Hello everyone. Today's presentation is on a topic called Frugal Innovation. Now, there are several other words that I use to describe this type of innovation and we'll go into all those terms in just a minute. This is also sometimes referred to as BoP Innovation which is the term BoP is bottom or base of the pyramid. Sometimes it's connected to the idea of reverse innovation. And at times it's also referred to as jugaad. Jugaad is a word in Hindi, which is the national language of India, and I'll explain that later on. But we'll talk about frugal innovation as an essential concept which relates to the three other ideas and topics as well in this presentation. So let's start by looking at the term itself. What does the term frugal mean? From the Oxford English Dictionary, always a good resource, something that's simple and plain and, most importantly, costing a little. So not too expensive, so managing costs is one big part of frugal innovation. Another definition from the Merriam Webster Dictionary, can it rise by or reflecting economy in the use of resources? So, use as less resources as possible to do what you need to do, that is being frugal. And again, in this case with innovation, can you innovate by minimizing your use of resources? So now that having understood the term frugal, what does frugal innovation mean? There is a book called Frugal Innovation and Jugaad Innovation by Radjou and Prabhu. And they use this definition is the ability to generate considerably more business as well as social value, while deducing the use of scarce resources. So, providing value to people. Providing business value and social value but minimizing the use of resources. And they go on to say and this is the subtitle of their book doing more with less. That's an interesting statement. It's about what might seem like a paradox. How can you do more with less? But as we'll see in some examples later in this presentation, it is possible to have frugal innovation, it's possible to have interesting new ideas that have business value but at lower cost and less user resources. Yet now the definition of frugal innovation. Good enough affordable products that meet the needs of resource constrained consumers. So on the one hand you're using less resources to make this innovation happen but on the other hand, you also have to recognize that your consumers, people who are buying your innovation, themselves, don't have as many as of these sources. So you have to make sure that the products are affordable but they are of a good quality. So one thing to keep in mind with frugal innovation, is that you are not compromising on quality for this consumer because you're reducing cost. Very often what happens when multinationals want to introduce new products in emerging markets in poorer nations, what they do, is they strip down the features of a product, they cut down all the type of material. They will cut down on a whole host of features and functions about that product to make it affordable for that market. But in that case what happened is that the quality of the product drops. That's the difference between that form of product development and frugal innovation. In case of frugal innovation you do not compromise in quality. But you do it with less resources and you offer it at a lower cost. One example of this, which is talked about quite a bit, is what is now referred to as the least expensive car in the world. And what you see in this photograph is a car called the Nano, made by a company called Tata, in India. Now interestingly, Nano refers to nanotechnology, which is technology that happens at the nanoscale which is really really small. But interestingly nano as a word in one of the local languages in India Gujarati also means small. So in a sense it's a bit of a play on words. What you see here in this photograph is a car that costs about $2,000. Now there are several versions of this vehicle. Some are 2,500 some could go more. But the base level model is $2,000 and that's an incredibly inexpensive vehicle in the market right now. The company Tartar engaged some Italian designers in the process of creating this car. It looks incredibly small but it is surprisingly roomy on the inside. And the way they were able to do this is by cutting cost in several stages of the product. The photograph that you see here, you see the front and the back of this vehicle. It's actually the Nano that my mom and dad owned in India. And I've ridden in this car, it's incredibly comfortable. It's a good city vehicle and they have reduced cost by cutting down several features and functions in the vehicle. For example, now what you are seeing here is the dashboard of the vehicle. You can see that there's very little. There isn't even a glove compartment, the box that you often have. There is a speedometer, there is ventilation and you might have an AC in the car. And in this case there also is a CD player which is some of the more higher end versions. But what you see in this case is again, a very, very simple dashboard. And they've done this, they've cut down cost, they've tried to minimize as much as possible. So you can see extreme simplification across the board and the vehicle itself. Because the car is really small it uses less steel, in some cases they've used aluminum in the vehicle. The other thing that was really interesting in terms of the business model that the company Tata used is it actually sold as a kit and they often have the kits are shipped and the car is assembled in local situations. And that ultra sensor of having one really massive manufacturing plant where all the vehicles are made you have a decentralized or a distributed system which cuts down cost significantly. And by doing these kind of things the company was able to offer this car for $2,000 and it's really a remarkable innovation and this is one example of frugal innovation. So the term jugaad which we talked about earlier in this presentation is like I mentioned Hindi word which refers to making do and what that means is you try to find simple solutions to problems that you might be facing. You might use rubber band, and tape, and wire. So you find materials, mechanisms, processes and you try to fix problems yourself. And that often is referred to as jugaad. And so, this type of frugal innovation is now often referred to as jugaad, or some people also use the term jugaad innovation. This person in this photograph is Carlos Ghosn. He is the CEO and Director of the French company Renault but also Nissan. And he has been known to do a significant amount of work in emerging markets, such as India, on this idea of frugal innovation. And so this is how we explains what jugaad is. Again, in the west when we face huge problems and we lack resources we tend to give up too easily. What jugaad is, is about never giving up. So you try, and try, and try again to solve the problem by using the least amount of resources. And that to him is what is really interesting about this form of innovation. So Renault sells cars in India. And they are on a journey to sell really inexpensive cars in the country. Well this is an example of jugaad. What you see here in this photograph is, half of this, what you see here is a bicycle. And the other half is actually put together by welding these metallic sections, creating a frame, adding wheels, and creating a new sort of a hybrid vehicle, which is pedal powered. So it's autonomous powered, it's human powered but also allows people to transport goods in this case. So it's a bicycle that's been converted by jugaad into something that can transport stuff for people. Here's another example which I think it's really interesting. Simply by making holes in a water bottle, it becomes a means of watering your garden, watering your flowers. These forms of minor modifications to things often referred to in India in the local language of Hindi as jugaad. Jugaad innovation refers to this form of innovation or low cost innovation that people do. And this is one of the cars that we're going to introduce. It's called the Logan, and this car is available for $10,000. And again, it's not as inexpensive as the Tata Nano, but for these kinds of emerging markets, this was a fairly low cost alternative to other things that existed in a market at this time. There's yet another word which is called reverse innovation. Now reverse innovation is really interesting because that is what happens in emerging markets but ends up not in emerging markets but ends up elsewhere. So for example, with products like what comes out of frugal innovation, these are design, for example, design in a place like India by Indian designers to be used in India. So they are locally designed, locally manufactured for that local context. So where they're made and where they are manufactured and where they're used, it's that same environment. What happened with reverse innovation is these things are designed in India and other emerging markets, other low cost markets, poorer nations and then, they are exported to richer nations. So, normally the way we imagine multinationals operating is that they'll produce design and make these products in, design if not make, design these products. Or do the innovation on the products in richer nations like the US or Europe, etc. And then they strip the products down to make them affordable for the emerging markets. So there's an assumption that innovation happens in these richer nations, this form of innovation flips that story because creative people are all over the world. So the innovation, in this case, happens in places like India, but it's so good for a global market that those low cost goods actually are exported and those ideas are exported to richer nations as well. And that's what reverse innovation is all about. And one company that's doing an incredible job with this, is GE, especially GE healthcare and Jeffrey Emelt, who you see in this photograph, who is the CEO of GE. He talks about this a lot in his work as well that we now imagine situations where innovation doesn't happen just in countries like U.S. and Europe. It happens also in places like India and China and other parts of the world and those ideas are implemented and can also be exported to places like Europe and the U.S., and one example of a product that GE did which had been incredibly successful is what's called an infant warmer or a baby warmer. So when children are born, the minute the baby's body leaves the mother's body, they have to regulate the temperature. So temperature has to be maintained to a certain level. And if that doesn't happen, the baby's can very quickly die because they don't have enough fat, baby fat to be able to regulate the body temperatures. So, what's been happening in a place like India where there could be almost 30 million babies born each year. 30 million is an incredibly high number. Very often what ends up happening is their latest statistics say that about 1.3 million babies died each year and that's a really large number of babies dying. And so one of the things that can happen is you can get these infant warmers. And these things are simple warming devices that can save the babies life. So GE at their office in Bangalore which is in Southern Indian. Designed and manufactured these baby warmers, they were referred to as lullaby infant warmers, and these are manufactured and sold at about $3,000 a unit. Which in term of cost is 70% less than a traditional infant warmer. So you can see that this can have like the initial definition we saw, offer an innovation. Lots of business value, so GE is able to sell these products. Social value because it can save lives of these infants. But more interestingly also that they can be exported to other countries as well thereby spreading this idea in a much broader market. So this is one form of reverse innovation that something that happens in place like India is then able to be exported to the rest of the world. And the last one which is BoP. So, this term BoP started as bottom of the pyramid. Which then, later on transformed to the notion of base of the pyramid. But this is an idea that was promoted quite a bit by this gentlemen, CK Prahalad. He wrote a book called, The Fortune at the Bottom of the Pyramid, Eradicating Poverty Through Profit. So the argument that Prahalad makes in his book is that, we often think of poorer nations again like India and China as places where we have to strip down products and we can only sell at a very low cost and companies often end up losing money in trying to sell to these markets. What CK Prahalad says that's not quite the case if we design and innovate these products appropriately, we can actually do two things. We can eradicate poverty, so we can allow and encourage people with lower incomes to have these things, these basic amenities that they need, but companies can also make profits in the process. There are some people who argue that the picture that Prahalad paints. This idea that Prahalad talks about is too idealistic and it's not always possible. Because there's lots of complications in markets like these. But let's see what Prahalad says. He says we had to stop thinking of the poor as victims right. That they're not victims you can stop thinking of them as a burden on society or economies. But you start recognizing them as value-conscious consumers and entrepreneurs themselves. And if you start thinking in this new way, you start changing your mindset on what this market is, there's a whole possibility of opportunities that companies might have in front of them. So what this means for companies is that you start looking at the rest of the world as a market. You start creating products that offer value, that are not cutting costs, cutting costs but not cutting corners. And being offered to these large markets. So if you're able to do that, then companies can still make money. But it can still provide lots of value to the countries in which they are being sold. So that idea is what Prahalad referred to as the bottom of the pyramid. Which is, people who make the least amount of money but have the same needs as people in the rest of the world. So this idea of innovating and creating products, and solutions and services for that group of the market is what, base of the pyramid, or bottom of the pyramid, is all about. One another example is, if you think of the area of prosthetics, or what's referred to as artificial limbs, very often in places like, places where there have been old wars, there are lots of landmines. They often what can happen is, people get blown up, they loose their limbs and buying prosthetics in many cases can be extremely expensive and some of this prosthetics are extremely high-tech prosthetics. So what you see in this photograph is really high-tech prosthetics, those can be really expensive but what about creating artificial limbs for a really low cost for large percentage of the population. So there is a lot of work going on in this area of low cost prosthetics. Where a really high tech prosthetic could be tens of thousands of dollars, if not hundreds of thousands of dollars. Depending upon the kind of materials that are used, and the kind of capabilities that that artificial limb provides. But if you want basic walking, if you just want people to be able to get around, who do not have limbs or who have one limb that has been injured in some way, or lost in some way, these kinds of innovations, which are done at a frugal level, which are done with low cost materials. But provide the value that people need that becomes a really wonderful way of trying to change society in a positive way by providing products and services that are of good value but at a low cost. So to go on to non-product based solutions what we have seen so far innovations in the product space. There are some innovations that can happen in the service sector as well. Now in this case what we see here is an example of a bank in the country of Bangladesh called the Grameen Bank. The word Gram means village, and so Grameen Bank is a bank that was started by a gentleman whose name is CEO Muhammad Yunus. Muhammad Yunus started this idea of a Grameen Bank and what he said was, if we start providing very small amounts of loan, very small amount of loan two families that are in need. Extremely poor families we can start changing their lives dramatically. So he started the Grameen bank and he actually won the Nobel Peace Prize for his work in this space. So Yunus and the bank were given the Nobel Prize for Peace. And this idea of what's called microfinancing, microcredit, microloans, where the term micro essentially refers to extremely small amounts of loan. This could be something like $25 US. Which, if you translate to Bangladeshi currency, ended up being a significant amount of money. 95% of these loans are given to women and these women either start small cottage industries or able to get some education or somehow are able to use a small about of money to really make large change. They don't have to have any collateral, so one of the problems of getting a loan from a bank is that you have to demonstrate the fact that you can pay back. A bank is not going to give you a loan unless you have collateral. You have to show a house. You have to show some steady income. You have to show something that the bank says, yes, I can now accept your application for loan because I can see that you can pay it back. If you are trying to improve the social conditions and economic conditions of someone who lives in a village. They cannot show income. They do not have the means of showing their income. They actually need that initial investment to be able to pay you back. So what Yunus did was Grameen bank was able to give these small loans without any collateral. And that has transformed the lives of several people in Bangladesh and the rest of India. And other parts of the developing world as well. So that's another idea of frugal innovation where it's small amounts of money that make a significant impact in somebody's life. So what we've talked about today is the idea of frugality or doing more with less. Frugal innovation, where how can we create new innovations that cut cost but provide value? Value is really important, because these are value-conscious consumers. We talked about reverse innovations, how these ideas and these innovations can actually then transform not only those nations, but other countries in the world as well. You talk about the word jugaad, which essentially means how do you make do? How do you create small innovations on your own, by being entrepreneurial, by being creative? And we talked about base, or bottom of the pyramid innovations as well. So these are all connected with slightly different ideas that all relate to this notion of doing more with the least number of and least amount of resources. Thank you.
