Professor Minna Halme discusses frugal innovation and how large companies are now becoming interested in creating products aimed at lower-income consumers.
Simon, the founder of Nairobi-based Craftskills, collects old motorcycle engines. Craftskills sells renewable energy equipment to farms, village collectives and small businesses in East Africa. Motorcycle engines are an essential component of wind turbines which like other products of Craftskills need to be affordable for ordinary Kenyans. Renault recently launched an inexpensive Dacia Logan, a sturdy but no frills car with a big boot and ability to transport heavy loads. Dacia Logan, partially designed in Renault’s Romanian subsidiary, was targeted for low-income users at emerging markets, who cannot pay much, but often need to transport many people or heavy equipment or their fruit or veggie harvest to the market place.
What do wind turbines of a small Kenyan enterprise and cars of a large MNC then have in common? The answer is frugal innovation. Both Craftskill’s wind turbines and Dacia Logan are examples of affordable, resource-scarce solutions that serves a clientele which needs reliable easy-to-use products at a low price.
We tend to think of innovations as something that technology experts design in R&D laboratories of corporations; but it is important to acknowledge that different worlds of innovating by local experts occur in rural areas or shanty towns of emerging economies and developing countries. Innovations coming from these grassroot settings solve pressing everyday problems of poor and low-income households and communities. Such problems are in many areas of life from access to clean water, food, light, shelter, mobility, banking, and represent the need for connectivity at large. Aside from Craftskill’s segment of wind turbines, other examples of frugal innovation are propagated by Liter of Light bottle lamps who provide lighting for tin-roof shanty town homes and Mitticool fridges that help to preserve food in environments without electricity, thus making it possible for low-income families to avoid throwing food away or becoming sick by eating decaying food.
If we are to question the links between sustainability and frugality, could these ideas originating from resource-scarce contexts spark sustainable innovations that help to reconcile some of the tensions between two wicked sustainability problems – extreme poverty and overuse of natural resources? At the outset, these objectives often appear mutually exclusive as addressing pressing poverty problems such the need for clean water, food, access to energy and decent shelter requires the use of natural resources.
If frugal innovations are a partial solution toward sustainable development, the recent interest of MNCs toward frugal innovations is promising. And the financial motivation is there too: emerging markets are growing as opposed to the higher income markets MNCs traditionally were geared to serve. Yet while some MNCs succeed in frugality minded innovating, many give up. Developing innovations for low-income settings is much different to how MNCs’ typically innovate. It can take five years or more to develop not only the affordable, easily functioning product that serves a local need, but also a business model, which delivers the product to its users in a profitable way.
Grassroots micro-entrepreneurs alone cannot be the only agents to serve all their needs either. While they have the essential local knowledge, and some are ingenious innovators, grassroots innovators often lack technical expertise, money to scale up their innovation and contacts to get their innovation to the market beyond their own community.
Instead, making frugal innovations succeed calls for co-creation. MNCs need to work with local non-governmental organisations and micro-entrepreneurs. Grassroot entrepreneurs or social enterprises benefit from the help of researchers for technological and social innovation knowledge, and legitimacy building. Successful frugal innovation is often a result then of extensive collaboration of untypical partners and hybridization of relationships.
Such collaborations are also beneficial for developing an agenda for more ecological and social sustainability-led frugal innovations. While the assumption goes that frugal innovations are socially sustainable because they serve the un(der)served poor and ecologically sustainable because they need to be made material and energy efficient, early research shows frugal is not automatically sustainable (Levänen et al. 2015; Rosca et al. 2016). With the right kind of co-creation partners, there is a higher likelihood that the local and the system level sustainability effects get taken into consideration in the design of frugal innovations, from the technology to the business model.
Levänen, J, Hossain, M, Lyytinen, T., Hyvärinen, A., Numminen, S. and Halme, M. 2015. Implications of frugal innovations on sustainable development: Evaluating water and energy innovations. Sustainability 8, 4; doi:10.3390/su8010004.
E. Rosca, M. Arnold, and J. C. Bendul, “Business models for sustainable innovation – an empirical analysis of frugal products and services,” Journal of Cleaner Production, 2016. In press.