Why corporate frugal innovations fail and grassroots frugal innovations succeed

Our excitement with the concept of frugal innovation, or as some call it ‘jugaad innovation,’ is misplaced and short-lived. Whether it is the Tata’s Nano, or Godrej’s Chotukool, such innovations are not picked up by the consumers as well as the firms would have anticipated. If anything, these are commercial failures. Still the cause of making ‘low- cost, good- enough’ solutions does not seem to fade anytime sooner.

While grassroots frugal innovations, as documented by the likes of National Innovation Foundation and SRISTI (Society for Research and Initiatives for Sustainable Technologies and Institutions) seems to be going well, the top-down frugal innovations attempted by the large firms have not lived up to their promise.

Why so? Is it that we do not need low-cost, good-enough solutions to our problems, or is it that the corporates are getting it wrong while aiming to achieve breakthroughs? I believe that there are two explanations to this mismatch. One has to do with design, and second has to do with psychology.

Examples of unsuccessful top-down corporate driven innovations include Tata’s Nano  and Godrej’s Chotukool, as compared to bottom-up, grassroots level innovations such as Mitticool or the conventional ‘jugaad’ used in India’s hinterland.

One of the emergent rules of managing successful innovation is the ‘design driven philosophy’. Promoted by the Stanford Design School and then the famous design firm IDEO, ‘design thinking’ starts with the consumer insight and ends with consumer delight.

The gap in practice often lies between assuming what the customer wants as compared to observing what the customer desires. The case of Tata Nano was the ambition of Ratan Tata, assuming that the customers would lap up the idea of a safe, cheap, okay-looking transport mechanism, which many actually did not desire.

Here a clarification is in place, however, that desires are usually unstated, or even unknown, but wants are rather easy to articulate. Most breakthroughs and successful innovations emerge from knowing the unstated, and not chasing the known.

Similar to Tata Motors, Godrej thought of having a small, portable (economic?) solution for people’s refrigeration needs, and assumed that it would sell, only to realise that people at the grassroots have already devised their mechanisms, often using conventional wisdom. Pushing heavy dollars behind a misinformed mission can only end up in a failed innovation

(Motorola’s Iridium satellite phone comes to mind here).

On the other hand, the improvisations devised by people at the grassroots level, of the likes of MittiCool or the conventional ‘jugaad’, work because they are designed by the people who face the real problem day in and day out. It is a first-hand insight that drives innovation, and not a borrowed sense of the problem.

Often called ‘user-lead innovations’, a terms coined by Eric Von Hippel of MIT, such innovations are pushed by consumers who are at the leading-edge of understanding the problem and even knowing what a solution could be like.

Such innovations are truly frugal, for the resource constraints are not artificial, and there is a continuous feedback in the making of the innovation -- attributes entirely missing in top-down, corporate driven frugal innovation attempts.

The question to be asked is: how many of the engineers and scientists working on frugal product would actually use one? If the answer is none, then the innovation is doomed to fail! That was about the design bit. Now let’s look at the physiological explanation of the conundrum.

There are two important behavioural principles that I offer to explain why top-down, corporate driven frugal innovation attempts often fail. The first explanation is ‘escalation of commitment’ and the second one is ‘fundamental attribution error’.

Escalation of commitment, also called as gambler’s fallacy, is a type of behaviour where good money is thrown after bad, or where one continues to invest on a losing cause hoping that the fortunes will turn. It results from a misplaced sense of optimism, where the right approach is to abort the mission.

In the context of our case, even if the team working on a frugal innovation project knows very well that the product would have a lacklustre performance, they continue working on it owing to the existing commitments, or pressure from the top. It might have happened that while making Nano or Chotukool, a thought of the product’s failure might have crossed the engineers’ minds, but they bowed to the wishes of the top management and their job-descriptions. It is not easy to abort a failing mission after all.

The ‘fundamental attribution error’ kicks in when one is disposed to believing that all good happens because of oneself, and all bad is owing to others. (This is a very common experience to have if you are married!)

In the case of frugal innovation, the innovating firm thinks that we have after all made a product with all the ‘right’ features -- and now if the customers are not able to use it, it is their problem. They do not know how to use it. Even internally the design and engineering wing thinks that marketing team has done a shoddy job in promoting the product, and is clueless about why customers are not excited enough.

In grassroots level frugal innovation, where the innovator and user are mostly the same person, there is not much room for these psychological pathologies.

To sum up, I would encourage corporate innovators to delve deeper into the lives of their non- traditional consumers when they are attempting frugal innovations. Often they would be amazed by how much the customer knows about the ‘real’ problem and the ‘probable’ solution, and to what extent such solutions are truly frugal.

It takes away a lot of guess work, shortens the selling cycle and does economic good after all.