Management thinker, C K Prahalad, spent the last years of his life thinking how the pyramid, a shape that depicts extreme wealth for a few at the top and abysmal poverty for the vast majority at the bottom, can be transitioned into a diamond with a large segment of middle class in between the rich and the poor. His new approach was to eradicate poverty through profits and byfighting corruption.

One of the elements of his strategy was the idea of innovation in a resource-constr­ained environment. “Active engagement at the bottom of the pyramid markets requires a new and innovative appro­ach to business. Retrofitting business models from the developed markets will not wo­rk,” he wrote in the 5th anniversary edition of his seminal book, The Fortune At The Bottom Of The Pyramid.

A different approach to innovation is essential. Dan Gol­dstein, the originator of fast and frugal heuristics, has laid down some rules of thumb for decision-making. One such rule: Be fast, frugal, and simple to operate effectively when time, knowledge and computational might are limited. If we apply this principle to smart innovation, then rule 1 is: When resources are limited, creativity must be boundless and rule 2 is: Innovation must be fast and frugal.

Seventy per cent of the world’s growth over the next few years will come from emerging markets, 40 per cent of which will be from India and China. And the mother and midwife of these innovations will be the pressing problems of the developing world - healthcare, education, water, energy, food, communicatio­ns, housing and corruption.

The Aadhar Project, led by Nandan Nilekani, is a good example of using frugal technological innovation to mitigate corruption. Contrary to popular misconception, he will not issue any cards! The project mission is to issue a unique identification number that can be verified and authenticated in an online, cost-effective manner to eliminate fake identities. To quote Nandan, “The unique number will be the ‘AADHAR’ or foundation through which the citizen can claim his rights and entitlements when assured of equal opportunities.” The big­gest challenge to the project is not technology –it will be the reaction of the people who are skimming the milk, especially when they realise what is abo­ut to hit them.

Innovations are happening in the most resource-constrained nations. Muhammad Yunus will launch his new book next month, “Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs”. He has focused on the social business. He describes the essence of social business as “an innovative business model, which promotes the idea of doing business to address a social problem, not just to maximise profit. This complement to traditional capitalism truly can serve humanity’s most pressing needs, especially poverty.”

Yunus started with micro-finance as a “banker to the poor” but developed a model of using technology and know-how of MNCs to produce products and services that are high quality and within the reach of the poor. The Grameen-Danone social business was aimed at reducing malnutrition among the children of Bangladesh. Grameen-Danone produces “Shakti Doi” (yoghurt) for children and sells at affordable rates. The metric of success of this firm is not the profits generated but the number of children escaping malnutrition.

Grameen has another JV social business with Veolia, a French water firm. The JV was created to bring safe drinking water to villages where arsenic contamination is a huge problem. Villagers are buying water from the company at an affordable price instead of drinking contaminated water.

Frugal innovations are happening in the Indian R&D hubs. GE has harvested from frugal innovation in India by crafting a handheld ECG machine, which reduces the cost of an ECG test to $1. When he envisioned Nano, Ratan Tata turned the adage “cost is a fact, price is a policy” on its head. He almost said, “Price is a fact, cost is an innovation”. Innovations and experiments are underway in “nano” housing.

Godrej has produced a battery-run fridge for $70. Have you seen one of the cool battery-operated lanterns marketed by Eve­ready for the rural market? Did you know how Haier has produced affordable and extremely durable washing machines in China for their rural markets? I want one of them.

Our Electronic Voting Machine is another example. The Slate magazine posed this question, “While we in the US agonise over touch-screens and paper trails, India managed to quietly hold an all-electronic vote. 380 million Indians cast their votes on over one million machines. It was the world’s largest experiment in electronic voting to date and, while far from perfect, is widely considered a success. How can an impoverished nation like India, where cows roam the streets of

the capital and most people’s idea of high-tech is a flush toilet, succeed where we have not?” The answer my friend

is blowing in the wind: frugal innovation.

The writer is Managing

Director of Deloitte

Consulting, India. Views

expressed are personal