A lesson from India: Necessity is the mother of frugal innovation
Innovation seems to be a prime directive at almost any firm we run into, regardless of industry. How do you get more of it? In these tough times the answer is no longer to throw money at it. What we increasingly need is frugal innovation, what the Indians call jugaad - an idea whose time has come.
Earlier this year, 30 McGill MBA and BCom students and one professor travelled to India to meet with executives of a number of large companies in New Delhi, Mumbai, and Bangalore as part of the ongoing Hot Cities of the World Tour. The word jugaad turned out to be the word of the trip.
We first encountered the word in London en route to Delhi while visiting the offices of The Economist during a layover. We sat down with Adrian Wooldridge, management editor and Schumpeter columnist, who had just returned from India and was glad to share some of his thoughts with us. One of the topics was frugal innovation, the essence of which is captured by the jugaad mindset, a Hindi word that refers to making do with what one has to solve one's problems. In a business context, it means bringing innovative products to market despite limited resources - if not thanks to limited resources, since it is financial constraints that drive it in the first place.
Throughout the trip's many discussions, three examples of frugal innovation stood out. One that everyone has heard of is the Nano, unveiled by Tata Motors in 2008, which retails for just more than $3,000 U.S. and is equipped with only the bare essentials. Though it is still too early to say whether the Nano will truly become "the people's car," we were told that, although it has problems working on really hot days, it provides a good example of frugal engineering.
New low-cost technology in health care also has everyone talking. For instance, GE, which operates tech centres in Hyderabad and Bangalore, has introduced breakthrough items such as an electrocardiogram in a backpack and a computer-based portable ultrasound machine. They sell for a fraction of the usual price of those devices and are said to have the potential to revolutionize access to health care in developing countries. Interestingly, frugal innovation reverses the historical notion that multinationals innovate in rich countries in order to sell their products in poor countries.
The concept of jugaad, however, is not just about developing new technology. In fact, the work of the Dabbawalas in Mumbai is a good example. The business model is simple: Dabbawalas collect freshly cooked meals in boxes from the homes of Mumbai residents and deliver them to the workplace for a (very) modest monthly fee (Dabbawala means "one who carries a box" in Marathi). Five thousand Dabbawalas deliver 200,000 boxes per day using only bicycles and various modes of public transportation. Forbes Magazine awarded its Six Sigma certification in 2001 to the Dabbawalas, based on a nearperfect delivery accuracy rate (only one error for every 16 million transactions).
We recounted a few lessons that we took away from the experience. For one, frugal innovation goes beyond clever R&D. It has a lot to do with process - in this case, maximizing the efficiency of the supply chain. Second, sometimes less is indeed more. No fuel, no capital investment, almost no modern technology, and yet a high quality of service. And third, the circumstances of the operating environment matter a great deal when it comes to frugal innovation.
In our mind, jugaad is a concept that appears to work in India and could definitely make a difference here in the West.
Karl Moore, Daniel Novak and Veronica Dasovich are from the Desautels Faculty of Management at McGill University. Moore is a professor, and Novak and Dasovich are BCom students.
Read full article: The Gazette, May 31, 2011