Frugal Innovation: Definition and Explanation

What is frugal innovation?

Frugal innovation refers to low-cost new products, methods and designs that have been created for or come out of what is known as the bottom of the pyramid or the unserved lower end of the mass-market.

The bottom of the pyramid

The idea of the bottom of the pyramid or unserved lower end of the market is important from a number of aspects:

• Firstly, it refers to the largest socio-economic group of people on the planet who have few resources and little money. Whilst each individual in this segment has hitherto not been considered to be a consumer and therefore largely ignored, the sheer size of the population at this level means that collectively they are a valuable prospect for companies and organisations.
• Secondly, due to the relative poverty of this population, it has been found that individuals with an entrepreneurial orientation within this group tend to drive frugal innovation and design products, methods and services which are practical, inexpensive and sustainable.
• Thirdly, a number of recent studies have shown that frugal innovations originating from individuals and groups within this sector have the potential to drive not only sustainable product innovation, but also methods and services. These innovations have been found to be not only practical and very cost-effective, but are also often ecologically sound and, as such, hugely attractive.
• Lastly, the thinking, rationale and problem-solving capability of frugal innovators from this population is inherently ‘resource light’ and, therefore, very attractive to organisations.

Increasing research interest

As a result, the whole area of frugal innovation is attracting increasing research and organisational attention, not least because of the progress and growth of emerging economies, such as China and India, who house the largest populations of bottom of the pyramid populations. These large populations of economic lower end people are being seen as both potential markets and resources.

In short, frugal innovation is rapidly becoming a serious driver of growth around the world and its links with sustainability is adding to its attractiveness.

For more research on frugal innovation see: Why Frugal Innovation is Becoming Big Business – New Research

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