Leapfrogging the world with frugal innovation
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On the surface, India is not an innovation economy. We have too few patents for a country of our size and very few globally path-breaking products have been invented here. We lack a tradition of people starting businesses which go on to undermine the business models of big companies, and we haven’t invented many new industries (with the notable exception of information technology or IT Services). Even the current e-commerce wave is a derivative of what has happened in the West, and in some ways has significantly lagged behind other parts of the world.
This lack of innovation is part inevitable and part ironic given the ubiquity of jugaad—improvised, flexible solutions that offer a low-cost, quick, and creative fix to local problems. Jugaad in itself is quite innovative, in a narrow sense of the word. But this paradox is not unique to India; it is a wider emerging market phenomenon. Given the institutional vacuum and resource constraints that most emerging markets operate in, it is natural that most have their own version of jugaad, right down to a unique word for it—Brazilians call it gambiarra, the Chinese call it zizhu chuangxin, and Kenyans, jua kali.
Innovation is the rich world’s game. Developing new products that can scale takes significant investments in cash, talent, and other resources which our companies can’t afford; sizeable public investment in pure science and higher education which we haven’t made; and easily available capital for entrepreneurs and companies which we have always been lacking.
Will we have to get rich before we get innovative? Or do we innovate along dimensions traditionally unexplored by the Western world?
Doing more with less, faster and more effectively
From the Jaipur Foot, which has allowed poor Indians access to good quality, affordable prosthetics since 1968 to Mitticool, the clay fridge developed in the aftermath of the 2001 Gujarat earthquake, India has been an incubator of frugal innovation. Several of these solutions were successful because the entrepreneurs behind them recognized the financial and infrastructure constraints of operating in a developing country. Tapping into traditional knowledge sources and readily available materials, these agile entrepreneurs created cost-effective solutions to local problems.
This is frugal innovation—anchored in the mindset of jugaad but oriented towards creating products and solutions uniquely suited to Indian needs. Frugal innovation is not just about individuals— it is something which has been embraced by the government and large companies, both Indian and multinational.
Tata Nano was catalyzed by a desire to develop an inexpensive family car—the world’s cheapest—for India’s middle class. Frugal engineering and unique design features made it possible. Swach was a similarly low-cost solution to the need for safe drinking water. The Mangalyaan mission used home-grown technologies to successfully send an operational spacecraft to Mars, on its very first attempt, on a budget of $74 million—less than what it costs to produce many Hollywood movies!
Multinational corporations have leveraged frugal innovation to develop high-quality, affordable products and boost penetration levels.
Along the way, many of the more successful outcomes have made their way to Western markets. Among the best-known of these exports are GE’s portable electrocardiogram and ultrasound machines—breakthrough offerings developed for the Indian market that are now being sold in the US as well.
Placing jugaad at the heart of business
One of the areas where India does well is in refining business models. Indian businesses have been quite effective at leveraging the jugaad mindset to invent and reinvent business models.
For example, India’s mobile telecom growth was powered by a change in the way telcos approached capital expenditure. Indian operators leveraged end-to-end outsourcing to convert their capital spending to operating costs, leading to lower tariffs, faster network roll-out and ultimately the widespread category adoption which is now underpinning the digital economy. And this model has travelled well globally, especially to other emerging markets.
Likewise, in the FMCG sector, new go-to-market models (adopted by multinational giants such as Unilever) have aimed at increasing rural penetration by adopting the motto “buy less but more often,” a goal achieved through the humble single-use sachet.
And then there is the IT services industry, which emerged out of an arbitrage in the cost and availability of talent between India and the Western world and is now a multibillion-dollar global industry. The arbitrage has narrowed, if not disappeared, but the industry continues to thrive.
In the years since 1991, the pace of innovation in India has unarguably quickened. Part of this is global—the world is more innovative now than ever before. Some of it is due to prosperity—we are a richer nation now, which allows us to spend more on innovation. The rest is largely due to the reforms of that year, which unleashed the animal spirits of the market and spurred a stronger private sector to rise to the challenge of addressing the needs of increasingly demanding consumers while operating in what is, even now, barely a middle-income country.
As with our growth, it is unlikely that India will take the same path to innovation which the Western world took and China emulated. But it is very likely that India will emerge as an innovative economy in the long run. This will be due in part to economic growth and the easing of some traditional constraints, but also due to the nature of our growth being different. And that is where our heritage of frugal innovation will become key.
Nikhil Prasad Ojha is a partner with Bain & Company and the co-editor of the Mint-Bain series on 25 Years of Reforms. Dinkar Ayilavarapu is a partner in the firm and a key member of Bain’s Technology, Media and Telecommunications (TMT) practice in the Asia-Pacific region.
Next week: Balanced sectoral development needed to accelerate new India’s growth.