Less is more
Mar 03 2014
The purpose of frugal engineering is to reach the bottom of the pyramid as effectively as possible
The purpose of frugal engineering is to reach the bottom of the pyramid. Its purpose is to serve the purpose of the people “who are quickly moving out of poverty” or drowned in poverty. But the catch is that the so-called bottom of the pyramid has developed a good sense of expectation. They are becoming demanding customers, but they have limited spending power.
“Constant expansion of features available to consumers in the developed world, frivolous or not, has provided many businesses with their richest profit margins,” write Vikas Sehgal, Kevin Dehoff, and Ganesh Panneer. Frugal engineering is not simply low-cost engineering. It, however, seeks to avoid needless costs. As Sehgal, Dehoff, and Panneer write, “It recognises that merely removing features from existing products to sell them cheaper in emerging markets is a losing game.” They believe high volume profits must be earned in the face of lower prices, lower per-unit profits, and stringent cost targets. The big challenge for frugal engineering, thus, is to recognise non-essential costs, while maximising value to the customers. Many companies are trying to understand the concepts of frugal engineering because of the market this segment supposedly occupies. This segment’s purchasing power is nearly as large as that of the developed world.
Sehgal, Dehoff and Panneer say taking an expensive product and then making it cheaper is not frugal engineering. Building up from the minimum and then adding essential functions is perhaps the better way of approaching frugal innovation. They say frugal engineering requires organisational innovation that requires cross-functional teams, non-traditional supply chains, and a top-down support. Nothing is more important to frugal engineering than commitment from the top.
Rishikesh Krishnan, the author of From Jugaad to Systematic Innovation: The Challenge for India, writes about the myths of frugal innovation. The first myth is that frugal innovation is not limited to ‘jugaad’. Consumers, both in the developed and the developing worlds, want the best. Products lacking integrity, safety and quality standards have fairly good chances of getting rejected in both the worlds. Frugal innovation also requires good engineering inputs. One of the criteria of good engineering design is that it should be affordable. People expect from a low priced car all the good things that make a car a good car. In fact, the frugal innovation tends to push up the bars of engineering excellence. Frugal innovation, like any other innovation, requires engineering talent. In getting good people at lower costs, location plays a big role.
People have always understood and appreciated that if something is available in excess, it doesn’t mean it should be floundered. Frugal innovation requires, like any other innovation, consumer insights. A bottom of the pyramid consumer can’t be taken for granted. Their expectations, be they are from resource rich or resource crunch nation, need to be taken care of. Frugal innovation-based products also need structured, market-driven development process. Too much focus on cost-reduction often do not result in the desired outputs. Customer’s priorities are most important and that decides what kind of trade-offs can be made to lower the costs.
Frugal innovation needs insight into unarticulated customer needs. How the product is different from the existing ones is one of the major yardsticks of frugal innovation. The innovator more often than not knows what even the customer doesn’t know, and acts on it. It is important to recognise the fact that customers are not same everywhere.
Nirmalya Kumar and Phanish Puranam rightly say best practices in frugal engineering are unlikely to be found in a textbook. They, however, tell us about few pillars on which frugal engineering can profitably rest in India.
India, being a large country, its operating conditions are quite different. What it needs is robust engineering design; this kind of robustness many other countries may not need. For example, some products for the Indian market need to be dust proof. This may not be the requirement of many other countries. Portability is another feature of the product for Indian market. As one CEO points out, “What counts here is simplicity, not sophistication.” Another idea is “leapfrogging over infrastructural constraints.” Mega-scale production in the health sector, for example, has been able to lower the costs dramatically compared to the costs in many other countries. The needs of the large-volume are not easy to understand. It is important to broaden the appeal of the product. Innovation without budget constraints is one thing. Innovation with budget constraints is entirely a different ball game.
Frugal engineering-based products are for all. They are not limited to only ‘frugal’ nations. We all like low-cost product. It should of course serve our basic purpose. Frugal innovation needs to work on the principles of calculated trade-offs. The question that is coming to me at this moment is: who needs the frugal engineering more — resource rich or resource constrained? zz
(The writer is a biotechnologist
and ED, Birla Institute
of Scientific Research, Jaipur)