Creating something from nothing is a growing entrepreneurial phenomenon. Historically, more than half the world’s population have been ignored by global corporations as a segment capable of being interested in innovation, but in recent years innovators in such resource-scarce environments have overcome their many environmental limitations. According to Eric von Hippel, Professor of Technological Innovation, the key to innovation comes from customers, not corporate thinking, and everyone has needs that can be satisfied by new products and services. Frugal innovations – defined as those that offer basic quality, reduce costs, concentrate on functionality, and show simplicity and sustainability (Weyrauch and Herstatt 2017; von Janda et al. 2020) – are increasingly being used to solve complex problems. According to Prahalad and Mashelkar (2010), frugal innovation or reverse innovation specifically engineers products to meet the needs of developing countries, for example a rough-terrain wheelchair or a $20 prosthetic knee that can be assembled in an hour.

Sustained global recession has affected many areas of business, and governments around the world have taken to using austerity as a watchword for managing national and regional affairs. This shift in emphasis has profound implications for marketers. Typically, innovation diffuses from high-income to low-income regions, but frugal innovations diffuse in the opposite direction. For example, engineers in India won the day with the Tata Nano when Renault–Nissan asked its engineers in France, India and Japan to come up with some cost-saving ideas. Haier Group, a Chinese consumer electronics manufacturer, has undercut western competitors by producing goods ranging from air-conditioning units and washing machines to wine coolers, often at half the usual cost. This has resulted in Haier taking significant percentages of US and European  markets. However, the shift towards frugal innovation is more far-reaching than just producing goods for western markets more cheaply. 

In the developing world, the various champions of frugal innovation include Anil Gupta, who is an academic at one of India’s top business schools, the Indian Institute of Management. Anil is a champion of individuals who are deemed to be ‘knowledge-rich yet economically poor’. Anil believes there is a solution to world poverty, but it requires a different approach: a bottom-up one. He established the Honey Bee Network in the 1980s with the aim of nurturing innovation, knowledge and creativity at a grassroots level. This initiative led to the development of a village-to government approach towards innovation. Innovation scouts go to rural villages in India looking for potential products to develop......

Questions: 

1. What are frugal innovations and how might they change the world? 

2. Suggest what barriers you might have to overcome when developing a frugal innovation in a high-income region (e.g. Italy, the UK, Sweden). 

3. If you worked for a large multinational, suggest how you would incorporate frugal innovations into your product development strategy.