Frugal innovation opens global doors

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What if slimmed-down quality products were offered to those interested only in the core function of the product, at a corresponding price?

To understand the concept of frugal innovation, all you need to do is turn on your computer. Open the list of applications and ask: how many do you actually need? Then consider how much your computer would have cost if the price had not included the development and installation of all that superfluous software.

According to those who are promoting frugal innovation, this approach can gain access to enormous and expanding markets. Unsurprisingly, the majority of those markets are to be found in developing and emerging markets. 

A project called the New Global at Helsinki’s Aalto University aims to co-create frugal innovations for large low-income and emerging markets, and to encourage non-traditional innovation.

Adapting to ecosystems

Project director, professor Minna Halme of the Aalto University School of Business, is excited by the support that small- and medium-sized companies as well as large corporations receive from the project.

“Co-creation means developing products from the point of view of the people who are producing them as well as those who use them,” says Halme. 

“A standard case of frugal innovation is Galanz microwave ovens made in China,” she says. “The company started by making small microwaves for the Chinese market, where homes were smaller and purchasing power was lower. Galanz conquered market share from US producers that were making only large models as it turned out that there was a big market in Europe and the US for the smaller models.”

New Global looks beyond this definition, however. “We are looking at how the innovations we facilitate can fit into business models that are adapted to social systems,” says project manager Sara Lindeman.

Aalto University started a research project in communities in Tanzania in 2009, and its Department of Design runs a lab at the Tec de Monterrey in Mexico. South America and India are also potential target areas.

“Frugal innovation isn’t just making things cheaper,” says Antti Öhrling, a founder of the Nordic Frugal Innovation Society. “It’s finding satisfactory solutions with a feasible price tag that are usable in countries such as India, providing a sufficient performance.”

New markets flourishing

While the Western countries have been fighting the aftermath of the economic crisis, new markets in Asia, Latin America, and Africa have been flourishing, says Stig Tackmann, research manager at Dalberg Research, a Denmark-based Emerging Market Innovation Camps partner.

“Within the next five years, the growth in these countries will become six times higher than the growth in traditional European core markets,” says Tackmann.

The novelty of the innovations is important, says Petri Allekotte, business engagement manager of New Global. “Our idea is to be able to work with the companies over a longer period of time, to help with learning and making additional contacts, helping to design business models.”

For bigger companies especially, the challenge is to change their mindset and to take a longer term strategic view of the opportunities. 

The New Global reflects a relatively enlightened climate in Finland for frugal innovation, but other Western countries are still ahead. 

Many Finnish companies need to look beyond elite markets, says Sara Lindeman. “They need to understand that there are growing markets in which our innovations could have enormous potential if applied creatively.”

Nordic sensibilities

  • According to the Nordic Frugal Innovation Society, frugal innovation responds “to limitations in resources, whether financial, material or institutional, and turns these constraints into innovative ideas and quality, practical, affordable and sustainable solutions.”
     

  • InnoFrugal 2016 takes place in Helsinki on April 25–26, 2016, bringing together entrepreneurs and speakers on Healthcare, Education, Water, and Cleantech.
     

  • 4Nature is a Finnish example of frugal innovation at work. Modular and building elements, made with low-cost natural and ecofriendly materials, are used in buildings designed to withstand earthquakes, storms, and fires.

Text by Tim Bird
Photo by iStock

A longer version of this article was originally published in Finnair's Blue Wings magazine (December 2015).

 

Published December 7, 2015

Category: Collaboration, Economy

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