13 July 2015 14:05:07 IST

Frugal innovation is a mindset, say authors Prabhu and Radjou

A flat production model that brings the consumer and producer closer leads to remarkable outcomes

Jaideep Prabhu (left) and Navi Radjou are on a multi-city tour to promote their second book, Frugal Innovation, How to do better with less, a sequel to their earlier book, Jugaad Innovation. Radjou, who hails from Puducherry, is an innovation and leadership advisor based in Silicon Valley and a fellow at the Judge Business School, University of Cambridge, where he teamed up with Prabhu, who is the Jawaharlal Nehru Professor of Business and Director of the Centre for India & Global Business at Judge.

Their new book focuses on cases of frugal innovation from the West, and develop insights about a Western model of frugality. It’s not just about products and processes but also about a mindset, say the authors in an interview to Business Line. Excerpts:

Frugal innovation has many connotations: to some it’s cheap, low quality, or could be something delivering great value. How do you define it?

Navi: In the first book, we referred to jugaad to capture frugal, flexible innovation in resource-constrained countries such as India. It’s actually a continuum; essentially people are using tools, to be able to do more with less, better with less, to delivermore value, to the end customer, shareholder and society, using less resources which could be financial, natural or even time.

How would frugal in India and the Western model be different?

Navi: Frugal in the Indian context is not necessarily a product; it is often talked about as the Nano or affordable healthcare (of the kind delivered by Aravind Eye Care). These are frugal solutions; this is one dimension. Frugality can extend to the entire supply chain and business model; it can apply to the value you can bring to customers. Two criteria are affordability and quality. In the West we are seeing two other attributes being added. One is simplification; customers have had to put up with complex solutions so far, but now people, especially the young, want to simplify their busy lives. The fourth attribute is sustainability, because while you can do something cheap it shouldn’t be polluting. A product and service can also be frugal, like car sharing/pooling, which can have a lower environmental impact.

So, frugal is essentially a state of mind?

Navi: We call it mental models; we have three levels: one is at the product level, the second is a frugal business model where you can systematically create a solution, and the third level is a frugal mental model, which is a mindset. If your staff are not trained and incentivised, you can have it (a frugal mindset) for a while and people can go back to doing things the way they were before.

So, in your book, you refer to frugality in processes as well?

Navi: We refer to the Logan example, a car made by Renault. They set a target cost of €6,000 but what they didn’t do is take an existing car and reduce its features, value-engineering as it’s called, trim it down to the point where a car without these features can hit their cost target. But it’s not the right value to customers. In this case, both R&D and designers were in cross functional teams and were involved in leveraging customer insights. Reducing costs is not about reducing comfort and safety; R&D started doing work from scratch on the entire value chain. So, it meant more collaboration between R&D, design and manufacturing. Things are done in a linear way in car manufacturing and that adds to the cost. In the case of Renault, they put these guys together to reduce lead time in making it and reducing cost as well.

How much does consumer insight and feedback work in frugal innovation?

Jaideep: That’s our first principle of engage and iterate. It started with digital startups and has now extended to other startups as well. You start with a customer insight and develop a minimal viable product, something that addresses the main part of the need.

You develop that quickly and test that with consumers, follow the consumer home as they say; this is part of the process.

Rather than develop a finely engineered product from scratch, which takes a lot of time, and then find that it hasn’t met the market needs, here you have a better chance of hitting a sweet spot and doing it faster, better and cheaper.

What was the most exciting innovation you came across while writing the book?

Jaideep: There are many, but an example I really love, encapsulates what we’ve been talking about. It’s not found in the book. In Barcelona, politicians wanted to turn it into a smart city, but a different kind of smart city, more a 21st century kind of one.

We cite the example of prosumers --- consumers who are not passive recipients of products but also participate in making those products. They have access to resources that only big companies could do in labs 10 years ago. Consumers have access to 3D printers and spaces where they can go and work on prototypes and bounce their ideas off others and also market it through social media.

In Barcelona, the city has set up several fab labs, where the community is involved --- ordinary citizens and students of engineering and architecture. One of these is on pollution, which we can appreciate in India.

Instead of installing sophisticated equipment around the city, they said it would be much smarter if individual consumers can test pollution levels out of their homes using simple equipment.

They created these remote sensing devices in these fab labs which that can sense light, nitrogen, carbon levels, noise, and which can send data to another device. They use cheap computers and micro processors. Data is sent through the internet to a central server.

These devices are sold through Amazon and anyone in Barcelona can buy them. Consumers get back processed data, which shows pollution levels relative to other parts of the city. We can do it in India; we have the need.

You refer to conversations with consumers…is that where the strongest ideas come from?

Jaideep: What you are seeing in the West is a democratisation of capitalism. Things like innovation, which was the preserve of big companies because you needed capital and sophisticated labs and special people to work there. That’s going away, ordinary people now have the tools and with training and space, they are able to do stuff. Maybe it’s not the most sophisticated, but they are innovations nevertheless.

One of my other favourites is something called the Square, which fits into the audio jack of a smart phone. And it enables you to take credit card payments. It was developed in a tech shop by Jack Dorsey, who came up with Twitter. A friend of his wanted to sell spare stuff in his garage and he couldn’t sell it because he couldn’t take card payments.

They developed a prototype of the Square in a tech shop and it’s a huge business; in four years, they have transacted something like $30 billion. It’s a flattening of the structure; innovation is now easier to do as small teams with focus can do it.

You can sell online, outsource manufacturing, you don’t have to own a distribution and market through social media.

The whole process of doing business is more democratic. Even though ‘prosumers’ may not come up with the most earth-shattering idea, they come up with ideas that have social application and that ingenuity is what you want to tap into.