keskiviikko 27. huhtikuuta 2016

Frugal innovation - a new approach to sustainable innovation in emerging markets

Presentation in InnoFrugal 2016 conference at Heureka, Vantaa, Finland 25-26.4.2016

Sustainable innovation

Sustainable innovation means that innovation should balance the long term influences of the innovation process, and the actual innovative output with the needs of and impacts on people, societies, the economy and the environment. The motivation for sustainable innovation is in combining competitiveness, the well-being of people and sustainable solutions.

Properties of sustainable innovation:

  • Inclusivity
  • Systemic approach
  • Wicked problems
  • Impact orientation

One defining attribute of sustainable innovation is inclusivity: open innovation, user-driving innovation; innovation for all.  Systemic approach is related to changes in socio-technical systems and often they are described by jumps or transitions; need of societal innovations. Sustainable innovation provides the foundation for future business; it is not just part of ethical responsibility. Sustainable innovation is oriented towards solving wicked problems.

Sustainable innovation follows the 4i-Model of innovation:

Idea -> Invention -> Implementation -> Impact.

In the impact stage the effect of innovation and the actual ways of use are actualized and assessed.

Frugal Engineering/Innovation

”Frugal innovation or frugal engineering is the process of reducing the complexity and cost of a good and its production.” Frugal innovation tries to achieve more with fewer resources.  Examples; Tata Nano car, 100 € computer.

Frugal innovation is societally tuned: no affordable solution is working well if operating models, communities, institutions and habits of people are not adjusted to adopt solutions. Therefor frugal innovation presupposes systemic approach.

Frugal is not cheap in the sense of bad quality. It is the optimization of quality/cost ratio to achieve affordable solutions. The secret of frugal innovation is modularity and collaboration: solutions must be divide into separate modules which are easy to combine to perform a certain task.  The modularization allows to distribute the task to different firms and organizations leading to collaboration.

How to improve capabilities of Finnish enterprises to produce frugal innovation?

  • Better knowledge about frugal engineering and Bottom of Pyramid markets
  • Better access and connections to emerging markets (India, Indonesia, Brazil etc.)
  • Partnership with local agencies and enterprises in emerging markets (marketing, distribution channels)
  • Real collaboration in innovation and production combining Finnish competencies in engineering and ICT with production capacities and low costs of emerging markets
  • Building vivid global special business ecosystems between Finland and emerging markets like India

First of all, Finnish enterprises have to adopt a new mind-set to understand that

  1. You can do profit even when prices are low if you could scale your products to "billion customers markets"
  2. Normal engineering thinking is not enough, you have to know how customers behave and use your products

PS. By the way, the Innofrugal 2016 conference was more that just collecting experts to meet each other: Conference opened a new prospect for Finnish companies and public agencies to enlarge activities into emerging markets. Few years ago no one in Finland knew what frugal innovation is. I became familiar with the concept in 2010, when I visited Singapore and when professor Ruben Biswas visited at University of Jyväskylä. 

Hautamäki A. (2010). Sustainable Innovation. A New Age of Innovation and Finland’s Innovation Policy. Sitra Reports 87. Helsinki.
Hautamäki A. & Oksanen K. (2016): Sustainable Innovation: Solving Wicked Problems Through Innovation. Mention A-L. and Torkkeli M. (Eds.), Open Innovation, A Multifaceted Perspective, In two parts, Part I. Singapore: World Scientific, 87-110.
Radjou, Navi, Jaideep C. Prabhu, Ahuja, Simone. "Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth." San Francisco, CA: Jossey-Bass - Random House India, 2012.