21-PM1-07: ST3.3 - Frugal Innovation in the Age of Digital Transformation
In a short span, the concept of frugal innovation has gained considerable acceptance in the scholarly community (Tiwari, Kalogerakis, and Herstatt, 2016; Lim and Fujimoto, forthcoming). They can be broadly defined as products, services, technologies and business models that target “affordable excellence” while minimizing use of resources (Le Bas, 2016; Weyrauch and Herstatt, 2016). Frugal innovations have become increasingly important for ensuring long-term competitiveness of firms in both, emerging market economies and industrialized nations, as current research suggests (Radjou and Prabhu, 2015; Kroll, Gabriel, Braun et al, 2016). In addition, they may be considered as a very useful and important tool in meeting the global sustainable development goals (SDGs), for example by providing affordable access to healthcare and ensuring food security (Chavali and Ramji, 2018; De Waal, Tiwari, and McMurray, 2018).
Nevertheless, the advancement of the scholarly discourse has also brought to fore several new research issues that need attention of the research community. These emerging research issues include, but are not limited to, the following:
• What sectors are especially promising for frugal products and services?
• What determinants are leading the acceptance for frugal products and services in societies that are NOT characterized by extreme resource constraints?
• How can digital transformation contribute to the development of innovative frugal solutions and their diffusion?
• In what ways can frugal innovations lead to a positive impact on ecological sustainability and what limitations must be taken into account?
• Can frugal innovation act as a counter measure to the phenomenon of planned obsolescence?
• What policy measures may be required to mitigate the potential impact of rebound effects?
• What dimensions of affordability (e.g. monetary, societal and environmental) must be addressed by firms while creating frugal solutions?
• What is the role of open global innovation networks in creating frugal technologies?
• In what ways do frugal and social innovations overlap each other?
The special track is conceptualized as a multidisciplinary track that will seek contributions from a variety of sources and welcome papers with both conceptual and empirical focus. The idea is to start a new (next-level) discourse on the phenomenon of frugal innovation and organize a special issue (e.g. of R&D Management) on this theme. We will invite papers from researchers from management sciences, economics as well as from engineering disciplines with the purpose of generating new insights by transdisciplinary integration of relevant themes. We envisage several contributions from R&D-intensive disciplines such as Healthcare, Nanotechnologies that lead to affordable and ecologically sustainable excellence.
Is the future smart or simple – or maybe both? Taking a glimpse at the future of Frugal Innovation based on Scenario Technique
Fraunhofer IAO, Germany
Frugal Innovation successfully manages the gap between high quality and low prices by putting a focus on the needs of a specific customer group. The topic is of increasing importance, both for emerging and developed countries. Its future, however, is hard to predict due to interdependent and sometimes conflicting trends.
Recent research has looked into the different perspectives of Frugal Innovation with respect to origin by comparing corporate and grassroots frugal innovators (Wohlfart et al. 2016). Other scientists have assessed the various industries Frugal Innovation has affected by e.g. looking into the specifics of frugal robotic hands, frugal radio telescopes, frugal electrocardiograms and frugal beating heart surgeries (Rao 2013). Some authors have tracked the development paths Frugal Innovations have taken. Zetschky et al. (2014) have e.g. done research on Reverse Innovation, i.e. Frugal Innovations that started as solutions for emerging countries and later on entered their home markets. Wohlfart et al. (2018) have studied the characteristics of different Frugal Innovation competence centers worldwide.
The paper presented in this abstract will create a concise overview on the various aspects and trends related to Frugal Innovation by establishing a set of future scenarios that highlight the potential directions the topic could take. It will leverage existing scientific publications as well as insights from industry experts.
The research questions at the heart of the study presented in this paper are the following:
- What will be the relevance and the characteristics of Frugal Innovation in the next 20-25 years, both in emerging and developed countries?
- Which factors will influence this development?
- Which future scenarios present themselves?
The study presented in this paper uses a bottom-up scenario approach. It starts with a collection of influence factors based on an assessment of existing scientific publications and case studies. In addition, the authors interview industry experts (see below) and analyze data provided by a Knowledge Analytics tool. All of the sources help the team to identify descriptors that affect the future of Frugal Innovation and to derive potential projections for them. A scenario software then helps to clusters projections into scenarios.
The research presented in the paper uses existing publications and data provided by a Knowledge Analytics tool. A number of interviews (approx. 5) with industry experts will add knowledge on the specifics of Frugal Innovation in these fields. The research is ongoing, so the authors have planned but not done the interviews yet.
The paper will present three to four future scenarios related to Frugal Innovation. Relevant trends of the different STEEP categories covered by them include the following: (1) Society – There is a growing middle-class in emerging countries. At the same time, Western societies observe a rise of the so-called “Neo-Minimalism”, i.e. a tendency to reduce consumerism voluntarily that goes hand-in-hand with an increased social and environmental consciousness. (2) Technology – Frugal Innovation e.g. makes use of established technologies by transferring them to other disciplines in cross-industry innovation efforts. (3) Economy – Besides big players, many small start-ups venture into Frugal Innovation. (4) Environment – Restricted natural resources will further inforce existing social trends towards sustainable lifestyles. (5) Politics and Legislation – The current increase in funding for Frugal Innovation initiatives and the uptake of higher education related to the topic suggest that its importance will further increase. The scenarios presented in the paper will present holistic pictures with statements to all of these and more relevant trends.
Contribution to Scholarship
Although research has taken a lot into various aspects of Frugal Innovation already, so far science has not aimed at establishing a concise understanding of relevant trends as provided by future scenarios. The scenarios presented in this paper will be an excellent basis for future research on various aspects of Frugal Innovation, e.g. regional specifics, industry characteristics, social developments.
Apart from the use for Frugal Innovation, the research presented in the paper will also inform strategic foresight by delivering insights into scenario technique. There are different approaches for the design of scenarios: bottom-up vs. top-down concepts, structured tool-based processes vs. open brainstorming, etc. The paper will present one design that has proven especially useful for large industry players.
Contribution to Practice
Looking into future scenarios of Frugal Innovation will help companies to assess the relevance of the topic for their strategic planning. The methodology presented in the paper will demonstrate how entrepreneurs can proceed to develop detailed insights in the future of their industry, a vision for their specific company and practical hands-on initiatives for moving forward. Frugal Innovation itself offers enormous opportunities for European SMEs considering the growing middleclass in emerging countries and current socio-economic trends in developed markets.
The research presented in this paper will cover the State-of-the-Art and future trends related to Frugal Innovation in all three conference themes: research, industry & society. In addition, Frugal Innovation itself is a topic that bridges these three aspects, as emerging social needs result in new offers from industry and accompanying research activities.
Rao, B.C. 2013. “How Disruptive is Frugal?” Technology in Society 35 (2): 65-73.
Wohlfart, L.; Weik, S.; Lang-Koetz, C. 2018. “Frugal Innovation Labs.” R&D Management Conference 2018 “R&Designing Innovation: Transformational Challenges for Organisations and Society”. June, 30th -July, 4th, 2018, Milan, Italy
Wohlfart, L.; Bünger, M.; Lang-Koetz, C.; Wagner, F. 2016. “Corporate and Grassroot Frugal Innovation: A Comparison of Top-Down and Bottom-Up Strategies.” Technology Innovation Management Review 6 (4): 5-17.
Zeschky, M.; Winterhalter, S.; Gassmann, O. 2014. “From Cost to Frugal and Reverse Innovation: Mapping the Field and Implications for Global Competitiveness.” Research-Technology Management 75(4): 20–27.
UNDERSTANDING MANAGERS PERSPECTIVES IN THE FACE OF GLOBAL SOCIO-ECONOMIC SHIFTS – TOWARDS AN INSTRUMENT TO MEASURE THE RECOGNITION OF OPPORTUNITIES FOR FRUGAL INNOVATION
Hamburg University of Technology, Germany
Three developments are particularly interesting for our discussion: global socio-economic shifts, respective changes in consumer demands and new companies that become increasingly effective in catering these demands. We investigate how decision makers in organization react to these developments with regard to their innovation activities.
While a variety of concepts provide theoretical lenses to analyze the above mentioned developments, frugal innovation (FI) seems to become the most frequently applied approach (Agarwal, Grottke, Mishra,, & Brem, 2017). FIs are defined as offerings that cost significantly less than comparable solutions while focusing on core functionalities and providing a performance level, which is optimized for the given use context (Weyrauch & Herstatt, 2016). Offering such innovations provides opportunities that are increasingly targeted by new local players in emerging markets (Ernst, Kahle, Dubiel, Prabhu, & Subramaniam, 2015), which might become a challenge for established companies (Zeschky, Widenmayer, & Gassmann, 2011). These developments arguably have implications for various actors in the global marketplace. Multi-national companies (MNCs) being especially confronted with these dynamics. However, MNCs often seem to ignore the opportunities provided by targeting cost conscious customers with affordable solutions that fit local needs (Prahalad & Hart, 2002).
Case study research has shown that a committed leader that is convinced of the opportunities for FIs can have a catalysing role (Ramdorai & Herstatt, 2015). While giving a comprehensive insight on the crucial championing role, literature remains relatively silent on the cognitive antecedents of the leadership behaviour in focus.
With regard to Prahalad and Hart’s (2002) notion, it is important to keep in mind that organizations do not identify opportunities, but its members do (Krueger, 2007). We believe that investigating the respective mindset is very promising to understand why MNCs might not always exploit the opportunities provided by FIs.
We build on our previous efforts to frame the frugal mindset phenomenon (Krohn & Herstatt, 2018) and include the Theory of Planned Behaviour (TPB) (Ajzen, 1990) as an analytical framework.
To identify and define factors that can be applied to understand the cognitive antecedents to supporting FI projects, this study applied a multi-method approach. First, a systematic literature review (SLR) was conducted to synthesize relevant existing findings. Second, to validate and complement the analytical framework and the identified factors, the results were discussed with 16 practitioners, experts and political stakeholders of FIs in a focus group.
After the identification of 361 sources an iterative selection process was conducted using developed inclusion criteria. From the results of two literature databases 66 duplicates were removed. Afterwards a title screening was done to identify obviously unrelated articles towards the research question and 236 out of the 295 remaining articles were included for further analysis. The abstracts of the 236 articles were analyzed and 104 sources matched the inclusion criteria and were consequently included in the final selection. Nine of the sources could not be obtained so that the final database included 95 relevant articles for which a multi-stage coding process of was conducted.
The full-text analysis and coding of the literature sample resulted in the identification of 30 total key influencing factors and 6 stakeholders in the decision towards the performance of FI projects in organizations. These consist of 11 factors for the individual attitude, five factors from the professional environment and therefore subjective norms, and a total of 14 barriers for FI projects as factors for the perceived behavioral control.
The identified influencing factors affect the decision making process from several angles. Selected findings show that economic arguments are driven by the market potential that FIs offer to companies (Banerjee & Leirner, 2014) but also sustainability and social aspects are important to individuals in the organization (Agnihotri, 2015). The recent trend of frugality and a growing feature fatigue among customers increases the acceptance of frugal innovation projects in organizations as well.
Our study indicates that the management of a firm is a crucial stakeholder in the decision-making process and a strong support from the management for frugal innovations is regarded as a key enabler for such projects (Tiwari, Fischer, & Kalogerakis, 2017).
Contribution to Scholarship
We advance the theoretical discussion of the frugal mindset phenomenon, which has been suggested to be important for FI (Zeschky, Widenmayer, & Gassmann, 2011; Soni & Krishnan, 2014) but not received in-depth investigation. While scholars have suggested that individuals in organisations need to change their mindset (Zeschky, Widenmayer, & Gassmann, 2011) and develop a “frugal mindset” (Soni & Krishnan, 2014) the discussion remains descriptive. To the best of our knowledge, no publication attends a theory driven approach to this FI focused phenomenon.
We apply the TPB, which suggests that intentions are credible predictors of actual succeeding behaviour and its closest cognitive antecedent (Ajzen, 1990). Intentions in turn are a function of attitudes towards a behaviour, perceived social norms and perceived behavioural control. We provide influencing factors to these categories, which can help to understand the formation of intentions to pursue FI projects, which we define as a deliberative frugal mindset.
Contribution to Practice
From a practical perspective, the nuanced understanding of a mindset is a first step in developing actions to understand, influence and guide the prevailing mindset of individuals in an organization in the desired direction (French II, 2016). Hence, the understanding of the frugal mindset can help to assess the perspective of important project stakeholders and support FI champions to achieve full support.
Special Track 3.3 poses the question what determinants are leading the acceptance for frugal products and services in societies that are not characterized by extreme resource constraints. Key decision makers in organizations are important societal stakeholders regarding FIs and our work allows a systematic understanding of their perspective.
Agarwal, N., Grottke, M., M. S., & Brem, A. (2017). A systematic literature review of constraint-based innovations: state of the art and future perspectives. IEEE Transactions on Engineering Management, 64(1), 3-15.
Agnihotri, A. (2015, 5). Low-cost innovation in emerging markets. Journal of Strategic Marketing, pp. 399-411.
Ajzen, I. (1990). The theory of planned behavior. Organizational behavior and human decision processes, 50(2), 179-211.
Banerjee, P. M., & Leirner, A. (2014). Frugal innovation and returnee-diaspora entrepreneurship. In F. Thérin, Handbook of research on techno-entrepreneurship (pp. 325–336). Cheltenham, U.K; Northampton, MA, USA: Edward Elgar Publishing.
Ernst, H., Kahle, H. N., Dubiel, A., Prabhu, J., & Subramaniam, M. (2015). The antecedents and consequences of affordable value innovations for emerging markets. Journal of Product Innovation Management, 32(1), 65-79.
French II, R. P. (2016). The fuzziness of mindsets: Divergent conceptualizations and characterizations of mindset theory and praxis. International Journal of Organizational Analysis, 24(4), 673-691.
Krohn, M., & Herstatt, C. (2018). The question of a frugal mindset in Western MNCs: Exploring an emerging phenomenon with a systematic literature review. Working Paper 103, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
Krueger, N. F. (2007). The cognitive infrastructure of opportunity emergence. In D. R. Álvaro Cuervo, Entrepreneurship (pp. 185-206). Berlin, Heidelberg: Springer.
Prahalad, C. K., & Hart, S. L. (2002). The Fortune at the Bottom of the Pyramid. strategy+business(26), 54-67.
Ramdorai, A., & Herstatt, C. (2015). Frugal innovation in healthcare: How targeting low-income markets leads to disruptive innovation. Springer.
Soni, P., & Krishnan, T. (2014). Frugal innovation: aligning theory, practice, and public policy. Journal of Indian Business Research, 6(1), 29-47.
Tiwari, R., Fischer, L., & Kalogerakis, K. (2017). Frugal Innovation: An Assessment of Scholarly Discourse, Trends and Potential Societal Implications. In C. Herstatt, & R. Tiwari, Lead Market India: Key Elements and Corporate Perspectives for Frugal Innovations (pp. 13–35). Cham, Switzerland: Springer International Publishing AG.
Weyrauch, T., & Herstatt, C. (2016). What is frugal innovation? Three defining criteria. Journal of frugal innovation, 2(1), 1.
Zeschky, M., Widenmayer, B., & Gassmann, O. (2011). Frugal innovation in emerging markets. Research-Technology Management,, 4(54), 38-45.
Towards Affordable and Sustainable Products: The Application of TRIZ in New Product Development
1RMIT University, Australia; 2Lappeenranta University of Technology, Finland; 3Saint Petersburg State University, Russia
Systems Engineering scholars have long been studying the application of various Value Engineering (VE) techniques such as TRIZ (Theory of Inventive Problem Solving) for new product development (NPD) and designing disruptive products. Such products, however, are not always cheaper than the existing ones and this results in less customer share.
To address this limitation, the literature has accommodated numerous contributions on the concept of Frugal Innovation (FI) since the seminal work by Zeschky et al. (2011). Scholars have shown how “good-enough” products can replace the expensive products. Recently, there has been a particular attention towards sustainable development (SD) in FI by studying affordable products that improve well-being and reduce detrimental environmental effects. Bocken and Short (2016) used multiple case studies to show how the concept of ‘sufficiency’ can be included in sustainable business models. Levänen et al. (2016) identified the main challenges of frugal innovation in sustainable development by empirically testing FI in water and energy sectors. Kim et al. (2019) showed how reusing of components for renewable energy systems can be helpful for a more sustainable power supply in rural areas. Tiwari and De Waal (2018) analysed the challenges and opportunities for frugal innovation in the food industry.
The empirical applications of FI in SD remain rare (Levänen et al., 2016). Moreover, FI scholars have largely ignored the role of VE techniques in fuzzy front end (FFE) of NPD for designing affordable and sustainable products (ASP).
RQ: Can the application of VE techniques in fuzzy front end of NPD generate potential ideas for ASP?
We took an inductive approach to explore how TRIZ can be applied to develop ASP. We had a real industry problem in cement raw production process and holistically studied the FFE of NPD to find good-enough solutions with less environmental impacts (Cazacliu and Ventura 2010). Mixed methods used in this study.
We built on an idea proposed previously (Yakovis and Khademi, 2019, unpublished data) and applied various TRIZ principles such as ideal final result, trimming and temporal separation to find new solutions. Finally, we interviewed chemical engineering experts to ensure of the feasibility of the results in practice.
Simulations by MATLAB and Simulink used in this study.
We ended up in two new conceptual solutions which were then simulated using MATLAB and Simulink. The new ideas not only eliminate the need for mechanical agitation, they even improve the efficiency of the mixing process. In other words, the new scenarios would significantly reduce the production costs, time and environmental impacts while improving the quality of the process. The outcome of the interviews shows that one of the ideas is feasible in practice, but the feasibility of the other idea was neither rejected nor approved.
Contribution to Scholarship
We contribute to the intersection of FI, NPD and SD by touching upon the existing research puzzle regarding the benefits of applying VE techniques in NPD for producing ASP by empirically testing the application of TRIZ principles in reducing costs and energy consumption in the mixing process for cement raw mix production.
Contribution to Practice
Innovation and R&D managers may benefit from our study in two ways. Firstly, using the ideas presented in this study, chemical industry managers may significantly reduce energy costs and environmental impacts by eliminating mechanical mixing equipment meanwhile improving the efficiency of mixing process. Secondly, managers may apply TRIZ and other VE techniques in other industrial and technological contexts to observe the effects for FI.
The special track calls for the contributions on how FI can reduce the detrimental environmental impacts. In this study, we addressed the issue by taking an inductive and multidisciplinary approach to show how VE techniques can be used in FFE phase of NPD to generate ASP.
BOCKEN, N. M. P. & SHORT, S. W. 2016. Towards a sufficiency-driven business model: Experiences and opportunities. Environmental Innovation and Societal Transitions, 18, 41-61.
CAZACLIU, B. & VENTURA, A. 2010. Technical and environmental effects of concrete production: dry batch versus central mixed plant. Journal of Cleaner Production, 18, 1320-1327.
KIM, B., AZZARO-PANTEL, C., PIETRZAK-DAVID, M. & MAUSSION, P. 2019. Life cycle assessment for a solar energy system based on reuse components for developing countries. Journal of Cleaner Production, 208, 1459-1468.
LEVÄNEN, J., HOSSAIN, M., LYYTINEN, T., HYVÄRINEN, A., NUMMINEN, S. & HALME, M. 2016. Implications of Frugal Innovations on Sustainable Development: Evaluating Water and Energy Innovations. Sustainability, 8.
TIWARI, R. & DE WAAL, G. A. 2018. Frugal Innovations for Food Security: An Australian Case Study. The International Society for Professional Innovation Management (ISPIM). Manchester.
ZESCHKY, M., WIDENMAYER, B. & GASSMANN, O. 2011. Frugal Innovation in Emerging Markets. Research-Technology Management, 54, 38-45.