Frugal Innovation

Navi Radjou and Jaideep Prabhu

In an age of scarcity, frugal innovation is the ability to do

more with less.

Inflation has outpaced incomes in many countries pushing frugal

consumption.

We now see more value consumers and values conscious

consumers.

New regulations require businesses to be more resource

efficient. President Obama passed a law requiring cars to move from 27.5 miles per gallon to 54.5 miles

per gallon by 2025.

Companies need to recycle and rethink the value chain

People are preferring access and sharing to ownership. This pushes

a peer to peer business model.

Frugal innovation aims to reduce the financial cost of doing

business and also its environmental cost.

Frugal innovation aims to maximize three difficult

attributes : Affordability, Quality and Sustainability.

In the US among the 100 million people who have full time jobs, 50

million are not engaged and 20 million are totally disengaged. The cost of this disengagement in the US is about $550 billion annually.

CEOs and senior managers have an important role in making the

whole company agile and responsive.

The 20 th century industrial model worked as long as cheap labor and economies of scale came through.

Good leaders simplify things to get more from their people. Poor

leaders make their employees ‘miserable and disengaged’ with

‘dizzying complexity’

Focus on the core is key. GM plants to reduce the number of

distinct vehicle architectures from 30 in 2010 to 18 in 2018.

Gil Amelio, CEO of Apple cut innovation projects from 350 to 50 and that was seen as good. Steve

Jobs cut that from 50 to 10.

A top down management culture is good in a crisis, but can never

work to make a company flexible and agile. That needs

empowerment and letting people realize and come along.

When leaders don’t dictate, employees must have the ability

to co operate and get things done.

Nearly 50 % of young European consumers feel that cars will be

consumed as a ‘shared good’ this decade.

Large companies can only do so much for sustainability.

Consumers also have to learn to do more with less.

MOOCs lets students learn at their own pace and from peers, thus

reducing drop out rates.

Consumers want a ‘conversation’ with their brands.

6 ways to hyper collaborate

1. Talk to suppliers who think originally2. Work with partners to develop an ecosystem3. Engage competitors in realizing big hairy,

audacious goals4. Share assets and resources with other

companies and save5. Work with the social sector6. Engage restless entrepreneurs, innovators.

Increase internal agility and responsiveness if you want

innovation.

What GE learnt from start ups

1. Keep things simple2. Work fast3. Find solutions through partnerships in eco

system4. Don’t be afraid of uncertainty

Supply chain experts refer to sales forecasts as ‘stale food’, because it

forecasts the future sales based on past trend. Getting Innovation

forecasts right is a challenge

New technology at point of sale and real time inventory level data

in the value chain will make a future demand forecast better.

Companies win when they compete to be ‘the best’ as

opposed to offering the ‘most range’