Frugal innovation or frugal engineering is the process of reducing the complexity and cost of a good and its production. Usually this refers to removing nonessential features from a durable good, such as a car or phone, in order to sell it in developing countries. Designing products for such countries may also call for an increase in durability[1] and, when selling the products, reliance on unconventional distribution channels.[2] Sold to so-called "overlooked consumers", firms hope volume will offset razor-thin profit margins.[2] Globalization[3] and rising incomes in developing countries may also drive frugal innovation.[4] Such services and products need not be of inferior quality but must be provided cheaply.[5]
In May 2012 The Financial Times newspaper called the concept "increasingly fashionable".[6]
Several US universities have programs that develop frugal solutions. Such efforts include the Frugal Innovation Lab at Santa Clara University and a two quarter project course at Stanford University, the Entrepreneurial Design for Extreme Affordability program.[7]
- Fully 65% of the world’s population earns less than $2,000 each per year—that’s 4 billion people.
- Consumers at the bottom of the pyramid pay much higher prices for most things than middle-class consumers do.
- The critical barrier to doing business in rural regions is distribution access, not a lack of buying power.
- Clearly, poor communities are ready to adopt new technologies that
improve their economic opportunities or their quality of life.
- Businesses can gain three important advantages by serving the poor—a new
source of revenue growth, greater efficiency, and access to innovation.
- Markets at the bottom of the economic pyramid are fundamentally new
sources of growth for multinationals. And because these markets are in
the earliest stages, growth can be extremely rapid.
- Shared access creates the opportunity to gain far greater returns from all sorts of infrastructure investments.
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