Frugal innovation – why it is so important in business nowadays?

• it means: faster, better, cheaper;
• it allows companies to get high-quality products to market quickly using limited resources;
• it allows them to be efficient and deliver what the customer wants;
• high-quality products can be affordable and sustainable, as well as meaningful for end-users.

If you still don’t believe that “more for less” is possible, take a look at the example below.

But now we would like to present you with more European productions, which will make frugal innovation more clear to you.

In 1999 Renault’s CEO dreamed about a modern, reliable and affordable car that would retail at $6000. He was inspired by Lada when he visited Russia. Lada was selling faster on Russian market comparing to Renault, which was twice as expensive as the Lada. What were the advantages of the Lada?

Its simplicity and affordable price.

In 1999 Renault acquired a Romanian car company called Dacia. This step was strategic for the plan of producing cheap and reliable vehicles, as Renault’s decision was to place the production in Romania. It was a marriage of two extreme approaches: French design sensibility with a post-communist nature of doing more with less (world of limited resources was typical for communist countries).

As a result Dacia Logan was launched in 2004. What was initially planned only for emerging markets, the Logan also found buyers in affluent western Europe.

Logan van, Logan pickup, Sandero hatchback and Duster SUV have become more and more popular in western Europe.

Features of frugal innovations based on Dacia’s example

Engineers developing Dacia did more with less:

• 50% fewer parts than a typical Renault with more space inside,
• reduction of raw materials and costly tooling on the shop floor
• reduction of pricey electronic components (which means cheaper production and repair),
• affordable price of €5,000 ($6,000)

Are we facing a frugal economy?

Should we associate frugal innovations only with emerging markets?

For example, India has produced many frugal innovations like Tata Nano, Mitti Cool or Aravind Eye Hospital, the world’s largest provider of cataract surgery.

The answer is no, we should not.

Many changes can be observed which appoint new “frugal” trends in a global economy:

• Advanced economies nowadays are characterized by widening inequalities among consumers.
• The financial crisis, 2008 imposed an age of austerity, which means frugal living and consuming.
• Various research prove that middle classes in advanced economies point out that they purchasing power shrink.
• Governments have become more cost-conscious. States’ deficits, ageing populations and thus pensions burden have made many governments reduce their budgets.

Consumers, apart from being cost-sensitive, have become more value-conscious. Social and ecological aspects are increasingly considered by consumers while shopping.

In these times of economic turmoil and rising prices for raw materials, resource efficiency is where environmental benefit and innovation growth come together.

Janez Potočnik , The European Commissioner for Environment 2010-2014

Frugal innovation proposes a breakthrough approach to solving some of the most complex issues of our global economy, it empowers human beings to use their creativity to generate economic and social value while preserving the environment.

Bruno Rocher, Special Adviser to the G20 French Presidency Mission on Social Justice & Globalisation, and Chief Economist, Mars Incorporated

Business have to innovate in an increasingly resource-constrained environment. Addressing clients’ pain points and dreams in frugal way requires a focus on simplicity and agility.

Sophie Vandebroek, chief technology officer, Xerox and president of Xerox Innovation group