Affordable Excellence How frugal innovations can turn into an engine for growth in India and abroad

Affordable Excellence How frugal innovations can turn into an engine for growth in India and abroad

Frugal Innovations and their relevance to the global competitiveness of companies Dr. Rajnish Tiwari

AGENDA TIM/CFI @ TUHH Challenges of Managing Innovations in a Globalizing World The Concept of Frugal Innovation Frugal Innovation in Practice 3

Institute for Technology and Innovation Management (TIM@TUHH) Founded in 1998, engaged in teaching, research and industry collaboration A 24-members strong team with business management and business engineering background 4

TIM Research Areas USER INNOVATION OPEN INNOVATION GLOBAL & FRUGAL INNOVATION SUSTAINABLE INNOVATION HEALTHCARE AND AGEING INNOVATION PROCESS 5

(CFI@TIM) Research and Policy Guidance Teaching Industry Collaboration Founded in September 2013 6

(CFI@TIM) Board of Management Prof. Dr. Herstatt Dr. Stephan Buse Dr. Rajnish Tiwari Research Associates Stephan Bergmann Viktoria Drabe Dr. Katharina Kalogerakis Daniel Kruse Malte Krohn Timo Weyrauch 7

Research Partners University of Cambridge (UK), Institute for Manufacturing (IfM) Sloan School of Management, MIT (Cambridge, USA) Kaunas University of Technology (Litauen) Tokyo Institute of Technology (TiTech), Tokio/Japan Harvard University Institute for Quantitative Social Science Symbiosis International University in Pune Santa Clara University School of Engineering, USA Swinburne University of Technology in Melbourne Royal Melbourne Institute of Technology in Melbourne 8

Expertise & Experience in Relevant Field Focus: Key elements and corporate perspectives for frugal innovation Focus: Emergence of a lead market in a nonindustrialized economy Focus: Organizational aspects of frugal innovations Focus: Understanding the degree of innovativeness at Grassroots Edited volume with several (empirical) studies from multiple industries and contexts Multiple empirical studies including personal interviews of 33 senior managers/ CEOs in India Qualitative research based on 26 personal interviews in the healthcare sector in India Quantitative research based on evaluation of 425 innovations in the database of National Innovation Foundation 9

BMBF ITA Project Project title: Potentials of Frugal Innovation for Germany Timeframe: 2015-2017 Partner: Fraunhofer Center for International Management and Knowledge Economy Task: Investigating opportunities for frugal innovation in Germany Potentials, challenges and societal relevance of frugal innovations in the context of the global competition for innovation Analysing the frugal innovation pathways 10

Further Research Projects Government of Austria: Analysis of the relevance of Frugal Innovation for the Austrian Mittelstand Methodology: Analysis of secondary sources plus quantitative and qualitative studies in Austria Rexnord: Developing a stage-gate innovation process model for supporting frugal innovation work Methodology: action-research CFI @ TUHH: Analyzing the relevance of Frugal Innovation for German Hidden Champions Methodology: Analysis of secondary sources plus quantitative and qualitative studies in Germany Industry association MedTech Germany: Analyzing the relevance of Frugal Innovation for German MedTech Firms Methodology: Analysis of secondary sources plus quantitative and qualitative studies in Germany PhD Projects (recently started): Need Analysis in Frugal Innovation, Frugal Mindest, Barriers in Frugal Innovation Projects 11

Master Course in Santa Clara Lecture title: Product Planning and Design for Frugal Innovations Time: Winter term Focus: The focus of this course is on integrating market research, design, manufacturing and marketing-functions of firms in creating new (frugal) products services that fulfill the criteria of affordable excellence. Prof. Herstatt teaching at Santa Clara 12

AGENDA TIM/CFI @ TUHH Challenges of Managing Innovations in a Globalizing World The Concept of Frugal Innovation Frugal Innovation in Practice 13

Too good to succeed? 14

Need for affordable products Market opportunities outside the industrialized world The emergence of lead markets in emerging economies Share of selected countries in global automotive production (2000-2016); (source: OICA-Data; Statista 2017) Share of developing economies in global GDP (source: IMF) 15

Over-engineering in Innovations? 16

India s Automotive Market 17

Market participation to secure global competitiveness Case Study Hidden Champion from Germany Premium Supplier Highly innovative in their niche Market leader in Europe, USA and Japan Present in Asian markets, incl. India Loss of market share in emerging markets 18

New Reality: Market Shift in India 19

Growing Markets & Positioning of Western Corporations Developed Markets Emerging Markets Typical Positioning of Western Corporations M1 M1 FRUGAL Key Growth Area M2 M3 M2 M3 M4 M4 High Low 20

A Study of German Hidden Champions 21

Some Results of the CFI-Study (An ongoing) Study of Hidden Champions in the BRIC countries Established firms (on average in business: 90 years) Median number of worldwide associates: 2250 The majority generate more than 1 billion annually N=53 Country Share of turnover [%] Brazil 4.8 30 Russia 6.5 25 India 3.1 36 China 11.5 160 No. of associates 22

Addressed Market Segments in China and India 23

AGENDA TIM/CFI @ TUHH Challenges of Managing Innovations in a Globalizing World The Concept of Frugal Innovation Frugal Innovation in Practice 24

The Concept of Frugal Innovation Innovative products, services or processes, which seek to create attractive value propositions for their targeted customer groups by focusing on core functionalities and thus minimizing the use of material and financial resources in the complete value chain. They substantially reduce the cost of usage and/or ownership while complying with all relevant regulatory norms. At the same time they may seek to disrupt prevailing industry standards set by established incumbent firms. (Tiwari & Bergmann, forthcoming) 25

The Concept of Frugal Innovation Innovative products, services or processes, which seek to create attractive value propositions for their targeted customer groups by focusing on core functionalities and thus minimizing the use of material and financial resources in the complete value chain. They substantially reduce the cost of usage and/or ownership while complying with all relevant regulatory norms. At the same time they may seek to disrupt prevailing industry standards set by established incumbent firms. or Good enough solutions (Tiwari & Bergmann, forthcoming) or Appropriate solutions or Affordable excellence 26

Three Defining Criterias of FI Weyrauch & Herstatt, 2016 27

What Frugal Innovation is NOT (Confusingly) Similar innovation concepts: Jugaad Grassroots BoP (Base of the Pyramid) 28

Frugality s fourth renaissance as a societal virtue Frugality 1.0: Prior to 1945 (universal value propagated by all major world religions & schools of philosophy; special phase: 1650-1800 AD) Frugality 2.0: Attempt by Ernst F. Schumacher et al to revive frugality in the 1970s ( Small is Beautiful, Buddhist Economics, Appropriate Technologies ) Frugality 3.0: In mid 2000s revival of frugality as a means of raising standards of living in emerging economies from non-existent or non-appropriate ( bad ) solutions to appropriate and modest solutions Frugality 4.0: Spread of frugality towards regaining a more universal stature due to financial constraints, environmental concerns & market saturation in the industrialized world responsible innovation 29

What Characterizes Frugal Innovation? F Functional (19x) R Robust (26x) / Resource-efficient (24x) U User-friendly (15x) G Growth opportunities (15x) A Affordable (53x) L Less complex/ simplified (34x) Monetary affordability Societal affordability Environmental affordability Characteristics based on a keywords-based media perception analysis of 108 non-academic, online articles in German language published between 2010-2015. Source: Bergmann and Tiwari (2016) Infrastructural affordability 30

Frugal Innovations from India GE MACi Frugale Medizintechnik von Siemens 31

GE s frugal EKG-Gerät MACi 32

GE s MACi 33

Vortex Solar-powered ATM 34

Need for Frugal Solutions: Food Processing Growing population, and growing capacity for discretionary spending Average share of spending on food set to decrease: o 1995: 56% o 2015: 34% o 2025: 25% For example, only 2% of vegetables and 4% of fruits produced in India are processed, while 20-22% are wasted or lost! Widespread use of primitive processing in the unorganized sector, leading to lower value-add and loss of valuable nutrients In India, the processing of 15 to 18 million tons of wheat into making flour in the unorganized sector ends up destroying 58% of iron and 67% of folic acid 35

Frugality in the Industrialized World 36

Summary 37

Thank you for your attention! Institute for Technology and Innovation Management Hamburg University of Technology (TUHH) TEL +49 40 42878-3777 FAX +49 40 42878-2867 Frugal.innovation@tuhh.de www.tuhh.de/tim