Frugal Innovation and Knowledge Transferability

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1 Research-Technology Management ISSN: (Print) (Online) Journal homepage: Frugal Innovation and Knowledge Transferability Peter Altmann & Robert Engberg To cite this article: Peter Altmann & Robert Engberg (2016) Frugal Innovation and Knowledge Transferability, Research-Technology Management, 59:1, To link to this article: Published online: 08 Jan Submit your article to this journal Article views: 48 View related articles View Crossmark data Full Terms & Conditions of access and use can be found at Download by: [University of Nebraska, Lincoln] Date: 31 May 2016, At: 02:48

2 FEATURE ARTICLE Frugal Innovation and Knowledge Transferability Innovation for Emerging Markets Using Home-Based R&D Western firms aiming to develop products for emerging markets may face knowledge transfer barriers that favor a home-based approach to frugal innovation. Peter Altmann and Robert Engberg Downloaded by [University of Nebraska, Lincoln] at 02:48 31 May 2016 OVERVIEW: Western firms are generally advised to rely on emerging market partners when attempting to develop frugal innovations for these developing markets. Underlying such advice is the idea that the requirements of emerging market consumers may not be familiar to Western firms and local developers will better understand local needs. We propose an alternative approach for high-tech firms one that relies on home-based breakthrough R&D focused on emerging market needs. Three frugal innovation projects at a Swedish medical devices manufacturer serve to illustrate both how home-based breakthrough R&D can help managers reconceptualize their core products and the contextual factors favoring such an approach. KEYWORDS: Frugal innovation, Breakthrough R&D, Knowledge transferability Western firms are often encouraged to capture growth opportunities in emerging markets by engaging in frugal innovations low-cost products tailored for emerging market contexts and resource-constrained buyers (Lim, Han, and Ito 2013). In part, this is because existing solutions developed for Western markets often are overengineered for emerging market contexts and do not match the needs, or resources, of emerging market customers (Corsi, Di Minin, and Piccaluga 2014; Zeschky, Widenmayer, and Gassmann 2014). Instead of simply altering products, research suggests Western firms should engage in innovation approaches that rely heavily on collaborative efforts with local market partners. Recent work suggests three approaches to this process. The first relies on collaboration focused on ensuring that core products are appropriately modified to suit emerging Peter Altmann is a PhD candidate in the Department of Technology Management and Economics at Chalmers University of Technology in Sweden. His work focuses on managerial cognition and strategy. He earned a Licentiate of Engineering degree from Halmstad University in From early 2013 through 2014, he was employed as a strategy coordinator at the Getinge Group. peter.altmann@chalmers.se Robert Engberg is PhD Fellow at Getinge Sterilization AB at Halmstad University. His work focuses on innovation management and strategy. He obtained a Master s degree in mechanical engineering from Chalmers UniversityofTechnologyinSwedenin2002.Hehasmorethan10yearsofR&Dproject and quality management experience. robert.engberg@getinge.com DOI: / Copyright 2016, Industrial Research Institute. Published by Taylor & Francis. All rights reserved. market needs (Lim, Han, and Ito 2013). The second recommends that innovations for emerging markets focus on value engineering, a process by which the function-to-cost ratio of a product is systematically increased based on market and customer insights (Corsi, Di Minin, and Piccaluga 2014). The third suggests that Western firms rely on local R&D centers and even full subsidiaries to provide needed local expertise (Zeschky, Widenmayer, and Gassmann 2014). Managers are generally advised to consider these three approaches as superior alternatives to home-based R&D (Brem and Wolfram 2014; Corsi, Di Minin, and Piccaluga 2014; Soni and Krishnan 2014; Zeschky, Widenmayer, and Gassmann 2014). With this work in mind, we explored how a Swedish medical device company engaged with these three generally accepted approaches to frugal innovation. Contrary to previous research findings and our own expectations we found that the most successful project relied on home-based breakthrough R&D rather than local collaborations or market-based R&D. A closer examination of the case data suggests that R&D in local markets may face challenges that can interfere with the success of a frugal innovation. Specifically, the transferability of certain kinds of knowledge, or lack of it, may determine the suitability of particular frugal innovation approaches. In some cases, home-based breakthrough R&D may represent a viable, or even superior, alternative approach, especially when the transfer of highly technical knowledge represents a key factor in the success of an innovation. 48 j Research-Technology Management. January February 2016

3 Frugal Innovation and Western Firms Researchers have amply explored the challenges underlying the limited success of Western firms with home-based development of frugal innovations. In the process, they have developed three general approaches to frugal innovation: core product modification, value engineering, and localized product development (Table 1). All of them rely to some degree on collaborations with local partners, and each addresses a specific set of frugal innovation challenges. As less-developed economies emerge as powerful new markets, Western firms are advised to adopt a new mindset that sees cost-conscious consumers those at the bottom of the pyramid (Prahalad 2009) as valuable target groups (Zeschky, Widenmayer, and Gassmann 2011), consider new business models that create value both for these new targets and for the business (Radjou and Prabhu 2013), abandon preexisting technological trajectories that may encumber entry into emerging markets (Corsi, Di Minin, and Piccaluga 2014), and rethink product development processes to accommodate frugal innovation (Sharma and Iyer 2012). Given the many difficulties associated with reaching these new markets, firms are generally advised to pursue emerging market development efforts through some kind of localized presence (Brem and Wolfram 2014). Such a presence can help firms access a deeper understanding of local needs and capabilities, leading to reduced risk and a clearer picture of the path to success. One principal reason for the advice to rely on localized development is a concern for the transferability of knowledge related to emerging market requirements. Developers in emerging markets are seen as more familiar with the local context and thus more likely to be able to identify the features consumers require in a given product offering (Radjou, Prabhu, and Ahuja 2012), thereby ensuring adequate modification of core products (Lim, Han, and Ito 2013). Similarly, sharper insight into the product functions that customers require can allow for an increased functionto-cost ratio in value engineering (Corsi, Di Minin, and Piccaluga 2014). And finally, a reliance on local R&D centers in emerging markets gives companies direct access to deep local knowledge, which may be necessary when knowledge transfer is particularly difficult or complex (Zeschky, Widenmayer, and Gassmann 2014). The many challenges associated with frugal innovation may force Western firms to innovate beyond modifying existing product offerings (Prahalad 2009). In the case of high-tech products, frugal innovation may require adaptations on what Henderson and Clark (1990) call the architectural and component levels that is, modifications both in the product as a whole (the architecture) and in TABLE 1. Frugal innovation approaches Approach Underlying Challenge Benefits of Local Presence Examples from the Literature Core product modification Value engineering Localized product development Products poorly designed for emerging economies Offering does not fulfill target customer needs Core technology poorly suited for emerging markets Inability to adopt new business model Price too high Existing logic applied to frugal innovation Marketing capabilities focused on the top 5 10% R&D structures not suitable for frugal innovation Low innovation process efficacy R&D capabilities aimed at product development for top 5 10% Provides information on local operational conditions and infrastructure Provides insights into required features and functions Builds better understanding of what constitutes a suitable technology platform Aids in challenging the existing business model and in designing a more suitable one Provides insights into necessary functions Provides access to an alternative logic that embraces resource scarcity as an opportunity Leaves new efforts unconstrained by previous branding Enables localized R&D more suitable for meeting local needs at low costs Empowers local markets to be active developers of frugal innovation Enables cheaper development processes Focuses capabilities on frugal innovations Leaves new efforts unconstrained by current features Anderson and Markides 2007; Christensen, Craig, and Hart 2001; Zeschky, Widenmayer, and Gassmann 2011 Radjou, Prabhu, and Ahuja 2012; Zeschky, Widenmayer, and Gassmann 2014 Corsi, Di Minin, and Piccaluga 2014 Corsi, Di Minin, and Piccaluga 2014; Gassmann and von Zedtwitz 1998; Gupta and Wang 2009; Zeschky, Widenmayer, and Gassmann 2011 Lim, Han, and Ito 2013 Brem and Wolfram 2014; Radjou and Prabhu 2013; Soni and Krishnan 2014 Gupta and Wang 2009 Gassmann and von Zedtwitz 1998; Pearce 1999; Zeschky, Widenmayer, and Gassmann 2011 Corsi, Di Minin, and Piccaluga 2014; Soni and Krishnan 2014; Zeschky, Widenmayer, and Gassmann 2014 Anderson and Markides 2007; Christensen, Craig, and Hart 2001; Gupta and Wang 2009; Zeschky, Widenmayer, and Gassmann 2011, 2014 Frugal Innovation and Knowledge Transferability January February 2016 j 49

4 its parts (the components) in order to create truly novel solutions that satisfy local needs. Veryzer (1998) suggests that such novel products are evaluated based both on the degree of change to components and architecture and on how the technical changes relate to product benefits valued by the target customers. Taken together, Veryzer (1998) and Henderson and Clark (1990) suggest that new products should be evaluated in terms of what is modified from existing offerings, the degree of modification, and the product benefits resulting from that modification, from the perspective of the target customer. In this context, it is clear that the transferability of technical knowledge is as important a factor in frugal innovation as the transferability of local market knowledge. This suggests that, in some cases, particularly where the technical knowledge is too difficult or risky to transfer, innovation may have to occur at home. The Study Our case company, the Getinge Group, is a global medical technology company that develops and provides medical equipment and systems. With sales of over $3 billion in 2014, the Getinge Group employs nearly 16,000 employees inover40countries.ourcasestudywascarriedoutwithina smaller Sweden-based subsidiary that develops and manufactures medical sterilizers. This subsidiary, which has annual sales of $10 million, has a history of developing low-cost products and introducing them in emerging markets. It also has extensive experience with product development for these markets both in collaboration with emerging market actors and through home-based breakthrough R&D. Following the suggestion to develop deep contextual knowledge when studying a complex phenomenon such as innovation (Eisenhardt and Graebner 2007), we adopted an insider/outsider (I/O) case study approach (Louis and Bartunek 1992). This research approach aims to generate knowledge around a study phenomenon through collaborative efforts; an insider who is a member of the case organization aims to generate contextually embedded and actionable knowledge and an outsider aims to balance the insider s immersion with a more analytical approach. In this way, the I/O approach aims to create knowledge that is useful for practitioners facing similar situations to those captured in the original research setting (Louis and Bartunek 1992). Inthiscase,theinsiderspentninemonthsin2002working with new product development at the subsidiary. In addition, he has worked in R&D in the Getinge Group since March 2006; in that time, he has participated in various joint development projects with the subsidiary. Based on these experiences, the insider identified three completed development projects that had run partially in parallel; the projects selected represent varying degrees of architectural and component modifications and involved both collaborative efforts and home-based development. Data were collected from two primary sources: project documentation and interviews. Regulatory requirements necessitate project-specific documentation of technical details and identified user needs. This documentation provided data on the technical and market need characteristics of each project. In addition, we interviewed managers in R&D, marketing, sales, and quality and regulatory assurance, as well as the managing director of the subsidiary. Three members of the product development team and two members of the production staff were also interviewed. Each interviewee had been involved in the development of at least one of the projects; some had been involved in all three. Interviews were conducted on-site and lasted between 30 minutes and 2 hours. We initially explored how the varying levels of technical product modifications related to the transfer of knowledge about the target emerging market. Analysis began with the outsider preparing narratives of each project, based on project documentation and interview data. The insider then reviewed the outsider s interpretations and added clarification and detail. Using Henderson and Clark s (1990) framework, we identified product modifications in each project as either component-level or architectural. We also relied on Veryzer s (1998) typology to evaluate the three projects based on the technical changes to the way functions are performed and the benefits these changes offered to target customers. This mapping highlighted differences in customer needs between Western and emerging markets and showed that technical changes frequently emerged from home-based rather than localized development efforts. These findings ultimately focused our attention on how the transferability of different types of knowledge determines the suitability of frugal innovation approaches. Case Data Together, the three projects we examined represent three separate attempts to develop products for emerging markets, each of which involved varying degrees of technical modification. In each case, the company attempted to collaborate with local actors but ultimately turned to home-based R&D to complete the needed technical work at an acceptable standard. The transferability of knowledge both technical and local market knowledge played a key role in the development trajectory of each project. The Adaptation Project: Architectural Innovation and Local Operational Conditions The first development project was based on modifications of an existing core product; launched in early 2000, it was an attempt to harness previous R&D efforts to extend the The transferability of technical knowledge is as important in frugal innovation as the transferability of market knowledge. 50 j Research Technology Management Frugal Innovation and Knowledge Transferability

5 The modular solution meant that local adaptations could be made through component-level changes. company s presence in southern Africa and southeast Asia. Several incremental architectural-level innovations had to be made to make the product suitable for the local markets. To ensure patient safety, sterilizers run on strict tolerances; operational conditions in the target markets necessitated development work to ensure the product could maintain these tolerances. For instance, differences in the way the sterilizers were handled and in local water quality required technical modifications to pipe connectors and seals. The work was initially undertaken locally, but this approach soon proved troublesome. To modify the linkages in a way that both addressed local conditions and maintained the product s overall performance, developers needed a good understanding of the product on an architectural level, to understand how each linkage affects the performance of the entire product system. This architectural-level knowledge proved difficult to transfer and, as a result, the local partners were unable to modify the core product successfully. The changes to linkages had negative effects on the sterilizer s performance and exacerbated quality concerns. The issue was initially resolved by shipping the products back to Sweden for further development, along with knowledge of the local market conditions that caused the original issues. Due to these challenges, the subsidiary abandoned its African and Asian R&D and manufacturing operations after the initial batch of sterilizers was marketed. Home-based efforts continued until the product model was phased out within three years. The Modular Project: Moving Beyond Architectural- Level Modifications The second project was developed using a value engineering approach. In 2002, work began to develop a new sterilizer for emerging markets that would consider both total cost (purchase and ownership) and product quality. Based on experiences from the first project, the development team in Sweden aimed for a modular solution with fewer components and linkages. The result was a new sterilizer based on a three-part system. Two modules, the front panel and chamber, were to be developed and produced internally. The development of the third module the component assembly was ultimately sourced to a Sweden-based component supplier after efforts to involve emerging market partners proved unsatisfactory. The emerging market partners limited their offerings to cost reductions for single components and were not able to provide the reduction in the total number of components offered by the Swedish supplier. The Swedish supplier reduced the number of components by two-thirds, lowering the chance of failure and enabling a sturdier design with fewer component linkages. The reduction in vulnerable linkages was especially important given local road conditions; rough roads frequently jostled the sterilizers in transit sufficiently to cause product breakdowns. It also opened up the possibility of localized production, which was important in the context since governmental policy and subsidies privileged local manufacturing. The modular solution also meant that local adaptations could be made through component-level changes without requiring the architecture-level knowledge that had proven difficult to transfer in the first project. Additional cost savings were realized by creating a component assembly module and chamber-mounting unit that could be used in several sizes of sterilizers. The result of the three-month development process was a sterilizer that was 12kg lighter and 25 percent faster in terms of processing time than existing products. The increased benefits of mass production, sturdiness, and flexibility in product functionality enabled by replaceable modules and locally sourced standardized components made the product more suitable for emerging markets. As a result, this offering enjoyed greater success in its target markets than did the first project we studied. However, it was still not fully suitable for emerging market contexts as it relied on well-functioning infrastructures, for instance, in terms of electricity. Also, although this sterilizer was sturdier, its weight required well-developed transportation and service networks for delivery and maintenance. The Composite Project: The Power of Home-Based Breakthrough R&D While the first two projects ultimately turned to homebased development after difficulties transferring technical knowledge, the third project we examined used breakthrough R&D from the beginning to reconceptualize a core product. Following the managing director s observation that boat propellers could be made out of composite materials, the R&D manager realized that composite-based pressure chambers were used extensively in other industries. As a result, the team began exploring the possibilities for sterilization chambers to be made out of injection-moldable materials such as polyamides. Initial work, undertaken in the 1990s, investigated whether injection-moldable materials could handle the alternating pressures that characterize the sterilization process. This work, which relied heavily on external collaboration with materials experts from DuPont and Ålborg University, resulted in a patent for the use of injection-moldable materials in sterilization chambers. Over time, two crucial benefits of injection-moldable materials became apparent. First, compared to stainless steel, the traditional material for sterilization chambers, injection molding allows faster manufacturing, which translates into reduced manufacturing costs and easier scaling for production. Second, the low thermal conductivity and light weight of injection-moldable materials enable Frugal Innovation and Knowledge Transferability January February 2016 j 51

6 The transferability of knowledge played a key role in the development trajectory of each project. significant cost savings in operation, as energy requirements associated with heating and cooling are reduced by more than 90 percent and processing time by 50 percent. Additionally, injection-moldable materials are resistant to damaging corrosives and thus more durable. Development efforts were subsequently expanded to realize these benefits in a product. However, the development team soon ran into a major issue: existing products used square chamber designs to maximize processing capacity per volume. Square designs represent a significant challenge for injection-moldable materials, as the alternating pressure common to sterilization processes can cause sharp edges to rupture. Following years of unsuccessful attempts to find a solution, the development team questioned whether the requirement for square chambers could be relaxed. The team posited that other designs might be suitable for emerging markets. In developed economies where electric power is reliable, where infrastructure allows for easy transportation, and where sales and support networks are established, customers appreciate the utility of maximized chamber space. However, feedback on existing solutions from emerging market customers, together with information on power availability and established infrastructure in the local market, revealed to the development team that weight, power efficiency, and sturdiness were important features; chamber space, the team believed, might be more negotiable in these contexts. Based on the identified user needs and local operational conditions, attention moved to developing a new sterilizer for emerging markets based on a rounded chamber design. During a development meeting, the marketing manager argued that further weight reduction could open up possibilities for a mail-order business model lighter sterilizers could be delivered directly to customers rather than to warehouses. On delivery, a single person could handle and install the sterilizer. Customers would also be able to send a broken machine in for service using existing delivery facilities and have a new one shipped the same day to minimize downtime. This opened up for an alternative sales logic based around uptime rather than direct sales. With the product goals in mind, the development team set out to leverage the benefits of injection-moldable chambers in order to reconceptualize the technical aspects of the sterilizer. This new direction required development efforts to move beyond the sterilizing chamber to include other components; ultimately, the entire architecture of the product was affected. Leveraging existing technical knowledge, the team realized several benefits. Lower thermal conductivity meant lower energy and insulation requirements and the size of the steam generator was reduced by 50 percent. Most of the components and their linkages were reevaluated and replaced. These changes led to the total weight of the sterilizer being reduced by 54 percent, and manufacturing costs cut to almost a third of similar alternatives. The resulting sterilizer was a product of developers moving beyond the organization s established sales and technical evaluation systems, as well as its existing knowledge and technology platforms. The project output was later transferred from the subsidiary following a reorganization and continued as two centrally managed initiatives. The first initiative, which was focused on capturing some immediate gains from the project output, culminated in a product launch in 2011 that has since been sold in multiple emerging markets. The second initiative aimed to scale up the project outcomes by leveraging the benefits of injection-moldable materials in other components. That effort continues. Comparing the Three Projects Comparing the three projects in terms of the frameworks of Veryzer (1998) and Henderson and Clark (1990) provides a simple overview that illustrates the role of product functions (technological capabilities), customer benefits (product capabilities), technical knowledge (component or architectural knowledge), and the transferability of technical and market knowledge in the progress of each project (Table 2). Such a comparison also provides a foundation for deeper discussion of how and when home-based breakthrough R&D can be a viable alternative to more conventional localized approaches to frugal innovation. In many ways, these three projects may be seen to fall along a continuum, from fairly incremental innovation based on existing technological and product capabilities, to a modular design that improves responsiveness to unique customer needs but does not represent any major discontinuity in product or business model, to a breakthrough design that enables the reconceptualization of both product functions and the supporting business model. The technological elements also fall on a continuum. The first project mainly featured attempts at architectural-level adaptations to suit local operational conditions, which were largely unsuccessful because local developers lacked an adequate understanding of how modifications to product linkages affected the product as a whole. The second project was meant to address the knowledge transferability challenges encountered in the first project by accessing local component suppliers. However, local suppliers did not have the knowledge needed to fulfill the company s needs. The full scope of component and architectural modifications needed were finally realized with a Swedish component supplier. The third project relied entirely on home-based R&D built on collaborations with Western organizations. In all three cases, the transfer of technical knowledge presented a more significant challenge than did the transfer of local market conditions, thus favoring a home-based 52 j Research Technology Management Frugal Innovation and Knowledge Transferability

7 TABLE 2. Comparison of the three projects The Adaptation Project The Modular Project The Composite Project Technological capabilities Pre-existing way to perform product function Discontinuous modular solution Reconceptualization of product functions and structures Product capabilities Technical knowledge requirements Transfer of technical knowledge Transfer of market knowledge Based around existing customer benefits Architectural-level modification to product linkages Unsuccessful, resulting in quality problems and inadequate modifications Local operational conditions Results Product launched in 2000; phased out within three years R&D approach. In the first project, knowledge around local operational conditions was more easily transferred than was the technical knowledge necessary for the architectural innovations needed. In the second project, local market knowledge related to infrastructure and governmental policy was easier to transfer than was the technical knowledge needed to reduce the number of components and arrive at the new modular solution. In the third project, knowledge related to local customer needs was easily transferred and translated into clear development goals in terms of, for instance, weight and power efficiency. In contrast, the technical solution relied on home-based knowledge. Knowledge Transferability and Frugal Innovation Contrary to the large body of research emphasizing the need to collaborate with local actors and innovate in local markets, the most successful project in our case study relied on homebased R&D to create a breakthrough product for emerging markets. Although it is admittedly risky to generalize from a single case study, observations that run counter to conventional wisdom can be used to extend the conceptual knowledge around a given phenomenon (Siggelkow 2007). Our findings suggest that the suitability of home-based R&D for a particular frugal innovation is likely to depend on the transferability of two important kinds of knowledge: 1) knowledge about the relevant market and 2) technical knowledge. If the transferability of emerging market knowledge is low as may be the case when such knowledge is tacit or is related to local norms and behavioral patterns such as cultural taboos or religious practices suggestions to rely on local partners makes sense, as those with direct experience in the market have concrete knowledge that can become the basis for a clear set of market assumptions (Zeschky, Widenmayer, and Gassmann 2011). However, when the transferability of emerging market knowledge is high as is the case with objective knowledge such as data on electric power availability and stability possibilities open up for home-based development approaches. Improved sturdiness and lower total cost Reduced weight, energy consumption, and processing time New business model based on uptime Architectural-level development of module interfaces Component-level development to reduce number of components Limited to cost reduction of component N/A (home-based) Local operational and infrastructural conditions and governmental policy Product launched in 2002; currently being phased out Component-level for new chamber Architectural-level for reconceptualization of product Additional component-level alterations Local infrastructure Customer purchasing and after-market behavior First product version launched in 2011; currently offered in several markets Further development ongoing It is also important to consider the transferability of technical knowledge in formulating a frugal innovation approach. Reliance on localized partners makes sense if technical knowledge is highly transferable. In contrast, low transferability favors a home-based approach. One such case may be when the knowledge required to develop the products is largely tacit or based on accumulated experience. In such cases, training local firms may be difficult, and Western firms can more effectively rely on their superior technical capabilities. The impact of technical knowledge transferability is evident in all three projects examined in this study. In the first project, the lack of deep architectural knowledge among local developers hampered local development work; the second project benefited from increased technical knowledge, held at home; and the third project relied almost entirely on cutting-edge technical knowledge and a solid understanding of the product system, again held at home. However, Western firms that attempt frugal innovation through home-based R&D may find that long-standing assumptions thwart their efforts. For instance, the third project was encumbered by assumptions related to chamber designs; it was only through developers questioning of existing technical evaluation requirements that the benefits of the technology could be realized in a product. These findings are echoed in, for instance, Garud and Rappa s(1994) claim that the development of technological innovation is heavily influenced by underlying assumptions about products and technology. In the case of frugal The resulting sterilizer was a product of developers moving beyond existing knowledge and technology platforms. Frugal Innovation and Knowledge Transferability January February 2016 j 53

8 Western firms that attempt frugal innovation through home-based R&D may find that long-standing assumptions thwart their efforts. innovation, interventions aimed at changing mindsets are considered particularly important (Soni and Krishnan 2014); tools such as the business model canvas (Osterwalder and Pigneur 2010), which can help surface assumptions and show how they influence product and business model development, may prove particularly effective in accomplishing this. Although the generalizability of a single case is admittedly limited, our case provides a counterpoint to accepted wisdom that calls for collaboration with local partners in frugal innovation. This suggests that home-based breakthrough R&D may offer an alternative approach to frugal innovation when the transferability of highly technical knowledge is low. However, as the success of a home-based approach depends on the ability to reconsider longstanding underlying assumptions related to breakthrough R&D, we urge managers looking at such an approach to: 1. Examine technical evaluation systems and technological assumptions that may affect the team s ability to modify existing solutions or develop new ones. For instance, the dominant belief regarding customer preferences and square-shaped chambers in sterilizers encumbered the third project for years. 2. Reconsider market assumptions that may be valid only in developed economies. Assumptions about power availability, infrastructure, access to capital for up-front payments, and other factors were all challenged during the third projectastheteamworkedtomaketheproductanditsvalue proposition more suitable for emerging markets. 3. Rethink assumptions related to customer needs. Customer needs may differ substantially between Western and emerging markets. For instance, in the sterilizer projects, emerging market customers favored low weight and ease of installation over maximum utility of chamber space. 4. Allow for ongoing changes beyond early development decisions. Considerable alterations may have to be made as the development process unfolds and additional technical and market insights emerge. For instance, the realization of how the injection-molded chambers could drive a different business model and reach new customers came only after considerable trials with chambers and input from the marketing manager. 5. Reconceptualize the role of breakthrough R&D in frugal innovation. The traditional view sees breakthrough R&D as a costly and often risky path to access higher margins. But it can also be a means to access the lower margins in emerging markets. In our case, it was breakthrough discoveries related to injection-molded chambers and the use of composite materials that made radical market and product adaptations possible and enabled a successful entry into emerging markets. Home-based breakthrough R&D can result in technological innovations suitable for emerging markets as long as the firm can approach these five factors with flexibility. This is particularly good news for smaller firms and development units that may lack financial resources to support localized R&D units or full subsidiaries. Similarly, home-based R&D may provide an alternative for high-tech firms that experience difficulties transferring technical knowledge to local partners. Given the limitations of our study approach, we cannot know the extent to which these findings are generally applicable. For instance, it may be that a different collaboration partner would have yielded better results in the first two projects, and that relying on localized R&D would have generated even better solutions (or arrived at the ultimate solution more quickly) in the third project. Questions regarding how well home-based R&D compares to localized R&D in cases where technical knowledge transferability is low and where emerging market knowledge transferability is high can only be answered through comparative studies using larger sample sizes. Conclusion Western firms attempting to develop frugal innovations are generally advised to avoid home-based R&D in favor of collaboration with emerging market partners. Such advice makes sense when it is difficult to transfer local market knowledge and easy to transfer technical knowledge. However, in cases where the transfer of technical knowledge represents a key challenge, a home-based approach may be preferable. Such was the case for the development-oriented subsidiary of the Getinge Group we studied. The most successful project of the three we examined relied on Western-based development efforts and on the experience and technical knowledge housed within the case company. However, that success did not come without difficulty. Challenges were presented by long-standing technological assumptions, which had to be questioned before the technology s full benefit could be realized. The case company s experiences show that managers may consider home-based breakthrough R&D as a viable approach to frugal innovation, particularly when technical knowledge is difficult to transfer, if the firm is willing to tackle the unique challenges such an approach brings. References Anderson, J., and Markides, C Strategic innovation at the base of the economic pyramid. 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