Frugal management originated from countries like India, which is considered part of long-term economic and managerial innovation strategy. Different initiatives are taken into consideration to demonstrate the effectiveness that frugal innovation has. This means that you can start with limited resources and develop a breakthrough innovation management plan.
Therefore, frugal innovation is a process of producing low-cost methods, products, and designs or coming out of the unserved lower-end market or the bottom of the pyramid. The whole process involves removing non-essential elements and features from durable goods like phones and cars and selling them in developing countries.
This is one of the management trends that adapt to the encountered constraints, especially budgetary constraints. Frugal innovation translates to economic innovation solutions to gain competitiveness in the emerging markets by incorporating new collaborative practices. Therefore, this innovation management solution caters to all organizations, from SMEs to large firms.
Introduction to frugal innovation
According to strategist Navi Radjou, human creativity is an infinite and naturally renewable resource. It is associated with cheap and intelligent solutions to the biggest problems that people face in society. The developing world must have many optimists if they see an opportunity in every challenge. Therefore, people have learned to find creative ways of using renewable and non-renewable products and gain more from limited resources.
Some companies use matrix management to develop and implement small-scale innovation to help billions of people, especially those with high aspirations but low income. Frugal innovation is making more-for-more business models obsolete because many customers cannot afford expensive goods. In addition to that, the world is running low on natural resources like oil and water. The only way to grow and prosper is to learn more with less.
What it takes to start on frugal management
One of the best ways of initiating frugal innovation is to stop thinking of the company’s environment as being limited to stakeholders, but consider all company members, from employers to employees. It is crucial to expand the partnership market to expose the company to flexible and frugal culture without disrupting the whole corporate culture.
Therefore, it is vital to develop a strong leadership, since diversity management is systematic. For example, promote female leadership in the management plan to see the difference in production and innovation. Your company’s culture should not be similar to the old ones, but should continuously transform to be better than the previous one. The right question to ask, as the business, is: does it have what it takes to leverage frugal innovation ideas?
It takes several business lines of the organization to answer the question from a marketing strategy point of view. Everyone in the company should think and offer solutions about the relevance and limitations of this project criteria.
What do frugal innovators do?
Frugal innovation is a form of strategy, but more. It denotes new mind frames that see opportunities and development in resource constraints and not liabilities. Frugal innovation focuses more on agility than efficiency. Therefore, frugal firms have no business wowing customers with expensive and technically sophisticated products; instead, they work to meet consumers’ basic needs by producing good-quality solutions.
In the recent frugal innovation books, it is seen that the number of organizations and firms taking part in frugal innovation is increasing. The leaders of a liberated company will not only change the company’s business model but the employees’ mental model through the distribution of frugal innovation examples. Below are some valuable lessons to follow when leaders want to foster frugal innovation in their company.
Crowd sourcing of solutions
Businesses across different sectors face messy and complex problems that lead to poor economies. Depending solely and greatly on in-house resources and capabilities will not count as a strategy to grow your business. Instead of wasting money and time reinventing HR trends, managers need to engage the whole organization in crowdsourcing external frugal solutions from the available suppliers and nimble entrepreneurs.
Teaming up with external investors, researchers or collaborators can be a fast ticket to speed up workplace diversity and shift employees’ perspectives.
Building circular value network
Most companies these days operate a linear value chain. This means that products are designed, produced and sold to consumers then end up in landfills. Linear economies are costly, environmentally unsustainable, and wasteful. Therefore, leaders need to reinvent their chain and operate in a circular value network.
The company can take advantage of neuromanagement to embrace new sustainable production, design, and distribution techniques. The circular approach will enable continuous reuse of components, parts, materials, and waste.
Encourage “do better with less” technique
Companies need to communicate their frugal innovation goals. Leaders need to put their reputation on the line when making public announcements about frugal innovation goals and restate incessantly to customers, employees, partners, and investors.
For instance, the Unilever CEO, Paul Polman, has done this exactly. Polman launched a sustainable living plan for Unilever in 2010 and committed his company and himself to a progressive target of increasing the revenue and reducing environmental footprints for the next 10 years (2020). Since that big announcement in 2010, Paul Polman has been holding meetings and traveling worldwide to impart his vision in prime Unilever regions.
Empowering employees and simplify structures
One of the most valuable market resources in business is being frugal with time. Companies need to know and understand ways of flexing their assets (service, physical and human assets) to gain agility and save time. The first step is simplifying organizational structure through empowering employees, cultivating a flexible workplace mid-set, and embracing holacracy to address customers’ needs better and faster.
Using key performance indicators to sustain frugal practices in the organization
CEOs and senior management need to create specific KPIs (Key Performance Indicators) to drive frugal behavior, action, and thinking at all levels. The main purpose of using key performance indicators is to help employees to track enterprise-wide goals against performance.
In addition, KPIs will adjust collective and individual efforts. Most managers deliver learning outcomes of the company’s policies that include training, recruitment, incentive system, and performance management. The measurement and rewarding system needs should be based on the learning outcome and financial return.
The Jugaad principles of frugal innovation
Do more with less
All organization members should think differently to get solutions facing the company and bring additional value to consumers from the product and services that already exist.
Keep it simple
There is no need to innovate complex products. Most products are complicated for the end-user to master and learn. The solution presented by frugal innovation practices must at all times be simple and easy to use.
Stay open to constraints
Regardless of the complexity of a particular environment, the company should view it as an opportunity for innovation. Fear of managerial and business model reinvention should not be a problem. This will make it easy to circumvent unforeseen events and daily hazards without worrying about traditional processes.
Flexible thinking and acting
The management and company should put the customer’s needs in front and develop flexible thinking solutions to adapt to the market’s constant changes.
Integrate all innovative project members
It is essential to solicit suppliers, customers, and collaborators to develop an alternative or new product with frugal and agile project management.
Following what you believe
Frugal management and innovation depend mainly on intuition principles. However, intuitions will be nothing without standby intelligence inspired by new frugal innovation examples. When following your heart, ensure to track results from start-ups and other companies to unleash the capacity and innovation creativity.
Frugal innovation examples
The good news about frugal innovation is that it is not restricted to durable products. Therefore, it includes services like mobile banking and microfinance.
It is a low-cost prosthetic and among the best frugal innovations in India.
It is a tough microscope designed to cost less (not more than a dollar) and made from lens and paper sheets.
Mobile banking services allow people to easily access any banking services from mobile phones. Services like phone money transfers are cheaper than traditional methods. It is another form of remote management.
It is among top 10 frugal innovations in India to appeal to motorcycle drivers. It is the cheapest car worldwide and was developed by Tata Group.
It is a paper-based device for biotechnology and biochemistry applications. It is a low-cost device that offers services equivalent to lab equipment costing more than $10.000. The device portion can be recycled and provide portability benefits.
Why is frugal innovation important
The idea of serving the bottom end of the market or pyramid has some importance that includes:
Caters for the largest socio-economic group
The largest socio-economic group in the world has little money and limited resources. Most individuals in this group are ignored since they are not considered consumers. Frugal innovation will bring diversity and inclusion to ensure that every member of the society is taken care of in terms of utilizing products. People, regardless of their financial status, are valuable prospects for organizations and companies.
Individuals in this group have entrepreneurial skills to drive frugal innovation and develop methods, services, and products that are inexpensive, sustainable, and practical due to the population’s relative poverty.
Development of cost-effective practices
From recent studies, frugal innovation coming from groups and individuals with limited resources have the necessary potential to drive sustainable methods, services, and products. The resulting digital culture is very cost-effective, ecologically sound, and practical.
The keystone in frugal innovation
Frugal innovation redistributes management cards making toxic managers and executives lean toward more collaboration. The innovation process depends mostly on human ingenuity and not new technology.
Indeed, collective intelligence supports frugal management. Because of that, collective intelligence establishes diversity in the workplace through a creative work environment. A collective meeting is one of the best ways to brainstorm a new and large quantity of ideas for a certain problem in the organization.
The frugal innovation is attracting organizational attention and increasing research on areas like managing remote employees due to the growth of emerging economies. The largest population in emerging economies is people at the bottom of the pyramid. Therefore, these large populations are seen as potential resources and markets. Frugal innovation is increasing in popularity due to its serious growth drive worldwide, and its sustainability link is adding more to its attractiveness.
The best way to achieve frugal innovation in your organization is to go for individual and or group coaching. Coaching (just a few sessions) will open doors to a proper definition of concrete transformation goals and see tangible progress at the end. There is no better professional coaching solution than CoachHub when it comes to offering technical and non-technical skills.