They are all pioneers of innovative business strategies called frugal innovation. Frugal innovation is able to generate more commercial and social value while significantly reducing the use of scarce resources. It is about resolving or even surpassing the paradox of doubling the effort with half the effort. Frugal innovation is a revolutionary strategy in the austerity era. In this era, companies are being forced by cost and environmentally conscious consumers, employees and governments to create affordable, sustainable and affordable Quality products. Frugal innovation is not just a strategy, it is also a new way of thinking, a flexible method that treats resource constraints as an opportunity for growth rather than a debilitating challenge.
Unilevers serious CEO Paul Polman is a business leader who firmly believes that scarce resources can be a catalyst for radical innovation. It recognizes that, at our current rate of consumption, by 2030, we will need two planets to supply the resources we need and absorb our waste. Polman hopes that Unilever will use its brand reputation and scale to meet this challenge. Unilever has set a bold goal to double its revenue by 2020 while reducing its environmental impact by 50%. In order to implement his bold strategy of doubling the effort with half the effort, Polman integrated frugality into all aspects of Unilevers business. For example, Unilever currently sources nearly 25% of its agricultural raw materials from sustainable sources and uses low-emission trucks to distribute its products. At the same time, its RD team is redesigning all its existing products, such as soaps and detergents, to reduce water use and packaging, and reduce pollution. Unilever has launched many frugal products in European countries that have been hit hard by the economic crisis. For example, in Spain, Unilever sells Surf detergent in small packages that only need to be washed five times, while in Greece, it now offers small packages of mayonnaise and mashed potatoes. The company also introduced low-cost olive oil and tea brands to the European market.
Frugal innovation: the secret weapon of emerging markets
Unilever’s frugal products in Europe are inspired by emerging markets such as India. Over the years, the company has been distributing soaps and soaps in individual units or small sachets to millions of conscientious rural consumers. shampoo. Markets such as India, China, Africa and Brazil are hotbeds of frugal innovation. In our book Playing Innovation, we show how innovative entrepreneurs and companies in emerging markets can innovate in resource-constrained environments and create frugal solutions to provide customers with better solutions at lower costs. Much value. For example, millions of Kenyans now trust M-PESA, a service that allows them to use their mobile phones to save, spend, and transfer money without a bank account. Similarly, SELCO provided solar energy to more than 125,000 households in remote villages in India at very low prices, debunking the myth that the poor cannot afford clean technology. Or take Gustavo Grobocopatel, an Argentine farmer, who overcomes the shortage of land and skilled labor by outsourcing all agricultural work to a network of small businesses. By expanding its asset-light business model, Grobocopatel has increased agricultural production without increasing resources. All these creative entrepreneurs in emerging markets have a unique mentality, which we call gambling. Jugaad is a Hindi word that means an innovative solution or an impromptu solution created by originality and cunning. It is this gambler mentality that enables these entrepreneurs to look for opportunities in adversity and use limited resources to develop frugal solutions.
Changing the Western Corporate Mindset Finally,
frugal innovation is not just a completely different way of innovation, even a brand-new way of business operation, but a fundamental change in the corporate mentality. As Albert Einstein said: “You can’t solve a problem with the same mentality that created the problem in the first place.” Western CEOs must cultivate an interesting mentality in their organizations so that they can see scarcity as an opportunity for innovation. And use the ingenuity of employees to create frugal solutions to provide customers with greater value at a lower cost. These CEOs can emulate Paul Polman of Unilever, Carlos Ghosn of Renault-Nissan and Peter Löscher of Siemens. They are all visionary leaders who have successfully integrated the mindset of gamblers into their organizations. Take Carlos Ghosn, the CEO of the Renault-Nissan Alliance, for example. In 2006, Ghosn coined the term frugal engineering, which was inspired by the ability of Indian engineers to (and quickly) innovate under extreme resource constraints. As Ghosn pointed out: In the West, when we face big problems and lack resources, we tend to give up (too) easily. To play is to never give up! Under Ghosns leadership, Renault-Nissan actively embraces thrifty engineering and potential playfulness, and has established itself as a major global manufacturer of low-cost cars and electric vehicles, the two fastest-growing global automotive markets. In 2004, Renault launched the moderately priced, rugged, and well-designed Logan priced at 5,000 euros (now priced at 10,000 US dollars). Logan has become Renault’s source of income in the European market hit by the economic recession, as well as many emerging economies. But Ghosn wants to do more. In 2012, he sent Gérard Detourbet, a senior Paris executive responsible for Renault’s entry-level automotive business, to India. Starting from its new base in Chennai, Detourbet will design and manufacture
The car , which is a US$5,000 car, will be launched first in India and then in Brazil and South Africa. It can be bet that when Detourbet returns to Renaults headquarters in Paris, he will bring the thrifty gambler mentality he has honed in India. German industrial giant Siemens also uses the gambler mentality of its RD teams in India and China to develop frugal solutions to provide customers with greater value. For example, Siemens’ Indian engineers worked closely with their German counterparts to develop a fetal heart rate monitor that uses cheap microphone technology instead of expensive ultrasound technology. This affordable fetal heart rate monitor is part of Siemens’ broader portfolio of affordable solutions labeled SMART (simple, easy to maintain, affordable, reliable, and time to market). SMART products are 40% to 60% cheaper than high-end solutions.
They are also energy efficient, faster, and easier to implement, use, and maintain. Siemens estimates that the global smart product market is US$200 billion. As Siemens CEO Peter Löscher said: The scarcity of resources is not an obstacle, but an enabler of (innovation). In the next few years, we believe that more Western CEOs will accept the game in their organizations Thinking, as Paul Polman, Carlos Ghosn, and Peter Loscher did so skillfully. By doing so, more Western companies will be able to innovate faster, better, and cheaper, and provide a steady stream of frugal solutions to please value-conscious customers.