Frugal innovations contribution to regional and economic development

I’ve been working on policy guidance to encourage frugal innovation (more on this later) and want to share my thoughts on the relevance of frugal innovation for regional and local economic development.

Frugal innovation has been promoted as a business management practice that can be applied in resource-constrained conditions. However, it is also relevant for policymakers and program managers interested in supporting innovation at the grass-roots. It presents an important response to the current trend for supporting high-tech solutions that are using expensive and with long gestation periods. Indeed, there are very few organisations that have the full range of resources they require to invest in innovation and frugal models have much to offer.

Creating value

Innovation spans a wide range of social and economic processes and is primarily concerned with the successful commercial exploitation of new ideas. It identifies and develops new ideas to generate value.

Within the broad concept of innovation, frugal innovation is a kind of innovation that occurs with limited resources. Frugal innovation reflects efforts by businesses to do more with less. It represents a low-cost process aimed at creating better products, services or business models that can be rapidly scaled-up to achieve a significant economic and social impact.

Doing better with less

Frugal innovation focuses on doing better with less and finding ways to reduce complexity in business. Frugal innovations embrace the indigenous innovationpotential of emerging economies while offering the promise of more inclusive and resource efficient economic growth.

Often equated with the creation of cheap, low–tech products, frugal innovation is about making better things, not just cheaper things. Frugal innovation seeks out low-technology solutionsthat require or can be combined with the new frontiers of science and technology.

An inclusive approach to innovation and entrepreneurship

A frugal, flexible and inclusive approachto innovation and entrepreneurship has its genesis in the Indian word, jugaad.

Originally used to describethe hybrid vehicles that farmers in Punjab were known to cobble together from sundry parts and colloquially used by the Indian populace to describe initiatives aimed at making things happen, the term has come to denote the creative improvisation associated with innovation and entrepreneurship activity observed in these context.

Frugal innovation comprises of a frugal mindset, a frugal process and a frugal outcome.

A relevant response to global and local challenges

Frugal innovation is a relevant response to many of the challenges governments face around the world. It has been successfully applied in developedand developing economies.

In developing economies with insufficient economic growth, frugal innovationis increasing demand for frugal products and services and frugal innovation processes. As new technology platforms drastically reduce the cost of some forms of innovation, new opportunities for frugal innovators are opening.

Environmental constraints around climate, energy, water, and other resources are also increasing the demand for more frugal models of production and consumption.

Frugal innovation can generate additional social and environmental benefits and help to tackle common challenges, from delivering good public services in conditions of austerity and growing demand, to promoting social and economic inclusion and ecological sustainability. Entrepreneurs and companies can offer frugal products and services in an insightful manner to create economic, social and environmental value. Firms can use frugal innovation to reduce their consumption of scarce natural resources by designing, making and selling products and services with a lower environmental impact and through more sustainable business products, services and practices.

Applying frugal innovation for regional and local economic development

In many countries around the world, frugal innovation occurs despite the government policy settings. Indeed, many countries contain policy, legal and regulatory frameworks that inhibit innovation and are not open to new ideas or ways of doing things. Innovators in these settings factor in these conditions and create their own workarounds to overcome these problems. Yet, greater better economic, social and environmental outcomes are more likely to be achieved when government recognises the relevance and importance of innovation and encourages innovators and entrepreneurs to take initiative, manage risk and mobilise the resources available to them.

Erasmus University Rotterdam conducts a training program on local economic development and has produced this short videoon the contribution of frugal innovation for local economic development. It highlights the role of frugal innovation for small, under-resourced firms. It also highlights the bottom-up aspects shared by frugal innovation and LED. Overall, frugal innovations are found to contribute to local economic development in three ways. By:

1. Increasing access of local populations to affordable, good value for money, functional products, services, and systems. While international companies often develop frugal innovations, many more invisible frugal innovations are developed and distributed at the local level, by local firms and local communities.
2. Generating local employment as local producers and distributors innovate. Local employment can also be generated through the frugal innovations of outside companies.
3. Moving towards more polycentric innovations in which new combinations of knowledge lead to new business opportunities with more skill intensive employment generation at the local level.

The International Development Allianceidentified the following principles for facilitating frugal innovation internationally:

• Invest in locally-driven solutions:Recognize that the best ideas can come from anyone, anywhere. Support innovators in emerging countries, since proximity to the challenge is critical for designing better solutions. Encourage innovators to partner with talent and resources from global networks.
• Take intelligent risks:Understand that experimenting with new possibilities is the essence of progress. Navigate uncertainty in an informed manner, using rigorous data to learn and improve, while also upholding the principle of do no harm. As initial steps yield stronger evidence, invest more boldly.
• Use evidence to drive decision-making:Evidence is critical to understanding what works and to improving impact and cost-effectiveness. Develop clear metrics early on and measure progress against milestones on an ongoing basis. Be prepared to reduce funding if a project or idea no longer shows promise for achieving large-scale impact.
• Fail fast and iterate:Embrace failure as an opportunity for learning. Revamp and retry, again and again; even good ideas can be made better. Demonstrate impact before scaling.
• Facilitate collaboration and co-creation across sectors:Coordinate the application of scientific and technical, social, and business innovations with partners across all sectors–public, private, and civil society. Leverage intellectual, financial, and social resources from all to address the urgent need for life-changing and life-saving solutions. Share results widely, good and bad, to accelerate learning from, and building on, the work of others. Strive for openness–in data, standards, sources, and the innovative process.
• Identify scalable solutions:Identify solutions that demonstrate high potential to achieve disproportionate impact and to change systems impeding progress, especially for the poor. Invest in sustainable solutions that deliver significant impact, cost-effectiveness, and open the potential to reach millions of people in need.

The frugal future

Frugal innovation is now a global phenomenon driving inclusive and sustainable growth across all nations and at sub-national levels. While it has been conceived as a business management practice, policymakers should consider the conditions in which frugal innovation can be encouraged and nurtured. Business, consumers and governments can benefit from frugal innovation. SMEs and large corporations can benefit from frugal practices. Indeed, frugal innovation presents a refreshing and relevant counter-balance to the current emphasis on high-tech––and high-cost––innovation policies and programs.