A conceptual analysis of foundations, trends and relevant potentials in the field of frugal innovation (for Europe) : interim report for the project "study on frugal innovation and reengineering of traditional techniques".
Date: 2016-08-04
Institutions: Directorate-General for Research and Innovation
Subjects: EU market, Europe, business policy, economic development, innovation, public policy, report, research and development, technology

A Conceptual Analysis of 
Foundations,  
Trends and Relevant 
Potentials  
in the Field of Frugal 
Innovation (for Europe) 

Interim Report for the Project  
"Study on frugal innovation and reengineering of 
traditional techniques" 

Written by Fraunhofer ISI and NESTA 
July– 2016 

EN 

 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Directorate-General for Research and Innovation 
Directorate D – Industrial Technologies  
Unit D.1 - Strategy 

Contact: Doris SCHRÖCKER 

E-mail:  Doris.Schroecker@ec.europa.eu  

RTD-PUBLICATIONS@ec.europa.eu 

European Commission 
B-1049 Brussels 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

A Conceptual Analysis of 
Foundations,  
Trends and Relevant 
Potentials  
in the Field of Frugal 
Innovation (for Europe) 

Interim Report for the Project  
"Study on frugal innovation and reengineering of 
traditional techniques" 
Commissioned to Fraunhofer ISI and Nesta 

Contract n°NMP1-SC-2015-FRUGAL 

edited by : 

Henning Kroll  

Madeleine Gabriel 

Annette Braun 

Emmanuel Muller 

Peter Neuhäusler 

Esther Schnabl  

Andrea Zenker 

2016 

Directorate-General for Research and Innovation 
Key Enabling Technologies 

EN 

 
 
 
 
 
 
 
 
 
 
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This document has been prepared for the European Commission however it reflects the views only of the 
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Luxembourg: Publications Office of the European Union, 2016. 

PDF  

ISBN 978-92-79-59757-2 

  doi: 10.2777/12143  KI-02-16-639-EN-N 

© European Union, 2015. 
Reproduction is authorised provided the source is acknowledged. 

)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents 

1. 

2. 

INTRODUCTION ..................................................................................................... 4 

A CONCEPTUAL LITERATURE REVIEW ON FRUGAL INNOVATION .................................. 5 

2.1.  Frugal innovation: Concepts and preconditions ................................................. 5 
Approaching the core of frugal: More than just cheap ........................... 5 

2.1.1. 
2.1.2.  Central preconditions for frugal innovation ........................................ 12 

2.1.2.1.  Frugal mindsets: Seeing things differently ......................... 12 

2.1.2.2.  From  local  ecosystems  to  larger  markets:  Issues  of 

scalability ...................................................................... 15 

2.1.2.3.  Barriers  and  enablers:  Regulation  and 

institutional 

frameworks .................................................................... 18 

2.2.  Frugal innovation as an opportunity for Europe ............................................... 20 

2.2.1. 

(Re)discovering capacities for frugal innovation ................................. 20 

2.2.2.  A market opportunity in emerging and developing economies ............. 23 

2.2.3.  A response to emerging frugal needs and choices in Europe ................ 24 

2.2.4. 

European public policy challenges .................................................... 26 

2.2.5. 

The potential wider benefits of frugal innovation ................................ 26 

2.3.  The role of technology for and in frugal innovation .......................................... 27 

2.3.1. 

Frugal  integration:  combining  available  technological  knowledge, 
traditional techniques and new ideas ................................................ 29 

2.3.2.  Non-frugal  means  towards  frugal  ends:  developing  specific    new 

technologies as components of future solutions ................................. 32 

2.3.3. 

From ‘mass frugal’ to ‘networked sourcing and delivery’? .................... 34 

2.4.  Appraisal and outlook .................................................................................. 37 

2.4.1.  Weighing tensions between benefits: when is frugal welcome? ............ 37 
2.4.2.  Weighing policy options: how could frugal activities be triggered? ........ 39 

3. 

FINAL HYPOTHESES AND PROPOSITIONS ............................................................... 41 

Tables and Figures 

Table 1:   Common Lists of Criteria for Frugal Innovation ....................................................... 6 

Figure 1: 

Different Strands of Literature in the Debate on Frugal Innovation ............... 6 

Figure 2:  

Perspective 

Elaboration  of  Frugal  Innovations: 
10 

  Technological  vs.  Needs-oriented 

Figure 3:  

Affordability vs. Ecological Footprint in Frugal Innovation ........................... 10 

Figure 4:  

Background in terms of frugal market-customer requirements .................... 17 

3 

 
  
 
1.  INTRODUCTION 

This  publication  is  an  excerpt  and  summary  of  major  sections  of  an  interim  report  that  was 
produced  in  the  context  of  the  study  “Study  on  Frugal  Innovation  and  the  Re-engineering  of 
Traditional  Techniques”  commissioned  by  the  European  Commission’s  Directorate-General  for 
Research and Innovation (NMP1-SC-2015-FRUGAL) and performed by Fraunhofer ISI in partnership 
with Nesta, UK. 

In the context of the project, this report had the following headline objectives: 

 

 

To  provide  a  summary  of  the  literature  study  and  accompanying  desk  research  that  has 
been  performed  during  the  first,  exploratory  stage  of  this  project  and  –  on  this  basis  – 
identify a number of key hypotheses, 
To  establish  a  conceptual  approach  to  select  case  studies  for  the  second  stage  of  the 
project,  by  defining  key  conceptual  issues  that  should  be  covered  by  them  in  the  form  of 
summary headline hypotheses. 

In detail, these shall be reached by 

1.  Going  back  to  questions  of  definition  as  well  as  central  drivers  and  barriers  –interpreting 
existing  literature‚  through  a  European  lens  and  focus  on  those  elements  of  the  concept 
that must be considered in rendering  it fruitful for European policy; 

2.  outlining why frugal innovation should – in view of recent trends – be considered a relevant 
opportunity  for  Europe  and  European  industries  taking  into  account  capacities,  market 
opportunities and societal challenges to be tackled; 

3.  elaborating  in  some  detail  on  possible  fruitful  linkages  between  frugal  innovation  and 
technological development that will be constitutive for this study‘s eventual usefulness for 
European policy makers; 

4.  casting  a  first  general  perspective  on  considerations  for  policy  recommendations  and 
vehicles of policy delivery, provide an outlook on what may be discussed in more detail in 
the final report.  

Against the background of these objectives, the following chapters have been developed. 

4 

 
 
2. 

A CONCEPTUAL LITERATURE REVIEW ON FRUGAL 
INNOVATION 

In the following, this report will briefly summarise the findings of an extensive literature review as 
well  as  further  desk  research  and  more  than  ten  exploratory  interviews  conducted  so  far  in  the 
course of this study. In general terms, the analysis seeks to conceptualise the relevance of frugal 
innovation  for  Europe  by  clarifying  basic  aspects  on  the  level  of  definition,  highlighting 
opportunities, focusing on the role of technology and, finally, discuss relevant developments with a 
view to the future role of frugal innovation in Europe. 

2.1. 

Frugal innovation: Concepts and preconditions 

2.1.1. Approaching the core of frugal: More than just cheap 

Background 

As  the  academic  study  of  frugal  innovation  and  business  practices  continues  to  evolve,  the 
definition  of  the  term  itself  continues  to  evolve.  While  its essence  remains  succinctly  captured  by 
Pralahad and Mashelkar’s (2010) phrase “more with less for more people”, and most would agree 
that  it  relates  to  creative  problem  solving  that  generates  utility  under  adverse  framework 
conditions, different origins and contexts of application have led not only to diverse interpretations 
but also to a certain blurring of the conceptual boundaries of what can and should be considered as 
frugal innovation.  

Importantly,  the  frugal  innovation  debate  stems  from  different  sources,  including  earlier 
discussions  on  frugal  engineering  by  and  in  multinational  corporations  (Kumar  and  Puranam, 
2012), grassroots innovation in developing countries (Gupta, 1997), reverse innovation leveraging 
frugal  insights  for  more  sophisticated  applications  (Saraf  2009,  Howard,  2011),  and  catalytic 
innovations  prompting  transformative  change  (Christensen  et  al.,  2006).  In  parallel,  more 
regionalised discussions have developed around practices of ‘Gandhian’ and ‘Jugaad’ innovation in 
India  (Prahalad  and  Mashelkar,  2010;  Radjou  et  al.,  2012;  Radjou  and  Prabhu,  2012)  as  well  as 
‘Shanzhai’ and ‘Indigenous’ innovation in China (Ming and Flowers, 2016; Fu and Gong, 2011; Zhu 
and Shi, 2010; Schwaag Serger and Breidne, 2007). Overall, these concepts have been developed 
from  a  variety  of  academic  backgrounds,  personal  motivations  and,  in  part,  based  on  empirical 
reference to quite distinct phenomena. 

Against this background, this introductory section will seek to establish, structure, and delineate an 
understanding  of  frugal  innovation  that  will  guide  the  remainder  of  the  work  in  this  project.  In 
providing this introduction, the authors define a framework of reference for the specific purpose of 
establishing the role of frugal innovation in and for Europe  – without any explicit or implicit claim 
that  this  framework  can  be  considered  all-encompassing  or  fitting  for  subsequent  reports  and 
studies with different ambitions. 

General approaches to definition 

In summary, two main approaches to defining the scope of the discussion can be observed in the 
recent discourse on frugal innovation and related phenomena: 

First, a number of consultants, corporations and some academics have developed lists of criteria to 
describe  what  they  consider  to  be  frugal  solutions  or  at  least  solutions  with  particular  relevance 
under  emerging  market  conditions  (Roland  Berger,  2014;  Agarwal  and  Brem,  2012).  Most  often, 
the guiding notion behind their establishment is the perspective of firms seeking to unlock entirely 
new  markets  through  the  provision  of  more  affordable  solutions  for  a  wider  population.  In  that 
sense, most of them constitute business case oriented definitions (The Economist, 2015). Generally 
speaking,  they  aim  to  describe  desirable  characteristics  of  frugal  solutions  in  a  straightforward, 
inclusive  and  generic  manner  –  rather  than  to  elaborate  extensively  how  a  process  of  frugal 
innovation in a producing firm should look like or  what  motivates specific actors to provide frugal 
solutions in certain contexts.    For illustration, three examples of  such  lists of  criteria  are  outlined 
below. 

5 

 
 
 
 
Table 1:   Common Lists of Criteria for Frugal Innovation 

Kumar and Puranam 
(2012 Study) 
Physical Robustness 
Portability 
De-featuring 
Leapfrog technology 
Low cost by scaling 
roduction 
Service Ecosystems 
Source: Kumar and Puranam (2012), Roland Berger (2014), Siemens (2011) 

Roland Berger 
(2014 Study) 
Functional 
Robust 
User-friendly 
Growing 
Affordable 

SIEMENS SMART 
(2005 Strategy) 
Simple 
Maintenance-friendly 
Affordable 
Reliable 
Timely-to-market 

Local 

Second, many academic authors have taken a broader perspective that, beyond immediate product 
based  criteria,  includes  a  more  detailed  discussion  of  the  process  of  frugal  innovation  per  se, 
framework  conditions  giving  rise  to  such  efforts  and  their  potential  socio-economic  implications 
(Radjou  et  al.,  2012;  Radjou  and  Prabhu,  2012;  Radjou  and  Prabhu,  2015).  In  general  terms, 
Bhatti (2012) identifies frugal innovation as positioned at the intersection of technology innovation, 
institutional innovation, and  social  innovation. In a slightly different approach, Brem  and Wolfram 
(2014)  have  undertaken  an  analysis  and  categorisation  of  relevant  literature  along  the  three  key 
dimensions  of  sophistication,  sustainability,  and  emerging  market  orientation  that  acknowledges 
and  contextualises  the  different  academic  streams  from  which  the  discussion  of  frugal  innovation 
has developed. In contrast with Bhatti, they do not refer to ‘frugal innovation’ as the overarching 
concept,  but  as  one  variant  of  several  under  the  general  heading  of  ‘research  and  development 
from the bottom up’ (cf. Figure 1). 

Figure 1:  Different Strands of Literature in the Debate on Frugal Innovation 

Source: Brem and Wolfram, 2014 

The definition of frugal innovation in this report will draw on both approaches. While establishing a 
list of criteria appears useful to delineate the core of the concept, the academic discussion suggests 
that it must be extended beyond the types of lists  referenced in Table 1. At the same time, it will 
follow Bhatti (2012) and the majority of other authors (Howard, 2011; Radjou et al., 2011; Radjou 
et al., 2012; Bound and Thornton, 2012) in considering frugal innovation as an overarching notion 
rather than  a specific sub-area  of a more  general debate on  ‘bottom  up’ innovation. Nonetheless, 
the framework of analytical dimensions proposed by Brem and Wolfram (2014) appears very useful 
and will be taken up in the following discussion. 

Common criteria for frugal innovation 

While different and in part diverging lists of criteria have been proposed in the discussion on frugal 
innovation (Kumar and Puranam, 2012; Roland Berger, 2014; Siemens, 2011), several aspects can 
be  considered  as  prevalent  and  recurring,  forming  what  could  be  termed  a  ‘frugal  core’  that 
appears in most definitions.  

6 

 
 
 
 
 
First, frugal innovation generates products and services that provide a better value proposition 
for  less  affluent  customers  (Radjou  and  Prabhu,  2015;  Leadbeater,  2014;  Agarwal  and  Brem, 
2012; Gupta 2011; Gupta 2008). It underlines that for a large part of many countries’ populations 
‘better’  and  ‘more  useful’  products  and  solutions  do  not  have  to  be  more  elaborate,  complex  or 
expensive.  This  approach  of  generating  products  and  services  that  are  ‘good  enough’  (Tiwari  and 
Herstatt, 2013; Zeschky et al., 2011) features prominently in nearly all ‘criteria systems’ for frugal 
innovation, resonating with terms such as ‘affordability, functionality and user-friendliness’ (Roland 
Berger,  2014),  ‘lower  cost  and  de-featuring’  (Kumar  and  Puranam,  2012)  or  ‘simplicity  and 
affordability’ (Siemens, 2011). 

While the first and most often quoted aspect of this aspect is of course price and cost (Seghal et 
al. 2011; Gallis and Rall 2012), it, necessarily, also includes the other side of the equation: utility 
and  durability.  In  providing  products  with  higher  ‘reliability  and  maintenance-friendliness’ 
from 
(Siemens,  2011), 
infrastructure’  (Kumar  and  Puranam,  2012)  frugal  innovators  not  only  allow  for  increased 
product  lifetime  (Bound  and  Thornton,  2012)  but  also  unlock  entirely  new  markets  by,  for  the 
first time, providing viable product propositions under less than favourable conditions. 

‘physical  robustness’  (Roland  Berger,  2014)  and 

‘independence 

Second, many newer definitions of frugal innovation contend that frugal innovation cannot simply 
be  analysed  as  a  goal-oriented  process  to  devise  products  and  solutions  for  specific  markets 
according  to  a  pre-defined  list  of  characteristics  but  instead  a  problem-oriented,  creative 
approach  to  problem  solving  which  integrates  specific,  often  local  needs  of  developing  and 
emerging markets as a starting point and works from the bottom-up to develop contextually 
appropriate solutions (Brem and Wolfram, 2014). In consequence, it may result in management 
processes  and  philosophies  that  are  significantly  different  from  existing  ones  (Gupta,  2011;  The 
Economist, 2010; Arnold and Quelsch 1998). As a tendency, such processes will be frugal in ends 
but  also  in  means  (Bound  and  Thornton,  2012),  i.e.  often  relying  on  the  recombination  of 
existing knowledge and technologies from previous efforts rather than substantial, dedicated R&D 
investments  (Bhattacharyay,  2012).  With  the  advent  of  crowd-sourcing  new  opportunities  have 
emerged  in  this  respect.  Moreover,  frugal  innovation  processes  put  stronger  emphasis  on 
conceiving  context-sensitive  systems  of  market-delivery 
into  which  products  are 
embedded (Bound and Thornton, 2012).  

In  some  cases,  frugal  solutions  may,  with  some  modification,  also  be  attractive  to 
consumers  at  the  upper  end  of  the  market.  In  several  studies,  there  is  evidence  of  firms 
seeking to leverage that  opportunity  by  using frugal  environments as ‘lead  markets’ (Christensen 
et al. 2006, Immelt et al. 2009; Howard, 2011; Tiwari and Herstatt, 2012). 

Due  to  its  different  perspective,  this  process-oriented  proposition  features  somewhat  less 
prominently in the abovementioned ‘criteria lists’ of frugal innovation, but it is referred to indirectly 
through  the  acknowledgement  of  a  ‘local  basis’  (Roland  Berger,  2014),  a  need  for  ‘service 
ecosystems’  (Kumar  and  Puranam,  2012),  and  the  challenge  to  operate  ‘timely  to  market’ 
(Siemens,  2011).  Quite  evidently,  successful  processes  of  frugal  innovation  that  develop  relevant 
impact  do  not  only  depend  on  specific  locally  adapted  products  but  also  on  innovative  business 
models (Bhatti and Ventresca, 2012). 

Third,  many  discussions  on  frugal  innovation  make  clear  claims  with  respect  to  improving 
access  to  products  and  services  and  improving  resource  efficiency  and  thus,  implicitly, 
social  and  ecological  sustainability  (Brem  and  Wolfram,  2014;  Fukuda  and  Watanabe  2011). 
While  some  literature  on  frugal  engineering  and  jugaad  innovation  (e.g.  Brem  and  Ivens,  2013; 
Brem and Wolfram, 2014) makes little or passing reference to this aspect, it occupies centre stage 
in  others  (Pralahad  and  Mashelkar  2010;  Bhatti,  2012;  Radjou  et  al.,  2012).  In  particular,  such 
claims  are  present  in  the  literature  on  grassroots  innovations  that  empower  bottom-of-pyramid 
inventors  in  a  sustainable  manner  (Gupta,  2008;  Seyfang  and  Smith,  2007)  and  ‘catalytic 
inventions’  that  become  relevant  beyond  their  original  context  of  application  and  cause  positive 
socio-economic  transformations  (Christensen  et  al.,  2006;  Yip  and  McKern,  2016).  Moreover, 
ecological  claims  are  central  to  what  Brem  and  Wolfram  (2014)  identify  as  the  core  of  the  frugal 
innovation debate (Gupta and Wang, 2009; Howard, 2011), i.e. the discussion on the solutions that 
are in multiple ways adequate for bottom-of-pyramid markets. 

So far, this aspect has not yet been prominently taken up in the standardised criteria systems for 
frugal engineering in global industries that, by definition, tend to place strongest emphasis on the 
market  dimension.  Having  acknowledged  frugal  innovation  as  an  overarching  notion,  however,  it 
would  seem  inappropriate  to  leave  out  the  implication  of  improved  resource  efficiency  and 
affordability. Hence, this report  follows Gupta (2011), Prahalad  and Mashelkar (2010), and  Bhatti 
(2012)  in  understanding  a  sustainability-informed  motivation  as  at  least  a  weak  condition  to 
consider  a  process  of  innovation  as  genuinely  frugal.  The  implications  of  this  assumption  will  be 
discussed in more detail below.  

7 

 
As a final note, it has to be acknowledged that frugality (and thus frugal innovation) remains 
a  relative,  rather  than  an  absolute,  concept  with  respect  to  all  three  of  these  dimensions. 
Whether  a  certain  solution  can  be  considered  frugal  depends  partly  on  available  alternatives  (i.e. 
whether  the  new  solution  is,  for  example,  better  suited  to  user  needs  and  cheaper  than 
alternatives)  and  also  on  the  questions  which  are  analytically  considered.  Whether  a  Tata  Nano 
appears frugal or not (in terms of price) will depend on whether the point of reference is a luxury 
car or a motorcycle. Whether an iPhone is frugal depends on whether it is used as a mere phone or 
to  steer  a  satellite.  Notwithstanding  these  considerations,  generic,  guiding  characterisations  are 
still useful – and will be developed below. 

Summary and Concept 

Based on these insights from the literature review, this report and all following empirical efforts will 
refer to frugal innovation based on a three-level, criteria-based definition, including: 

  A product dimension capturing the ‘what?’,  

i.e. concrete characteristics of frugal solutions 

  A process dimension capturing the ‘how?’,  

i.e. aspects of their design and delivery context 

  A context dimension capturing the ‘why?’,  
i.e. their functions in frugal environments 

In  line  with  that  approach,  this  report  will  maintain  that  few  solutions  will  in  practice  meet  all 
criteria  at  once  or,  even  less,  to  the  same  extent.  Frugal  innovation  is  a  multi-dimensional 
phenomenon  that  combines  aspects  of  product,  process  and  environment  in  different, 
context-specific  ways.  Consequently,  no  single  threshold  for  frugality  can  be  defined 
with  a  view  to  one  particular  criterion.  Moreover,  the  very  nature  of  the  abovementioned 
criteria, such as ‘context-specific utility’ underlines that successful frugal innovation cannot be 
‘measured’ in generic terms, but only be identified qualitatively in a specific framework. 
Hence, the above criteria system should not be read or applied as a listing of hard preconditions. 
Instead,  it  provides  a  concrete  framework  of  reference  to  identify  the  overall  ‘degree  of 
frugality 'of specific solutions in defined contexts of application.  

8 

 
Product Dimension 

  Simplicity / de-featuring  

  Context-specific utility 

  Robustness / long service life 

Process Dimension 

  Designed in creative response to contextual challenges 

 

Integrated in localised delivery concept 

  Scaling from local context to address wider market opportunities  

Context Dimension 

  Affordable 

  Resource efficient 

  Systemically transformative 

Intentionally,  the  above  list  of  criteria  does  not  distinguish  between  frugal  innovations  in 
developing and developed economies. Contrary to rather strong claims in the literature, such a 
distinction  does  not  seem  relevant  at  a  fundamental  level,  as  both  frugal  conditions  and  creative 
entrepreneurs  able  to  respond  to  them  can  in  principle  be  found  in  both  environments.  In  the 
following,  this  overall  approach  will  be  applied  by  identifying  central  tradeoffs  between  different 
criteria for frugality and several types of frugal innovation. 

Common strategies for frugal innovation  

As the two figures below illustrate, even some of the most commonly quoted examples only fulfil 
some  of  the  commonly  mentioned  criteria 
innovation,  partly  due  to  their  
context specificity and partly due to the different dimensions of frugality. Beyond ‘obviously’ frugal 
solutions, there is a broad range of solutions that incorporate key aspects of frugality (simplicity, 
low cost) while at the same time, they address needs that are not particularly basic (cars) or have 
a distinctly less than favourable ecological footprint (mobile phones). 

frugal 

for 

One relevant distinction in the context of this study is the contrast between the elaboration of 
needs addressed (i.e. if an innovation really addresses a bottom-of-pyramid, basic need, as often 
stipulated  in  the  literature)  and  the  level  of  technological  elaboration  (i.e.  whether  the 
innovation can be developed without any additional technological input) (cf. Figure 2). While these 
may  indeed  coincide,  there  is  in  principle  no  reason  why  they  must,  and  frugal  solutions  can  be 
developed based on one of them only. 

A  further  relevant  distinction  is  the  contrast  between  low  cost  and  ecological  footprint  (cf. 
Figure 3) which in some literature appears underdeveloped, as it is implicitly posited that all frugal 
innovations  are  in  some  way  automatically  socially  and  ecologically  beneficial.  In  fact,  however, 
many  frugal  innovations  have  quite  a  notable  ecological  footprint  and  many  firms  that  engage  in 
frugal engineering with the potential to unlock new markets in emerging economies will not per se 
be motivated by considerations of environmental sustainability. 

In  general,  different  types  of  frugal  innovations  are  pursued  based  on  different 
motivations  and  to  different  ends,  so  that  it  would  be  mistaken  to  assume  that  any 
convergence  between  them  was  likely  to  occur.  Instead,  frugal  innovation  should  be 
understood as a broad concept that provides multiple points of leverage to pursue different political 
objectives and contribute to the overall ambition to create more growth and jobs in different ways. 

9 

 
 
Figure 2:   Elaboration of Frugal Innovations:  

Technological vs. Needs-oriented Perspective 

Source: Own figure 

Figure 3:   Affordability vs. Ecological Footprint in Frugal Innovation 

Source: Own figure 

With  a  view  to  the  positioning  of  relevant,  known  examples  in  the  figures,  moreover,  it  becomes 
clear that focusing this study on obviously frugal innovation in which as many as possible 
of  the  above  criteria  are  met  would  not  only  result  in  a  limited  understanding  of  the 
phenomenon  as  such  but  also  in  its  missing  some  of  the  potentially  most  relevant 
examples. As the European market environment is neither broadly characterised through bottom-
of-pyramid populations nor through basic needs unmet, the most relevant interfaces between 
traditional technological activities in the European Union and frugal innovation may well 
exist  at  the  ‘boundaries  of  frugal’,  i.e.  those  solutions  defined  by  some,  but  not  all  aspects 
raised  in  the  literature.  Below,  typical  strategies  for  frugal  innovation  (cf.  The  Economist,  2015; 
Radjou  and  Prabhu,  2015)  are  outlined  with  reference  to  the  general  criteria  system  developed 
above.  

10 

 
 
 
The below listing provides a basic overview of various way of frugal innovation. 

1. 

  Local solutions to meet low-threshold demand on less developed markets 

Along  the  lines  of  the  discussion  on  grassroots  innovation,  many  ‘innovative  fixes’  under  frugal 
conditions  emerge  locally  to  address  specific,  context  dependent  problems.  Often,  such  solutions 
have  an  explicitly  social  ambition  as  they  address  latent  yet  pressing  basic  needs  of  a  local 
population  that,  without  an  affordable  solution,  would  remain  unmet.  While  their  degree  of 
robustness  and  simplicity  is  high,  they  are  strongly  adapted  to  certain  context  and  not  always 
relevant beyond (e.g: water filter powered by motorbike, solar light bulb). 

2.  

Local solutions for sustainability challenges on less developed markets 

Beyond their main ambition to address localised social challenges, some grassroots entrepreneurs 
develop  solutions  with  a  particular  focus  on  sustainability.  By  using  and  combining  available 
materials and commonly available traditional techniques they provide simple, robust solutions with 
high context-specific utility while at the same time reducing the overall use of resources on a larger 
scale.  Their  applicability  outside  of  their  initial  environment,  however,  is  equally  uncertain 
(example: agricultural innovation). 

3. 

Product  based  frugal  engineering,  corporate  “mass  frugal”  based  on  simple  de-
featuring and affordability 

Larger, often Western, firms tend to develop standardised ‘mass frugal’ products through a process 
of  de-featuring  existing  solutions.  The  most  common  motivation  for  this  strategy  is  to  unlock 
additional,  often  foreign,  markets  via  low  prices.  In  general,  it  relies  on  affordability  as  the  main 
vehicle to unlock additional markets and increase profit. Given their focus on opening up access to 
products to new markets, their ecological impact in particular can be negative rather than positive, 
for  example,  if  connected  to  throw-away  products  or  if  increased  usage  results  in  greater  CO2 
emissions (examples: Tata Nano, Gillette Guard). 

4.   Product based frugal innovation, based on increased utility through robustness and 

sustainability 

Instead  of  simply  removing  features  from  existing  products  other  external  developers  devise 
independent  frugal  solutions  that  create  additional  utility  for  low  income/bottom  of  pyramid 
customers through an increased robustness and durability – in part through co-creation with local 
actors.  Often,  such  solutions  are  more  independent  from  advanced  infrastructure  so  that  this 
approach implicitly increases the sustainability and resource efficiency of the supplied products and 
services (examples: Solar Lamps, Nokia 1100, Jaipur Foot).  

5.   Process based cost reduction, based on leveraging emerging market conditions and 

smart processes for cheap production 

A further option to lower prices and unlock low income markets are process based cost reductions. 
Here, ‘frugal prices’ are not (only) achieved by adapting the product but also through substantial, 
cost-cutting  adaptations  in  the  production  process.  At  times,  this  can  be  achieved  through  new, 
smart  processes  for  the  recombination  or  more  efficient  use  of  existing  resources  (for  example, 
Renault-Dacia’s  dashboard  was  designed  to  be  manufactured  from  a  single  injection-moulded 
piece).  Bringing  production  close  to  end  markets  also  reduces  logistical  costs.  Other  strategies, 
however,  exploit  gaps  in  environmental,  health  or  labour  regulation  –  or  simply  lower  wages  and 
may create a detrimental social and ecological impact.  

6.   Mass  customised  solutions  for  less  developed  markets  based  on  cooperation  with 

local partners 

Beyond  a  common  need  for  affordability,  frugal  market  contexts  can  differ  substantially.  To 
differentiate  between  genuine  bottom-of-pyramid  customers  and  emerging  middle  classes  or  to 
take  into  account  cultural  specificities,  some  firms  seek  to  create  mass-customisable  or  at  least 
modular solutions. In principle, such a process increases the local fit of the provided solution and 
implies a somewhat improved social outcome (example: household appliances). 

7.   Standardised  frugal  solutions  for  less  developed  markets  based  on    customised 

delivery concepts 

In  some  cases,  frugal  solutions  are  developed  around  a  rather  simple  and  standardised  product 
that is embedded in a centrally-designed yet context sensitive and adaptable service and delivery 

11 

 
concept.  Even  without  customization,  this  can  substantially  increase  a  per  se  standardised 
solution’s utility under various conditions. While these approaches do not necessarily come with a 
social or ecological ambition, they are  easily  amenable to such if consciously  pursued (examples: 
models to rent healthcare devices or solar panels). 

8.   Globally  transformative  solutions  based  on  challenges  initially  identified  in  frugal 

environments (reverse innovation) 

Importantly, however, some grassroots innovations that were originally designed to address rather 
context  specific  challenges  proved  very  amenable  to  larger  scale  application  and  in  some  cases 
even so superior to incumbent technologies that they caused a disruptive or at least transformative 
effect in the overall economic system. Typically, this scalability is caused by either their particularly 
superior  value  proposition  or  their  particularly  evident  social  or  ecological  benefit  (examples: 
Skype, e-bikes, mobile phone banking). 

2.1.2. Central preconditions for frugal innovation 

far, 

this 

So 
innovation  can  best  be  defined.  
This, however, does not  answer  the  question which  relevant preconditions have to be in place  so 
that frugal solutions can thrive and generate substantive socio-economic impact.  

report  has  considered  how 

frugal 

The following subsection will explore three main dimensions: 

  Actors and environments needed to encourage frugal thinking, 

  Strategies to scale frugal solutions to larger markets (and their limitations), 

 

The double role of regulation as both barrier and potential enabler. 

2.1.2.1.  Frugal mindsets: Seeing things differently 

The  literature  strongly  suggests  that  frugal  innovation  is  linked  to  a  specific  mindset:  
“not just a drastically different way of innovating or even a radical new way of running a business – 
it  is  about  fundamentally  shifting  the  corporate  mindset.”1  The  following  section  aims  to  develop 
this idea from the viewpoint of European innovators. It starts by exploring the individual level and 
then  places  the  individual  in  his  or  her  cultural  context,  before  discussing  the  issue  of 
transferability of contextual frugal solutions to larger markets. 

The individual perspective 

To establish the preconditions for making ‘frugal thinking’ a driver of frugal innovation in firms, it is 
obvious  to  start  by  looking  at  the  individuals  driving  innovation  processes.  As  the  inception 
workshop established, the individual view on innovation needed to conceive and implement frugal 
innovations  is  different  from  that  currently  prevalent  among  developers  in  many  of  Europe’s 
technology  leading  technology  firms.  Against  this  background,  the  following  section  explores  to 
what extent frugal thinking relates to dimensions like creativity, freedom, motivation, and culture. 

Conventional conceptions of innovation tend to envisage this process as stepwise, following a more 
or less linear process  from  research  to technology to product. Frugal innovation, on the contrary, 
requires  a  different  approach  that  involves  a  consideration  of  the  user  from  the  outset.  In  most 
cases,  such  approaches  can  be  traced  back  to  individuals  who  intentionally  diverge  from 
established processes due to a different understanding and perception of the nature and purpose of 
innovation. Such diverging perception,  and  the  diverging behaviour that follows, can conceptually 
be captured in the concept of ‘positive deviance’; “intentional behaviors that depart from the norms 
of  a  referent  group  in  honorable  ways”  (Spreitzer  and  Sonenshein  2004:  828).  Importantly,  not 
every form of creativity necessarily follows honourable intentions or deviates from norms, so that 
neither creativity nor innovation meets the conditions of positive deviance per se. Nevertheless, the 
concept of positive deviance  provides a  basis to  understand and conceptualise  frugal mindsets: If 
creative individuals’ behaviours deviate from innovation norms in their company, industry, market, 
i.e.  from  ‘conventional  ways  of  innovating’,  by  aiming  to  limit  the  use  of  resources,  even  if 
available, or, from  the outset, conceive technologies  and products to serve new user  groups,  this 
could be understood in the sense of positive deviance. 

Hence,  several  factors  can  be  identified  that  characterise  people  with  ‘mental  prerequisites  for 
frugal mindsets’. At the core lies the problem-solving approach. This approach implies that the 
creation  process  starts  with  a  certain  challenge  and  the  wish  to  overcome  it.  Such  an  attitude 
requires  an  open  mindset  and  the  ability  to  observe  one’s  environment  with ‘open  eyes’,  free  of 
prejudice and ready to challenge prevalent convictions. Coupled with creativity, energy and 
the motivation to break out of given routines, this favours ‘unconventional projects’ that positively 
deviate from existing practices and habits. Generally such individuals are highly creative when it 

1  http://knowledge.insead.edu/innovation/frugal-innovation-a-new-business-paradigm-2375. 

12 

 
                                                 
comes to developing new ideas, but at the  same time ‘down to earth’ when it comes to 
customer needs and acknowledging resource limitations. In other words, a frugal mindset is 
open  to  perceive  things  from  different  angles  rather  than  judge  them  based  on  existing  norms, 
open to intuition rather than overly reliant on analytics (Briggs and Myers, 1995). 

A further relevant concept of this way of thinking  has been proposed by Claude Lévi-Strauss and 
his  approach  of  “bricolage”  (1962).  At  the  core,  this  concept  focuses  on  solving  problems  with 
given resources through  improvisation and by using existing ingredients in uncommon ways. This 
process  of  “testing  and  crafting”  not  only  requires  a  certain  mental  disposition  of  seeing 
opportunities  differently,  but  also  creativity  and  a  pool  of  experience.  Lévi-Strauss  contrasted 
this  approach  to  the  engineering  mode  of  creation,  this  latter  being  characterised  as  developing 
items  along  a  (predetermined)  logical  and  linear  structure.  At  the  time,  he  assigned  the 
engineering  view  to  Western  traditions  with  their  rational  and  systematic  approach  compared  to 
rather  improvising  approaches  as  observed  in  the  cultures  of  indigenous  people  using  traditional 
techniques.  From  a  current  perspective,  these  two  approaches  could  still  be  interpreted  as 
archetypes  of  exploration  and  exploitation  respectively:  while  the  engineer  aims  to  explore  new 
technologies  and  add  to  the  existing  knowledge  base,  the  “bricoleur”  or  “tinkerer”  uses  existing 
knowledge and resources, from a continuously growing respository (Sarasvathy, 2001). As will be 
outlined  below,  however,  it  has  been  demonstrated  that,  contrary  to  Lévi-Strauss’  generalist 
dichotomy, exploitation does play a substantial role in the European economy, providing a point of 
leverage for further consideration with respect to the broader adoption of frugal mindsets. 

To summarise, an individual’s ability to pursue frugal innovation projects strongly depends on his 
or her ability to identify or even ‘foresee’ problems that others do not see or not view in 
the same way. Moreover, it depends on willingness to consider problems an opportunity to 
respond  with  creative  solutions  in  deviance  from  prevalent  practices  and  habits  –  by 
including elements of bricolage. Additionally, frugal innovators tend to have  a different perception 
of resources, meaning that they are able to conceive of resource scarcity as a driver rather than a 
restriction of creativity, inspiring them to deploy given resources in unconventional and unexpected 
ways,  for  other  purposes  than  initially  foreseen,  or  combine  them  in  different  ways  and  relations 
than usually done. 

In  addition  to  the  problem-solving  and  the  perception  factors,  the  “will  factor”  (Héraud/Muller, 
forthcoming) constitutes a third mental prerequisite. It complements mere creativity as defined by 
Sternberg/Lubart (1999) as “novelty and appropriateness of an idea” with a “willingness to change 
the  world”.  This  implies  that  for  most  frugal  innovators  it  is  not  enough  to  develop  ideas  and  to 
conceive  ways  to  apply  and  exploit  them;  rather,  they  seek  to  pursue  a  certain  objective,  be  it 
entrepreneurial,  social  or  environmental.  Taken  together,  the  mental  prerequisites  of  frugal 
innovators  thus  involve  creativity,  vision-building,  and  an  entrepreneurial  spirit  as  well  as  the 
courage to transcend and break existing rules and paths, with the intention to realise their ideas. 
To  do  so,  frugal  innovators  often  seek  to  cross  boundaries  between  different  worlds  or  to  link 
different  communities,  similar  to  the  role  of  “knowledge  angels”  knowledge-intensive  business 
services  (Muller,  Zenker  and  Héraud,  2015).  Arguably,  connecting  the  worlds  of  exploitation  and 
exploration  thus  constitutes  a  central  opportunity  for  aspiring  frugal  innovators  in  the  European 
Union. 

Culture and philosophy 

Individuals  with  frugal  mindsets  do  not  act  in  isolation.  They  are  part  of  social  groups  and 
communities  that  shape  their  values  and  their  behaviours.  In  the  literature,  for  example,  frugal 
innovation  is  often  discussed  as  particular  to  an  Indian  or  Asian  context  (see  ‘jugaad  innovation' 
and  frugal  creativity  being  part  “of  the  Asian  DNA”).2  To  an  extent,  therefore,  it  has  to  be 
questioned  whether  frugal  mindsets  can  be  ‘learned’  by  everyone  or  if  they  are  contingent  on 
specific  cultural  and  philosophical  backgrounds.  In  other  words:  Can  the  mindset  of  individuals 
shape a frugal context or is the individual to be seen as reflecting and determined by the values of 
a larger group or culture? 

Without aspiring to answer this question at a fundamental level, it can be acknowledged that frugal 
thinking is indeed common in  certain cultures.  If national cultures (and norms) indeed differ with 
respect to ‘uncertainty avoidance’, ‘long term orientation’ and ‘individualism’ (Hofstede, 1984) this 
will have consequences  not  only on how work is performed  but also on how  innovation  processes 
are set up. In that sense, Indian innovators can justly view their individual activities as related to 
certain national characteristics. In a general sense, moreover, such patterns have been confirmed 
in empirical studies (Brem and Freitag, 2015).  

On  the  other  hand,  today’s  innovation  practices  are  established  in  different  companies,  be  they 
Western or Asian, and thus in a more complex and diverse range of contexts than can be captured 

2  http://thinkbusiness.nus.edu/articles/item/126, referring to Radjou et al. (2012). 

13 

 
                                                 
through the attributes of a specific national culture. In any country, some companies may oppose 
deviant  thinking  while  others  may  nurture  it,  giving  more  room  to  ‘intrapreneurial  bricolage’ 
(Halme  et  al.,  2012).  As  outlined  above,  moreover,  ‘frugal  thinkers’  tend  to  be  less  limited  by 
conventions,  be  they  culturally  or  firm-specific.  Finally,  successful  practices  tend  to  reconstitute 
themselves vigorously and thus to shape their surrounding context rather than remain limited by it. 
In  consequence,  frugal  mindsets  will  not  be  absent  in  Western  contexts,  nor  should  they  by 
definition be impossible to acquire.  Frugality  implies a different way of thinking: solution-oriented 
instead  of  primarily  technology-based.  For  this,  many  examples  can  be  found  in  Western 
economies, even though they are typically not labelled as ‘frugal’.  

Nonetheless,  specific,  favourable  environments  will  be  necessary  to provide  room  for the  spirit  of 
frugality in Western industrial culture as under standard framework conditions it will have difficulty 
thriving (Halme et al., 2012). Radjou et al. (2012) argue that the R&D-related innovation approach 
which is common in a large share of Western companies has created persistent path dependencies 
that reduce their “spirit of flexibility”: “With so much money invested in R&D, Western firms have 
become risk averse in their approach to innovation. They have implemented standardised business 
processes  [...]  to  manage  and  control  their  innovation  projects.  These  structured  processes  were 
expected to drastically reduce uncertainty – and risk of failure – from the entire innovation process 
and  make  R&D  projects  more  predictable  in  both  execution  and  outcomes.  But  these  structured 
business processes and methods are unfit to deliver the agility and differentiation that enterprises 
need in a fast-paced and volatile world.” (Radjou et al. 2012: 10). In short: many such firms have 
lost  the  very  flexibility  needed  for  any  user-oriented  and  certainly  frugal  innovation  and  their 
current internal culture is likely to stifle any individual attempts to that effect.  

This, however, is a result of specific developments, not deterministic, inescapable cultural traits. As 
Tiwari  et  al.  (2016)  elaborate,  frugality  and  thrift  were  acknowledged  as  positive  norms  from 
Seneca to Kant and Smith to Weber while a sense of improvisation, Yankee ingenuity, was among 
the triggers of the Industrial Revolution (Radjou et al., 2012). Hence, the main task for Europe is 
one of re-discovering frugal spirits and re-learning frugal approaches. In recent years, there have 
been  indications  of  a  rising  number  of  ‘intrapreneurial  innovators’  in  firms  as  well  as  a  ‘maker 
movement’ outside of them which seeks to make this transition – drawing on new information and 
communication technologies, and promoting co-development between formerly fragmented groups 
and communities.  

What  may  be  even  more  important  is  a  problem-meets-solution  oriented  ‘frugal  mindset’  can  be 
brought  about  by  allowing  open  discussions  of  current  challenges  and  by  giving  room  to 
‘entrepreneurial  activity  within  large  organisations’  as  a  means  to  more  creatively  bundle  scarce 
resources  (Halme  et  al.,  2012).  Furthermore,  society  can  be  considered  a  laboratory  for  what  is 
missing  in  industry:  How  could  Dawanda,  the  preference  for  certain  food  and  eating  cultures 
leading  to  recipe  sharing,  specialised  restaurant  recommendations  or  ‘Social  Cooking’  as  well  as 
voluntary support for refugees, to name just a few examples, gain so much momentum in such a 
short  period of  time?  For large organisations,  Jaideep  Prabhu  thus  recommends  giving  space  and 
room  to  experiment  internally  while  at  the  same  time  seeking  to  collaborate  with  actors  from 
society or other national contexts. 

Transferring, initiating and learning frugal mindsets 

If  frugal  mindsets  can  in  principle  be  acquired,  yet  the  current  situation  is  far  from  satisfactory, 
new approaches need to be identified to spread and ‘teach’ them. To do so, it is instructive to build 
on the three main preconditions that allow frugal mindsets to thrive: (i) individuals’ open 
attitude  and  willingness  to  identify  and  solve  problems,  (ii)  an  appropriate  intra-firm 
environment  allowing  the  spread  of  unconventional  ideas  (iii)  an  external  environment 
or community that provides additional inspiration, visions and ideas. 

Concerning the first aspect, it can be concluded that ‘creative minds’ may be everywhere, but most 
often need to be  motivated and perhaps  incentivised  to put  forward  and  pursue  their visions and 
creative  ideas.  With  a  view  to  the  second  and  the  third  aspect,  Cohendet  et al.  (2010)  underline 
that individual characteristics only partly explain differences in creativity. Contextual factors are of 
equal  importance:  “The  creative  output  (products,  services,  ideas,  procedures,  and  processes)  of 
the  entire  system  stems  from  the  complex  mosaic  of  individual,  group,  and  organizational 
characteristics  and  behaviors  occurring  within  the  salient  situational  influences  (both  creativity 
constraining and enhancing) at each level of social organization” (Woodman et al. 1993: 298). To 
promote a frugal culture of  innovation  and  encourage  latent or nascent frugal mindsets to thrive, 
therefore, suitable environments for both learning and practice will have to be nurtured at both an 
organisational and a local ecosystem level.  

In  this  respect,  the  following  key  persons  or  groups  of  individuals  may  play  a  catalytic  role  in 
improving the immediate and larger environment of the frugal solution.  

14 

 
  High-level decision makers who support rather than stifle ‘intrapreneurship’ and lateral 
thinking in their organisation and permit contact to external sources of inspiration, 

 

 

 

Early producers who are not necessarily the genuine ‘inventors’ of the frugal solution but 
belong to the first ones to diffuse it and demonstrate its commercial viability,  

Early adopters who add momentum to its diffusion by adopting, adapting or transforming its 
first versions (comparable to beta-users in the field of software development), 

Trend launchers, who as ‘spokespeople’ or ‘promoters’ help raise awareness and create 
relevant user communities for frugal solutions in a certain area.  

2.1.2.2.  From local ecosystems to larger markets: Issues of scalability 

In  outlining  how  frugal  thinking  can  be  brought  to  fruition,  the  section  above  describes  an  initial 
step in the itinerary of a frugal innovation, from conception to socio-economic impact. To achieve 
noteworthy  socio-economic  impact,  however,  frugal  solutions  have  to  be  transferred  out  of  their 
original ‘biotope’ onto larger markets – actually to reach ‘more’ people. 

Hence,  localised  ecosystems  provide  a  favourable  incubator  for  frugal  innovation  but  they  may 
eventually  become  obstacles  to  scaling  situated  frugal  solutions  to  a  socio-economically  and 
industrially relevant level.  If  frugal  solutions remain  overly contingent and their utility proposition 
dependent  on  a  specific  socio-economic  context,  their  impact  will  remain  unduly  limited.  In  the 
following,  therefore,  this  section  will  explore  some  of  the  characteristics  of  situated  frugal 
innovation  –  and the difficulties that these  may  entail  in  the  process  of scaling up  their provision 
beyond their initial context.  

Obstacles to scaling up localised frugal solutions to larger markets 

In  general  terms,  three  main  categories  of  obstacles  can  be  identified  that  hamper  the  market 
enlargement of frugal solutions. 

The first category concerns the possible disconnection between producers and users. In the case of 
local  ecosystems  one  may  assume  that  the  community  of  producers  corresponds  more  or  less  to 
the  community  of  users  or  that  at  least  these  two  communities  are  strongly  interrelated.  In  the 
case  of  larger  markets,  this  is  no  longer  the  case.  Producers  most  often  do  no  more  constitute  a 
community but rather a sector or industry and if there is any identifiable community of users, this 
may be rather fragmented. In addition, the perception of frugality may be very different from one 
socioeconomic context (i.e. market) to another. As a consequence, motivations for ‘buying frugal’ 
may be so different that producers are not able to identify the potential broader markets. This may 
be  especially  true  when  it  comes  to  transform  a  solution  developed  out  of  scarcity  to  ‘something 
hype’ because of its simplicity or environment-friendly nature for instance. 

The  second  category  relates  to  the  way  producers  conceive  and  may  develop the  production  and 
delivery  processes  of  their  frugal  solution.  For  instance,  crafts  or  agricultural  products  using 
traditional techniques are often produced in specific regions, using local resources and sold in only 
a few locations. This may constitute a unique selling proposition, but most often the local producers 
display  neither  consciousness  nor  specific  interest  to  bring  these  products  to larger  markets.  The 
same  applies  to  the  question  of  market  segments.  While  local  market  conditions  are  usually 
intuitively well known, aiming for larger markets usually requires further marketing skills, such as a 
good  knowledge  of  price  sensitivity  of  different  market  segments.  This  may  be  especially  true  in 
extreme  cases  when  the  initial market  corresponds  to  medium-  and low-end market  segments  in 
poor or emerging countries and  the  targets are  high-end markets of  developed countries. Finally, 
the  case  of  low-cost  air  filters3  demonstrates  that  some  propositions  may  be  compelling  in  some 
places but not at all relevant elsewhere. 

Finally,  different  implications  result  from  producing  and  selling  at  a  larger  scale  for  a  broadened 
market. This may concern in particular a minimal level of standardization that must occur at least 
in the production process if not within the frugal product and/or the service itself. Standardization 
constitutes  in  some  cases  a  hampering  factor  mainly,  but  not  only,  because  of  the  initial 
investments  that  may  be  required.  In  fact  the  quasi  artistic  dimension  (or  at  least  handicraft 
character)  of  small  scale  (or  even  unique)  frugal  products  probably  gets  lost  when  these  frugal 
products are made available on a larger scale. Customization can be (at least partially) a solution 
from a marketing point of view, but the initial genuine character may vanish. The same applies to 
the  issue  of  norms  (e.g.  safety  regulations)  when  it  comes  to  larger  scales  of  production  and/or 
sale of frugal products and services. 

3   smartairfilters.com 

15 

 
                                                 
In summary, the challenge of spreading innovative frugal solutions to larger markets touches upon 
the  more  general  challenge  of  connecting  local  producers  and  a  broader  consumer  base.  In 
consequence,  a  key  factor  allowing  producers  to  successfully  target  broader  markets  is  the 
availability  (or  development)  of  appropriate  and  reliable  delivery  channels  that  enable  them  to 
bridge geographic distance and market segments with different specificities. 

Paths leading from local to larger markets 

Depicting the different ways a frugal product or service conceived (and initially produced) within a 
local  ecosystem  may  be  distributed  on  a  larger  scale  requires  consideration  of  market 
segmentation.  While  market  segmentation  can  derive  from  income  segmentation  –  and  in  the 
discussion  on  frugal  innovation  is  most  often  referred  to  in  that  sense  –  it  may  also  result  from 
demographic  or  even  lifestyle  segmentations,  as  the  case  of  “Frugal  Freiburg”,  identified  by 
Leadbeater (2014) vividly illustrates. Furthermore, it results from technological lifecycles that, with 
the  advent  of  particular  enabling  technologies,  may  allow  for  new  and  different  opportunities  for 
frugal solutions (cf.  Gallis and Rall,  2012).  Finally, it  can result from  linguistic, cultural or market 
characteristics.  Arguably,  such  market  segmentation  is  a  much  more  prominent  challenge  in  the 
institutionally, culturally, linguistically and economically fragmented European environment than in 
the  much  larger  markets  of  e.g.  India  and  China.  While  these  emerging  economies  are  not 
necessarily less heterogeneous in  economic  terms,  regulatory, cultural and linguistic barriers  may 
be less prevalent in the multicultural nation of India than they are in European Union as, like China, 
it at least shares a lingua franca.  

In that sense, emerging economies may profit from a large market advantage in the field of frugal 
innovation  alike  to  that  commonly  attributed  to  the  United  States  in  the  high-tech  field. 
Remarkably, most European frugal innovations have so far emerged in those areas  that are  least 
affected  by  a  national  fragmentation  of  customer  behavior  and  regulation  (Ryanair  in  air  travel; 
Skype and TransferWise in the virtual domain) while, at the same time, many experts on Eastern 
Europe suggest that the individual markets of these economies could be too small for large-scale, 
non-situated business models based on frugal innovation – and structural boundaries too difficult to 
overcome4. 

Beyond these macro-level obstacles relating to national boundaries and regulatory barriers, further 
challenges may result within frugal markets on the side of delivery. Typical retailers, for example, 
will usually not accept (or legally not be allowed to provide) frugal solutions on their shelves that 
are not standardised products. Contextually embedded solutions, however, often involve a certain 
do-it-yourself component which may not meet these criteria5. 

For  its  socio-economic  impact  and  commercial  relevance,  in  any  case,  it  is  far  from  enough  to 
demonstrate  the  viability  of  a  certain  frugal  innovation  in  a  specific  context.  Instead,  the  more 
relevant  question  will  remain  how  the  interested  producer  finds  ways  to  adequately  connect  with 
and involve an increasingly complex customer base.  

In summary, three basic pathways of scaling up frugal solutions can be outlined: 

1.  The initial frugal  inventor or group of inventors develop their own  growing business  (e.g. as a 

start-up), expanding its sales from segment to segment. 

2.  The diffusion of the frugal solution through an expanding phenomenon of adaptation over time 
without  one  clearly  traceable  ‘inventor’  and/or  ‘birthplace.  Following  global  trends,  activities 
may occur simultaneously in different market segments. 

3.  The solutions found in a local  ecosystem  serve  as a  source  of inspiration for others  –  who are 
not necessarily embedded or linked to this ‘original’ local ecosystem. In this case it is rather an 
effective translation of the philosophy behind a solution that allows a larger scale of production 
and/or distribution in totally different market segments. 

Against this background, Figure 4 illustrates the implications of market segments in terms of paths 
leading from local to larger markets. 

4   Interviews  with  Prof.  Slavo  Radosevic,  UCL;  Mark  Boden,  IPTS;  Yannis  Tolias,  Innovatiasystems  Greece; 

Prof. Boris Cizelj, Slovenia (former Ambassador to EU) 

5   cf. example of smartairfilters.com  

16 

 
                                                 
Figure 4:   Background in terms of frugal market-customer requirements 

Source: Laboratory for Manufacturing Systems and Automation (LMS) (2015): 27 

Mastering complexity  

Many  of  the  commonly  quoted  business  cases  of  and  for  frugal  innovation  focus  on  limiting 
complexity  thus  enabling  smart,  high-utility,  but  low  cost  solutions.  Unsurprisingly,  therefore, 
many  of  these  business  cases  have  been  developed  in  low-wage  countries  with  comparatively 
limited educational levels. In and for those, frugal innovation is a natural choice. 

From  a  global  perspective,  however,  most  EU  Member  States  are  high-wage  economies  with 
comparatively  high  levels  of  education,  for  which  the  more  complex  parts  of  the  value  chain  in 
which substantial value is added are considered more economically relevant. In this context, frugal 
approaches are often neither required nor the obvious choice. 

Once  a  firm  or  entrepreneur  begins  to  scale  up  frugal  innovations  to  high-volume  markets, 
however,  additional  sets  of  complex  skills  are  needed  that  go  beyond  mere  entrepreneurial 
ingenuity  of  the  grassroots  innovation  type  and  depends  on  the  involvement  of  an  educated 
workforce.  Beyond  technological  qualifications  these  requirements  extend  to  other  parts  of  value 
creation, related to contexts of delivery such as general market intelligence, interaction with future 
customers or co-creation with existing ones.  

Relevant areas of such non-technological yet complex knowledge include: 

  Collecting, processing and analyzing information on diverse markets, 

 

Intercultural skills, 

  Regulation and standardization management, 

  Application related knowledge (e.g. medical applications), 

 

Technology processing, 

  Set up of manufacturing, 

 

Procurement, 

  Distribution in various markets, 

  Value chain management. 

To draw on such competences successfully, frugal innovators in technologically leading as well as in 
emerging economies depend  on  access to qualified personnel with skills beyond the technological 
realm. In brief, the non-technological challenge to successfully  deliver  frugal solutions to multiple 
markets  out  of  growing  firms  is  such  that  it  can  only  in  exceptional  cases  be  addressed  through 
learning-on-the-job alone. In most cases, support staff with formal qualifications in social sciences, 

17 

 
 
medicine,  economics  or  even  humanities  will  be  needed  in  addition  to  a  core  team  technological 
developers  with  a  ‘frugal  mindset’.  Ideally,  even  the  development  teams  themselves  should  be 
interdisciplinary and open. 

2.1.2.3.  Barriers and enablers: Regulation and institutional frameworks  

The  question  of  whether  regulation  ultimately  fosters  or  hinders  innovation  has  not  yet  been 
comprehensively  answered.  The  empirical  literature  on  the  impact  of  regulation  on  innovation  is 
rather  scarce,  and  often  only  provides  anecdotal  evidence,  while  the  few  existing  quantitative 
studies  show  more  or  less  ambiguous  results  (Pelkmans  and  Renda,  2014).  What  most  of  the 
scientific  literature  on  the  topic  has  in  common  is  the  basic  argument  that  regulation  can  on  the 
one hand drive  innovation by  having an  “incentive impact”, increasing the available resources  for 
innovation,  but  on  the  other  hand  is  associated  with  “compliance  costs”,  having  an  innovation 
hindering effect (Carlin and Soskice, 2006; Stewart, 2010). This already implies that the effect of 
regulation  on  innovation  is  dependent  on  the  type  of  regulation  (whether  it  directly  targets 
innovation  or  not  and  whether  it  is  aimed  towards  short-  or  long  term  goals)  and  also  on  the 
context of the targeted firms, e.g. their sector or size (Blind, 2012). The debate on how regulation 
affects  innovation  has  recently  also  entered  the  arena  of  policy  making,  since  improvements 
towards making the regulatory framework more innovation friendly can be seen as an instrument 
to  promote  countries  where  an  increase  in  public  R&D  expenditures  is  not  a  viable  option, 
especially after the financial crisis (Blind, 2012).  

The  question  of  how  regulation  particularly  affects  frugal  innovation  has  not  yet  been  debated  in 
more detail. The mentality of ‘frugal thinking’ can be seen as a response to constraints in resources 
– financial, material, temporal or institutional – with the aim of turning them into an advantage for 
users  as  well as providers of  frugal solutions.  Frugal products are  characterised  as ‘good enough’ 
and ‘having a better fit’ with a view to actual user demand and often are the result of creative and 
‘out  of  the  box‘  thinking  (Agarwal  and  Brem,  2012;  Bound  and  Thornton,  2012;  Tiwari  and 
Herstatt, 2012; Zeschky et al., 2014). At least at first sight, this stands in conflict with the view of 
regulation  and  the  need  to  comply  with  certain  standards  (e.g.  environmental,  safety),  laws  and 
intellectual property rights (IPR), which is especially problematic in comparably regulated markets 
of industrial economies. Consequently, the current opinion of experts6 suggests a negative impact 
of  regulation  on  frugal  innovation,  as  the  costs  of  adapting  to  a  given  amount  of  regulation  in  a 
certain market, e.g. bureaucracy, information gathering etc., seem to outweigh the benefits. 

Before  discussing  this  in  zdetail,  the  term  regulation  has  to  be  defined,  to  gain  a  better 
understanding about where challenges may arise and which policy measures might be adequate to 
address  these  challenges.  The  classic  OECD  definition  states  that  “regulation  refers  to  the 
implementation of rules by public authorities and governmental bodies to influence market activity 
and the behaviour of private actors in the economy” (OECD, 1997). This definition can be further 
differentiated  into  economic,  social  and  institutional  regulations.  Economic  regulations  cover 
competition, antitrust, mergers and acquisitions, market entry and price. Social regulations refer to 
environmental  protection,  workers  health  and  product  and  consumer  safety,  while  institutional 
regulations cover liability law, employment protection, immigration and bankruptcy laws as well as 
IPR (OECD, 1997). 7    

From  these  dimensions,  it  can  be  derived  that  there  are  certain  regulation  regimes  that  directly 
target innovation as an ultimate goal, as in the case of IPR, but the bulk of regulations are geared 
towards  other  economic,  environmental  or  social  goals.  Regulations  that  do  not  directly  target 
innovation  might  nevertheless  spur  innovation  in  the  sense  that  firms  have  to  adapt  to  the 
regulatory  framework  by  improving  their  products  and  processes,  but  especially  here  the 
compliance costs have to be taken into account (Blind, 2012).  

A very prominent example of a regulation directly targeting innovation is the patent system, which 
grants  inventors  a  temporally  limited,  exclusive  right  to  sell  products  based  on  their  invention  in 
exchange for full information disclosure. Besides the fact that the patent system is associated with 
certain costs at the patent  process  stage (patent application, translation, renewal or lawyer fees) 
as  well  as  the  diffusion  stage  (opposition,  litigation  and  commercialization),  which  already  might 
deter firms from filing a patent (Frietsch et al., 2013), the patent system also puts a challenge on 
frugal  innovation  from  another  perspective.  Since  frugal  innovations  often  are  characterised  by 
being  “adapted  to  actual  demand”  (Bound  and  Thornton,  2012),  they  often  do  not  constitute  a 
patentable  invention  per  se,  as  they  may  fail  to  adhere  to  the  novelty  criterion  within  the  patent 
system. This implies that a regulation, in this case IPR, at least to a certain extent excludes frugal 

6   based on this project’s inception workshop held in Brussels, February 17th, 2016. 
7   Beyond these, tax law, public procurement, labour regulation and standardization and standards have to be 

mentioned (OECD 1997) 

18 

 
                                                 
innovators from a system of rules that is supposed to spur innovation. The criteria for patentability, 
however,  at  least  slightly  differ  across  jurisdictions  in  terms  of  what  is  patentable  and  how  the 
novelty criterion is interpreted. China, for example, changed its novelty criterion from “new to the 
market” to “new to the  world” to adhere to the TRIPS8  agreement in  2009  (Frietsch  et  al., 2012; 
Frietsch  and  Schüller,  2010).  Another  interesting  example  is  the  Indian  patent  system,  which  is 
comparably special in dealing with patents in pharmaceuticals. Although India amended its patent 
law to adhere to the TRIPS standards and now provides protection for pharmaceutical products, it 
still limits patents on “incremental” pharmaceutical innovations (Sampat, 2010), which can be seen 
as  a  major  obstacle  for  frugal  pharmaceutical  innovations.  These  examples  show  that  regulation, 
i.e. in this case the amendment of the patent system that raised the bar for patentable inventions 
regarding novelty and inventive step, excludes certain frugal innovations that might not be “new to 
the world” or “too incremental” from being patented. 

However,  there  are  various  examples  of  frugal  innovations  that  have  recently  emerged  in 
developing  economies  like  India,  China,  or  South  Africa.  From  the  regulatory  perspective,  this 
might have to do with what has been labeled “institutional voids” in the scientific literature (Khanna 
and  Palepu,  2010),  which  describe  missing  institutions  and  intermediaries  within  a  market 
economy.  Usually,  these  institutional  voids  are  discussed  as  driving  up  transaction  costs,  as  the 
market lacks access to e.g. information,  risk-capital or qualified labor (Soni  and Krishnan,  2014). 
Yet from the perspective of frugal innovations, another way of looking at such deficiencies is that 
they actually might favor frugal innovations, due to less tight environmental and legal regulations 
(Bhatti, 2011; Radjou et al., 2012).  

A prominent example at this point is the Chinese “Shanzhai” movement. Though Shanzhai used to 
be  seen  as  a  simple  culture  of  product  or  brand  infringement  and  counterfeiting,  it  has  at  least 
partly moved to become an industry of innovative adaptation of existing goods serving the needs of 
local markets, e.g.  a strong flash-light coupled to  an  already existing  cell-phone for  customers in 
rural  areas.  This  includes  rapid  production  cycles  of  Shanzhai  firms  as  well  as  a  very  high 
manufacturing  flexibility  adapted  customer  needs  (Ming  and  Flowers,  2016;  Zhu  and  Shi,  2010). 
Another  renowned  example  of  a  frugal  innovation  in  a  less  regulated  environment  is  the  M-Pesa 
micro-financing  service  launched  by  Vodafone  and  Safaricom  in  Kenya  and  Tanzania  in  2007.  M-
Pesa allows users to easily transfer, deposit and withdraw money with a mobile device, giving the 
Kenyan people access to the formal financial system (Saylor, 2012). Due to the massive growth of 
the service, Kenyan banking institutions lobbied for a government audit against the service, which, 
however,  declared  that  M-Pesa  was  in  line  with  the  country’s  objectives  for  financial  inclusion, 
partly also because M-Pesa engaged Kenyan regulators (Mbiti and Weil, 2011; Ministry of Finance 
of  Kenya,  2009).  Thus,  the  less  heavily  regulated  financial  services  sector  in  Kenya  allowed 
Vodafone as a telecommunications provider to enter the financial services market segment. M-Pesa 
then  also  expanded  to  other  markets  like  South  Africa  or  India,  but  still  struggles  with  the  local 
regulatory requirements.  

Similar financial services businesses not only exist in developing countries, but also within the EU. 
Two examples are  TransferWise  and TransferGo. TransferWise  is a UK-based peer-to-peer money 
transfer service, developed in Estonia and launched in January 2011, that efficiently routes cross-
national  payments  to  avoid  costly  currency  conversion.  TransferGo  is  also  a  UK-based  company, 
although the idea was developed in Latvia. It follows a similar business model as TransferWise, yet 
with a different logic. While TransferWise redirects money between senders and recipients to avoid 
currency  conversion,  TransferGo  sets  up  digital  accounts  within  the  country  a  person  works  so 
money  transfers  do  not  have  to  leave  the  country.  What  the  two  firms  have  in  common  is  their 
status as a small payment institution (SPI) within the UK. The SPI status is a license that firms can 
acquire  from  the  UK's  Financial  Conduct  Authority  (FCA)  and  the  Prudential  Regulation  Authority 
(PRA). To become an SPI, firms have to meet certain regulatory conditions within the UK. However, 
these conditions are less strict compared to becoming an Authorised Payment Institution (API), i.e. 
the  costs  related  to  regulation  are  lower.  This  implies  that  firms  in  Europe  do  not  face  an 
institutional void in a strict sense. Yet, it  is sometimes possible in developed countries to identify 
‘institutional  niches’  that  provide  a  looser  regulatory  framework.  All  of  these  examples  show  that 
domestic and foreign firms are able to use institutionally weaker environments for their innovative 
advantage  with  new  business-  or  service  delivery  models  or  process  innovations,  adapted  to  the 
local  market,  while  the  absence  of  economic  intermediaries  might  be  more  problematic  for  firms 
from industrialised economies as they are confronted with a less regulated (and unfamiliar) context 
(Soni and Krishnan, 2014). This might be even more problematic for SMEs as they lack  resources 
to experiment on foreign markets, build up cooperations, labs etc.  

8   The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) administered by the World 
Trade Organization (WTO) defines international "minimum rules" for IPR regulation. It was negotiated at the 
General Agreement on Tariffs and Trade in 1994 and came into force in 1995. 

19 

 
                                                 
In  sum,  it  can  be  stated  that  there  is  no  regulation  that  is  tailor-made  to  frugal  innovation,  i.e. 
there is no direct incentive to innovate frugal and the existing regulations can be assumed to rather 
scale up costs instead of reducing them. It can thus be hypothesised that regulation is negatively 
correlated  with  the  emergence  of  frugal  innovations,  which  might  be  even  more  problematic  for 
SMEs than for large firms who are less  financially constrained to meet the demands of regulatory 
compliance.  

Yet,  from  a  theoretical point  of  view,  there  are  at  least  two  angles  where  policy  might  come into 
play.  The  first  is  that  any  regulation  regarding  frugal  innovation  should  move  towards  regulating 
good  innovative  outcomes  rather  than  the  processes  of  how  these  outcomes  are  achieved,  i.e. 
there should be a clear incentive, while compliance costs should be kept at the minimum. Another 
starting point could be the institutional void that actually seems to favour frugal innovations. Firms 
from  developed economies  could be  encouraged to  generate  inventions in  less  regulated  markets 
by  experimenting  and/or  tapping  into  local  knowledge  sources  as  well  as  potential  customers.  In 
this case, however, it would be extremely important to make sure such processes are ethical and 
non-exploitative. An option for foreign markets would be to generate a less regulated environment 
within the home markets where firms are able to test new products and processes without adapting 
to the full regulatory requirements.  

2.2. 

Frugal innovation as an opportunity for Europe 

While  the  concept  and  practice  of  frugal  innovation  have  their  roots  in  emerging  and  developing 
economies, this project starts from an assumption that frugal innovation is also relevant to Europe. 
This section explores why, how and to what extent frugal innovation may be applicable in Europe, 
considering three main lines of argument: 

 

 

 

Emerging markets offer huge opportunities for European firms. However, to compete 
effectively in these markets, companies need to embrace frugal innovation, in order to meet 
demands of highly price-sensitive consumers. 

There is also some demand for frugal innovation within Europe, not only in emerging 
markets in Eastern Europe but also in developed economies in the west. Further, this 
demand is likely to increase in future, as a result of socioeconomic and demographic change 
(e.g. an ageing population) and increasing constraints on resources. 

Frugal innovation could, theoretically, generate additional social and environmental benefits 
and help to tackle common public policy challenges in Europe, from the challenge of 
delivering good public services in conditions of austerity and growing demand, to promoting 
social and economic inclusion and promoting ecological sustainability. 

The  existing  literature  on  frugal  innovation  focuses  largely  (although  not  exclusively)  on  issues 
surrounding  the  design  and  manufacturing  of  frugal  products.  These  themes  have  relevance  in  a 
European context, and are particularly important for this project given its focus on the relationship 
between  advanced  technologies  and  frugal  innovation.  Nevertheless,  this  section  also  notes  that 
other ‘lenses’ on frugal innovation may also be important for Europe - for example, exploring how 
digital  technologies  can  make  public  services  more  efficient  and  effective  or  how  frugal  business 
models or business processes  can make products and services more affordable. In a similar vein, 
while demand for  frugal  innovation in Europe  may be driven  by  many  of the  same  considerations 
as in emerging economies, there are also some characteristics with a more distinctly European (or 
at  least,  Western)  flavour,  such  as  a  desire  among  some  consumer  groups  to  live  more 
environmentally sustainable lifestyles and move away from excessive consumerism. 

In order to take advantage of the opportunities that frugal innovation could offer, European firms 
need to develop new mindsets or, as this report argues, to rediscover past competences.  

2.2.1. (Re)discovering capacities for frugal innovation 

As  suggested  from  a  conceptual  perspective  above,  many  European  firms  face  substantial 
challenges  in  embracing  or  even  tolerating  frugal  mindsets  or  a  culture  frugal  innovation  as  they 
lack  frugal  thinkers,  supportive  internal  cultures  as  much  as  suitable  external  environments  that 
they could draw on as sources of additional inspiration.  

Instead,  most  technological  developers  take  professional  pride  in  conceiving  solutions  that  are 
among  the  most  complex  and  technologically  advanced.  In  the  social  and  professional  context  of 
European technology  firms or their  R&D departments the development of ‘good enough’ solutions 
for  resource-constrained  users,  however  elegant,  (Roland  Berger,  2014)  is typically  not  rewarded 
for three main reasons: 

 

First, the approach of limiting resources or functionalities conflicts with general premises 
that engineers (and their managers) have been trained to take for granted, 

20 

 
  Second, most technological development is perceived as a linear process in which 

considerations on product characteristics are secondary to technology and enter late, 

 

Third, executives may be cautious of developing entry-level products through fear that they 
may ‘cannibalize’ more expensive lines (Winter and Govindarajan, 2015). 

From  research  and  development  and  product  design  to  manufacturing,  managing  supply  chains, 
distribution,  marketing,  and  providing  financing  and  servicing  options  for  customers,  many 
common assumptions would have to be challenged and processes rethought to establish successful 
processes of  frugal  innovation.  This,  however,  can  succeed  as  the  example that  this of  GE’s  MAC 
portable ECG diagnosis machine demonstrates, where engineering teams started by setting a price 
(because affordability was their main criterion), and then worked backwards on product features to 
ensure its quality (Mukerjee, 2012). 

Further,  it  will  be  essential  to  develop  closer  relationships  with  potential  users  to  connect  to  the 
abovementioned  favourable  external  environments  from  which  inspiration  can  be  drawn.  In  this 
respect, Tiwari and Herstatt (2012) highlight the importance of open global innovation networks to 
frugal innovation and outline  several models that firms have developed to create these  networks. 
One  such  model,  polycentric  innovation,  or  decentralised  prototyping  (Radjou,  2009),  emerged 
from  the  acknowledgment  that  most  engineers  are  disconnected  from  the  needs  of  prospective 
customers  in  emerging  markets  (Fuchs,  2015).  European  firms  have  partnered  with  context  and 
needs-aware local engineers or sent their own engineers to work on specific emerging markets to 
understand  the  context  and  specific  needs.  Renault-Nissan,  for  example  established  a  centre  for 
frugal engineering in Chennai, where some of the group’s engineers have been working with Indian 
engineers to develop a new affordable car, answering the actual needs of the Indian middle-class 
market (Crabtree, 2015).  

These  new  ways  of  organizing  for  innovation  have  been  demonstrably  important  in  enabling 
Western multilaterals to develop frugal innovations for emerging markets. Yet it would be mistaken 
to  give  the  impression  that  all  capacity  for  frugal  innovation  stems  from  emerging  economies. 
Taking a slightly different perspective, there are fields in which Western firms have led the way in 
developing frugal solutions. Beyond discount supermarkets, a good example are low-cost airlines, 
where ‘no-frills’ operators like Ryanair and Easyjet have developed models that have been adopted 
across the world, including in emerging markets. 

In fact, while recent press articles on frugal innovation tend to imply it is a new phenomenon The 
Economist  (2015),  for  example,  states  “after  some  teething  troubles,  frugal  innovation  is  on  the 
rise”,  it  can  be  argued  that  the  conditions  that  now  spur  frugal  innovation  in  countries  like  India 
previously prevailed in today’s industrialised countries. Put differently, Europe has a  quite notable 
frugal past. 

For  example,  many  historians  argue  that  it  was  the  not  least  the  scarcity  of  raw  material  in  e.g. 
Baden-Württemberg  (today  one  of  the  wealthiest  areas  in  Europe)  that  forced  people  to  either 
emigrate  or  stay  and  identify  innovative  business  ideas  with  limited  means.  Even  now,  this 
mentality  of  ‘productive  tinkering’  (tüfteln)  is  commonly  ascribed  to  the  region  and  quoted  in 
context of many of its success stories, not least in the field of low-tech innovation (Som and Kirner, 
2015). Likewise, a further breed of frugal innovation was prevalent during socialist times in Eastern 
Europe where economies of shortage (Kornai, 1980) resulted in a scarcity of both goods and inputs 
to  innovation  processes.  At  the  same  time,  therefore,  people  had  to  find  innovative  ways  to 
address  everyday  problems  and  to  conceive  new  avenues  to  develop  new  goods  without  inputs 
taken for granted in other places. Arguably, it was only the economic system itself that prevented 
further entrepreneurial activities needed for the scaling up of such relevant solutions and, instead, 
largely relegated them to the informal economy. 

On a further note, the demand for raw material and basic goods was especially high during times of 
war,  so  that  in  these  (not  uncommon)  times  of  shortage  frugal  solutions  were  generated  and  in 
fact  actively  encouraged  by  the  government.  One  such  example  can  be  found  in  Britain  during 
WWII (Bhatti, 2012). At that time, most available  resources  were dedicated to the war effort. To 
prevent rising consumer prices as a result of this, the British Board of Trade introduced the Utility 
Clothing Scheme 1941 (CC41 “controlled commodity”), forbidding the wasteful use  of material as 
well as unnecessary decoration. In order to make fashion still appealing, designers were asked to 
design  new  clothes  –  while  meeting  the  regulations.  Eventually,  34  designs  for  women  were 
created and mass-produced.  9 In addition, people were asked to “make do and mend” old clothes 

9   http://www.vadact.co.uk/fashion/4574375626. Accessed 22/03/16. 

21 

 
                                                 
according  to  a  further  campaign  that  was  introduced  in  1942  and  advertised  with  “Mrs  Sew” 
introducing “resource-efficient” sewing tips.10 

However,  frugal  innovation  was  common  in  now  advanced  economies  not  only  during  times  of 
scarcity  and  war.  Likewise,  the  rising  buying  power  of  an  emerging  middle  class  as  well  as  new 
types  of  demand  spreading  across  larger  parts  of  the  population  prompted  new  types  of  frugal 
industrial efforts – as in the case of mass motorisation. 

The history of affordable passenger cars can be traced back to the early 20th century. In 1908, the 
Model T was produced by Henry Ford, often cited with the sentence “I will build a motorcar for the 
great multitude”,11 at a time when automobiles were regarded as status symbol and only affluent 
people  could  afford  automobiles.  An  important  step  to  this  end  was  introducing  the  integrated 
moving assembly line in 191312 a central process innovation that resulted in cost savings with the 
effect of lowering consumer prices tremendously. Over time the price could be reduced from about 
$850  to  $450  in  1920.  Until  1927  when  the  production  of  Model  T  ended,  15  million  cars  were 
sold.13 

In Europe, similar developments are observable, but started later. One example is the French car 
manufacturer  Citroën  founded  in  1919.  In  the  early  1930s  Citroën  was  the  largest  car 
manufacturer  in  Europe.  After  the  death  of  André  Citroën  in  1935,  Pierre  Boulanger  became 
chairman. He is quoted with the sentence: “we will create a car that can carry four people and 50 
kg of potatoes at 60 km/h, while consuming just three litres of fuel per 100 km...” stemming from 
1936. Once more, the explicit aim was to build a car affordable for a larger part of the population. 
The prototype of the 2CV was presented in 1938, but due to WWII, car production ceased. Finally, 
the 2CV was launched at the automobile exhibition in Paris in 1948. By 1990, five million 2CVs had 
been sold.14 

During  the  same  period,  affordable  cars  did  not  only  come  to  the  mind  of  entrepreneurs  and 
managers, but also became a publicly promoted issue of national interest.  In the 1920s, Germany 
saw itself falling behind the United States, France and Great Britain with regard to motorisation  – 
despite  the  production  of  passenger  cars  by  Opel  and  Hanomag.  Although  several  attempts  to 
produce  an  affordable  car  for  wider  consumer  groups  were  undertaken,  but  the  economic  crisis 
hindered their further development. Hence, it was only after the NSDAP takeover in 1933 that the 
German  state  announced  financial  support  to  promote  broader  motorisation  and  the  automotive 
industry. In 1934, Ferdinand Porsche, an engineer based in Stuttgart, submitted an “exposé on the 
construction  of  a  German  Volkswagen”  (“car for  the  people”)  that  described  a  passenger  car  for 
four adults, reaching 100 kph. 

At the International Automotive and Motorcycle Exhibition in 1934 in Berlin different car producers 
and  developers  presented  such  solutions  for  a  Volkswagen,  but  Porsche’s  original  contribution 
prevailed and was taken up to be further developed. One premise was that the Volkswagen should 
cost  no  more  than  990  Reichsmark.  Until  January  1937  the  Porsche  KG  developed  several 
prototypes  to  meet  the  requirements,  but  due  to  foreign  currency  constraints  and  a  lack  of  raw 
materials,  their  economic  viability  remained  questionable.  However,  the  regime  regarded  the 
Volkswagen  as  a  national  prestige  project  so  that  the  Deutsche  Arbeitsfront  stepped  in  to  form 
what  became  the  Volkswagenwerk  BmgH  in  1938.  In  February  1938,  construction  of  dedicated 
plants began in the specifically formed city of Wolfsburg, taking up Ford’s production facilities as a 
model.  Although  people  could  start  buying  shares  since  1938,  WWII  intervened  and  no  civilian 
Volkswagen  was  ever  produced  under  the  regime.  Quite  immediately  after  the  war,  in  1946, 
however, the production of civilian passenger cars was taken up by the Allied Forces, with the plant 
operating  under  even  more  severe  constraints  than  initially  conceived  of  before  the  war.  In 
1948/49,  about  half  of  the  cars  produced  in  Western  Germany  were  produced  by  Volkswagen, 
crossing the threshold of the 100,000th car in 1950. For a number of years, production remained 
focused  on  evolving  versions  of  the  original  Volkswagen  (to  become  called  ‘the  Beetle’)  that 
surpassed Ford's Model T in terms of number of cars sold by 1972 (Volkswagen AG, 2015) and laid 
the  foundations  of  a  corporate  empire  that,  through  its  Skoda  branch,  bears  affordability in  mind 
until today. In that sense, the presented cases of endeavours of constructing affordable passenger 
‘cars for the masses’ can be regarded as early and very successful examples of frugal innovation in 
the developed  world  –  as could be  argued for Britain’s  Mini15  –  which conceptually preceded  later 

10   http://www.iwm.org.uk/history/10-top-tips-for-winning-at-make-do-and-mend. Accessed 22/03/16. 
11   http://www.modelt.ca/background.html Accessed 16/03/2016. 
12   https://corporate.ford.com/company/history.html Accessed 16/03/2016. 
13  http://www.history.com/topics/model-t Accessed 16/03/2016. 
14  http://www.citroen.de/unternehmen/historie.html Accessed 22/03/2016. 
15   http://added-value.com/mini-the-car-of-the-people/ 

22 

 
                                                 
relevant  efforts  by  others  such  as  Dacia  with  the  Logan,  different  Japanese  producers  with  their 
various ‘Kei cars’, or, in the extreme case, Tata with its Nano. 

As  indicated  above,  this  report  will  therefore  maintain  that  frugal  mindsets  are  neither  as  such 
culturally  specific  to  emerging  or  developing  economies,  nor  in  a  generic  sense  new  for  today’s 
industrialised countries. Historically, these countries faced recurring times of shortages for different 
reasons  as  much  as  ensuing  times  of  dynamism  when  a  broader  range  of  a  less  than  affluent 
population articulated new, common demands. In principle, it seems that, whenever a framework 
of shortage was relevant, creative responses to frugality occurred in Europe and other parts of the 
developed world – just as they do in today’s emerging economies. 

2.2.2. A market opportunity in emerging and developing economies 

“The rise of emerging markets” notes a recent Euromonitor report, “has been perhaps the defining 
feature  of  the  global  economy  this  century”  (Boumphrey  and  Bevis,  2013).  Since  the  term  BRIC 
was  coined  in  2001  by  a  Goldman  Sachs  executive,  the  significance  of  emerging  markets  in  the 
world  economy  has  increased  dramatically.  Even  while  three  of  the  four  original  BRICs  (China, 
Russia  and  Brazil,  with  India  the  exception)  face  periods  of  uncertainty  and  economic  slowdown, 
they  are  still  huge  and  growing  markets;  the  four  original  BRICs  are  home  to  nearly  half  the 
emerging market population. Meanwhile, smaller emerging markets are gaining in significance, not 
only elsewhere in Asia but in  Africa,  Latin America,  the Middle East and Eastern Europe. As large 
markets,  experiencing  faster  rates  of  growth  than  industrialised  economies,  emerging  markets 
represent  increasingly  important  opportunities  for  European  firms.  Between  2000  and  2009,  the 
share of euro area exports to Asia grew from 19% to 22%, but exports to the USA declined from 
17% to 12% in the same period.16 

Traditionally, Western companies operating  in emerging  markets have tended  to  focus on serving 
‘premium’ customers (EY, 2011). Yet in these countries, the fastest growing customer segment is 
the mid-market (Brandt and Thun, 2010). This segment is already very large. In 2009, 28% of the 
world’s  middle  class  -  some  525  million  people  -  lived  in  Asia,  and  10%  (181  million  people)  in 
Central and South America (Kharas, 2010). It is also rapidly growing: during the next two decades, 
the  middle  classes  globally  could  grow  from  1.8  billion  to  4.8  billion  people  by  2030,  3  billion  of 
whom will be in Asia. In contrast, the numbers of middle class people in Europe and the USA are 
projected to remain stable. With many markets for premium goods in emerging economies largely 
saturated, the key opportunities for Western firms lie in reaching mid-market  consumers (Radjou 
and Prabhu, 2012). 

Developing products and services that meet the needs of this customer segment is challenging for 
Western  firms.  The  emerging  middle  classes  have  incomes  that  outstrip  their  basic  needs 
(Williamson  and  Zeng,  2009)  and  have  been  described  as  enthusiastic  consumers  (Kharas  and 
Gertz, 2010).17  Yet with small disposable incomes, and a cultural predilection for thriftiness, they 
tend to be highly price sensitive. Research amongst consumers of soft drinks in Brazil, for example, 
found  that  the  ‘newly-minted  middle  classes’  still  tended  to  prefer  low-cost  ‘generic’  brands  that 
compete  on  price,  to  heavily  marketed,  premium  brands  such  as  Coca-Cola,  preferred  by  the 
‘traditional’  middle  classes  (Eizenberg  and  Salvo,  2014).  Products  developed  for  more  affluent 
markets  are  often  seen  as  over-engineered  and  too  expensive  to  be  within  the  “window  of 
consideration” in emerging economies (Hesseldahl, 2012). Nevertheless, these very customers are 
highly conscious of value as well as price. Citing interviews with business leaders working in India, 
Tiwari and Herstatt (2013) point out that consumers in these markets tend to want to pay “35% of 
the global price, [for] 90% of the performance”.  

Western multinationals also face competition from domestic companies to serve the growing mid-
level  market  in  emerging  economies.  Gadiesh  et  al  (2007)  and  Brandt  and  Thun  (2010)  have 
described how in China, for example, domestic companies that previously served the low end of the 
market  in  sectors  like  automotive  and  construction  machinery  have  been  able  to  upgrade  their 
capabilities  and  expand  into  serving  mid-market  consumer  segments,  a  process  they  describe  as 
“the fight for the middle”.  Increasingly,  moreover, multinationals from  other emerging economies 
enter this game as well. 

To  tap  into  these  consumer  segments,  several  authors  argue  that  European  firms  need  to  shift 
strategies  and  embrace  frugal  innovation  (e.g.  EY,  2011;  Roland  Berger,  2014).  This  does  not 
simply  mean  stripping  back  products  designed  for  more  affluent  markets.  Instead,  firms  need  to 

16   www.ecb.europa.eu/ecb/tasks/international/emerging/html/index.en.html. Accessed 04/04/16. 
17   For  the  OECD’s  analysis,  “the  middle  classes”  were  defined  by  their  role  as  consumers,  using  an  absolute 
definition:  the  middle  classes  were  defined  as  those  with  daily  expenditures  between  $10  and  $100  in 
purchasing power parity terms.  

23 

 
                                                 
gain  a  deep  understanding  of  users’  specific  needs  and  adapt  existing  products  or  design  new 
solutions  to  meet them.  Procter  and  Gamble’s  launch  of  a  new  razor  in  India  is  a  good  example. 
After  observing  Indian  men  shaving  with  traditional  double-edged  razors,  Gillette’s  engineers 
intuited that it might be possible to tempt consumers with a razor that was safer and required less 
concentration to use - as long as it was also cheap, easy to clean with little water, and delivered a 
close shave. Since  Indian men were willing to spend longer shaving than Western men, however, 
there  was  no  need  for  razors  to  have  multiple  blades.  This  enabled  Gillette  to  create  the  Guard 
razor  using  80%  fewer  parts  than  other  razors.  The  Gillette  Guard  cost  only  15  rupees,  and  has 
now captured two thirds of the market in India (Winter and Govindarajan, 2015). Developing frugal 
solutions  for  consumers  in  emerging  markets  tends  to  involve  ruthless  prioritisation  of  features, 
focusing only on those most important to users (Hesseldahl, 2012, for example, outlines processes 
used  by  firms  like  GE  to  prioritise  features  for  customers  in  India)  and  modularisation  -  starting 
from  a  basic  version  of  a  product  and  giving  customers  the  option  to  add  features  as  their 
resources allow (Roland Berger, 2012). 

There  are  already  several  high-profile  examples  of  European  multinationals  developing  frugal 
solutions  for  emerging  markets.  In  healthcare,  for  example,  Siemens  Healthcare’s  low-cost  x-ray 
machine,  the  Multix  Select  DR,  was  developed  by  a  German-Chinese-Spanish  team  and  costs 
around  a  third  less  than  the  products  it  replaced  (Roland  Berger,  2014).  In  the  energy  sector, 
Philips  is developing  low-cost  solar  lighting  solutions  for  Africa  and  is  also  setting  up  ‘Community 
Light  Centers’  powered  by  solar-powered  LED  lights  to  foster  community  development  and 
entrepreneurship’18.  In  automotive,  China  is  now  the  largest  sales  market  for  Volkswagen  based 
not  least  on  the  local  production  of  market-specific  affordable  model  lines  (Roland  Berger,  2014) 
and  Renault-Nissan  is  exploring  opportunities  in  India  (Radjou  and  Prabhu,  2015).  In 
telecommunications, Nokia’s 1100 phone is a classic example of frugal innovation, designed to be 
dust- and waterproof, cheap, robust and with a built-in flashlight (Hesseldahl, 2012); Nokia is now 
developing information tools and financial services that customers can use via their phones without 
internet access (Radjou and Prabhu, 2012).  

Some evidence suggests that interest in frugal innovation among multinationals is becoming more 
widespread. A survey of 547 senior managers, board members and executives working in emerging 
markets19 found that 36% saw frugal innovation as a major opportunity and claimed already to be 
taking  advantage  of  it,  while  a  further  40%  saw  it  as  a  major  opportunity  that  they  intended  to 
pursue in future (EY, 2011).  

Further, while much of the literature focuses on the experience of multinationals, there may also be 
opportunities  for  European  SMEs  to  engage  in  frugal  innovation  in  emerging  markets.  Reid  et  al 
(2015)  document  case  studies  of  UK-based  SMEs  partnering  with  large  firms  in  China  to  develop 
and  scale  technologies.  Moreover,  Prabhu  (2016)  notes  that  social  enterprises  and  startups  also 
have  a  role  in  developing  frugal  solutions  and  there  is  some  evidence  of  such  being  started  by 
Europeans alongside local entrepreneurs20. 

2.2.3. A response to emerging frugal needs and choices in Europe 

Much  of  the  literature  exploring  demand  for  frugal  innovations  focuses  on  large  emerging 
economies  in  Asia,  particularly  China  and  India.  Nevertheless,  there  are  also  some  smaller,  but 
significant, emerging markets within Europe. A report by the World Resources Institute (Hammond 
et  al,  2007)  estimated  the  bottom-of-pyramid  market  in  Eastern  Europe  to  include  254  million 
people (64 per cent of the region’s population), with 36 per cent of the income. Furthermore, these 
markets  are  growing  faster  than  Europe’s  developed  markets.  The  IMF’s  World  Economic  Outlook 
for  2015  projected  growth  in  output  of  3.0%  in  2015  in  ‘Emerging  and  Developing  Europe’21, 
compared with 1.5% for the Euro area and 2.5% for the UK (IMF, 2015).  

Radjou  and  Prabhu  (2015)  document  how  Renault  developed  the  Logan  car  for  resource-
constrained consumers in Eastern European markets. Starting from  the challenge of developing a 
car  for  €5000  that  “married  quality  and  affordability”,  Renault  decided  to  base  R&D  for  the  new 
model  in  Romania,  where  it  had  recently  acquired  a  new  subsidiary,  Dacia.  Bringing  together 
French  designers  and  Romanian  engineers,  Renault-Dacia  “created  a  car  that  used  50%  fewer 
parts than a typical Renault vehicle”, yet was spacious and specifically designed to meet the needs 
of  Romanian  families.  While  the  Logan  was  developed  for  cost-conscious  consumers  in  Eastern 

18   http://www.communitylightcenters.philips.com. Accessed 06/04/16. 
19   This survey was carried out by the Economist Intelligence Unit in September 2011.  
20   Cf. the example of smartairfilters.com, developed by a U.S. student in Bejing and now scaled all over China 

and taking root in India  

21  The  IMF  refers  to  CEE  as  ‘Emerging  and  Developing  Europe’  including  Turkey,  Poland,  Romania,  Hungary, 

Bulgaria, Serbia, Croatia, Albania, Bosnia and Herzegovina, Kosovo, FYROM and Montenegro. 

24 

 
                                                 
Europe, Renault soon discovered that there were markets for it in Western Europe as well, and in 
response, developed a new line of entry-level products using the Dacia brand name. By 2013, the 
Dacia line was Renault’s “cash cow”, accounting for more than 40% of the company’s global sales 
(Radjou and Prabhu, 2015). As this example demonstrates, demand for frugal solutions also exists 
in  developed  economies,  and  it  seems  that  multinationals  are  beginning  to  recognise  this.  EY’s 
survey of companies operating in emerging markets (2011) found that 82% of respondents based 
in  developed  markets  agreed  that  ‘frugal  innovation  is  a  concept  that  has  as  much  relevance  in 
developed economies as it does in rapid-growth [emerging] markets’.  

This  demand  for  frugal  innovation  in  developed  markets  has  grown  partly  because  increased 
poverty, long-term decoupling of economic growth and living standards and the enduring results of 
recession  have  led  to  a  reduction  in  consumer  spending.  Research  on  consumer  attitudes  in  the 
United  States  found  a  growing  willingness  to  purchase  in-house  brands  and  consider  price  over 
brand. As these changes become habits, it is argued that this ‘new frugality’ is here to stay (Egal et 
al,  2010).  A  global  study  of  15,000  consumers  by  Boston  Consulting  Group  (2013)  uncovered 
anxiety and pessimism in many Western European countries, with those who believe their economy 
will  improve  greatly  outnumbered  by  those  who  think  it  will  not.  While  the  study  found  that 
consumerism  was  by  no  means  dead  -  affinity  with  brands  was  still  strong,  particularly  among 
younger  people  -  nevertheless  nearly  half  of  respondents  in  developed  economies  planned  to  cut 
their  spending  in  the  next  12  months,  and  54%  were  expecting  to  ‘trade  down’  (choose  cheaper 
products and services). Those who were planning to ‘trade up’, meanwhile, revealed a strong focus 
on value, durability and quality (BCG, 2013). Similar research focused on the UK found that while 
consumers  were  becoming  more  confident,  many  had  recently  ‘traded  down’  -  and  were  were 
“pleasantly  surprised”  by  their  experience  of  lower-cost  brands.  59%  claimed  no  longer  to  prefer 
higher-priced  items  (Opinium,  2013).  These  changing  preferences  seem  to  be  well  illustrated 
through  the  example  of  discount  supermarkets.  Combined  with  smart  marketing  strategies, 
consumer demand for cheaper products has enabled discounters such as Aldi and Lidl to capture a 
market share of around 15% in the groceries sector in the European Union, with market share in 
some  countries  (like  Germany)  much  higher.  Research  with  consumers  suggests  a  sizeable 
proportion  of  those  who  shop  at  these  stores  would  continue  to  do  so even  if  their  incomes  rose 
(The Economist, 2014).  

Increasing  consumer  demand  for  frugal  solutions  in  Europe  raises  the  possibility  that  some 
products developed for emerging markets could be adapted for and sold in developed economies, a 
process known as ‘reverse innovation’. Notwithstanding frequently-cited examples like the Renault 
Logan and GE Healthcare’s low cost ECG machine (developed in India, but now being sold in other 
markets  including  the  USA),  there  are  relatively  few  examples  of  where  multinationals  have 
developed  products  for  emerging  markets  and  successfully  sold  them  worldwide  (Winter  and 
Govindarajan,  2015).  Further,  it  is  not  only  Western  firms  that  can  attempt to  engage  in  reverse 
innovation;  some  emerging  economy  firms  have  also  successfully  done  so  (Zeschky  et  al,  2011). 
Chinese  firm  Haier,  for  example,  has  the  biggest  share  of  the  global  white  goods  market  of  any 
firm and in 2000 opened a factory in South Carolina (Forbes, 2012), selling low-cost refrigerators 
to the American market.  

Moreover,  ‘temporarily  frugal’  situations  can  occur  in  any  market,  including  developed  ones.  In 
situations  of  emergency,  including  accidents,  natural  disasters  but  also  the  recent  refugee 
movement, basic needs have to be met in an effective manner until new provisions  are made and 
infrastructures re-established.22 

Finally, consumer ‘frugality’ in  Europe  seems  not only  to be passively driven by growing resource 
constraints,  but  also,  amongst  some  consumer  segments  at  least,  by  changing  values,  such  as  a 
focus  on  durability,  environmental  sustainability,  a  ‘do-it-yourself’  ethic  and  a  desire  for  lower 
consumption.  In  early  2016,  Ikea’s  Head  of  Sustainability  claimed  that,  “in  the  West  we  have 
probably  hit  peak  stuff”,  and  argued  that  consumers  were  showing  a  greater  desire  for  products 
that  could  be  repaired  and  recycled  (Guardian,  2016).  A  new  website  guiding  consumers  to 
products  that  are  highly  durable,  ‘Buy  Me  Once’,  has  received  considerable  media  coverage  (The 
Telegraph,  2016).  A  new  knowledge  sharing  platform,  ‘Fixperts’23  has  been  launched  for  people 
who want to fix everyday problems and share their learning with others. On a similar note, Radjou 
and  Prabhu  (2015)  argue  that  Western  consumers  are  becoming  not  only  value-conscious  but 
‘values-conscious’,  referencing  consumer  surveys  that  show  widespread  willingness,  particularly 
amongst millennials, to switch to socially responsible and environmentally sustainable brands. This 
sense  of  idealism  underpinning  demand  for  frugal  innovation  in  Europe  is  also  reflected  in 
phenomena such as  the maker  movement and some initiatives in the so-called sharing economy, 
as well as in places, such as Freiburg, that have embraced frugal innovation at a community level 

22   Interview with Nivedita Agarwal, 29/04/16 
23   http://fixperts.org/ 

25 

 
                                                 
(Leadbeater, 2014). These trends add a new dimension of “frugal innovation by choice” which can 
be very relevant in developed markets.  

Having  said  this,  it  would  be  incorrect  to  assume  that  these  changing  values  are  not  relevant  in 
emerging  markets,  although  the  Tata  Nano  does  struggle  with  persistently  “traditional”  values  of 
customers who see it as a “low reputation” solution. China, for example, has a burgeoning maker 
movement  (Saunders  and  Kingsley,  2016)  and,  in  light  of  food  and  environmental  scandals,  an 
increasing  awareness  of  sustainability  among  the  emerging  middle  classes.  Likewise  some 
interviewees  suggested  that,  in  Africa,  frugal  innovation  and  sustainability  are  becoming  more 
closely identified.24  

2.2.4. European public policy challenges 

Individual  consumers  are  not  the  only  potential  customers  for  frugal  innovation  in  Europe. 
Governments  across  the  EU  have  implemented  austerity  measures  since  the  financial  crisis  of 
2008-9  (and  some,  like  Germany  and  Sweden,  began  doing  so  before  the  crisis).  Even  though 
European  countries  have  different  economic  models,  austerity  measures  have  been  remarkably 
similar across the continent, with, for example, a strong focus on reducing the cost of public sector 
employment  through  job  cuts,  wage  freezes  and  other  measures  (Hermann,  2013).  Since  it 
appears that austerity measures in many  countries were not only a response to crisis, but also in 
line  with  a  broader  ideological  drive  towards  smaller  government  (Müller  et  al,  2014),  it  is  likely 
that austerity is here for the long term. Meanwhile, an ageing population is increasing social care, 
health and pension costs, putting additional pressure on public sector budgets. It is not surprising, 
therefore,  that  the  frugal  mantra  -  ‘doing  more  for  less’  -  is  commonly  heard  in  the  context  of 
public services.  

Yet  although  this  would  seem  to  create  a  strong  driver  of  demand  for  frugal  innovation,  it  is  not 
clear that there has been significant interest in frugal solutions among public sector organisations 
in  Europe  to  date  -  at  least  in  not  the  more  obvious  sense  of  adopting  ‘reverse  innovations’.  As 
noted  elsewhere  in  this  report,  regulation  can  act  as  a  barrier  to  scaling  up  of  frugal  solutions  in 
developed markets. Narayana Health, for example, which has developed a very successful model of 
low-cost heart surgery in India, believes there is a market for its services in the USA. However, for 
regulatory reasons it has located its hospital serving this market in the Cayman Islands. There may 
also  be  cultural  barriers  to  adoption  of  frugal  innovation  from  emerging  markets.  Harris  et  al. 
(2016)  suggest  that  the  origin  of  an  innovation  may  make  a  difference  to  its  likelihood  of  being 
adopted  in  Western  healthcare  settings,  noting  that  “the  adoption  of  low-income  country 
innovations into high-income country contexts is thwarted in part  by perceptions that low-income 
countries are unlikely to offer innovations of value and that these contexts are “too different” from 
their  own  for  the  innovation  to  ‘fit.’”  Nevertheless,  looking  through  a  slightly  different  lens,  it  is 
possible to see frugal innovation principles reflected in some emerging public sector initiatives - for 
example,  a  willingness  to  explore  the  use  of  hidden  or  under-used  assets,  such  as  volunteers  in 
public services; challenge-based procurement as a means of sourcing solutions for the public good; 
and the greater use  of big data and  smart  technologies to gain insights and target services more 
effectively.  

A  related  area  of  high  current  interest  among  policy  makers  in  Europe,  where  frugal  innovation 
could  be  applied,  is  in  services  to  support  and  help  promote  integration  of  refugees  and  asylum 
seekers. A number of innovative housing solutions have reached at least prototype stage, such as 
IKEA’s refugee housing, tested with the UNHCR in Ethiopia, Jordan and Iraq (Guardian, 2014) and 
Concrete  Canvas  shelters,  made  of  concrete-injected  cloth  (National  Geographic,  2014).  These 
solutions  are  currently  operating  a  small  scale  and  are  still  relatively  high-cost.  Beyond 
manufacturing, digital technologies also offer potential for frugal solutions to support refugees. The 
Bitnation  Refugee  Emergency  Response  project  develops  solutions  to  help  refugees  using 
blockchain technology, including the Blockchain Emergency ID and Bitnation Visa Debit Cards. The 
Techfugees initiative, set up in the UK in September 2015 and rapidly spreading to other parts of 
the world, is engaging the tech community to crowdsource solutions to support refugees. 

2.2.5. The potential wider benefits of frugal innovation 

Interest in frugal innovation amongst policy makers also stems from the theoretical possibility that 
it may help to address other public policy challenges, including the ‘Societal Challenges’ highlighted 
in the context of Horizon 2020. Research and examples to date suggest that frugal innovation can 
contribute in two main ways.  

First,  the  themes  covered  by  the  H2020  Societal  Challenges  (SCs)  are  areas  in  which  there  is 
demonstrable  potential  for  successful  frugal  innovation.  For  example,  many  existing  examples  of 

24   Interview with Peter Knorringa, 15/02/16. 

26 

 
                                                 
frugal  innovations  fall  into  the  category  of  “new  models  and  tools  for  health  and  care  delivery” 
(SC1: Health, demographic change and wellbeing). Moreover, some of these are also examples of 
‘reverse  innovations’,  having  been  designed  for  emerging  economies  and  then  successfully 
introduced in the west. Secure, clean and efficient energy (SC3) has also been a strong focus for 
frugal  innovation  in  emerging  and  developing  economies,  although  the  context  in  which  these 
innovations have been designed – lack of access to an electricity grid  – means that they may not 
have  so  much  direct  potential  for  introduction  to  industrialised  economies.  Nevertheless,  experts 
interviewed  for  this  study  suggested  that  local,  decentralised  energy  production  could  provide  a 
ripe opportunity for frugal innovation in Europe.  

Second, the characteristics of frugal innovation are complementary to several of the Horizon 2020 
Societal  Challenges.  For  example,  by  increasing  access  to  goods  and  services,  frugal  innovation 
could  help  to  foster  socio-economic inclusion  (SC6: Inclusive,  innovative  and  reflective  societies). 
There is considerable evidence of this in emerging economies, where well documented examples in 
sectors like  energy  (e.g. SELCO’s  solar  lanterns  in India),  mobile  banking  (e.g.  M-Pesa  in  Kenya) 
and  healthcare  (e.g.  Aravind  Eyecare  in  India)  have  broadened  access  to  essential  services  and 
helped to generate improved social and economic outcomes for customers. There are comparable 
opportunities in at least some of these sectors within Europe - for example, Mastercard estimates 
that some 93 million Western Europeans are ‘underbanked’ - but at present few examples of frugal 
solutions  developed  for  these  markets.  Similarly,  there  is  considerable  potential  in  how  frugal 
innovation can contribute to achieving the objectives of SC5 (climate action, environment, resource 
efficiency and raw materials) given the focus of some frugal innovations on a more efficient use of 
natural resources and the promotion of ‘circular economy’ principles. Nevertheless, as pointed out 
below,  the  contribution  of  frugal  innovation  to  environmental  sustainability  is  not  always 
straightforward and can be in tension with the goal of improving access to goods and services. This 
can happen if frugal innovation results in the more widespread use of a solution, thus increasing its 
ecological footprint. 

It  has  also  been  suggested  that  frugal  innovation  can  help  achieve  a  range  of  other  socially  and 
economically  desirable  outcomes  for  Europe.  Consultation  in  the  preparation  of  this  report 
uncovered aspirations including: 

 

 

 

Preservation of cultural heritage, possibly through combination of traditional manufacturing 
techniques with frugal distribution methods, to reach wider markets. 

Job creation, as a result of new economic opportunities. 

Promoting global development through research and innovation partnerships, rather than 
traditional development assistance. 

However,  while  each  of  these  remains  a  theoretical  possibility,  none  are  inevitable  outcomes  of 
frugal innovation. For example, Reid et al (2015) found that while collaboration between UK SMEs 
and large Chinese firms generated new jobs in the UK, the employment gains tended to be much 
greater in China. The question for  policy  makers will therefore not simply be whether to promote 
frugal innovation, but how to promote it in a way that generates the most positive social, economic 
and environmental outcomes and minimises negative impacts. 

2.3. 

The role of technology for and in frugal innovation 

This  section  argues  that  technological  development  is  not  necessarily  integral  to  innovation. 
Innovation  generally,  and  frugal  innovation  specifically,  can  take  place  without  dedicated 
technological development. On the one hand, the history of innovation shows that recombination of 
existing technologies is as at least as important. On the other hand, disruptive innovations – those 
that  transform  economic  and  societal  systems  –  may  not  always  be  among  the  most 
technologically  advanced.  Indeed,  when  first  introduced,  they  may  be  technologically  inferior  to 
alternatives, yet at the same time, a much better fit for users’ needs. Nevertheless, technological 
development and  frugal  innovation  are  not  at all incompatible. Even frugal innovations developed 
from recombinations of basic technologies require a good understanding of available technologies. 
There are undoubtedly many technologies whose ‘frugal potential’ has so far been under-explored, 
and  many  more  in  development  that  will  offer  potential  for  use  in  frugal  solutions  at  least  in  the 
medium term, such as 3D printing. Meanwhile, ubiquitous technologies, such as smartphones, are 
already  facilitating  numerous  frugal  solutions  that  would  not  be  possible  otherwise.  It  is  also 
plausible to argue  that new  technological  development may in some cases be needed  to advance 
frugal solutions.  

So far, a perceived tension between technological development and frugal innovation arises mostly 
from the fact that technological development is often still conceived of as a largely linear process in 
which teams  of developers pass through the different  stages of technological readiness (TRL  1-9) 
independent of the outside world – to at the end of the process launch a high-price, highly featured 
products  to  obtain  return  on  investment.  Frugally  inspired  reverse  engineering  processes,  in 

27 

 
contrast,  puts  quite  an  opposite  emphasis.  Winter  and  Govindarajan  (2015),  for  example, 
succinctly outlined that and how processes of reverse engineering differ from technology-based one 
in five relevant ways: 

  before anything else, they acknowledge the needs of potential users, 

  second, they identify the indispensable functions of the solution needed to fix it, 

 

third, they consider traditional fixes that are already available and the messages they pass 

on with a view to context specific requirements, 

 

fourth,  they  subject  all  products  and  solutions  to  a  reality  check  latest  before  their  first 

market introduction, ideally already during the development process, 

  subsequently, they explore which uses these solutions could have in other contexts. 

In  detail,  they  outline  “five  traps”  that  must  be  avoided  in  designing  frugal  innovations  through 
reverse engineering by observing “five design principles”. 

  matching market segments to existing products, 

 

defining problems independent of pre-existing solutions, 

 

trying to reduce the price by eliminating features, 

 

create an optimal solution, not a watered-down one, 

 

forgetting to think through all technical requirements, 

 

analyzing the technical landscape behind the consumer problem, 

 

neglecting stakeholders, 

 

test products with as many stakeholders as possible, 

 

ignoring that products designed for emerging markets could have global appeal, 

 

use emerging market constraints to create global winners. 

In new product development processes this implies that some common assumptions will have to be 
reconsidered and, even more so, for common routines in technological development. In particular, 
the  possible  functions  of  technologies  being  developed  should  be  considered  from  various 
perspectives at early stages (TRL 2-3, “technology concept and/or possible application formulated”) 
and  concrete  application  contexts  beyond  the  high-price  segment  should  be  taken  into  account 
when technological  validation  is transferred from  the  laboratory to  a “relevant environment” (TRL 
4-5).  

In  the  following  sections,  therefore,  this  report  will  in  more  detail  explore  in  which  ways  and 
function existing knowledge as well as specifically developed technologies can feed into processes 
of “frugal new product development”. 

28 

 
 
 
2.3.1. Frugal  integration:  combining  available  technological  knowledge,  traditional  techniques  and 

new ideas 

Innovation without dedicated technological development 

As outlined in section 2.1, the key to frugal innovation cannot be identified in one single dimension 
of  the  process.  Instead,  it  leads  back  to  the  notion  of  innovation  per  se.  According  to  Joseph 
Schumpeter  (1911/1934:66),  “innovation”  refers  to  “the  introduction  of  a  new  good  …  or  a  new 
quality  of  a  good  ...  a  new  method  of  production  …  or  a  new  way  of  handling  a  commodity 
commercially” in the process of production and – ultimately – the marketplace; laying the basis for 
later definitions  such  as  “the  implementation of  a  new  or  significantly  improved  product  (good  or 
service),  or  process,  a  new  marketing  method,  or  a  new  organizational  method  in  business 
practices, workplace organisation or external relations” (OECD, 2005). 

While, initially, the term ‘innovation’ was most commonly related to the transfer of inventions and 
other technological advances into commercial application, the arguably more important point of the 
definition  is  the  focus  of  innovation  as  the  successful  ‘implementation’  of  new  solutions  ‘in  the 
process  of  production’  and  ‘on  the  market  place’.  In  the  course  of  the  further  development  of 
innovation theory, this acknowledgement has given rise to a broader understanding than proposed 
by  its  founding  father(s),  one,  that  beyond  technological  innovation  includes  marketing 
innovations, organisational innovation and service innovations.  

More importantly, however, the role of technology in and for innovation has been reconsidered as 
exemplified  in  the  often  quoted  yet  seldom  fully  acknowledged  work  of  Kline  and  Rosenberg 
(1986).  The  publication  is  most  often  cited  with  regard  to  recursive  nature  of  the  innovation 
process.  There  is,  however,  a  further  key  feature  of  their  “chain  linked  innovation  model”, 
developed based on practical observations in firms: In innovation processes, firms, in a first step, 
take recourse to existing knowledge bases – both within and outside the organisation – before they 
consider  the  need  for  dedicated  technological  development  to  address  a  specific  problem.  In 
general,  the  coupling  of  innovative  activities  with  market  demand  and  users  needs  has  been 
identified as a constitutive condition for successful innovation since the early 1970s (SPRU, 1972; 
Rothwell et al., 1974).  

In  line  with  this  conceptual  argument,  many  firms  have  in  practice  developed  business  model 
innovations  based  on  ‘implementing  new  solutions’  –  by  considering  user  needs  and  market 
demand yet without the dedicated development of technologies (Hirsch-Kreinsen, 2011; Henderson 
and Clark, 1990), e.g. 

 

(Customer) value oriented strategies focus on new value propositions that leverage a so 
far latent demand for novel solutions by integrating new channels of delivery, product-
oriented services, etc. 

  Strategies of stepwise or gradual innovation seek to, based on experimentation and trial-
and-error, upgrade a standardised product up to the point where it fully meets customer 
requirements,  

  Strategies of architectural innovation build on existing technological solutions and 

components to create new solutions that address specific demands better, 

  Strategies of process specialisation apply (known) high-tech processes to non-high-tech 

products, at times to increase quality and robustness and at times to increase efficiency and 
thus realise lower prices, 

  Strategies of modular innovation seek to improve the components of an existing product 

with a view to quality, robustness and, in some cases, price. 

Overall, it is thus evident that even outside of the frugal innovation literature the promise of non-
technological  and  low-tech  innovation  has  been  broadly  recognised  (e.g.  Som,  2015).  Indeed,  it 
seems  worth  recognising  that  many  to  most  innovation  strategies  in  large  part  of  the  European 
SME  sector,  including  the  famous  German  Mittelstand  are  predominantly  based  on  what  theorists 
call the doing, using, and  interacting  (DUI)  rather than a classic, more linear science, technology 
and invention (STI) driven model of innovation.  

In practice, many firms take recourse to the business models outlined above, drawing notably on 
synthetic  (technological  and  technical)  and  symbolic  (design  and  market  trend  related)  types  of 
knowledge  rather  than  the  pure  analytical  knowledge  of  science  (Asheim  and  Vang,  2004; 
Laestadius,  1998).  While  this  crucial  difference  has  for  a  long  time  been  vividly  discussed  in  the 
conceptual literature (Arrow, 1962; Sahal, 1981; Rosenberg, 1982; Andersen and Lundvall, 1988) 

29 

 
 
it has only rather recently been empirically validated (Kamp et al., 2004; Som, 2012; Som, 2015) 
– and thus politically acknowledged on a broader basis. 

In  summary,  these  introductory  paragraphs  illustrate  that,  in  general,  dedicated  technological 
developments  are  neither a  necessary  nor  a  sufficient  criterion  for  successful  innovation.  Nor  can 
the  nature  of  innovation  be  sufficiently  and  comprehensively  described  as  the  translation  of 
technological inventions into new products and services. 

Recombining available knowledge and traditional techniques 

As  has  been  explained  in  the  introductory  section,  low  cost  (or  longer  lifetime)  may  not  be 
necessarily  the only  but  certainly  one  defining  characteristic  of  frugal  solutions.  While  some  have 
argued that a key means to that end lies in de-featuring existing products (Hartigan, 2011; Moore, 
2011)  others  have  pointed  out  that  to  achieve  a  sufficiently,  substantial  reduction  in  inessential 
cost  (Seghal  et  al.,  2011),  frugal  innovators  have  to  transcend  current  solutions  through  the 
creative  leveraging  of  existing  knowledge.  While  this  does  not  have  to  imply  outright  “reverse 
engineering”  (Samuelson  and  Scotchmer,  2002)  it  will  imply  taking  recourse  to  and  reactivating 
existing reservoirs of knowledge (Kline and Rosenberg, 1986), for example in processes of “reverse 
innovation” (Tiwari and Herstatt, 2012).  

Among  the  various  low-tech  approaches  outlined  above,  the  strategy  of  recombining  existing 
component  technologies  to  create  new  or  improved  solutions  while  avoiding  investments  in 
developing  new  core  technologies  thus  lends  itself  naturally  to  the  main  business  case  behind 
frugal innovation. Different from standard stepwise or gradual innovation strategies they allow for 
the development of entirely new markets while at the same time keeping down both material and 
investment cost. 

In  terms  of  illustration,  the  success  of  China’s  Shanzhai  firms  who  successfully  and  creatively 
recombined  available  knowledge  accumulated  by  local  producer  networks  to  address  unmet 
demands  of  the  local  population  with  novel  products  is  a  prominent  case  in  point  (Ming  and 
Flowers, 2016; Design Mind, 2013; Zhu and Shi, 2010; Booz & Company, 2009). This case clearly 
underlines  how  going  back  to  technologies  already  available  can  suffice  to  introduce  a  genuinely 
new solution to the market and increase the value proposition to the customer while at the same 
time  keeping  down  costs.  Once  more,  this  model  does  not  apply  only  to  the Chinese  context  but 
has  in  a  similar  sense  been  characteristic,  for  example  of  the  conception  of  the  first  generation 
iPhone based on existing technologies (Mazzucato, 2013).  

While  the  outcome  and  context  of  the  process  can  be  entirely  different,  the  mere  notion  of 
“working backwards from a problem” until one arrives at a suitable technological basis to develop 
appropriate solutions (Gupta, 2011), existing or specifically developed, complex or obvious, is thus 
not  unique  to  frugal  innovation.  What  is,  is  the  pronounced,  conscious  emphasis  placed  on  these 
first  stages  of  the  search  process  to  find  the  simplest,  most  robust  and  cost-effective  solution 
(Zeschky et al. 2011; Gupta and Wang, 2009).  

As outlined in the conceptual section, frugal innovation is motivated by the aim to address unmet 
demands  of  resource-constrained  consumers  (usually  bottom-of-pyramid  populations  or  emerging 
middle classes (Woodward, 2011; Arnold and Quelsch, 1998) by providing affordable higher value 
to  customers  with  smaller  purses  (Zeschky  et  al.,  2011).  Against  this  background,  frugal 
innovators tend to carefully consider  available knowledge and go some way to avoid unnecessary 
R&D  investments  (Bhattacharyay,  2012).  Rather  than  moving  through  the  first  steps  of  this 
process  swiftly,  they  will  spend  more  time  and  energy  to  find  “improvised  solution  born  from 
ingenuity and cleverness” (Radjou et al., 2012). 

To  do  so  systematically,  collaborative  partnerships  with  future  users  are  crucial  not  only  to 
understand  which  unmet  demands  exist,  but  also  to  which  local  traditional  techniques  and  social 
practices providers of frugal solutions can relate to make an improved value proposition (Ray and 
Ray,  2010).  In  the  past,  many  Western  firms’  and  governments’  ambitions  to  transfer  new 
products  without  adaptation  to  substantially  different  social  use  environments  under  frugal 
conditions have been less than successful. From negative experience in development assistance it 
has  been  learned  that  new  product  propositions  have  to  relate  to  and  draw  on  traditional 
techniques and practices that may in fact already be quite suitable for the local population – if they 
are to add any utility to their life. 

Infusing new ideas and moving beyond the pure architectural stage 

A  further  relevant  point  of  reference  to  develop  an  understanding  for  the  relation  between 
technology  and  frugal  innovation  can  be  found  in  the  well-known  but  sometimes  less  than  fully 
interpreted  differentiation  between  incremental  and  radical  innovations  (OECD,  2005)  –  as  first 
described  by  Schumpeter  (1911,  1934).  Very  often,  this  distinction  is  considered  mostly  from  a 

30 

 
technological  perspective,  identifying  as  radical  innovations  those  that  enable  a  quantum  leap  in 
technological terms – as is indeed the case for information technologies, biotechnologies and, more 
recently, network technologies. 

What  characterises  these  technologies  more  succinctly,  however,  is  their  potential  to  bring  about 
societal  and  economic  transformation  by  putting  incumbent  systems  of  production  and  service 
production  on  an  entirely  different  basis.  Notably,  many  updated  illustrations  of  Kondratieff’s 
(1926) famous cycles mention  not the steam  engine, but railways;  not chemistry per se, but the 
fertiliser industry; not the Otto engine, but the large-scale production of automobiles, not the Zuse 
Z3, but IBM’s personal computer. Evidently, therefore, the transformative power of innovation does 
not result from its technological traits per se but from the fact that it is amenable to a large scale 
application to latent needs (Gallis and Rall, 2012). 

Interestingly, therefore, the same authors who point out the key role for architectural innovation as 
the  founding  stone  of  frugal  innovations  (Ray  and  Ray,  2010)  also  liken  the  process  of  frugal 
innovation  to  Bower  and  Christensen’s  (1995)  generic  model  of  “disruptive  technologies”. 
Essentially,  this  model  draws  on  existing  interpretations  of  basic  Schumpeterian  thinking,  adding 
that potentially  transformative technologies may initially  enter  the  market not as premium but  as 
simple propositions, technologically still lacking, that eventually improve and replace the incumbent 
technology  at  all  levels  (Christensen,  2009).  Common  examples  are  the  replacement  of  large 
mainframe  computers  by  personal  computers,  the  replacement  of  landlines  by  mobile  telephony, 
and, eventually, the replacement of personal computers by smartphones and tablets. 

As  Ray  and  Ray  (2010)  argue,  the  market  entry  of  novel  solutions  tends  to  be  dynamic  if  the 
technological  performance  of  existing  technologies  exceeds  what  relevant  customers  are  able  to 
utilise or pay – so that the technologically simpler solution fits their needs better. 

First, it may become evident that the seemingly inferior solution is in fact quite superior or at least 
displays a better fit with customer demand and, on top of it, comes at a substantially lower price. 
In  this  case,  the  low-level  solution  will  replace  the  incumbent  product  as  happened  prominently 
with the introduction of the personal computer,  or  on a somewhat different note, with the partial 
replacement of chain stores by online traders. 

Second,  however,  architectural  innovators  may  seek  to  appeal  to  more  discerning  customers  as 
their  societal  and  competitive  environment  develops.  By  upgrading  their  solutions  from  the  initial 
“copies with added features” to more advanced solutions they will seek to access further customer 
groups. Key to this strategy is modularity in the initial product (Ray and Ray, 2010) which allows 
the  firms  to  develop  some  modules  further  in  line  with  emerging  and  evolving  needs  of  the  local 
markets and raise the impact of the overall, still frugal, product proposition. 

Once  more,  the  example of  the  Shanzhai  community  illustrates  how  –  after  a  first  phase  of  pure 
architectural innovation (i.e. recombination of whatever technology they got hold of) – many firms 
have  upgraded  their  business  models  and  products  in  line  with  market  requirements  through 
gradual  infusions  of  tailor  made  technological  developments  (Ming  and  Flowers,  2016;  Booz  & 
Company,  2009).  In  the  meantime,  some  of  them  like  Xiaomi  or  BYD  have  moved  even  beyond 
that stage, becoming technological innovators (Paris Tech Review, 2014). At the same time, some 
have kept their initial business model as it was successful outright (Designmind, 2013).  

In  any  case,  such  a  modular  upgrading  strategy  once  more  depends  on  an  understanding  of 
traditional  techniques  and  social  practices  that  define  a  local  use  context  as  only  this  knowledge 
can bring the frugal innovator in a position to further develop products in a process of co-creation 
with  potential  users  (Paris  Tech  Review,  2014;  Designmind,  2013).  Throughout  the  years,  a 
plethora of local cooperation models have emerged or been designed to that end of which several 
have been successful (Zhu and Shi, 2010). Certainly, a regular interaction between developers and 
customers is crucial and indispensable to fully harness the arguably superior potential of this model 
of re- rather than de-featuring. 

Conclusions 

Taking  this  into  account,  it  is  easy  to  acknowledge  that  technologies  play  a  natural  role  as 
components  of  frugal  innovation.  If  frugal  innovation  is  understood  as  a  “holistic  rethinking  of 
products, services, underlying processes and business models so that companies can squeeze costs 
and expand the customer base, business and profit” (Jagati, 2011), four main aspects come to play 

First, existing technologies are the basis from which all but the most basic frugal solutions are built 
in  a  process  of  recombination.  While,  importantly,  this  process  does  not  involve  technological 
development  and  can  in  fact  be  grounded  on  fairly  basic  technologies  it  does  involve  an 

31 

 
understanding of available technologies and the ability to interpret them in terms of their potential 
for new product and service propositions. 

Second, some fairly recent technologies may be available but less than fully exploited with a view 
to their potential to support and enable new business models. In this situation, even the targeted 
use  of  an  existing  technology  may  lead  to  a  product  proposition  so  strong  that  it  can  undermine 
most  incumbent  solutions  without  any  need  for  further  developments.  To  achieve  this,  however, 
investments have been made into a better understanding of such technologies. 

Third, some frugal solutions may only be relevant for a certain market niche or the very bottom of 
the  pyramid.  To  reach  a  broader  customer  base,  modules  will  have  to  be  improved  and  some 
additional  features  will  have  to  be  added.  In  this  process,  original  technological  development  will 
have to play a certain role as the problems encountered may not in all cases be fully resolved by a 
creative reinterpretation of available solutions. 

Finally,  some  frugal  solutions  may  at  all  stages  require  infusions  of  original  technological 
development  and  even  research  activities.  While  this  has  not  always  been  made  explicit  in  this 
section,  it  is  evident  from  the  analogy  to  Kline  and  Rosenberg’s  recursive  innovation  model: 
Whenever a problem, however basic, cannot be resolved with existing knowledge, recourse will be 
taken to targeted development to bridge the gap to a relevant product proposition. 

2.3.2. Non-frugal 

means 

towards 

frugal 

ends: 

developing 

specific  

new technologies as components of future solutions 

Awareness of value chains and value added 

If  policy  support  for  frugal  innovation  aims  at  increasing  the  level  of  growth  and  creating  jobs  in 
Europe,  the  question  of  where  relevant  value  added  is  generated  has  to  be  taken  into  account. 
Against  this  background,  it  will  not  be  enough  to  simply  create  new  business  opportunities  for 
European technology firms, because from a macro-economic perspective, technology development 
is first of all an investment. Value added (and in that sense ‘return on investment’), in contrast, is 
generated  by  downstream  industry  and  services.  That  means,  with  regard  to  the  economic  and 
social benefit of innovation downstream system integration constitutes the most crucial part of the 
value chain. Relevant system integrators can be huge OEMs, specialised SMEs as well as mid caps 
like the so-called hidden champions in Germany. These companies, however, will not be visible as 
technology  firms  in  the  first  place,  although  they  are  experts  with  regard  to  the  exploitation  of 
technological potential and market opportunities. 

The outcome of technology firms’ broadly supported activities, like new materials, new components 
or  new  equipment,  enables  innovative  products  in  the  downstream  industry.  Equally  important, 
however, is the matching between technology firms and downstream sectors which, with a view to 
the creation of growth and jobs should at least partially be located in Europe. Otherwise the costs 
for  technology  development  are  borne  in  Europe,  but  the  major  part  of  the  revenue  is  created 
outside. 

Technology-based approaches for frugal innovation 

In European contexts, both understanding and practice of technology based innovation procedures 
often follows the “diffusion of innovations” concept as outlined by Rogers (2003)25. In this theory, 
“early  adopters”  play  an  important  role  for  paving  the  way  for  a  broad  market  acceptance  of 
innovations  (see  above).  Characterised  by  high  social  status,  financial  liquidity,  and  advanced 
education,  these  users  are  expected  to  generate  a  first  substantive  return  on  investment  for 
research  and  innovation  activities.  In  a  similar  manner,  demanding  high  value  markets  like 
aerospace  can  understood  as  “early  adopters”  for  technology-based  innovation  before  these  are 
diffused into more commonplace markets like, for example, household appliances. This means that, 
today,  standard  technological  innovation  processes  primarily  address  advanced  requirements 
rather  than  basic  needs  and  that  the  first  customers  that  developers  envisage  as  relevant  after 
reaching Technology Readiness Level 9 (TRL9)26 are typically not interested in frugal solutions. 

Hence,  the  question  of  which  innovation  procedures  could  be  viable  for  technology-based  frugal 
innovation  has  to  be  explored  if  standard  routines  of  technology  development  do  not  usually 
support such  outcomes.  To do so,  particular  emphasis has to be  placed on the  issue of return  on 
investment.  Technological  development,  first  of  all,  requires  high  investments  that  have  to  be 
recovered both on the level of the firm and on that of the economy.  

25   Rogers, Everett (2003). Diffusion of Innovations. 5th Edition. Simon and Schuster.  
26   TRL9  is  the  highest  level  of  technology  readiness,  defined  by  the  European  Commission  as  technologies 

which have reached full commercial application and are ready for users. 

32 

 
                                                 
As  has  been  suggested  in  the  literature,  frugal  solutions  will  in  many  cases  not  justify  dedicated 
technology development as that would make little difference to their utility proposition, and, even if 
products later are sold at substantial volumes, expenses may be difficult to recover.  

Nonetheless, three situations can be envisaged in which such investments might pay off: 

 

Technologies that have been readily developed to TRL9 and implemented into  
non-frugal products can be adapted and modified to make them relevant for frugal solutions, 

  Specific platform technologies can be developed and later exploited in various areas of 

application, allowing for a distributed recuperation of development costs,  

 

Technologies which are developed with the specific purpose of reducing costs can or even 
have to be first launched in frugal markets to demonstrate their viability. 

The three concepts are described in the following. 

First,  one  strategy  of  technology  deployment  for  frugal  applications  can  be  the  modification  of 
already introduced technologies. With regard to Rogers’ (2003) “diffusion of innovation theory”, the 
target market in this case is “late majority”. As, in principle, advanced products are already on the 
market,  the  related  Technology  Readiness  Level  is  TRL9.  Also,  basic  issues  of  technological 
scalability  have  already  been  solved  when  “early  majority”  markets  were  exploited.  Hence, 
investments can be moderate, and targeted, as most fundamental knowledge is already available. 
As outlined above, however, the adaptation of technologies to frugal application contexts can make 
a substantial difference with a view to opportunities for value creation. Undoubtedly, moreover, few 
high-end  products  can  be  de-featured  single-handedly.  Even  technologically,  doing  so  might 
require specific knowledge and dedicated research. 

Another  approach  to  ascertain  an  adequate  return  on  investment  for  dedicated  research  and 
development  aimed  at  frugal  solutions  are  variable  platform-based  or  modular  concepts.  These 
technologies provide the basis for mass customization approaches as constitutive enablers for the 
launch  of  frugal  solutions  in  non-homogenuous  markets.  Undoubtedly,  Europe  holds  quite  a 
competitive position in  the production of these  technologies while, at the same time,  they  can  be 
deployed to customise products to the requirements of various target markets in a flexible manner. 
Barriers to the scalability of technologies from national to international markets may thus be more 
easily overcome. Examples of relevant adaptable technologies include: 

  3D printing, 

 

printed electronics, 

  microelectronics and embedded systems, 

 

 

industrial biotech (feedstock), 

all kind of software enabled approaches, 

  material on demand. 

Finally, technology development can not only aim at creating new products or de-featuring them. It 
can also aim to replace the function of existing products by significantly cheaper ones. In this case, 
a substantive return on investment can be expected from the much increased scale at which such 
low-cost  applications  can  be  distributed  and  sold.  At  first,  products based  on the  new  technology 
may not match the performance of existing ones, meaning that conscious efforts have to be taken 
to  minimise  this  obstacle.  Nonetheless,  market  entry  can  be  hampered,  even  at  much  reduced 
prices,  due  to  a  (systemic)  lock-in  to  established  technologies.  In  this  case,  emerging  markets 
might  provide  an  opportunity  to  pilot  low-cost  technologies.  After  reaching  a  performance 
comparable to that of established technologies, the low-cost technologies can be propagated also in 
European countries.   

New technology ecosystems to foster frugal innovation 

Today,  technology-based  innovation  is  characterised  by  complex  ecosystems  characterised  by  an 
extreme division of labour and highly specialised actors. Many stakeholders in the research driven 
domain  concentrate  on  the  solution  of  technology  related  problems  and  are  not  aware  of  market 
related  problems  and  potential  customer  demand,  let  alone  frugal  opportunities.  This  constitutes 
one  of  the  major  reasons  for  the  well-known  ‘valley  of  death’  between  TRL4  and  TRL6  in  which 
many technologies end up left behind. In this setting, developers are highly specialised researchers 
and engineers whose thinking focuses on technological viability and whose conceptual horizon does 
not  extend  to  target  markets.  Typically,  the  first  contact  between  a  technology  and  market 
intelligence occurs in the sales division of system integrators. 

33 

 
As outlined above, typical frugal innovation processes operate inversely: Real life problems are the 
starting  point  while  technologies  –  even  dedicated  technological  development  –  are  in  a  serving 
position. That means in order to implement technology-based frugal innovation, it is necessary to 
crack the typical technology  ecosystems  and  link  them  together with those  who are  aware  of the 
real  life  problems:  system  integrators  and  other  actors  with  know-how  about  technologies’  real 
world potential. If the abovementioned options could be thus activated, this could even become a 
role model for future technology-based innovation in general helping to finally break the ‘European 
paradox’,  having  a  positive  impact  on  the  productive  deployment  of  technology  in  Europe  as  a 
whole. 

Frugal innovation as testing field 

Various aspects that are commonly discussed in technology deployment are specifically relevant in 
the  setting  of  frugal  innovation.  Therefore,  a  successful  demonstration  of  the  viability  of  the 
abovementioned three avenues towards dedicated technological development for frugal innovation 
might  have  spillover  effects  on  Europe’s  technology  based  innovation  system  as  a  whole.  In 
particular,  both  the  public  and  the  private  research  and  development  community  can  see  frugal 
innovation settings as testing field: 

 

 

 

 

 

 

to implement need-oriented, innovation processes and market driven innovations; 

to raise awareness for market specificity and application requirements; 

to bear in mind and address issues like price/cost and regulation from the beginning; 

to test and pursue innovation processes jointly with stakeholders from ecosystems; 

to avoid a stratification of competences and resulting over-engineering; 

to pilot and consolidate new concepts like mass customization.  

The  aspects  mentioned  above  are  significant  in  the  current  technology  deployment  process  in 
general – and fairly often not sufficiently covered. Putting them to the test and demonstrating their 
relevance  and viability in the ‘extreme  environment’ of frugal applications may help to  raise their 
level of acceptance in other contexts. 

Ubiquitous technologies as enablers of frugal solutions 

A final, but important, point in relation to technologies as a component of frugal innovations relates 
to the way in which the spread of technologies opens up opportunities for frugal solutions. Mobile 
devices are an obvious example. With the number of mobile devices now exceeding the number of 
people on earth, mobile phones and smartphones are enabling frugal solutions to be developed in a 
wide  range  of  fields,  from  mobile  banking  to  health  and  education  (Nordic  Innovation,  2016). 
Peekvision,  for  example,  combines  an  app  and  lens  adapter  to  turn  an  iPhone  into  a  tool  that 
health workers can use to conduct eye examinations in remote areas. High-resolution images can 
then be shared online with clinicians to diagnose problems and prescribe therapies. Kenya’s M-Pesa 
uses SMS technology to provide mobile money services to ‘unbanked’ people. The power of these 
devices  to  facilitate  frugal  solutions  rests  on  what  one  participant  at  the  project’s  inception 
workshop described as “ubiquity,” and their connectedness. Piggybacking on existing technologies 
to create frugal solutions is not a new phenomenon  – in the 1970s the UK’s Open University took 
advantage of the fact that most people had a television set in their houses to provide ‘frugal’ higher 
education services – but the rapid spread of connected devices makes possible a far wider range of 
solutions  than  ever  before.  Meanwhile,  the  availability  of  low-cost  open  hardware  such  as  the 
Arduino circuit board has enabled, for example, development of a cheap Geiger counter, Safecast, 
which was given to citizen volunteers in Japan to monitor radiation levels after the accident at the 
Fukushima  Daiichi  nuclear  power  plant  in  2011.  By  2015,  over  15  million  data  points  had  been 
captured, far more than civic authorities were able to measure using traditional methods (Bria et 
al,  2015).  Moving  back  towards  the  idea  of  recombination,  components  from  smart  devices  can 
also  be  used  to  create  new  frugal  solutions.  Nasa’s  PhoneSat,  for  example,  uses  consumer-grade 
smartphone technology as the control electronics in a very low-cost satellite.27  

2.3.3. From ‘mass frugal’ to ‘networked sourcing and delivery’? 

As outlined above, industrially manufactured frugal solutions have in the past been associated with 
standardised  mass  production.  Initially,  in  fact,  the  very  concept  of  mass  production  with  its 
resulting economies of scale enabled the production of “more for less for more people” in the first 
place.  Without  the  implementation  of  Fordist  and  Taylorist  principles,  frugal  solutions  would  not 
have become possible in Western industries and mass consumerism would not have emerged in the 

27   http://www.nasa.gov/content/nasas-latest-smartphone-satellite-ready-for-launch 

34 

 
                                                 
same  manner.  During  the  advent  of  mass  production,  frugal  solutions  represented  the  previous 
status  quo,  bypassed  by  the  industrial  revolution  and  associated  with  locally  contingent,  often 
antiquated,  production  and  delivery  systems.  In  that  sense,  local diversity  and  context  specificity 
provided  a  background  from  which  affordable  industrial  production  was,  in  a  first  step,  to 
dynamically depart. 

In  the  overall  spirit  of  the  time,  therefore,  ‘mass  frugal’  solutions  became  associated  with  large, 
centralised corporate empires, strategic market analysis and centralised development, in short with 
standardisation,  homogenisation  and  a  certain  disregard  for  individuality.  In  consequence, 
prevailing  strategies  were  characterised  by  a  conceptual  dissociation  of  a  few  ingenious 
entrepreneurs  on  the  one  hand  and  a  large  majority  of  more  or  less  passive  consumers  on  the 
other whose needs were conceived of as comparatively similar in central respects. When the overall 
societal  environment  changed  after  WWII,  however,  the  business  proposition  inherent  in 
individualised – yet still affordable – products became more and more obvious. Still, it was not until 
many  years  later  that  technologies  for  so-called  mass  customization  would  become  sufficiently 
commonplace to perceive situated  user  and delivery  contexts as more than folkloristic relics from 
the past. 

With  the  advent  of  additive  manufacturing  and  flexible  computer-aided  manufacturing  systems, 
however, the rules of the game are beginning to change and, in the view of many, will be changing 
more  dramatically  in  the  coming  years  (cf.  The  Economist  2011;  Radjou  and  Prabhu,  2015).  For 
frugal  innovation,  this  is  of  crucial  importance  as  these  technologies  will  allow  manufacturers  to 
combine  the  low  unit  costs  of  mass  production  with  the  flexibility  of  individual  customization. 
Importantly,  this  will  not  only  become  possible  through  the  implementation  of  new  process 
technologies in the production process but also through new options for co-creation and feedback 
loops all across the innovation chain. 

The  following  section  will  therefore  provide  a  brief  definition  and  contextualisation  of  mass 
customization  per  se  and,  building  on  that,  elaborate  in  some  more  detail  on  processes  of  co-
creation and networked production. 

Mass customization 

Mass  customization  refers  to  efforts  aimed  at  substantial  increases  in  variety  without  a 
corresponding  increase  in  costs  (Tseng  &  Jiao,  2001;  Pine,  1992).  Through  company-customer 
interaction  at  the  conception,  fabrication  and  assembly  stages  it  constitutes  a  strategy  to  better 
meet  individual  customer’s  needs  at  prices  close  to  that  of  standardised  products  (Kaplan  and 
Haenlein, 2006). Thus, it by definition creates a substantial opportunity to increase the scope and 
impact  of  frugal  innovation  on  developed  markets.  In  the  foreseeable  future  its  broad  based, 
technology  driven  implementation  may  thus  become  a  technology  as  equally  ‘game  changing’  as 
the  broad  availability  of  steam  engines,  artificial  fertiliser  or  industrial-scale  electricity  (‘fourth 
industrial revolution’).   

In  the  past,  efforts  towards  mass  customization  were  often  mostly  conceived  of  as  “effectively 
postponing  the  task  of  differentiating  a  product  for  a  specific  customer  until  the  latest  possible 
point  in  the  supply  network”  (Feitzinger  and  Lee,  1997).  While  this  does  increase  utility  –  in 
particular in the area of classic consumer goods – this sort of ‘soft’ or ‘adaptive’ customization by 
the customer will on average have a rather limited transformative effect.  

As management research has demonstrated, however, customers perceive substantially increased 
utility when allowed to adapt their product through “mass customization interfaces” even when the 
adaptations that they can perform are limited by a number of restricted, or, in fact rather cosmetic 
changes (Kamis et al., 2008). In that sense, individual customization at the end of the production 
chain  brings  solutions  somewhat  closer  to  the  ‘norm’  of  frugal  solutions  even  if  not  to  the  same 
extent as if the (potential) customer had been genuinely involved. 

Nonetheless,  “hard”  or  “collaborative”  customization  (Chen  et  al.,  2009),  i.e.  customer-producer 
interaction  at  the  development  stage,  is  still  most  likely  to  provide  genuinely  transformative 
potential in the long run. Arguably, such early-stage collaborative efforts are particularly productive 
as they help to more effectively match the individual specific needs of customers with the growing 
customization capabilities of manufacturers. This, in turn, resonates with the concept of value co-
creation  as  put  forward  in  the  management  literature.  In  the  language  of  economics  it  suggests 
that  mutual  utility  will  be  increased  if  and  when  customers  can  personalise  experiences  using  a 
firm’s  product-service  proposition  to  a  level  best  suited  to  their  specific  needs  and  requirements 
and – at the same time – allow the producer to derive financial or otherwise relevant benefits from 
that use (Prahalad and Ramaswamy, 2000). To pursue that ambition, firms used to have no choice 
but  to  send  people  to  talk  to  individual  customers  or  conduct  telephone  surveys  –  methods  by 
which  both  bottom  of  pyramid  customers  and  relevant  niche  groups  with  particular  preferences 
were,  in  the  majority  of  cases,  insufficiently  covered.  At  the  same  time,  high  entry  barriers  to 
participation  in  product  development  processes  were  commonplace  with  a  view  to  the  formal 
affiliation to relevant firms or universities or at least documented prior qualifications.  

35 

 
These days now appear over, due to technological advances as much as to cultural changes. In the 
meantime, the culture of many companies has changed from one of in-house development to one 
of  open  innovation  and  (potential)  consumers  have  enter  the  stage  as  short-term  adapters  of  by 
and large predefined products but also as substantial co-developers in FabLabs, makerspaces and 
Pilot Plants. Importantly, this does not only refer to final, individual customers but also to supplier 
and  customer  firms,  often  SMEs  which  to  an  increased  extent  collaborate  up and  down  the  value 
chain. 

So far, mass customization has become prevalent mostly in consumer good oriented industries like 
textiles,  shoes,  toys,  watches,  prefabricated  houses,  furniture,  food  and  others.  By  means  of 
software-based  product  configurators,  customers  are  given  the  opportunity  to  add  or  change 
functionalities of a core product in a process of ‘soft or adaptive customization’ – i.e. either shortly 
before  or  after  purchase.  Apart  from  the  configurator  itself,  this  sort  of  customization  does  often 
not even require the implementation of new technologies. Sometimes, variants of one product are 
simply  mass-produced  in  parallel  and  sold  upon  demand.  Only  where  single  units  require 
substantial  investment  and,  at  the  same  time,  offer  a  large  number  of  varieties,  have  genuine 
processes of mass customization taken hold – as in the car industry. For the time being, there are 
relatively  few  genuine  ‘mass  customisers’  of  material  goods  to  start  with  and  even  fewer  that 
involve customers or other external partners at an early stage of the development process. In the 
coming years, however, this picture may well be changing. 

New technological options for co-creation 

A  few  years  ago,  large  scale  processes  of  piloting  material  goods  jointly  in  groups  of  individuals 
were  relatively  unheard  of.  At  best,  some  SME  who  would  have  otherwise  lacked  the  resources 
teamed  up  in  collaborative  endeavours  to  put  forward  new  technological  propositions  that  they 
lacked  the  resources  to  explore  on  their  own.  In  general,  the  threshold  to  contribute  ideas  to 
technological innovation was high as it required a high level of formal qualification and, as a rule, 
to be employed in R&D departments of relevant cooperations.   

With  additive  manufacturing  and  rapid  prototyping,  however,  a  game  changing  technology  has 
been  introduced.  Since  its  conception  and  first  demonstration  in  the  1980s,  the  technologically 
viable  variants  of  3D  printing  as  a  prototyping  tool  have  multiplied  and  become  applicable  to  a 
much larger range  of  materials than  before,  including not only thermoplastics and photopolymers 
but  also  metal  powders,  ceramic  powders  and  metal  alloys.  Hence,  it  has  become  relevant  for  a 
large range of industries. Today, 3D printing technologies include fused deposition modeling, fused 
filament  fabrication,  robocasting  or  direct  ink  writing,  stereolithography,  powder  bed  and  inkjet 
head  3D  printing,  electron-beam  melting,  selective  laser  sintering,  direct  metal  laser  sintering 
laminated  object  manufacturing,  electron  beam  freeform  fabrication  and  others.  Also,  it  has 
become exponentially cheaper in the past 5 years, years with decent 3D printers now available for 
less  than  $1,000.  In  consequence,  a  dynamic  culture  of  joint  development  emerged  in 
‘makerspaces’  that  was  further  enabled  by  enabling  components  like  credit-card  sized  frugal 
computers (Raspberry Pi) and has led to a vivid exchange of findings and ideas on online fora. In 
such  makerspace  contexts,  formerly  passive  customers  became  ‘prosumers’  engaged  in  the  co-
creation and development of products in what some observers see as an emerging “We-Economy” 
(Hesseldahl,  2015).  Increasingly,  even  larger  firms  like  GE  have  become  interested  in  sourcing 
these  hubs  of  creativity  and  platform  providers  like  Quirky  have  emerged  to  cater  for  that  need. 
Evidently, the threshold to participate in innovation processes has thus been lowered substantially, 
and the Chinese term ‘mass innovation’ may in a few years only be slightly overstating. 

Furthermore,  the  plethora  of  new  options  arising  from  the  use  of  cloud  computing  and  big  data 
analysis  give  firms  increased  opportunities  to  scout  new  markets  at  early  stages  and  identify 
precise entry points for  the inevitably still  needed personal interaction  with  future  customers (Wu 
et al., 2015). In parallel, cyber-physical systems and an internet of (affordable) things will help to 
consolidate consumer feedback into the innovation process at various stages and connect products 
to processes of delivery. 

New options for networked production 

Even  though  cooperation  in  the  early  stages  of  the  innovation  process  may  provide  greater 
opportunities for mass-customised frugal products than  ‘mere’ adaptive  customization, production 
facilities  still  have  to  provide  the  agility  and  adaptability  to  accommodate  new  designs  or  even 
basic  characteristics  on  short  notice.  Arguably,  the  requirements  that  collaborative  customization 
entails in this respect surpass in many cases exceed that of adaptive customization. As mentioned 
above, processes behind adaptive customization strategies are oftentimes simply resolved through 
parallel  production  or,  as  in  the  car  industry,  well  proven  approaches  of  modularisation.  For  the 
much greater volatility in design that genuine user involvement will bring, in contrast, only smart 
factories, embedded in real-time cyber-physical systems may provide a sufficient basis.  

Arguably, additive  manufacturing alone will  not  deliver on this promise in immediate  future, even 
though  some  are  more  optimistic,  predicting  a  potential  reduction in  prices  by  nearly  60%  in the 
metal  industry  (Roland  Berger,  2013:  35)  or  even  a  general  undermining  of  the  once  dominant 

36 

 
principle of economies of scale (The Economist, 2011) . To an extent, 3D printing does provide the 
potential  for  distributed  manufacturing  at  the  household  scale  of  customised,  high-value,  and 
complex  products  (Wittbrodt  et  al.,  2015;  Bopp,  2010).  It  will  be  some  time  until  a  “full  scale 
global  additive  manufacturing  ecosystem”  emerges,  however,  even  though  its  beginnings  are  on 
the horizon (Radjou and Prabhu, 2015).  

While  during  the  2000s,  additive  manufacturing’s  applications  have  typically  been  on  the 
conception  side  of  the  innovation  chain,  additive  methods  are  moving  ever  further  into  the 
production end of manufacturing in creative and sometimes unexpected ways. In parallel, additive 
manufacturing  joins  forces  with  cloud  computing technologies  in  decentralised  and  geographically 
independent  networks  for  distributed  rapid  manufacturing  (Wu  et  al.,  2015,  Hopkinson  and 
Dickens, 2006) – either by companies themselves or through matching services like 3D Hubs that 
put potential customers in contact with nearby owners of 3D printers (3D Hubs, 2015, Horn, 2013). 
Different from rapid prototyping, however, rapid manufacturing remains far from mature and many 
of  its  processes  remain  technologically  unproven.  In  the  short  term,  selective  laser  sintering  or 
direct  metal  laser  sintering,  some  of  the  better-established  rapid  prototyping  methods,  are 
considered as most promising options. So far, industrial applications have reached some maturity 
for  toys,  eyewear,  specific  components  for  the  aeronautics,  car  and  construction  industry, 
prosthetics, and cases for various electronic products. 

‘Industry  4.0’,  moreover,  will  provide  increased  opportunities.  In  the  nearer  future,  machines, 
storage systems and supplies will become embedded in common IT infrastructures and linked up as 
cyber-physical systems (CPS). Based on more advanced or ‘smart’ robots capable of man-machine 
interaction  as  well  as  new  types  of  cyber-physical  production  facilities,  opportunities  to  both 
accommodate  greater  product  variety  and  to  coordinate  production  with  development  outcomes 
and user demand in real time will be much increased. Based on these new options to communicate 
along the value chain in real time and an increasing abundance of mass data, mass customization 
in ‘smart factories’ will become much more commonplace than today. 

In summary, the impending re-organisation of production processes (‘fourth industrial revolution’) 
will  with  some  likelihood  enable  substantially  increased  efficacy  and  efficiency  in  complex 
production  processes  which,  in  consequence,  will  lead  to  opportunities  for  a  substantial  cost 
reduction of a much larger range of products than  traditional mass production could ever provide 
(Radjou  and  Prabhu,  2015).  In  concert  with  additive  manufacturing,  therefore,  the  trend  towards 
digital factories may indeed harbour a potential to, in the long, run eliminate or at least sideline the 
former  economies  of  scale  as  the  dominant  business  model  that  enables  frugal  solutions  and 
affordability in industrial production. 

2.4. 

Appraisal and outlook 

2.4.1. Weighing tensions between benefits: when is frugal welcome? 

To  conclude,  this  report  will  come  back  to  the  question  of  the  normative  character  of  frugal 
innovation  or  in  short,  the  issue  of  what  type  of  frugal  innovation  is  desirable  from  a  societal, 
ecological  and  ethical  standpoint.  While  at  this  stage  of  the  study,  no  definite  answer  can  be 
provided, this final section will revisit some central tensions and provide illustrative examples. 

Quite  evidently,  the  mere  fact  that  someone,  through  an  ingenious  solution  provides  ‘more  with 
less for more people’ does not per se lead to a more desirable, let alone sustainable outcome until 
further criteria are fulfilled. 

For  example,  the  business  model  of  discounters  is  clearly  frugal  with  a  view  to  their  reduced 
approach  of  offering  food,  beverages  and  other  consumer  products  at  lower  prices  than  in 
traditional  supermarkets.  At  the  same  time,  many  of  them  are  notorious  for  poor  working 
conditions,  low  wages,  robust  negotiation  practices  and  an  at  best  limited  regard  for  ecological 
sustainability  in  the  production  of  the  goods  they  offer.  Likewise,  industrialised  food  and  meat 
production  can  with  a  view  to  various  aspects  of  the  production  process  easily  be  considered  as 
frugal.  This  provision  of many  formerly  inaccessible  goods  at  substantially  lower  prices,  however, 
leads not only to improved accessibility but also to negative side-effects of mass consumption such 
as detrimental effects on public health, rising volumes of waste, the unethical treatment of animals 
and negative environmental impacts due to an overly extensive use of agricultural land.  

Similar  examples  can  be  found  for  organisational  innovations  that  allow  more  people  greater 
comfort  and  the  use  of  services  that  were  not  affordable  for  them  in  the  past  such  as  package 
holidays  or  low-cost  airlines.  Besides  these  positive  effects,  however,  both  innovations  have 
resulted in undisputable negative environmental consequences and, locally, in at least questionable 
social  outcomes.  Likewise,  these  substantially  lower  prices  for  services  are  in  more  than  isolated 
cases  achieved  at  the  cost  of  the  employees  providing  them  –  with  a  view  to  wages  or  working 
conditions. 

37 

 
Furthermore,  the  effects  of  ‘more  with  less  for  more  people’  should  be  assessed  from  a  dynamic 
perspective.  Mass  motorisation  could  be  mentioned  as  one  such  ambiguous  example.  When  Ford 
started offering cars ‘for the masses’ and, at later stages, German and Japanese producers added 
further affordable automobiles for wider parts of the population, individual transport opened many 
new economic opportunities and facilitated improvements in wellbeing. At the same time it created 
many  negative  effects  for  the  environment  and  for  society  in  terms  of  noise,  pollution  and  novel 
health threats.  

Figure  6  shows  the  development  of  the  stock  of  motor  vehicles  in  Germany  over  the  last  sixty 
years – triggered by rising incomes and the availability of affordable passenger cars. Additionally, it 
shows  how  arguably  more  sustainable  solutions  like  motorcycles,  which  in  the  1950s  and  1960s 
were  used  to  transport  whole  families,  were  gradually  replaced  by  passenger  cars.  While  this 
development could to  an extent be expected from  the outset,  policy  makers not only took a long 
time to address it but, until today, face grave difficulties in the restructuring of what has become a 
socio-technological  subsystem  shaped  by  easy,  and  affordable,  access  for  all.  At  the  same  time, 
China and India are moving into a quite similar track development with barely improved strategies 
for mastering their consequences. 

Figure 5:  

Stock of motor vehicles in Germany, 1960 to 2015  

Source: German Federal Motor Transport Authority, illustration Fraunhofer ISI 

Until the 1960s, most Western societies held a strong belief in technology and progress. Resources 
seemed  to  be  inexhaustible,  it  was  assumed  that  the  environment  could  cope  with  waste  and 
pollutants and if not, technological solutions would be found for the problems. When this perception 
started  to  change,  first  efforts  were  initiative  to  assess  technologies,  in  first  reports  to  the  US 
Senate  in  1966  and  with  the  establishment  of  the  US  Office  of  Technology  Assessment  (OTA)  in 
1972  (Dusseldorp  and  Beecroft,  2012).  Later  on,  similar  offices  were  established  in  European 
nations to monitor and analyse trends in science and technology and assess their opportunities and 
risks. Since 2005, the European Technology Assessment Group (ETAG) provides such assessments 
on social, environmental and economic aspects of new technological and scientific developments to 
the  European  Parliament.  More  recently,  the  European  Commission  initiated  a  debate  on 
'responsibility'  in  science,  technology  and  innovation  policy  to  better  align  its  support  effort  with 
societal  needs.  This  ambition  was  reflected  in  the  2010  framework  for  Responsible  Research  and 
Innovation building on earlier discussions on “Science and Society” as follows: 

Responsible Research and Innovation (RRI) refers to the comprehensive approach of proceeding in 
research  and  innovation  in  ways  that  allow  all  stakeholders  that  are  involved  in  the  processes  of 
research and innovation at an early stage  

A.  to obtain relevant knowledge on the consequences of the outcomes of their actions and on the 

range of options open to them and  

B.  to effectively evaluate outcomes and options in terms of societal needs and moral values  

C.  to use both of these considerations as functional requirements for design and development of 

new research, products and services.  

The RRI approach [is key to] the research and innovation process and should be established as a 
collective, inclusive and system-wide approach." (European Commission, 2013) 

Against this background six key dimensions were highlighted (European Commission, 2012): 

38 

05,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,00019601965197019751980198519901995200020052006200720082009201020112012201320142015MotorcyclesPassenger carsBussesTrucks 
 
 

Involvement of all societal actors (interest groups representing diverse concerns) 

  Gender equality 

  Science education to allow broad-based participation in debates 

  Open access to the results of publicly funded research 

 

 

Ethics – respecting fundamental rights and high ethical standards  

Ensure a conscious governance of responsible research and innovation. 

Certainly,  frugal  innovation  must  be  considered  as  distinct  from  the  type  of  science  and  science-
driven innovation that is typically discussed in the RRI discourse. As outlined in this report, many 
frugal innovations are based on the recombination rather than the scientific generation of existing 
knowledge and extend broadly into the field of service and organisational innovation.  At the same 
time,  they  can  also  be  closely  related  to  scientific  efforts  and  display  notable  overlaps  with 
technology driven innovation. 

In  any case,  the  above examples have demonstrated  that  it will be worthwhile to  reflect on their 
societal  and  ecological  implications  of  frugal  innovations  from  both  a  static  and  a  dynamic 
perspective.  For  this,  existing  experiences  with  technology  assessment  and  responsible  research 
provide suitable templates even if the object of their application may be somewhat different in the 
context of frugal innovations.  

2.4.2. Weighing policy options: how could frugal activities be triggered? 

Previous  sections  have  explored the  case  for  frugal  innovation  as  an opportunity  for  Europe.  This 
report  has  argued  that  frugal  innovation  represents  an  important  avenue  for  European  firms 
looking to compete in emerging markets, and increasingly, in developed European markets at well. 
Macro trends, including the long-term pressure on public sector budgets and increased demand on 
public services arising from an ageing population, as well as the European Commission’s aspiration 
to support ‘smart, sustainable and inclusive growth’, suggest that frugal innovation has potential as 
a means of tackling public policy challenges as well. Nevertheless, at present, frugal opportunities 
both  for  European  businesses  and  from  a  public  sector  perspective  remain  under-explored. 
Therefore, while it is not the aim of this interim report (and too early in the lifecycle of this project) 
to construct a detailed rationale for policy intervention, the evidence discussed so far suggests that 
there may be a case for policy makers to support frugal innovation – even if, as suggested above, 
it will be important in doing so to consider, and manage, potential negative impacts of supporting 
frugal innovations.  

Moving  on  from  the  question  of  whether  policy  makers  should  support  frugal  innovation,  this 
section briefly considers how they could do so. The research carried out as part of this project so 
far suggests that policy could play a role both in triggering demand and supply of frugal innovation. 
A first potential role  -  in fact already being  embodied through  the  funding  of this  scoping study  - 
involves  raising  awareness  and  generating  interest  in  frugal  innovation,  leveraging  the  European 
Commission’s role as a convener.   

A number of opportunities can also already be identified relating to research and innovation policy. 
Fraunhofer ISI and Nesta’s original proposal to undertake this study outlined a number of potential 
implications  for  Horizon  2020  and  more  specifically,  the  Leadership  in  Enabling  and  Industrial 
Technologies (LEIT) strategy. A key point made was that the focus of investment in Key Enabling 
Technologies  to  date  has  been  on  upstream,  early  stage  research,  while  promoting  frugal 
innovation may require a shift towards investment in later stages of the innovation cycle. This idea 
has been supported by the research carried out so far, which has re-emphasised, for example, how 
frugal  innovation  involves  not  only  (and  sometimes  not  at  all)  the  development  of  new 
technologies, but the combination of existing elements to meet user needs in a different way. The 
possibility of selecting specific technologies that would appear to most readily ‘lend themselves’ to 
frugal innovation and focusing on supporting their integration in frugal approaches was also raised 
in  our  proposal,  and  has  been  further  supported  by  the  research  to  date.  Additional  potential 
opportunities  include  promoting  partnerships  between  firms  in  Europe  and  emerging  economies, 
and  directing  programme  funding  towards  generating  frugal  solutions  for  emerging  markets  in 
Europe. 

Some  other  existing  initiatives  of  the  European  Commission  seem  to  have  relevance  for  frugal 
innovation,  without  necessarily  using  this  terminology.  The  European  Innovation  Partnerships 
(EIPs)  supported  under  the  Innovation  Union,  for  example,  are  exploring  a  number  of  themes  in 
which  frugal  solutions  are  likely  to  emerge,  such  as  the  EIP  on  Smart  Cities  and  Communities, 
which  among  other  issues  looks  at  integrated  energy  models,  urban  mobility,  energy  efficiency, 

39 

 
low-carbon  solutions  and,  in  a  broad  sense,  the  circular  economy.28  Moreover,  the  structure  and 
aims  of  these  partnerships  -  multi-stakeholder  groups,  intending  to  speed  up  the  innovation 
process,  and  taking  problems  or  challenges  as  their  starting  points  -  lend  themselves  well  to 
identifying  opportunities  for  frugal  innovation.  Further  exploring  the  extent  to  which  frugal 
innovation  could  become  more  explicitly  embedded  in  the  work  of  these  partnerships  may  be 
worthwhile. 

Beyond research and innovation policy, the research so far has highlighted the impact of regulation 
and  standards  on  frugal  innovation,  both  positively  -  as  when  new  standards,  duties  and  targets 
push  companies  to  develop  more  energy-efficient  solutions  -  and  negatively,  when  regulation 
prevents frugal solutions from being adopted in Europe. Given the importance of these issues, this 
report has discussed regulation and governance  and its implications for frugal innovation in more 
detail earlier in this report. 

The  public  sector  has  a  huge  potential  role  as  a  ‘customer’  for  frugal  innovation,  both  from  the 
perspective of procuring frugal solutions from third parties,  and of  adopting frugal thinking within 
the  design  and  delivery  of  services.  Exploring  ways  to  stimulate  demand  from  public  sector 
organisations for frugal solutions appears therefore to be a significant opportunity. This could take 
the  form,  for  example,  of  funding  pilots  to  explore  the  potential  for  adoption  of  ‘reverse 
innovations’ from other contexts, for example in health and education; funding challenge prizes to 
bring forward frugal solutions to public sector challenges; or supporting learning programmes that 
aim  to  develop  ‘frugal  capabilities’  amongst  public  servants  in  Europe.  The  broader  area  of 
education  and  skills  policy  also  appears  relevant  to  this  agenda,  given  the  need  to  develop 
capacities for frugal innovation within European firms, although no specific proposals have emerged 
from the research to date.  

Frugal  innovation  could  also  form  a  focus  for  European  countries’  innovation  partnerships  with 
emerging and developing economies, in  way that  both generates benefit  for Europe and supports 
development goals. The UK’s Newton Fund29 fund, for example, promotes research and innovation 
collaborations between UK organisations and counterparts in a number of focus countries, as part 
of the UK’s official development assistance, while the Prosperity Fund30 supports collaborations that 
simultaneously promote both UK and global growth.  

Taking a slightly different track, the research to date highlights that frugal processes are important 
as  well  as  frugal  outcomes  -  raising  the  questions  of  whether  frugal  innovation  principles  can  be 
better reflected in policy design itself. This may include, for example, greater use of technology to 
generate  insights  that  could  inform  research  and  innovation  priorities,  or  to  source  solutions  (for 
example through collective intelligence platforms or challenge prizes). 

Finally, this report has also noted that the social, environmental and economic outcomes of frugal 
innovation will not always be positive and that tensions between these different types of outcomes 
in  some  cases.  Therefore,  the  question  is  not  only  how  policy  makers  could  trigger  frugal 
innovation  but  how  they  can  do  so  in  a  way  that  maximises  positive  outcomes  and  manages 
tensions.  

28   http://ec.europa.eu/eip/smartcities/index_en.htm 
29   http://www.newtonfund.ac.uk/ 
30  https://www.gov.uk/guidance/prosperity-fund-programme 

40 

 
                                                 
3. 

FINAL HYPOTHESES AND PROPOSITIONS 

Based on the above sections, the following eight hypotheses have been consolidated.  

On mentality 

1.  A  mentality for frugal innovation and  technological  recombination is not  exclusive  to emerging 
economies.  It  played  a  central  role  in  Europe’s  past  development  and  remains  prevalent  in 
many  market  oriented,  mid-sized  firms.  Even  in  technology-driven  contexts,  frugal  mindsets 
can be (re)gained through active engagement. 

On routines 

2.  Current  routines  of  technology  development  will  have  to  be  substantially  re-thought  to  enable 
frugal  solutions.  Concrete  applications  of  technologies  under  development  will  have  to  be 
considered  at  much  earlier  stages  (TRL4-5)  and  additional  actors  will  have  to  be  involved  to 
integrate a market dimension from the outset. 

On openness 

3.  In  Europe,  many  innovation  processes  remain  contained  within  firms  and  fail  to  relevantly 
involve  potential  users  -  creating  a  "closed  world"  with  a  lack  of  market  awareness  and  an 
overt affection to high-tech solutions. Successfully creating frugal solutions will require firms to 
shift innovation practices towards more open models.  

On transformation 

4.  Key enabling technologies (KETs) will open up new avenues for frugal innovation. In particular, 
newly available technologies such as various ICT applications, 3D printing and industry 4.0 will 
not  only  open  up  new  options  for  frugal  products  but,  at  least  equally,  for  new,  frugal 
processes of innovation and production.  

On markets (European) 

5.  In principle, many trends in European markets spur rising demand for frugal solutions  - based 
on  needs  and  out  of  choice.  While  the  refugee  crisis  has  added  further  momentum  to  the 
former,  aspirations  and  preferences  for  the  latter  remain  to  be  shaped.  Finally,  the  public 
sector itself can be an important customer for frugal innovation.  

On markets (emerging) 

6.  Frugal innovation is a business opportunity for  European firms in emerging markets  and many 
larger  corporations  have  devised  strategies  on  how  to  leverage  it  to  the  best  of  their  ability. 
Moreover,  exposure  to  emerging  market  contexts  is  a  suitable  tool  to  engage  with  differing 
mentalities, enable learning and improve business models in a holistic sense.  

On scale 

7.  Achieving scale is a key challenge for frugal innovation as solutions will only develop a relevant 
impact  when  delivered  at  large  scale.  Localised  frugal  solutions  of  the  grassroots  type, 
however,  may  in  fact  not  be  scalable.  In  Europe,  cultural,  linguistic,  regulatory  and  other 
barriers between nations complicate the challenge. 

On tensions 

8.  Increasing access for more people is not unanimously positive with a view to ethical, ecological 
and  social  impact.  Detrimental  and  potentially  conflicting  outcomes  have  to  be  considered. 
Hence, policy makers should not only promote frugal innovation, but also consider how to do so 
in a way that addresses and manages potential tensions. 

41 

 
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49 

 
 
 
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This  literature  study  explores  the  quickly  expanding  body  of  literature  on  the 
subject  of  frugal  innovation  with  a  view  to  common  definitions,  central 
prerequisites and possible avenues of future development. On that basis, it seeks 
to  establish  a  better  and  more  focused  understanding  of  the  manifold 
opportunities  that  frugal  innovation  offers  for  Europe’s  firms  and  citizens. 
Furthermore, it elaborates on possible ways how existing technological capacities 
could be leveraged for frugal ends and how new development can further frugal 
innovation.  Despite  evident  particularities  in  market  conditions,  it  finds  that  the 
process  of  frugal  innovation  is  by  no  means  unique  to  developing  countries. 
While,  per  se,  European  firms  and  developers  do  not  face  limiting  resource 
constraints,  a  more  conscious  acknowledgement  of  those  of  others  will  not  only 
enable  them  to  leverage  additional  market  opportunities  elsewhere  but  also  to 
improve their contribution to societal challenges. 

Studies and reports 

ISBN 978-92-79-59757-2