Frugal Innovation is about doing more with less. Entrepreneurs and innovators in emerging markets have to devise low cost strategies to either tap or circumvent institutional complexities and resource limitations to innovate, develop and deliver products and services to low income users with little purchasing power, often at mass scale and arguably in a sustainable manner. My DPhil research seeks to understand this institutionally complex, constraint-based, and low cost innovation which is designed in or for emerging market contexts.
Regression analysis: Simple Linear Regression Multiple Linear Regression
Frugal Innovation Research
1. FRUGAL INNOVATION
When doing less is new
Yasser Ahmad Bhatti
yabhatti@frugal-innovation.com
DPhil (Candidate) in Management Research,
Said Business School, University of Oxford
www.frugal-innovation.com
2.
3. Business in Emerging Markets
66% of the world’s economic
growth in next 5 years will
come from emerging markets
(EIU 2011).
In 1987 EMs share of global GDP
was 16%; In 2011 is 31% (EIU 2011).
4. Business in Emerging Markets
In 1989 the 10 tallest buildings were all in North
America. In 2011, 7 of 10 are in Asia (EIU, 2011).
In 2006 there were only 15 companies from
the BRICS on the FT’s 500 list.
In 2008 it had risen to 62 (Economist, 2010).
In 2010 BusinessWeek’s 50 Most Innovative
Companies rankings, for the first time the
majority of corporations were based outside
the U.S particularly from Asia.
9. Vodafone’s solar-powered VF247 at
Rs, 1500 provides rural customers
with Torch, FM radio, a prepaid
balance indicator, and the ability to
charge under normal daylight.
Dual
Sim
Source: http://www.pluggd.in, http://www.treehugger.com/cars/ride-your-bike-to-charge-your-phone.html,
http://www.gizmowatch.com/entry/juice-up-your-mobile-phone-with-good-old-muscle-power/
10. OLPC’s $100 laptop
and Intel Classmate’s
competition creates
market for Netbooks
Source:
one.laptop.org/
11. Chotukool weighs 7.8 kg and priced
Rs 3,250, runs on a cooling chip and a
fan similar to those used to cool
computers. Consumes 1/2 the power
consumed by regular refrigerators
and uses high-end insulation to stay
cool for hours without power. Has
only 20 parts, as opposed to more
than 200 parts in a normal refrigerator.
Source: http://inhabitat.com/design-for-the-other-90-lifestraw, www.solvatten.se, and
http://www.innosight.com/impact-stories/chotokool-case-study.cfm
17. Institutional Void Examples
Institutional voids are defined as the lack of
institutional facilities, norms, and regulations
needed for a well functioning economy (North, 1990)
1. Lack of legal protection for property rights;
2. Poor enforcement of commercial laws;
3. Non-transparent judicial & litigation systems;
4. Lack of agency contracting;
5. Underdeveloped factor markets;
6. Lack of financial credit availability;
7. Inefficient market intermediaries.
18. Resource Constraint Examples
Resources controlled that enable the firm to
conceive of and implement strategies that improve
its efficiency and effectiveness (Daft,1983; Barney,
1991) and are tradable and non-specific to the firm.
• Lack of assets,
• capabilities,
• organizational processes,
• firm attributes,
• information, knowledge.
27. Core Competencies in Engineering for
the Developing World (Basu, 2010)
Ruggedization Lightweight
GE’s Mac I 400 $800 Cisco and NetHope’s
electrocardiogram in a Emergency Net-Relief Kit
backpack
Simple User
Affordability Centric Design
Aravind preventative
Jerry Can for Naandi’s
eye care
Safe Water Program
Simplification Green
Tata Chemicals Rice Husk
water Filter Technologies
Vodafone’s Solar powered
Mobile Handset
Adaptation Use of Local Materials
Nokia’s Mobile Phone
Bicycle Charger Kit
/ Manufacturing
Vortex Engineering’s solar
powered ATMs for rural
banking
Source: http://www.scu.edu/socialbenefit/innovation/frugal/corecomp.cfm
29. “Magnificent Simplification”
"If GE doesn't master reverse
(frugal) innovation, the
emerging giants could
destroy the company.”
(Immelt, Govindarajan, and Timble, 2009)
In 2010 Bloomberg BusinessWeek’s 50 Most Innovative Companies rankings, for the first time since the annual rankings were launched in 2005, the majority of corporations are based outside the U.S and the new global leaders are coming out of particularly Asia.
Image source: Innovation management online http://www.innovationmanagement.se/2010/12/13/technology-entrepreneurship-for-emerging-markets-an-ecosystem-approach/* Year indicates public disclosure in media and not necessarily year of conception or successful implementation; some are challenges yet to be met
Focus on artefacts, products, but where do they come from ? Impact of existing ecosystem? How is the new ecosystem formed? How are value chains restructured? What enables this restructuring? What do we need to know about FI to accomplish it in other sectors, domains?
Capabilities which are distinctive or superior relative to those of rivals, may become the basis for competitive advantage if they are matched appropriately to environmental opportunities (Peteraff, 1993). RBV focuses on the firm as the level of analysis and its resources as the unit of analysis.
Capabilities require institutional backing such as regulatory, health, education, and perhaps the most important, financial institutions and resources. For innovation, Johnson et al (2003) mention that in order to build competence and innovate it is important to establish institutions that enhance order, trust and predictability in the life of individuals and in the workings of firms and other organizations. The “institutional voids” concept hints that many emerging nations do not have the right institutions in place that would otherwise together make up a National Innovation System (Lundvall, 1992; Freeman, 1995). Therefore, all emerging markets fail to some extent in providing necessary institutions to support basic business operations such as regulatory systems, contract-enforcing mechanisms, financial markets, and even supply-chain infrastructure such as roads, ports, and transportation.
Capabilities which are distinctive or superior relative to those of rivals, may become the basis for competitive advantage if they are matched appropriately to environmental opportunities (Peteraff, 1993). RBV focuses on the firm as the level of analysis and its resources as the unit of analysis.
Study an ecosystem rather than an innovation. A standard innovation is an ecosystem, but frugal innovation is a different ecosystem (reconfiguring)Frugal is not cheap, it is reconfiguring value chains, I want to focus on cases for the poor, but conceptually it is useful for the West as well (like ebay). What does ebay have in common with the Tata Nano: the same concept in two different institutionally complex contexts (Ventresca).In the emerging markets innovation is about reconfiguration and rebundling of products and processes (Henderson and Clark, 1990) to fulfil needs at lower cost and at economies of scale.
Innovation under three or any two of the three constraints is Frugal innovationAny two of three sandbox constraints foster frugal innovation
Discuss core competencies with examples from the field.
The process may be very complex in managing linkages, resources, and stakeholders, but the overall aim is to make the outcome simplified. Just killing costs alone could kill the system as it would neglect underlying interdependencies. It involves rethinking the process, thinking differently on why and how to innovate and then that will result in reduced costs.