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Frugal innovation


As a consequence of the financial crisis, western enterprises will have to change the way they innovavate as less funding sources will be available and consumers will have less purchase power. At the same time innovators of emerging countries have more than ever opportunities to address the needs of massive population getting out of poverty.

Written by Christian Saublens

Reviewed by David Walburn

 

The concept

How to implement it?

Step in the RIS process

What can be expected?

A quote

References

Experts' comments

 

The concept


Frugal innovation - also known as reverse innovation or Jugaad - is the ability of enterprises to put onto the market solution/products/services/opportunities arising from adversity circumstances. This can be the results of scarce resources, thinking in a flexible manner, targeting simplicity, …

Both western multinationals (General Electric, Siemens, Danone, Renault, Nokia) and enterprises of emerging countries (Tata, Haier, Airtel India) or local start-ups of those countries (Microventures, Safaricom, Selco) are developing successful initiatives. Enterprises developing frugal innovation focus on simplicity, from the design to the after sale system of their products/services. They also interact with their consumers.

For more examples of frugal innovation, go to www.jugaadinnovation.com

 

How to implement it?


To develop a new approach to innovation by providing market intelligence, demonstration facilities, networking opportunities with partners from emerging countries, feasibility studies, coaching, … In some cases the support should be funding to allow redesigning of the products/services or even R&D+I activities, in order to develop totally new products/services/solutions.

 

Step in the RIS process


Step 5 - Definition of coherent policy mix, roadmaps and action plan

 

What can be expected?


  • New type of entrepreneurs/innovators
  • New market opportunities through product or geographical diversification
  • Niche markets
  • Response to social and societal needs

 

A quote


"Renault's Logan car was a bottom-up approach to rethink the costs of a car. Driven by three simple guidelines: modern, reliable and affordable. The company accomplished dramatic savings without compromising their core principles. " - Carlos Gohm, Renault's CEO

 

References


  • Jugaad innovation - Think frugal, be flexible, generate breakthrough growth by Navi Radjou, Jaideep Prabhy and Simone Ahuja
  • Siemens SMART range of products, SMART meaning Simple, Maintenance-Friendly, Affordable and Timely-to-Market

 

Mr Christian Saublens


 

Christian Saublens has more than 30 years of working experience in European trade organizations. Since 1992 he is the Executive Manager of EURADA, the European Association of Development Agencies, a network of 145 organisations. Christian has been involved in the organization of numerous conferences and meetings dealing with all matters related to regional development. He wrote several papers and working documents on business support schemes for SMEs. He played an important role for the dissemination in European regions of concepts such as benchmarking, business angels, investment readiness, proof of concept, clusters, open innovation, financial engineering, crowdfunding, … Several times Christian has been appointed as an expert by the European Commission and the Committee of the Regions.

christian.saublens@eurada.org

 

Experts' comments


The attraction of frugal innovation in a time of austerity is clear. The idea of doing more with less is particularly poignant for economic developers in the face of budget cuts in their agencies.

However, like many ideas which strike a chord with the times, there is a temptation to let the rhetoric get out of hand. The Jugaard website suggests that the in today’s world economy companies can no longer rely on innovation being achieved by having big R&D budgets. But that has always been the case. The contributions of invention, radical thinking, technological capability and using investment resources prudently have always been fundamental to commercially successful innovation.  The state of today’s economy has nothing to do with that. And there is no doubt that the availability of high levels of R&D cash at the right time and circumstances can be crucial to success.

 The idea that companies will have to change the way they innovate because in the post-2008 financial crisis sufficient R&D funding cannot be made available, is surely spurious. The corporate sector in western economies is flush with cash and governments have been taking extraordinary steps to boost liquidity. Lack of demand and reduced consumer spending power are certainly depressing investment and the incentive to innovate, and this will include what is now being termed frugal innovation, but this does not represent a changed paradigm in how to invest and achieve innovation.  There is little likelihood of innovation being spurred on by depressed economic conditions, except in the rather limited sense that firms will try to innovate to reduce costs and thus increase margins.

None of this means that the prominence now being given to frugal investment is either wrong or unhelpful. For sure, there are many firms, and particularly small firms, which need to stay competitive, or just stay in business, where finance is limited and innovation in the way they do business is vital to their future. If such innovation is achieved, it is bound to be “frugal”. And it is certainly the case that achieving innovation – and sometimes quite startling innovation - is not always dependent on access to large amounts of finance.  There are numerous examples for economic developers to draw on from advanced western economies and from emerging economies.

The important issue here is how these insights can be useful for policy makers and SME support organisations trying to intervene to support firms in their local economies. The usual problems arise:

  • How to identify firms needing support
  • How to communicate with such firms to establish the rapport to make intervention possible
  • Devising programmes which will be effective
  • How to mobilize the other regional stakeholders which might be able to help

We are of course back on intermediary organisation responsibility territory with “frugal innovation” featuring as just one more item in the tool box to support SMEs. The onus is on the organisation to identify what content in the frugal innovation field can be translated into something new in terms of SME support. In the end this may not turn out to be all that much, but anything new which can help firms in these troubled times would be a plus.

 

Mr David Walburn


After a career in business David Walburn joined Greater London Enterprise in 1986 where he was responsible for venture capital and other small business support, before becoming Chief Executive of the organisation. He was the Chair of the London Business Angels Network and played a key role in the setting up of the European Business Angels Network. He has worked with the UK government and the European Commission on developing public policy initiatives to improve the financing of small and medium-sized enterprises. He was the Chair of Capital Enterprise, the umbrella body for organisations supporting micro business development in London, until 2012.

For the last ten years he has been a Visiting Professor at London South Bank University where he headed the Local Economy Policy Unit and was the managing editor of the journal Local Economy.

He has served as President of EURADA, and been a member of a number of advisory bodies of the European Commission.  He has been an active member of the International Economic Development Council in Washington DC and has a wide range of international contacts with economic development organisations.

He continues to write and lecture on small business finance and regional economic development.

davidwalburn@london.com

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