Frugal innovation is all about designing products from limited resources.
Developed in India and spreading quickly across emerging economies and into developed nations as well, the design paradigm frames resource scarcity as an opportunity and poorer populations as a market to serve, not as an objective of charity.
Image: MittiCool fridges: Courtesy of inhabit.com
Frugal innovation is all about designing products from limited resources. Developed in India and spreading quickly across emerging economies and into developed nations as well, the design paradigm frames resource scarcity as an opportunity and poorer populations as a market to serve, not as an objective of charity.
This approach has been hailed as a game changer, providing affordable goods and services for the previously unserved consumers at the base of the economic pyramid. Its attraction continues as these products also tend to be resource efficient, completing its apparent sustainability credentials.
But whilst the social benefits to the world’s poorest people are transformational and the approach offers exciting new markets for companies, frugal innovation could also threaten to increase environmental degradation by massively expanding our consumption capacity. Frugal innovations in the automotive industry for example, has generated new demand for cars, which has led to an increase in the absolute number of cars consumed, resulting in an overall increase in resources consumed.
The nuances in the social and environmental benefits of frugal innovation vary significantly. Therefore, it is wrong to assume that all frugal innovations bring both social and environmental benefits. Where frugal innovation can make the most meaningful environmental contribution, is where its principles can be applied across the economic pyramid to reduce overall consumption.
Frugal innovation has been hailed as a method to help meet the needs of resource constrained consumers at the base of the economic pyramid. It entails using limited resources to design products and services that meet the needs of underserved consumers. Its key strength lies in its ability to frame constraints as opportunities and it aims to create business and social value whilst minimising the use of diminishing resources.
Innovation that responds to limitations in resources, to create affordable goods and services for the world’s poorest people could be game-changing. As such, many academics and business leaders alike are spearheading business campaigns and management studies to help realise the advantages of this approach. There is a growing number of case studies of frugal innovations delivering social and environmental benefits. A popular one is the MittiCool fridge, developed in India to meet the needs of consumers who are unable to afford traditional fridges.
Priced at just $50, the fridge is made from locally sourced clay and uses evaporative cooling techniques to keep cool, so it does not require electricity to operate. It also enables poorer consumers to store food more effectively, increasing the shelf life of products and helping to reduce food waste, which is a serious problem in India.
Whilst the social benefits associated with helping to meet the needs of consumers at the base of the economic pyramid are obvious, the environmental benefits of frugal innovation are questionable. Unlocking consumption at the base of the economic pyramid will also result in an overall increase the amount of resources consumed. For example, the Tata Nano and Renault’s Darcia Logan are often cited as classic examples of frugal innovation in the automotive industry.
These no frills products have made cars more affordable for mid-level consumers in the economic pyramid, generating new demand. Whilst these cars are cited to be less resource intensive than their competitors, in enabling new entrants into the market, they raise the absolute number of cars consumed, which also results in an increase in overall resources consumed. Unless lessons learned from these frugal cars can be used to reduce overall resource consumption in the automotive industry, the environmental benefits associated with them are meaningless.
The nuances in the social and environmental benefits of frugal innovation vary significantly. Therefore it is wrong to assume that all frugal innovations bring both social and environmental benefits. Encouraging consumption at the base of the economic pyramid may have obvious social benefits, but the environmental benefits are less clear.
Where frugal innovation can make the most meaningful environmental contribution, is if business models and products forged at the base of the economic pyramid, help to reduce resource consumption at the top of the economic pyramid, thus reducing overall consumption. The greatest opportunities for frugal innovation to result in positive environmental and social change, is where they ‘do better with less’ and reduce overall resource consumption.