From Lean Towards Frugal Product Development

Introduction

The adoption of innovation ideas in developing or rural territories can be rapid with high diffusion rates. This is particularly common among large companies, but the main problem lies with the product configuration, which must be set correctly. Such large companies entering rural markets as a leader can deliver innovative products. However, when corporations are not responding to the local context and need, even the minimum viable products derived from mature markets cannot succeed in developing territories. Instead, successful new product development for developing markets must incorporate innate needs of the context to shape innovative solutions, which in turn respects local requirements and leaves out all unnecessary elements within an economizing strategy. This process of reducing the complexities and cost of the production is called as frugal innovation and resulting products can even find their way back into developed territories in the form of reverse innovation.

Consequently, frugal innovation is desired by many firms but is considered as a new and developing concept. It is rather a disruptive growth strategy for more business and social value. Developing territories are promising a large potential because of the growth of their middle class (Tiwari et al., 2014). Similarly, rural areas which are getting more accessible with new technologies are promising a high potential as well. In both developing and developed areas, simple utilitarian products are preferred over heavily configured products and companies are trying to become leaders in developing innovative products or services (Schumpeter, 1950). Thus, there is a competition against time. In addition, there are many companies targeting these markets, which are mimicking each other’s products and services. However, pervasive social inequalities are restraining the widespread diffusion of innovation in developing territories (Greenhalgh et al., 2008, p. 61).

When it comes to diffusion of innovative ideas, there are many factors affecting the diffusion, which are intrinsic to the country, the context of the product and the market. Hence, companies from developed territories setting their only goal to minimize the cost, are mostly failing. The product should be cost effective, but it also must be suitable and applicable for local needs. This requires interaction with the local market to transform the minimum viable requirements into the product, which is covered in the lean practices.

Since frugal product development is reducing the consumption of already limited resources of rural areas, there is an analogy to lean product development. Lean is a mature product centric methodology, where no waste is allowed. So, it can be applied to processes and products. Then, lean product development integrates all suppliers within standardization to inspect a wide spectrum of alternate solutions that variation is reduced. This requires the evaluation of all processes for waste. However, lean management is also missing some important aspects such as (i) the interaction is not good enough since the iteration with the customer is not emphasized, (ii) the utilization level remains low, and (iii) the product development cycles are simply too long.

As a result, experiences of proven method “Lean Product Development” along with the newer concept of “Frugal Product Development” can be utilized to ensure success in developing territories. A product is something that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. Creating a product covers the complete process of converting all market requirements then to streamline all efforts to form a viable product, which can then be brought to the target market. This is usually made iteratively to fulfill the requirements and satisfy targeted customers. Consequently, there are product development phases within one product as well as successive products with modifications or additions driving the product towards maturity. Only when the novel or diverse characteristics provide added value to the end user, the product becomes successful. These new or different characteristics may be technology driven or market driven. Product development may involve modifying an existing product or creating an entirely new product that meets a newly defined customer requirement.

The development of a product from the scratch is occasionally expensive and has less confidence as compared to existing products and takes more time. The development of a product by the modification of existing products and functionalities is less expensive and has more confidence that it can be easily introduced to the market. Hence, it is beneficial to introduce an existing successful product to a different markets. This is one of the innovation practices followed by many companies.