Frugal Innovation or Engineering “down”

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piggyWhat if you had a potential market of 300 million customers who desperately need and want your product or service but your solution is too complex and expensive.  Complex because the environment they live in cannot support your solution and expensive because getting your solution to them is not easy.  This describes the problem in rural India (and many, many other places in the world) and the availability of banking services which is not just a matter of convenience.  This leaves them at the mercy of unscrupulous and traditional banking methods that are exploitative.  ATM’s would be an easy answer but they are very cumbersome, require a reliable power source, need a repair infrastructure etc. etc.

Enter Vortex Engineering(named a top 10 startup that could change your life by Time) who developed a much more simplified ATM using solar power and a lean design with a significantly higher MTBF (mean time between failure – thus reducing need for repairs)  – even having the money stacked vertically so it falls instead of being dispensed.  They have gone from a pilot in 2008 to more than 5000 this year and going global (Nepal, Bangladesh etc.).  And you know they are on to something because NCR and Diebold (market leaders) are fast trying to catch up with this disruptive technology.

There are many other examples like this.  The Nano – a extremely cheap, no frills car suited for the Indian market; a hand held ECG that runs on batteries and reduces the cost to just $1/patient; a rice husk based water purifier.  Clearly these and many other breakthroughs (cataract surgery) are solutions to some significant problems for large portions of the world’s population.  And these are all possible only when we fundamentally change our design philosophy – and it’s called frugal innovation.

It requires a breaking down of the solution to its barest elements and then re-assembling it and rethinking your entire process so that it can fit the market (rural India with little infrastructure to support banking or a place to install and support EKG machines).  This represents an entirely different way of penetrating markets that have huge potential volumes but need less complex solutions that have lower margins.  And these markets have tremendous opportunities for organizations that can change the way they think and operate.  All you have to do is see what the app called  “whatsapp” just got sold for – a basic, no frill chat app very popular in the rest of the world.  Normal solution design thinking will continue to add more complexity and more functionality which are the exact antitheses of what is needed in these situations.  As the headline proclaims, ”First break all the rules”.  And by the way, this does not mean “cheap” solutions because they do need to work in fairly harsh conditions.

To accomplish this, the cultural shift required in organizations is not easy.  In fact, that may be the reason why GE has set up their lab in India – away from the normal culture of GE.  There are many lessons to be learned from this and those organizations that can will exploit significant opportunities in vast untapped markets. 

There is another lesson to be had here.  We are all in the process of designing “solutions” inside our companies – whether that be a new process, new technology etc.  It would behoove all of us to keep this design principle in mind.  An over-designed solution that won’t get adopted adds little value and adding more and more functionality to our solutions may in fact be setting us back further and further.  I will take a lesser designed solution with a higher Adoption rate over a much better designed solution any day – would you?

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Dalip Raheja
Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.
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