When new or updated products hit the market, they usually outperform their predecessors in terms of scale and complexity. The manufacturers are driven by the assumption that customers expect more power with each generation. In reality, however, the offerings of companies often exceed the actual needs and wishes of users.

Exemplary here are modern household appliances such as washing machines or alarm clocks. The former is delivered with a variety of different programs, and then almost exclusively 40-degree wash over its entire life. And the latter has various settings but has only three buttons on the back for their operation. Many buyers would in return for a lower price on many of these functions renounce entirely – as long as the quality is not compromised. This is precisely where frugal innovations start.

A modern myth from the beginnings of spaceflight drives the topic vividly to the extreme. With the launch of their space program, the Americans faced a rather trivial problem: How should the astronauts take notes in space? Ballpoint pens do not work in weightlessness because the ink can flow down the mine only by gravity. As a result, NASA set great engineers and money in motion to develop a pen that works in space. The result was the extraordinarily complex and expensive “Space Pen”. At the other end of the economic and ideological scale stood the Russian cosmonauts. They made their records in space with ordinary pencils that could be bought anywhere – inexpensively and effectively.

What companies can learn

The term “frugal” derives from the Latin “frugalis” and can be translated as simple, economical and usable. Accordingly, at Frugal Innovation, the focus is on the essential basic functions, according to the needs of a clearly defined customer group. They aim to develop capital-saving but high-quality offerings that are of great benefit to the customer. Companies often make the mistake of merely omitting certain features of their established products to save costs and get into the markets quickly. However, frugal products are sophisticated new developments that are technically highly sophisticated in terms of cost and complexity reduction. For companies, this means dealing even more intensively with the actual wishes and needs of the target group to generate a clear focus for product development. The interaction with the potential customers and their feedback must become a fundamental part of the innovation strategy. This only works if the collaboration with the customers on the corporate side is accompanied by correspondingly fast and agile development cycles.

It is worth taking a closer look at the new growth markets. After all, the first frugal innovations emerged in developing and emerging countries – such as India, China, and Brazil. Especially here the requirements are entirely different than in the western world. People are asking for robust and affordable products that use minimal resources. Such as the refrigerator “Mitticool” from India, which is completely powered by electricity. Designed in need of a devastating earthquake, the “Mitticool” uses the evaporation effect of water in stacked clay pots. As a result, he manages to cool the interior up to eight degrees less than the outside temperature. The batteryless refrigerator is a wonderful example of the origin of Frugal innovation – often referred to as “Jugaad Innovation” or “Grassroot Frugal”. This refers to improvised solutions that are developed with the limited resources available locally. Behind this are usually individual individuals who are part of the target group of the finished product and act primarily for social or ecological reasons. But to make things easier and to conserve resources does not mean that ultimately a lower-quality product comes out – the opposite is the case.

Some companies are already embracing the advantages of these approaches. The term “corporate frugal” refers to the adaptation of organizations to new customer segments and markets that want to be supplied with high-quality but reasonably priced goods. The impetus for this methodological professionalization of Frugal Innovation is provided by the economic and social changes in emerging and developing countries, for the world economy will receive three billion new potential consumers in the next 10 to 15 years. So many people will move up into the global middle class. Middle class means higher purchasing power and more consumption. About 85 percent of them will come from Asia, mostly from China or India – a large market. For many companies a huge opportunity to make their products and services accessible to a broad mass.

Implement customer orientation correctly

The intensive exchange with the intended target group and an agile product development process will be the central element in order to succeed in these fast-growing and continuously changing markets. But even in the established markets, customer orientation is becoming more and more the deciding factor. Companies need to break new ground and be ready to open their innovation process to external ideas. The development of large communities for the direct exchange with the consumers stands here in the first place. This makes it possible to involve potential buyers and their expectations in collaborative development processes at an early stage, to incorporate feedback in iterative adjustment loops or to carry out extensive prototype tests.

For open cooperation projects of this size, companies need the appropriate digital infrastructure. Only with the support of the right technology is it possible to condense large amounts of information into usable data. This helps to structure the many discussions with the customers, their ideas, knowledge, and feedback and to extract the relevant information for the innovation process. Ultimately, this results in products and services that best meet the needs of consumers and, in no small extent, practically implement the criteria for frugal innovation.