Why Frugal Innovation is Becoming Big Business – New Research
One of the emerging topics of both research and organisational interest over the last 15 years has been the area of 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.
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.
Serious driver of growth
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.
Previous studies looking frugal innovation have tended to focus on:
- Product simplicity
- Cost reduction
- The fact that frugal innovations are often modular designs that can be bolted together
- The disruptive nature of frugal innovation
A new study however, has shown that frugal innovation can and should be incorporated in more complex product and service situations for products for higher socio-economic groups, and that frugal innovation / frugal radical innovations need to be considered in a broader way than just serving the bottom of pyramid populations. Additionally, the study found that, because of their often-modular nature, frugal innovations can be linked together into much more complex products and services that result in much more sustainable products, services and industrial processes.
Lim, C., & Fujimoto, T. (2019). Frugal innovation and design changes expanding the cost-performance frontier: A Schumpeterian approach. Research Policy, 48(4), 1016-1029. https://doi.org/10.1016/j.respol.2018.10.014
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