Frugal Innovation Disruptive Innovation

Introduction

Disruptive innovation has been taken to refer a technology whose application greatly impacts running and functioning of markets. Markides (2006), on his part describes it as a process by which a product or services becomes established in basic applications at the lower end of the market and eventually grows to surpass traditional competitors (Zeschky et al., 2011). In most markets, there are established businesses that have over the years, taken the lead in providing certain products or services to consumers. However, there are companies that have emerged with new ideas and ways of delivering the same products and services to consumers. The end result is that these emerging companies capture existing customers served by the established businesses thereby necessitating adjustment measures on the part of the incumbent (Zeschky et al., 2014).

Frugal innovation is the ability to produce more business and social value while largely limiting the uptake of the uncommon resources (Radjou and Prabhu 2013). The authors further argue that frugal innovation is modern way of production that sees the state of dwindling resources not as a challenge but as an opportunity for growth. As consumers grow more eco-sensitive, the demand for eco-friendly goods is also rising and this where frugal innovation comes in to fill the gap. Hence, products that are of high quality, sustainable in the long run, and affordable becomes very important in the current world order where populations are becoming more environmentally conscious. Rao (2013) contends that there is a growing awareness, manifested by companies that thrive to use minimum resources, in order to come up with cheap, easy-to-use, and quality products.

Innovations are indeed indispensable tenets of our society today. In different parts of the world, businesses and governments are adopting technologies, business models, and products that bring certain changes to the society. Consumers today also have evolving preferences to the extent that what was fashionable ten years ago is no longer considered as falling within the current trends (Agarwal & Brem, 2012). Therefore, adjustment mechanisms must undertake businesses wishing to stay afloat in the market. Globalization has thus provided impetus for increased competition in the world. Increased competition means businesses must strive to survive in a tough environment. As a result, Basu et al. (2013) point out that companies are emerging that apply the use of new technologies to achieve even better results under limited resources. Interestingly, these new entrants have overtaken the incumbents by disrupting the market and forcing the established companies to either adapt or face extinction.

Background

Markides’ theory of disruptive innovation has been used to explain other categories of disruptive innovations and there has been a debate as to whether it is the right way to go about it. Some authors have sharply differed with this kind of approach insisting that various kinds of innovations portend different competitive impacts as well as dissimilar markets (Markides 2006). Essentially, it is his contention that there are different types of disruptive innovations that do not necessarily fall under disruptive technology. For instance, he argues that the elements of disruptive business model innovation on one hand and disruptive product innovation on the other is substantially different from disruptive technological innovation.

Business model innovation is occurring in a scenario where the innovation strategically, disrupts establish competitors by extending the customer base in such a way that new customers are brought into the market (Tiwari & Herstatt, 2012). Alternatively, the new business can achieve a successful disruption by the ability to implore the existing customers to uptake more of what they offer in terms of products or services. Marksides insists that this type of innovation does not necessarily work to discover novel products and services. To prove this point, he gives Amazon as an example of a company that did not find out bookselling but simply redefine the manner of going about the same businesses that other businesses had not thought about or implemented.

Technological innovations are in some ways similar to the preceding one but still marginally different. When certain technologies are created, they become dominant to the extent that they replace the incumbent businesses (Mukerjee, 2012). Hence, the only way for the incumbent companies to stay afloat in the market is by first accepting the disruptive technology then exploiting the same. Alternatively, incumbent companies can create a separate unit to respond to the disruption (Agnihotri, 2015). Although, established firms may at times not be motivated to respond to technological disruptions given that they have an array of options to rely on in order to stay afloat.

Radical product innovations are similarly threat to established competitors since it introduces new products to the market causing disruption. Disruption here is attributed to the effect the new innovation has on consumer habits and behaviours. Despite existing competitors’ efforts in creating products that fulfil the consumers’ needs, the market is always ready for a supply push process. The new entrants in many instances have an upper hand against the incumbent given that they simply need to produce a product close enough in performance but relatively cheaper, to move in and take over the market (Bhatti et al., 2013).

In the modern business world, competition has intensified over the years as resources keep shrinking. Factors like technology, demography, climate change, and globalization have created a very rough field for businesses. Therefore, businesses have become creative in finding ways to go about the challenge while staying alive to the sustainability goals (Brem & Wolfram, 2014). The situation in developing countries has attracted a lot of interest from researches since there have been some edge-cutting innovations emanating from countries falling in this category. The innovations from such countries have had a unique characteristic largely lacking from most innovation from developed countries. In fact, it can be said that the innovations arose out of the need to use minimal resources to achieve affordable solutions to everyday problems (Bhatti et al., 2013).

Consequently, frugal innovation has been largely attributed to developing countries especially those in East Asia and Africa. As a result of climate change, there have been losses in biodiversity and scarcity of resources. This accompanied by financial crises has informed governments and businesses to adopt innovative technologies that are sustainable in the long run. Consequently, businesses have adopted a culture of producing innovative products that are affordable and of high quality using limited resources (Brem & Ivens, 2013). The beauty of these innovations is that these new products have been proven to serve the purposes for which they were made but at an extremely lower cost. Therefore, this is what has been referred to as frugal innovations.

Rao gives an example of a Bamboo Bicycle made in Ghana in comparison with the standard metallic one. He points out that the former’s ride is more comfortable than the latter (Sauvant, 2008). Accordingly, factors like low price, no frills structure, ease of use, use of limited raw materials are the basic tenets of frugal innovations. Additionally, frugality has influenced disease control especially with the advent of a probe that is basically made of lightbox and mobile phone camera. The device is used to detect bacteria responsible for tuberculosis at a relatively cheaper cost compared to standard devices (Soni & Krishnan, 2014). Hence, the element of frugal innovations being affordable, reliable, and causing ripples in the market is supported by the examples provided herein.

From the foregoing, the discussion it is no doubt that there are innovations that are disruptive, and frugal innovation is a new trend. The question as to whether frugal innovation can be considered as disruptive is still debatable as will be shown henceforth. In situation where products are produced under a strain or reuse of resources and the result is a cheap, good quality and sustainable, it can challenge incumbent products produced using standardized means (Ray & Ray, 2011). However, can this be taken to be a disruption to the incumbents like other business models have been proven to be. Therefore, the following discussion will use two examples of less popular forms of frugal to make certain points.

First of all, it is essential to note that companies like Unilever have been influenced to adopt frugal offerings by virtue of emerging markets like India. Hence, the company has been able to innovate in areas with limited resources by coming up with frugal solutions that bring additional value to customers at a lower cost (Ray & Ray, 2011). Hence, this paper will undertake a study of two forms namely: Avaz technology and rural banking through mobile phones in India

Mobile phone banking in rural India

Mobile banking has become a trend in many developing countries. Through mobile operators and network service providers in India, microfinance lenders, and borrowers are now able to track loan repayments. Mobile technologies are slowly replacing banks when it comes to certain services like payment of bills, wealth management, and bill tracking especially through the short message service. The upshot is that frugal innovation is important in easing the lives of the rural populations of Indians using a combination of hardware and software technologies, at a low cost (Brem & Ivens, 2013). The same cost-effective ways innovating new products is also useful when it comes to the regulation of the sector in that it can still be used to enhance effective cybercrime legislation.

Additionally, there have been developments in the combination of smartphone technology and biometric fingerprint scanner. After this, an ATM is placed on bicycle wheels. Trough automated message, customers in rural areas in India are now capable of receiving information such as account balance and mini-statements on their mobile devices. Rao (2013) has applauded a company known as Little World for its revolutionary efforts in connecting the rural population to banking services. The company is offering a secure cost-effective platform for financial services by use of specialized portable devices that are capable of storing and managing bank accounts of customers. They have incorporated a system that stores customers’ picture and biometric identification. Therefore, frugal finance can actually be seen to be bettering the lives of underprivileged populations using the limited resources available.

Mobile banking has also been used as a way of fostering financial inclusion in rural India (Yu 2009). The essence of this innovation is to save rural customers time and money spent travelling to brick and mortar banks in urban areas to conduct simple money transactions. Radically, mobile banking in rural India has been seen to be a substitute for the brick and mortar bank branches. It can thus be authoritatively be stated that the frugal innovative mobile banking service in rural India populations has disrupted the incumbent banking institutions’ manner of providing services. The upshot is that banks have to rethink their strategies in reaching remote areas without building additional branches (Brem & Ivens, 2013). Further, the new entrants, in coming up with this innovative disruptive technology have simply made use of the existing phones and network to provide a cheaper solution to the customers in a manner that is sustainable.

The Avaz speech synthesizer in India

A company known as Invention Labs has been the subject of international debate, especially among scientists. This is a perfect example of an innovation aimed and directed to the challenges facing differently abled people. The device provides an avenue for children with cerebral palsy and is incapable of verbal communication (Brem & Ivens, 2013). The invention thus presented an avenue, through a device, for such differently abled children to communicate easily. They are now more independent and free from the impediments that previously alienated them.

Interestingly, the devices were manufactured at a fraction of the cost of similar devices hence giving credence to the idea of a lesser cost of production. Again, the company preferred to launch their device after Apple had initiated the iPad so that they were riding on an existing platform to reach their goal. The task although not easy, simply involved tweaking an existing hardware to perform certain function with a specialized software. Effectively, Invention Labs being a new entrant were able to improvise a piece of Apple’s technology to get a revolutionary innovation in the field of speech recognition (Radjou & Prabhu, 2015). Essentially this really gives a huge credence to Rao’s argument on sustainable disruptive innovations and their impacts thereto.

Moreover, countries like the United States and Denmark already had a similar device by the time it was launched in India. However, the Indian version has been found to be better and more effective. The sales of Avaz were so successful that the United States became the number one market because of its ease of use. In fact, speech pathologists like Lucas Steuber have remarked that it remains the easiest device to use in the market today. It is thus no doubt that the speech assistance device was a special invention that fulfilled its purpose as was needed then (Bhatti et al., 2013).

Radjou & Prabhu (2015) proffer that a disruptive innovation is cheaper, smaller, simpler, and lastly convenient to use. He also talks about resource allocation, organization structure, and relevant markets as a key element of such kind of innovation. A look at the Avaz device brings out the conclusion that it meets all the requirements stated by the respected pioneer of disruptive innovation. Further, the fact that this device went on to surpass existing one shows that in this case, a new entrant in the name of Invention Labs took advantage of existing technology to even make a better one. The theory that established businesses must adapt in one way or the other thus comes to, in this case, otherwise, their place will be taken by the new entrants.

Whereas there is a distinction between Markides’ idea of disruptive innovation and Rao’s frugal innovation, they both lead to one thing that is low-cost products. The only fundamental difference is that the former begins with ease of use and ends with low-cost nature, however, the latter begins from the basis of low cost given the minimal resources available and ends with other attributes. It, therefore, means that in frugal innovation, especially in developing countries, innovation begins to form the basis of there being minimal resources hence the need to use cost-cutting means and eventually come up with a product or service that is affordable to all while maintaining the element of sustainability.

Conclusion

The concept of frugal innovation is one that has developed as a result of matters to do with climate change, globalization, economic, challenges to certain class of nations among other factors. Therefore countries have to grapple with these challenges and in so doing come up with solutions that are long term and sustainable. Previously innovations were all about making work easier. However, today innovations are pegged on many factors for it to be considered as a disruptive frugal innovation. As shown from several pieces of literature in this work, frugal innovation can indeed be disruptive to the incumbent businesses, companies, or technologies. In the end, disruptive frugal innovation must be controlled at some point. There should be policies and guidelines in place to safeguard both the innovators and the consumers. This way, the new technologies, business models, and products will serve their purpose in making the world a better place at a cheaper cost in a sustainable manner.

References

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Appendix

In going about the assignment, we undertook to first understand the problem question, which is the focus of the study. Then, a review of the literature available around study was undertaken with an aim of providing a background to the study. The next step in the research was a critical analysis of the existing literature on the subject. To do this, tasks were allocated to each member of the group who had specific areas to research. The members were given a strict timeline of one week to deliver their research portions of the report. After submission of the various areas done by group members, the team leader jointly with the members compiled the work beginning with introductory arguments from authors, then the body structure and finally the constitution.

The group’s overall performance was very good since group members were very responsive and proactive in the way they conducted the research. They were indeed very enthusiastic about the topic and shown a lot of interest in the subject. Within a period of twelve days, the group had had completed the weighty parts of the report. During doing this, report we realized members had developed a critical analytical skill hence approaching the study at a point of knowledge. This research improved the group’s critical analysis skills since group members had to apply the same in this study to come up with a sustainable solution in this case. In future, we would consider reducing the time required to complete the assignment.

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