Quo Vadis Frugal Innovations?

What, Why, and How?

[ Dr. Rajnish Tiwari and Prof. Dr. Cornelius Herstatt ]

We (Tiwari and Herstatt, 2012; p. 4) define frugal innovations as new or significantly improved products (both goods and services), processes, or marketing and organizational methods that seek to minimize the use of material and financial resources in the complete value chain (development, manufacturing, distribution, consumption, and disposal) with the objective of reducing the cost of ownership while fulfilling or even exceeding certain pre-defined criteria of acceptable quality standards.

Frugal Innovations generally refer to low-cost, no-frills solutions which are aimed at consumers with relatively low purchasing power. These solutions are so far normally found prevalant in lower and lower-middle income groups in developing countries. Business firms operating in these countries tend to have an advantage over their rivals in developed, industrialized economies in pursuing frual innovations, because they are more familiar with the needs, infrastructural deficits and the consumer mindset. Frugal Products generally need to be (Tiwari and Herstatt, 2011:478):

• Robust to deal with infrastructure shortcomings such as voltage fluctuation in power supply;

• Fault resistant to cope with partially unsophisticated/semi-literate or even illiterate user; and

• Affordable for larger sections of the society so as to generate large volumes of demand.

India has emerged as a hotbed for frugal innovations. First indications of India's growing role as an innovation hub for this category of innovations were first reported by Herstatt et al. (2008), even though they did not use the term "Frugal Innovations". Since then, India has been slowly advancing to the position of a "Lead Market" for such innovative products, be it the world's cheapest car the "Tata Nano", or Chotu Kool, a small, portable, solar-enabled refrigerator. Under the aegis of Research Project Global Innovation we are taking a closer look at this emerging phenomenon and questioning/updting the "Lead Market" theory to extend its scope to developing economies.

There are two studies currently underway within this stream of research at our institute:

• Inside Frugal Innovations: Understanding the Phenomenon
  
  
• Frugal Innovations in the Context of Developed European Nations: Appropriateness, Opportunities & Challenges

Our publications based on studies already completed and with a direct relevance to this theme are listed below:

• Tiwari, R. (2013): "Emergence of Lead Markets in Developing Economies: An Examination on the Basis of 'Small Car' Segment in India's Automobile Industry", Doctoral dissertation, TIM/TUHH.
• Tiwari, R. and Herstatt, C. (2012): "Frugal Innovation: A Global Networks' Perspective", in: Die Unternehmung (Swiss Journal of Business Research and Practice) Vol. 66, Issue 03 (2012), pp. 245-274 (Download a Working Paper version, PDF, approx. 525 KB).
• Tiwari, R. and Herstatt, C. (2012): "Assessing India's lead market potential for cost-effective innovations", Journal of Indian Business Research, Vol. 4, Issue 2, pp. 97-115 (Download a Working Paper version, PDF, approx. 515 KB).
• Tiwari, R. and Herstatt, C. (2012): India - A Lead Market for Frugal Innovations? Extending the Lead Market Theory to Emerging Economies, Working Paper No. 67, Institute of Technology and Innovation Management, Hamburg University of Technology, Germany.
• Tiwari, R. and Herstatt, C. (2011): Role of Lead Market Factors in Globalization of Innovation: Emerging Evidence from India & its Implications, in: Proceedings of IEEE International Technology Management Conference (IEEE-ITMC), pp. 475-483 June 27-30, 2011, San José (USA).
• Tiwari, R. and Herstatt, C. (2011): Lead Market Factors for Global Innovation: Emerging Evidence from India, Working Paper No. 61, Institute of Technology and Innovation Management, Hamburg University of Technology, Germany.
• Herstatt, C., Tiwari, R., Ernst, D. and Buse, S. (2008): India's National Innovation System: Key Elements and Corporate Perspective, Working Paper No. 96, Economic Series, East-West Center, Honolulu, Hawaii (USA).

[ For any enquiries, please contact: Dr. Rajnish Tiwari ]