A frugal and flexible approach to innovation for the 21st century.
By Navi Radjou, Jaideep Prabhu, and Simone Ahuja
Jugaad Innovation is rapidly gaining traction in Europe with French and Dutch editions now available. CLICK HERE TO PURCHASE the French Edition.
What the West Can Learn from Jugaad
On its own, the structured approach to innovation favored by mature companies can’t deliver the agility and differentiation they need in today’s complex business environment.
For three generations, Gustavo Grobocopatel’s family had pursued a small-scale, subsistence model of farming in Argentina. Grobocopatel dreamed of growing his farm into a larger, more sustainable enterprise, but his vision was hindered by scarcity. For one thing, he had difficulty accessing large tracts of land. Although Argentina is a vast country, farmland is hard to come by. Only 10 percent of the land is arable, and much of that is controlled by a few owners who are reluctant to part with it. Grobocopatel also faced a shortage of the skilled labor needed to scale up his business — people who could fertilize, sow, tend, and harvest crops. In Argentina, such labor is in limited supply, is not formally organized, is spread out across the country, and can be costly to hire, especially during peak harvest seasons. Finally, he didn’t have the capital to buy the farm equipment he needed. Funding opportunities for bootstrapping new businesses are very limited for entrepreneurs in Argentina.
Instead of giving in to these challenges, Grobocopatel developed an ingenious business model. He overcame the scarcity of land by leasing rather than acquiring it. He dealt with the scarcity of labor by subcontracting every aspect of farmwork to a network of specialized service providers, giving him access to “freelance” laborers whom he could hire as needed. And he overcame the cost of owning equipment and the lack of access to capital by renting the equipment needed from networks of small local companies. By cleverly leveraging a grassroots network of 3,800 small and midsized agricultural suppliers, Grobocopatel’s company, Los Grobo, which the entrepreneur founded in 1984, has evolved rapidly from a vertically integrated family business to an asset-light company. In 2010, it became the second-largest grain producer in Latin America, farming more than 300,000 hectares, trading 3 million tons of grain per year, and generating US$750 million in revenue — all without owning land or a single tractor or harvester. Having succeeded in Argentina, Grobocopatel is now exporting his “frugal farming” model to Brazil, Uruguay, and Paraguay.
Los Grobo’s innovative business model was born out of adverse circumstances. It shows how a resilient mind-set can transform scarcity into opportunity by combining limited resources with inventiveness and a never-say-die attitude. This approach — whether it is aimed at creating a product, service, or business model — is what we call jugaad innovation. Jugaad is a colloquial Hindi word that roughly translates as “an innovative fix for your business; an improvised solution born from ingenuity and cleverness.” It is based on six operating principles: seek opportunity in adversity, do more with less, think and act flexibly, keep everything about the business simple, tap the margins of society for employees and customers, and follow your heart. The extreme conditions that make jugaad innovation worthwhile have typically been more prevalent in emerging markets like India, China, and Brazil than in the United States or Europe. But in recent years, developed economies have begun to exhibit many of the same aspects of scarcity, diversity, unpredictability, and interconnectivity, making these principles relevant to companies around the world.
The jugaad spirit, also known as the “pioneer spirit,” was once common in North America and Europe, as well — at least until their economies matured. During the 20th century, Western companies built up dedicated R&D departments aimed at institutionalizing and managing their innovation capabilities. This industrialization of the creative process led to a structured approach to innovation that spawned big budgets, standardized business processes, and controlled access to knowledge.
Most Western firms have assimilated the idea that an innovation system — like any other industrial system — will generate more output (inventions) if fed more input (resources). As a result, the structured innovation engine in most companies is capital intensive, requiring an abundant supply of financial and natural resources at a time when both are scarce. The 1,000 companies in the world that invest the most in innovation spent a whopping $603 billion on R&D in 2011. But what did they get in return? As the Booz & Company Global Innovation 1000 study has repeatedly shown since 2005, pumping more money into R&D doesn’t necessarily buy more innovation. (See “The Global Innovation 1000: Making Ideas Work,” by Barry Jaruzelski, John Loehr, and Richard Holman, s+b, Winter 2012.)
The size of their R&D investments caused many Western firms to become risk averse, and led them to implement standardized business processes such as Six Sigma and stage-gate analysis to manage their innovation projects. These structured processes were expected to drastically reduce uncertainty and the risk of failure. And although such processes have several well-documented benefits — delivering volume-oriented economies of scale for standardized products and services, providing for the capital-intense needs of “big risk, big reward’’ R&D projects, and enabling more effective and efficient execution of innovation projects in stable environments — these structured processes can’t deliver the agility and differentiation that enterprises need in a fast-paced and volatile world. Six Sigma, for example, works marvelously when you are seeking to institutionalize “sameness.” But it can be like a straitjacket: Once you get in, you are stuck, and when things start to change, you can’t move. Worse, the orthodox Six Sigma culture weeds out positive deviance — the unconventional and counterintuitive strategies used by pioneering employees to solve vexing business problems that can’t be addressed with traditional approaches.
The top-down R&D systems common in the West are also often unable to open up and integrate bottom-up input from employees and customers. But in today’s interconnected world, finding, sharing, and integrating knowledge from across the spectrum is essential. It’s clear that companies competing in this complex business environment need a new approach to innovation and growth — one that, like jugaad, is frugal, flexible, and participative.
Instead of always using a hammer to deal with their problems, companies might find it helpful to use a screwdriver from time to time. In other words, we are not proposing that companies abandon their traditional structures and processes for innovation. Rather, they should expand their innovation tool kit.
Jugaad can bring value to conventional companies in the following ways: delivering economies of scope when companies need to tailor solutions to the specific needs of multiple customer segments in heterogeneous markets; providing “soft” capital by unleashing the passion of employees, business partners, and existing and potential customers; and enhancing flexibility to better manage unexpected challenges and harsh constraints through the improvisational use of limited resources. For companies attempting to combine a jugaad-like approach with their existing R&D systems, we offer two suggestions:
1. Prioritize the principles. At the corporate level, let industry dynamics and your company’s strategic requirements determine which jugaad principles are most critical for your business success. For instance, if you are a premium retailer that sells luxury items, “do more with less” and “tap the margins of society” may not be of critical relevance; however, “keep it simple” may be crucial to streamlining the service experience for high-end customers. If you are a consumer products manufacturer like Procter & Gamble or Whirlpool, you may choose to “do more with less” by creating new frugal products for buyers whose purchasing power is waning. Similarly, Western companies in industries undergoing major turmoil, such as pharmaceuticals and automotive, would be wise to “seek opportunity in adversity” and “think and act ﬂexibly.”
2. Aim for the low-hanging fruit. Once you have decided which principles are of strategic importance to you, adopt them in small, manageable stages. If “keep it simple” has appeal, begin by simplifying the design of your products and making them easier to use and maintain. Likewise, if you are attempting to “do more with less,” you can demonstrate frugality by ﬁrst reusing components across existing product lines. Later, you can develop your frugal mind-set by designing entirely new, very affordable, high-quality products. Finally, if you are an enlightened bank that wants to “tap the margins of society” — that is, the 60 million Americans who are ”unbanked ”or “under-banked” — you can ﬁrst partner with an organization like the Center for Financial Services Innovation and pilot ﬁnancial inclusion solutions in a few U.S. cities before scaling them up nationally. (But you’d better hurry, because nimble startups and established companies like Walmart are already offering basic banking services to underserved communities.)
To simultaneously deal with low-volatility, resource-rich settings and high-volatility, resource-constrained settings, companies need two sets of innovation capabilities: the structured capability, with its volume-oriented economies of scale, hard capital, and efficiency, and the jugaad capability, with its value-oriented economies of scope, soft capital, and flexibility. Mature companies that strike this innovation balance will be better positioned for success in today’s complex, turbulent markets.
- Navi Radjou is a Silicon Valley–based strategy consultant, a World Economic Forum faculty member, and a fellow at the University of Cambridge’s Judge Business School.
- Jaideep Prabhu is the Jawaharlal Nehru Professor of Indian Business and Enterprise and director of the Centre for India & Global Business at the University of Cambridge’s Judge Business School.
- Simone Ahuja is the founder of Blood Orange, a marketing and strategy consultancy with content production capabilities headquartered in Minneapolis and Mumbai.
- This article is adapted from the authors’ book, Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth (Jossey-Bass, 2012).
Think Frugal, Be Flexible, Generate Breakthrough Growth
Jugaad is a Hindi word that roughly translates as “overcoming hash constraints by improvising an effective solution using limited resources”. Jugaad innovation is a powerful approach to innovation that is most active in emerging markets such as India. It has the benefits of being frugal, i.e. enabling innovators to do more with less. Further, it is flexible, supporting improvisation and iteration, and it is inclusive or democratic, bringing in the knowledge of diverse swaths of customers and employees alike while addressing the needs of previously marginalized consumers. Similar to frugal innovation, we found through our research that jugaad innovation is becoming increasingly active in the West, where it complements the structured approach to innovation to deliver the agility, speed and efficiency that is so crucial in today’s complex economic environment.
Jugaad innovators don’t view customers as merely passive users of their products and services. Recognizing the diversity of customer needs, they invent new solutions from the ground up by working closely with marginal groups to identify their unique needs. They then engage local communities and partners to set up a grassroots value chain to locally build, deliver, and support their solutions—making these solutions in turn affordable, accessible, and sustainable.
For instance, to effectively serve the six hundred million unbanked Indians, YES BANK is constantly experimenting with new technology-powered inclusive business models that tap a vast network of partners. The YES MONEY service is one such initiative. As part of this initiative, the bank has teamed up with various payment platform companies like Suvidhaa Infoserve and Oxigen Services which offer payment services through about two hundred thousand mom-and-pop retail stores in urban and rural areas. YES BANK has helped these companies to deploy a specialized “domestic remittance” module, allowing, for example, migrant workers in cities to send money to their families in far-flung villages Compared to money order remittance services (offered by India Post, a government undertaking), YES MONEY is about five times cheaper and five times faster. YES MONEY also offers a cost-effective alternative to Western Union. Moreover, the majority of the fees collected are passed back to the payment platform companies and the retailers—creating value for all partners in the YES MONEY ecosystem.
“YES BANK constantly experiments with new technology powered inclusive business models that tap a vast network of partners.”
Like YES BANK, Zone V is positioning its products as tools for economic empowerment rather than for passive consumption. Zone V’s phones can therefore enable blind women in rural India to manage not only the finances of their households but also those of their neighbors and the village council. In this way, the individual phone becomes a vehicle for driving socioeconomic growth in an entire community. To make all this happen, Zone V will rely on a host of partners. It has outsourced its design and manufacturing to contract engineers and manufacturers and relies on nongovernment organizations (NGOs) like Sightsavers to distribute its phones in emerging markets like India—especially in rural areas. More important, Zone V will create a platform for third-party software developers to develop “inclusive apps” for its phones. These apps will be available at different price points depending on the customer segment and the phone being used. Naha believes that many mobile app developers will be motivated to create solutions that meet the basic needs of blind people worldwide.
In emerging markets, jugaad innovators often partner with state-level and local governments to make health care, education, and financial services more inclusive. For instance, GE Healthcare has signed a performance-based service contract with the government of the Northwestern Indian state of Gujarat. Under the terms of this public-private partnership agreement, GE-trained partners will operate and maintain all the medical equipment installed in government-run hospitals in the smaller cities of Gujarat. Rural hospitals, for their part, won’t need to invest in expensive equipment or scramble to recruit qualified technicians. Nevertheless, they will be guaranteed higher equipment uptime and lower utilization costs—all of which will translate into cost-effective and high quality care for rural patients.
“In emerging markets, jugaad innovators often partner with state-level and local governments to make health care, education, and financial services more inclusive.”
Scaling Up Personalized Solutions with Technology
Jugaad innovators cleverly employ technology—especially mobile computing—to reduce the cost of delivering services to marginal segments. They also leverage technology to customize their offerings on a large scale. A case in point is Reuters Market Light (RML), a mobile phone service developed by Thomson Reuters in India. RML delivers to farmers customized and localized weather forecasts, local crop prices, agricultural news, and other relevant information (namely relevant government aid schemes), in the form of three SMS messages sent daily to their mobile phones in the local language. Such customized and timely information enables farmers to better plan their activities such as irrigation, fertilizer use, and harvesting. As a result, farmers can better manage risks and improve their decisions regarding when and where to sell their produce to maximize profit. The service costs a mere 250 rupees (US$5) for a three-month subscription. As of 2011, some 250,000 Indian farmers from over fifteen thousand villages had subscribed to RML. Thomson Reuters estimates that over a million farmers across at least thirteen Indian states have benefitted from the RML service. Moreover, farmers have reaped substantial returns from their investment in RML. Some have realized up to 200,000 rupees (US$4,000) in additional profits, and savings of nearly 400,000 rupees (US$8,000) with an investment of only US$5 in subscription costs.
“Jugaad innovators cleverly employ technology—especially mobile computing—to reduce the cost of delivering services to marginal segments.”
Another jugaad innovator using technology to bring low-cost services to the masses is Dr. Liu Jiren, chairman and CEO of Neusoft, China’s largest IT solution and service provider. Dr. Liu, a former professor of computer science, is worried that the Chinese, thanks to sustained double-digit economic growth, “have accumulated lots of wealth in the past two decades, but have also accumulated lots of diseases as they got richer.” It is estimated that ninety million Chinese suffer from diabetes and two hundred million may be suffering from cardiovascular diseases. The explosion of chronic diseases—which are particularly devastating for low-income Chinese in rural areas—is forcing the government to invest in a health care system that has so far been deficient or nonexistent in the rural areas, which lag behind urban areas in medical resources and health care infrastructure. But Dr. Liu warns: “If the Chinese government were to build a health care system to serve 1.3 billion Chinese modeled on the United States [where health care spending is projected to account for 20 percent of GDP by 2020] we will need a huge budget which will soon bankrupt our country. We need an alternative health care model that is smart, affordable, and inclusive. We need a model that focuses on—and enables—disease preventionrather than treatment.”
For its part, Neusoft has developed several low-cost but high-tech solutions, such as affordable health monitoring devices and telemedicine solutions for rural hospitals to serve low-income Chinese patients. More impressively, Neusoft has developed a cutting-edge wristwatch for chronic disease patients to use as a mobile health monitor. On a regular basis, the watch collects bio indicators from sensors attached to the patient’s body. This dynamic data is sent to Health Cloud, a cloud computing–based expert system. Health Cloud analyzes the data using a health care knowledge database and offers customized advice to the patient in terms of exercise plans and diet regimen, thus helping the patient make healthy lifestyle changes. For instance, if you are overweight, the system will suggest a three-month jogging plan, monitor and report back your progress daily, and even suggest improvements when needed.
Dr. Liu notes that in a rapidly aging China—where family ties are important and the over-sixty-five population is projected to increase from 130 million in 2010 to some 222 million by 2030—these wristwatches and home health monitors have become popular gifts from young Chinese to their parents. Through these gifts, young Chinese can remotely track their parents’ health—through daily reports on their mobile phones—and proactively tend to their well-being. Dr. Liu believes that Neusoft’s ability to serve marginal groups (such as the elderly and the rural poor) faster and cheaper by harnessing affordable technologies like cloud computing gives the company an advantage over Western multinationals. He says: “We don’t have the resources of a large multinational corporation, but we identify opportunities in underserved markets early on and execute fast on them by harnessing the power of technology—especially cloud computing, which significantly lowers the cost of service delivery in sectors like health care.”
Jugaad innovators like Dr. Liu successfully include the margin by approaching marginal groups as whole new markets, helping everyone climb up Maslow’s hierarchy of needs, co-creating value with customers and partners throughout the value chain, and making clever use of affordable technology to scale up their personalized solutions. As Western nations become increasingly diverse, however, there is a growing urgency for Western companies to pay close attention to the margin.
“Western companies will miss out on a big market opportunity if they fail to adapt their offerings to the requirements of the rapidly aging consumer base in the United States and Europe.”
The Margin Is Becoming the Majority
In coming years, “marginal” segments in the West will no longer be marginal; they will become bigger, possibly muchbigger. And the number of marginal consumers will increase across a number of dimensions: age, ethnicity, and income.
Take age. In the next fifteen to twenty years, the number of Americans over sixty-five will double. In the same period, the number of Americans over eighty-five will triple. This shift will be even more dramatic in Europe. The continent already has nineteen of the world’s twenty demographically oldest nations. By 2030, nearly 25 percent of Europeans will be older than sixty-five, up from about 17 percent in 2005. As a result, the U.S. Census Bureau estimates that by 2030 the European Union will experience a 14-percent decrease in its workforce and a 7-percent decrease in its consumer populations. All this means that American and European companies will need to tend to a rapidly aging workforce and learn to serve aging consumers—many of whom belong to the assertive baby boomer generation which is used to getting what it wants given the sheer strength of its numbers.
The good news is that this senior market is a highly lucrative one. In the UK, the over-fifties spent £276 billion (US$437 billion) in 2008, making up around 44 percent of total family spending in Britain. In the United States, the over-fifties’ annual after-tax income is estimated to be $2.4 trillion, accounting for some 42 percent of all after-tax income. The bad news is that existing products and services are often not tailored to aging consumers’ needs. Ian Hosking, senior research associate at the Engineering Design Centre at the University of Cambridge’s Department of Engineering, points out: “Aging populations exhibit an increasing variation in functional capabilities such as vision, hearing, and dexterity. In general these abilities reduce with age. Even though it may seem obvious to design inclusive products, many products are targeted at young, able-bodied users. As a result, they are neither accessible nor desirable to older users. At the same time, the products that we use every day seem to grow ever more complex to operate.” Western companies will miss out on a big market opportunity if they fail to adapt their offerings to the requirements of the rapidly aging consumer base in the United States and Europe.
Western populations are not only aging, they are also becoming more diverse and multicultural. For instance, the percentage of children in the United States with at least one foreign-born parent rose from 15 percent in 1994 to 23 percent in 2010. Similarly, more than half of the growth in the U.S. population between 2000 and 2010 came from the increase in the Hispanic population, which rose 43 percent to 50.5 million during that period; these Hispanic consumers are likely to form the majority in states like California within a generation. It is estimated that the Hispanic consumer group has a collective buying power of about $1 trillion. The Census Bureau projects that the share of ethnic and racial minorities will reach 54 percent of the total U.S. population and surpass that of non-Hispanic whites by 2042—eight years sooner than expected.
The demographic makeup of Europe is also bound to change rapidly. Muslims, who currently account for 5 percent of the overall population of the European community (reaching 10 percent in France), are expected to account for 20 percent by 2050. But long before that, countries such as Britain, France, Spain and the Netherlands will have surpassed that figure. As the working-age population rapidly decreases, European governments will have no choice but to liberalize their immigration policies if they wish to sustain their economic competitiveness. This growing ethnic and cultural diversity of Western populations will force corporations to innovate their products and services to meet the differing needs of minority consumers.
Another key factor contributing to the diversity of Western populations is the rise of Generation Y and Z workers, with their idiosyncratic values and expectations. Many studies show that Gen Y and Z employees consider themselves widely misunderstood in the workplace and feel alienated—primarily because the hierarchical structures and top-down communication styles of Western corporations are at odds with the collaborative spirit of Gen Y and Z workers. Unless Western companies find an innovation mechanism to keep their Gen Y and Z employees fully engaged, these young workers are likely to feel marginalized and leave for organizations that truly capitalize on their creative talents.
Finally, there has been a dramatic shift in income in the United States, where the lingering recession has pushed more people into poverty. In 2010, 15.1 percent of Americans (or 46.2 million people) were living below the official poverty line, the highest level since 1993 (in 2009, the percentage was 14.3 percent). More worryingly, America’s consuming middle class, which accounts for 70 percent of national spending and forms the bedrock of the U.S. economy, is shrinking. According to Pew Charitable Trusts, nearly a third of Americans who belonged to the middle class as teenagers in the 1970s have slipped below it as adults. The study highlights the relative ease with which even Americans who started life with advantages can end up in low-income, low-opportunity circumstances.
And although it has become easier to be downshifted economically, it has become harder to climb back up the socioeconomic ladder. Median incomes in the United States have remained stagnant for the last thirty years. (In 2010, the median U.S. household income was $49,445, down slightly from $49,777 in 2009.) Adjusted for inflation, the middle-income family earned only 11 percent more in 2010 than it did in 1980, whereas the richest 5 percent in America have gained a 42-percent income boost. In sum, the bottom 60 percent of U.S. households experienced an income reduction in 2010, whereas households making $100,000 and above enjoyed an increase in income. As a result, the 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases.
An economy rife with such inequality and downward mobility—the so-called “plutonomy”—is simply not sustainable. In an op-ed entitled “The Limping Middle Class,” Robert Reich, former U.S. secretary of labor, warns: “When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt—which, as we’ve seen, ends badly.” Fifty million Americans currently don’t have medical insurance, and a whopping sixty million Americans are unbanked or underbanked—which means they are unable or unwilling to avail themselves of the full gamut of financial services offered by traditional banks. One can expect these numbers to go up significantly in coming years as economic conditions worsen. For a growing number of disenfranchised middle-class Americans, the American dream will remain just that: a dream.
“Companies that actively embrace the marginal groups, and form their businesses around their needs, are likely to find, just as jugaad innovators in emerging markets are finding, that doing so increasingly makes business sense.”
What does all this mean for Western corporations? The marginal groups that have traditionally been perceived—and therefore ignored—as the “long tail” of the consumer economy (that is, as niche segments) are rapidly becoming the “fat tail” (that is, dominant consumer groups). These groups can no longer be ignored. Companies that actively embrace them, and form their businesses around their needs, are likely to find, just as jugaad innovators in emerging markets are finding, that doing so increasingly makes business sense. Indeed, it will increasingly be possible to include the margin (do good) and make a profit (do well) at the same time. But there are several factors holding back Western companies from including the margin in their business strategies. We explore these factors in the next section.
Excerpted with permission from the publisher, Wiley, from Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth by Navi Radjou, Jaideep Prabhu, and Simone Ahuja. Copyright © 2012.
About the Authors
Navi Radjou (firstname.lastname@example.org) is an independent innovation and leadership consultant and speaker based in Palo Alto, California, and a fellow at the University of Cambridge’s Judge Business School.
Jaideep Prabhu (email@example.com) is the Jawaharlal Nehru professor of Indian business and enterprise and director of the Centre for India & Global Business at the University of Cambridge’s Judge Business School.
Simone Ahuja (firstname.lastname@example.org) is the founder of Blood Orange, a marketing and strategy consultancy with a focus on frugal innovation and emerging markets.
Over the last several years, we have conducted extensive field research in India, and it has become amply clear to us that India has its own unique approach to innovation — it goes by the name jugaad. Jugaad is practised by all Indians in their daily lives to make the most out of what they have around them.
Jugaad applications include finding new uses for everyday objects —such as using Coke or Pepsi bottles to store water — or building makeshift trucks (incidentally it is this rattletrap that gave this Indian phenomenon its name) from water pump engines and parts of bullock carts.
Jugaad should not, however, be written off as an approach that supports only local, short-term solutions. Rather, the jugaad approach to innovation can bring about significant long term socio-economic impact for the following reasons:
Because jugaad innovators are often faced with severe constraints and they target consumers who demand valuefor-money solutions, they are by nature frugal and expert in optimizing resources. They create “good enough” solutions that focus on deep consumer needs, rather than wants. This simplicity and focused design leads to solutions that function well, but eliminate unnecessary and often confusing bells and whistles that add cost but little value.
The fl exible mindset of jugaad innovators allows them to innovate faster, testing the impact of their products or services in the marketplace in real time, and quickly adapt to changes. They use on-theground feedback, not focus groups, to iterate, re-testing until they fi nd the sweet spot. This non-linear thinking often spurs breakthroughs that turn conventional ideas on their head to create new industry benchmarks.
Jugaad innovators create solutions with marginalized groups (low income, non-traditional) in mind, both as consumers and employees. This inclusive approach is refl ected in their very low-cost products and services that make these innovations accessible to a greater number of consumers, while generating employment and helping solve pressing problems in healthcare, energy and technology.
In sum, the jugaad approach to innovation is widespread in India. Indeed, it is increasingly being used to achieve low cost yet large-scale solutions to the major unmet needs many in the country face despite 20 years of growth.
Moreover, as we argue in our book, Jugaad Innovation: A Frugal and Flexible Approach to Innovation for the 21st Century, jugaad offers a powerful way to solve not only India’s major problems but also the world’s. One might even argue that jugaad will come to be seen as India’s unique and enduring contribution to the world.
Co-authors of the book ‘Jugaad Innovation’, Navi Radjou, Jaideep Prabhu and Simone Ahuja get together to explore if jugaad helps large organizations or if it only for the small scale enterprises.
Q: How did the three of you decide to get together and write the book?
Simone Ahuja (SA): About four years ago we started academic research in India on innovation in emerging markets. The project was commissioned by a Fortune 500 company in the US. We were looking at how innovation takes place in emerging markets, what’s the approach, mindset and how it could be relevant in the US context.
Navi Radjou (NR): This book germinated from that idea. We spent time documenting case studies because we didn’t want to just make something intellectual. In the West, there is a structured approach to innovation. Typically, this is done by top-down big corporations and governments with big budgets. When we first started looking at innovation in India and other emerging markets, we discovered that it was almost diametrically opposite here. That’s what we explore in our book, both in its western and Indian editions.
Jaideep Prabhu (JP): We’d been writing blogs about this notion of how these emerging markets have a different approach to innovation. For quite a while we got a lot of pushbacks. In the West, we got pushed back on the notion that there is scarcity in the emerging markets but we don’t have that problem back in the West. We even got pushed back in India where people were saying that jugaad is kind of dodgy. So while we were enthusiastic about it, we weren’t very sure if the world was ready for it. And then last year, in February, a literary agent wrote to Radjou saying, ‘I know you have been writing about jugaad, would you be interested in writing a book about this because I think this is a big idea whose time has come.’
Q: You must have come across many companies that are innovating this way. Is jugaad practiced predominantly by small companies or are large companies also relying on jugaad?
NR: Jugaad is predominantly practiced by small enterprises because of the lack of resources they have as well as grassroots entrepreneurs who are trying to deal with various socio-economic problems. Young innovators and small entrepreneurs actually use jugaad as a way of surviving. Large companies may feel they don’t need jugaad because they have all the resources in the world, but with the slowdown of the economy, we are telling the large companies that the jugaad mindset is becoming relevant even for you.
SA: We are increasingly seeing that large corporations are interested in the jugaad mindset though they are not throwing out their old structured processes.
JP: For example, the Tata Nano project is an example of a big company doing jugaad and structured innovation in a complementary fashion at various stages of the process. The Nano has the aspect of inclusiveness in terms of the cost of designing, manufacturing and R&D practices. Then there is also a frugal aspect to it. There was flexibility displayed by the team when they had to move the site from West Bengal to Gujarat at the last minute.
NR: Another company is HCL. Vineet Nayar is trying to do an ‘employee first’ kind of philosophy; which is to say that rather than doing innovation in a top-down fashion, Vineet is actually saying let’s do a bottom-up innovation by actually allowing employees to come up with interesting ideas.
SA: And one more example is YES Bank in the financial sector. They take a frugal, flexible and inclusive approach to addressing the financial needs of micro-entrepreneurs, for example. Also, the bank is doing well by doing good. Something like 46 percent of their market has under-served clients yet their profit margins in the bank are actually 2-3 times higher than that of a traditional bank.
Q: As you mentioned earlier, jugaad is perceived as dodgy and has a negative connotation. How do you create a positive rationale of the concept?
JP: Such a connotation is probably there with reason. There are three main criticisms leveled against jugaad. One is that it encourages or involves dubious practices, getting around the law in some cases. And that is probably true. But it’s a tool that can be used for good in the right hands and for bad in the wrong hands. The other criticism that is leveled against jugaad is that even if it’s used for making things that people want, those things don’t meet quality needs. There are examples of this happening but it’s not intrinsic to the jugaad approach. In fact, you can marry the jugaad mindset with reasonably high quality standard that delivers something of value to consumers. The third criticism is that these innovations don’t scale. Of course, there are lots of examples of companies that don’t scale but there are many which do.
NR: If you really look at why people view it as a negative concept, it’s because jugaad is like trying to beat the system, right? That is true! But it is trying to beat the system because the system is not efficient. Therefore jugaad is in a way symptomatic of some issues within the system itself.
Q: Is the jugaad culture resulting in mediocrity of Indian companies when compared to their western counterparts?
NR: That’s a good point. Take the example of Siemens. It has come up with a foetal heart monitor which essentially measures the heartbeats of an unborn baby, something that relies on ultrasound technology, which is very expensive. So it ended up using microphone technology. Suddenly, it dramatically reduced the cost of the product, making it more accessible to a lot more people, especially in the emerging markets. Now it’s a good enough solution in the sense that it may not have all the bells and whistles of a high-end product but it gets the job done. So, rather than thinking in terms of quality, which is a very western concept, we are saying that increasingly the notional value becomes more important. So, for Siemens, this is a whole new product line which is a good enough product, but it estimates that this is going to be a multi-million dollar business, not only in emerging markets but also in the West, in the coming decade.
Q: Is jugaad specific to Indian companies? How much jugaad do you see happening in other countries?
SA: It’s very active in many emerging markets. We found that there are actually parallel words for it in other emerging economy. Like in China it’s called ‘zizhu chuangxin’, in Brazil it’s called ‘gambiarra’, in France it’s called ‘System D’. In recent times, it is becoming active outside emerging markets.
JP: We have examples in the book from Mexico, Costa Rica, Brazil, Kenya, Philippines, China, and Argentina and, of course, from the US and the UK as well. So, it is very interesting to observe that this sort of bottom-up, grassroots-led, frugal and flexible kind of approach is really picking up around the world, partly for the negative reasons of scarcity and unpredictability but also because of positive reasons. People are increasingly more empowered to be able to do things themselves in a frugal-flexible way.
This is just the beginning, so we will see more of this movement. That said, it’s probably fair to say that India is at the forefront of this approach simply because India has scarcity and unpredictability in space. It has a lot of interconnectivity and liberty. People have a lot more freedom here. More importantly, India is very big and diverse. It has large multinationals operating here that can provide the scale. So, in many ways, India is probably at the forefront of the jugaad approach.