor countries. So this is freedom chair initially developed as frugal innovation for poor people that is disabled people.

Typical Traits

In terms of the traits the typical traits of the frugal innovation are that Frugal innovation has cost effective, raw materials, local sourcing, local production, standard components, and commodities reduction in size, new application that is Portability and Tailored for environments with poor infrastructure. Cost innovation, cost effective, raw materials are there, local sourcing and local production is there, standard components and commodities, smaller package size. In Reverse innovation it is same as cost and frugal innovation both because reverse innovations also need a little higher level of the Internet.

Innovation Strategy

So in terms of the innovation strategy the frugal elimination has application innovation based upon the cheap, specialized new solution. When I say cheap it is economical and all the factors like social innovation, business innovation, technology innovation work together to bring the frugal product. In cost innovation just the cost cutting and cheaper products are there. In Reverse innovation the cost frugal innovation with global launch is taken into consideration cheap and frugal in the solutions for the global market is there. So target customers for frugal innovation it is already discussed the first time or severely resource constrained customer, the potentially refresh efficiency seeking high income customer. Cost innovation again the customer, target customer here is first time resource-constrained customer. Potentiality is efficiency seeking high income customer. In reverse innovation the resource constrained or efficiency seeking customer is again there.

Summary

To summarize this lecture a true comparison between the different innovation strategies can be derived from consumers affected by their innovation. Frugal innovation as value to the product functionality while a cost innovation may not add functional value but reduce the price of the product to such extent that it create disruption in the market. Reverse innovation takes benefit of frugal innovation, developed for less resourceful market and hence an obvious candidate for sustainable innovation. So this is frugal innovation that I thought should be discussed when we are talking about design thinking in agriculture implements. Frugal innovation is generally practiced by many farmers in home also when you do some tinkering of the components, some tinkering of the shape and form and all of some connection of the components and you get something that is used for some specific purpose you are doing frugal innovation.
With this I like to say.

Thank you