"Innovation is an activity or process which may lead to previously unknown designs pertaining either to the physical world (think of buildings or infrastructure), the conceptual world (for example conceptual frameworks, mathematics, logic, theory, software), the institutional world (like social and legal institutions, procedures and organizations) or combinations of these which - when implemented - expand the set of options."
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.