The low-tech approach of frugal innovation is the way forward, as many leading companies are finding to their benefit
As the US and Europe enter an age of austerity, Western firms and governments have to learn to innovate cost-effectively and sustainably under severe resource constraints. To reboot their ailing economies, they need to master the art of frugal innovation. Frugal innovation is the ability to do more with less: that is, to create considerably more business and social value while minimising the use of increasingly limited resources. Here are three examples of frugal solutions:
M-PESA (See Development Downloaded): Launched in Kenya in 2007 by the local telecoms operator Safaricom, M-PESA is an SMS-based system that allows people to spend, save and transfer money using their mobile phone without having a bank account. The service costs a mere fraction of traditional money-transfer services. More than 14 million Kenyans – or over 68 per cent of the country’s adult population – are currently subscribed to M-PESA, considerably more than the number with bank accounts.
Liter of Light: Illac Diaz, a Filipino entrepreneur, launched the Liter of Light project to bring a free, eco-friendly source of light to communities without electricity in the Philippines. The innovative solar bottle bulb (SLB) is simply a recycled one-litre plastic bottle filled with water that has been treated with bleach. The bottle is fitted into a hole in the corrugated roof of the house and the water refracts the sun’s rays indoors, producing light equivalent to a 55 watt light bulb. The SLB costs less than US$2 and is easy to assemble, install and maintain. Diaz has deployed SLBs in almost a million Filipino homes.
Embrace: Embrace’s portable infant warmer costs US$200, or one per cent of the price of the high-tech baby incubators sold in Western markets. Embrace’s easy-to-use and affordable product is a boon for mothers in developing nations such as India, where 1.2 million premature babies die each year. Embrace aims to save the lives of more than 100,000 babies over the next three years and prevent illness in more than 700,000 babies.
It’s not surprising that many Western firms are falling in love with frugal innovation and adopting it as their new corporate strategy
What is amazing about these frugal solutions is that they were developed using little research and development investment, and are not dependent on latest technologies. The M-PESA service, for instance, piggybacks on the reliable and ubiquitous mobile phone infrastructure in Kenya. Likewise, to keep the babies warm, the Embrace product uses an inexpensive wax-like material that is widely available. By reusing existing technologies, the frugal innovation approach pioneered in emerging economies offers a sustainable and cost-effective alternative to the traditional research and development approach of the West, which is resource-intensive. In today’s resource-constrained world, bigger is not better. If anything, less is more.
It is not surprising that many cost-conscious Western firms are falling in love with frugal innovation and adopting it as their new corporate strategy. The consumer goods giant Unilever, for instance, intends to double its revenues by 2020 while reducing its carbon footprint by 50 per cent. To do more with less, Unilever is reformulating its products – such as detergents – to consume less water and is selling them in smaller packages to frugal European consumers. Similarly, the industrial behemoth Siemens is currently developing a range of inexpensive products under the label SMART (Simple, Maintenance-friendly, Affordable, Reliable, and Timely-to-market) that use less sophisticated technology but deliver more value to customers. And IBM has just opened a research and development laboratory in Kenya to find inspiration from frugal mobile solutions like M-PESA.
Frugal innovation is now being taught in top universities in developed economies, including Stanford, MIT and National University of Singapore.
I look forward to seeing what the future holds.