Companies must reinvent themselves as frugal enterprises that integrate digitally empowered consumers, addressing their needs in a more valuable and cost-effective way.
Frugal innovation is “do more with less”; to develop high-quality products that create more business and social value. The key factor is achieving this with minimum use of scarce resources such as energy, capital and time, or by leveraging them in new ways or finding alternative solutions. This results in dramatically lower-cost products and services, but a delivery of high value.
Two keys factors that will build a strong frugal economy is when startups build products with the right balance between “higher value” and “lower resource”.
The evolving economic reality, market needs, and digital revolution are redefining how products will be accessible and experienced by consumers. Companies need to reinvent themselves as frugal enterprises that integrate digitally empowered consumers, addressing their needs in a more valuable and cost-effective way.
So, how can one drive frugality?
Build Circular Value Chains: Most companies operate through linear value chains, wherein products are designed, produced, sold, consumed, and in few years end up in landfills. This linear economic model is not profitable and has high wastage, and also harms the environment. Startups in the early days need to think about building circular value chains wherein some of the key (scarce or expensive) resources are reused, and eventually add to overall business profits. The Harvard Business Review cited the example of Renault cars. French automotive company Renault has a 230 million euro remanufacturing business with engines and gear boxes. The remanufactured cars leave the factory with the same warranty as a new engine. Renault resells the car for half cost of a new car and makes 3X profit.
Create aself-organising frugal economy: A self-organising frugal economy could generate billions of dollars in value and add millions of jobs. Companies like Ola and Uber are posing as a threat to the taxi companies. Home-sharing service Airbnb supposedly has more annual bookings than the entire Hilton hotel chain. A WEF cited an example—65 percent of electricity produced in a neighborhood in the German city of Freiburg is by solar panels and a co-generation plant established and operated by local citizens.
Use frontier technologies: Frontier technologies such like Artificial Intelligence (AI) will shape our future more powerfully than any other innovation this century. It is particularly exciting now in the context of integrating it with frugal innovation for the next billion people. Some emerging startups that lean on the principles of frugality are SigTuple, an AI startup in the healthcare space that analyses medical images, scans and videos, and generates information and data to help diagnose with fewer resources (time, man power); and, Niramai, a “Non-Invasive Risk Assessment with Machine Intelligence” solution for early detection of breast cancer that is safe, non-touch, radiation-free, and low cost. Stellapps is using Internet of Things to bring about another white revolution for the dairy sector.
But we are yet to see the next wave of frugal innovation in the space of low-cost housing using 3D printed technology and the success of drones in the agritech industry.
As we leapfrog to the next generation of technology and products, we can have better, more sustainable products at a low price. We need to have more agile products and solutions that are highly valuable and use minimum resources - India needs this tomorrow!
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)