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Jugaad innovators don’t plan they improvise

June 15, 2012 by jugaad_innovation in blog page with 0 Comments

Business Standard

By demonstrating agility, jugaad innovators can deal with unanticipated challenges faster and seize unexpected opportunities-such as changing customer needs-more swiftly than their competitors.

Emerging markets are characterized by high volatility. Economic circumstances are constantly changing. Growth rates are often in double digits, and the competitive landscape is often shifting. New laws and regulations are constantly being put into place, and policy is constantly evolving. So jugaad innovators need to experiment as they go along and be willing to try multiple options, rather than adopting one approach at the start and sticking to it thereafter. Unlike their counterparts in Silicon Valley, jugaad innovators do not attempt to work everything out in advance or rely on a business plan to determine the mid- to long-term roadmap for their new ventures. Instead, they improvise their next course of action as circumstances change, and they do so from within a framework of deep knowledge and passion. Their approach is in fact more akin to a jazz band than to an orchestra: everything is improvised, fluid, and dynamic. As such, their strategies are organic and emergent rather than predetermined. Jugaad innovators’ flexible thinking—their ability to improvise—serves them especially well when confronted with adversity.

Given their propensity for improvisation, jugaad innovators don’t rely on forecasting tools like scenario planning, as many companies do, to assess future risks. They believe in Murphy’s Law—anything that can go wrong will go wrong—so what’s the point of anticipating every single obstacle that might appear down the road? Jugaad innovators don’t have a Plan B, let alone a Plan C. Rather, when confronted with an unexpected hindrance, they rely on their innate ability to improvise an effective solution to overcome it, given the circumstances at that time.

A good example is that of Tata Motors, the maker of the Rs 1 lakh Nano car. The Nano was the brainchild of Ratan Tata, chairman of the Tata Group (Tata Motors’ parent company), who conceived it as an affordable, comfortable, and safe alternative to the perilous two wheelers that often carry entire families on Indian roads. In 2006, Tata Motors announced that the Nano would be manufactured in Singur, West Bengal, an east-Indian state. The factory was to be built on land acquired from farmers by the state government in a bid to boost local industry. Tata Motors intended to roll out its first Nanos from the Singur plant in late October 2008.
In 2007, however, local farmers began protesting against the acquisition of land for the factory. The dispute rapidly escalated into a political issue — and caught Tata Motors off guard. As the protests intensified through 2008, Ravi Kant, then managing director of Tata Motors (and later its non-executive vice chairman) made a bold decision. He set aside his firm’s prior manufacturing plans and swiftly shifted the production of the Nano to Sanand, in the investor-friendly state of Gujarat, on the other side of the country. He didn’t hire a management consultant to advise him on the move; he just trusted his instinct that this was the right thing to do, given the circumstances. In just fourteen months (compared to the expected twenty-eight months for the Singur plant), Tata Motors built a new factory in Sanand, Gujarat. The new factory began production of Nanos in June 2010.

One year later, Ravi Kant and his team had to demonstrate the ability to adapt to rapidly changing circumstances yet again: the Nanos weren’t selling as well as expected. Monthly sales had fallen well below the optimistic forecast of twenty thousand units. Rather than being disappointed by the Nano’s lackluster performance, Tata Motors’ leadership used this early market feedback to improvise a plan to shore up sales. Ratan Tata originally envisioned a distributed supply chain model whereby Tata Motors would dispatch flat packs to local entrepreneurs across the country, who would do the final assembly of Nanos close to customers — thus creating gainful employment in local communities. With flagging sales, however, this original vision had to be revised: Tata Motors’ executives went back to the drawing board and quickly revamped Nano’s logistics network to a more straightforward one, which involved manufacture and assembly at one site in Gujarat, and distribution through a traditional dealer network throughout the country. But again Tata Motors hit a snag: rural customers — such as farmers — were not venturing into Tata Motors’ showrooms in small towns. Among other things, they felt intimidated by dealers dressed in suits and ties.

This setback led Tata Motors’ management to redesign their rural showrooms to make them more informal-for example by staffing them with casually attired salesmen who could pitch the Nano to Indian farmers over a cup of chai. Tata Motors also launched a nationwide TV campaign and began offering consumer financing at highly attractive rates to lure frugal Indian consumers. By constantly adapting and refining its business model—and implementing changes within weeks, not months—Tata Motors invigorated sales of the Nano, which, although still lower than expected, are gradually beginning to pick up. Indeed, it is very likely that the future success of the car will depend on more such quick adaptation and flexible thinking by the managers of Tata Motors.

Jugaad innovators experiment with multiple ways to reach a goal
Unpredictability is the norm in emerging markets. Because of diversity and rapid change, it is hard to predict how consumers will respond to new products and services-and how new business strategies will perform in, say, rural markets. Jugaad innovators may have a single-minded vision of where they want to get to, but they must be willing to try different paths to get there. Specifically, they must be willing to keep experimenting in order to attain their goals—and they must be flexible enough to quickly switch from one path to another along the way.

Dr Mohan, for instance, experimented with a number of different ways to frugally yet effectively engage rural communities both as consumers (patients) and employees. When he first sent his expensive technicians from his city hospital to work in remote villages, he found that these technicians—although highly competent—would soon leave, wanting to return to city life. Learning this, he developed a training curriculum in his city hospital to impart to young men and women from villages the basic skills they need as healthcare workers. After about three months, these newly trained healthcare professionals would return to their rural homes, where they were more likely to want to remain. This in turn helped reduce costs and turnover in Dr Mohan’s model. Dr Mohan had a similar experience with his attempts to work with non-traditional partners to develop a cost-effective tele-medicine platform. Although he initially contemplated partnering with more typical—and expensive—technology providers, Dr Mohan eventually linked up with ISRO, which provides his roaming tele-medicine van with a free satellite uplink to his clinic in the city of Chennai.

Jugaad innovators act with speed and agility
In emerging markets, new threats and opportunities can emerge from out of the blue. This forces jugaad innovators to not only think but also act flexibly. By demonstrating agility, jugaad innovators can deal with unanticipated challenges faster and seize unexpected opportunities—such as changing customer needs—more swiftly than their competitors. Zhang Ruimin is one such jugaad innovator who thinks and acts quickly.

Zhang, is the CEO of Haier, a Chinese consumer goods company that is making appliance makers like GE and Whirlpool nervous. Under Zhang’s leadership, Haier has, in the space of a decade, made huge inroads into North American and European markets by selling quality appliances at lower prices than those of Western suppliers like Whirlpool and GE. Armed with its ‘value for money’ strategy, Haier is disrupting the consumer goods market not only in mainstream segments like air-conditioners and washing machines, but also in niche segments like wine coolers. For instance, Haier launched a $704 (Rs 35,200) wine cooler that is less than half the cost of industry leader La Sommelière’s product. Within two years of this launch, Haier has grown the market by a whopping 10,000 percent and now controls 60 percent of the US market by value. By leveraging its value for money strategy, Haier has also rapidly established a strong presence in the Indian home appliances market, where it commands 8 percent of market share. In coming years, Haier aims to grow its Indian market share to at least 10 percent and achieve Rs 4,500 crore in revenue and become one of the top five brands in India by 2014.

What makes Haier so innovative is not just its cool products, but also its flexible organizational structure. Zhang believes that in the internet era, appliance makers like Haier need to shift from mass production to mass customization—and start thinking and acting nimbly, as Facebook and Google do. As Zhang explains: ‘The focus on promoting your cost or price advantage has shifted to a focus on service differentiation, mostly centring on customer experience.’

To sense and respond to his retail customers’ needs faster than rivals can, Zhang came up with a jugaad innovation: he radically redesigned Haier’s organization, which currently employs over fifty thousand people worldwide. Specifically, he replaced Haier’s organizational pyramid with a loosely coupled network of more than four thousand self-managed, cross-functional units (including R&D, supply chain, sales, and marketing) that interact directly with customers and autonomously make decisions. Each unit operates as an independent profit centre and is evaluated as such. Zhang refers to this organizational innovation—which empowers autonomous units of frontline workers to sense and respond to consumer demand—as ‘making a big company small’— that is, allowing a big company like Haier to maintain the unique flexibility of a small start-up. To make this bottom up, customer-centric organizational structure work, Zhang shifted the role of managers from being commanders and supervisors into being supporters and providers who ensure that the independent units have the resources they need to meet customer demand as promptly as possible. He doesn’t want managers to be in charge, as they aren’t directly in touch with customers.

Haier’s organizational agility enables it to react swiftly to rapidly changing—or unexpected—customer needs, and to innovate faster, better, and cheaper than its rivals. For instance, in China, any call placed to Haier’s national customer service centre is answered within three rings and a technician is dispatched to your house within three hours—even on Sundays. A few years back, one such call came from a farmer in a remote village in Sichuan province who complained about the constantly clogged drainpipe in his washing machine. The Haier technician who went to investigate found that that the farmer was using the machine to wash the mud off his freshly harvested potatoes; it was this mud that was causing the clogging. ‘Most companies would react by saying “This machine is not designed for this purpose”,’ explains Philip Carmichael, Haier’s president, Asia-Pacific, ‘but Haier’s approach was to say, “This guy (farmer) isn’t the only one who’s tried to wash potatoes. Is there a way to adapt this product to this requirement? Maybe we can make a machine that actually washes potatoes and clothes”.’

Haier’s flexible thinking was spot on: it turns out that crores of farmers across China routinely use their washing machines to clean their vegetables. Sensing a big market opportunity, Haier’s cross-functional teams quickly acted on their intuition by developing a washing machine with larger pipes that could also handle vegetables. The product was a big hit among farmers. But Haier’s creative teams didn’t stop there. They also invented a washing machine that can peel potatoes and even designed a model for herders in Inner Mongolia and the Tibetan Plateau to help churn yak milk into butter! These inventions eventually inspired Haier to introduce, in 2009, a washing machine able to wash clothes without detergent. That groundbreaking innovation helped propel Haier to the number one position in the laundry equipment market not only in China, but also around the world.

Jugaad innovators—such as Haier’s employees—are highly adaptable. They are capable of thinking on their feet and acting with great agility. Being nimble-minded and nimble-footed serves them well in the context of emerging markets which are characterized by extreme unpredictability. Corporate leaders confronted with increasing volatility and uncertainty in their own business environment must also learn to think and act flexibly—but, as we discuss next, that’s easier said than done.

Jugaad Innovation : A frugal and flexible approach to innovation for the 21st century by Navi Radjou, Jaideep Prabhu and Simone Ahuja published by Random House India

Indian Book Launch of Jugaad Innovation was a Hit

June 8, 2012 by jugaad_innovation in blog page with 0 Comments

The book launch of the Indian edition of Jugaad Innovation went phenomenally well and we had a great time. Here are a few photos and some media coverage of the tour:

JIauthors_RamaBijapurkar_JamesCrabtree_AsiaSocietyMumbai_BSE

Co-authors Dr. Jaideep Prabhu, Dr. Simone Ahuja, & Navi Radjou with Rama Bijapurkar and moderator James Crabtree at the Jugaad Innovation Mumbai launch, hosted by Asia Society Mumbai and BSE.

JIauthors_former PresidentofIndiaAbdulKalam

The authors visit former President of India, Abdul Kalam, at his home in New Dehli.

JIauthors_IBEFCEOAparnaDuttSharma

Jugaad Innovation co-authors have a talk with IBEF CEO Aparna Dutt Sharma in New Delhi.

NationalInnovationCouncil_ChairmanSamPitroda_launchesJugaadInnovation_inNew Delhi

National Innovation Council Chairman Sam Pitroda launches Jugaad Innovation in New Delhi.

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The authors reflect at the launch of Jugaad Innovation in New Delhi. (A tongue-in-cheek tribute to an earlier group photo.)

Our interview in the Wall Street Journal: “Q&A: Why the West Needs ‘Jugaad’ Creativity”

Tehelka: “Interpreters of Ingenious Innovations”

Review in LiveMint: “The UPA doesn’t tick, the country does”

Interview in LiveMint: “The currency of ‘jugaad’ “

Excerpts in Business Standard: “Jugaad innovators don’t plan – they improvise”

Everyone loves this fantastic book cover:

The Indian edition of Jugaad Innovation is Random House India’s book of the month. How to buy here.

Follow @JugaadIndiaNow on Twitter and Facebook.

Why Good Enough Is Better: Lessons In Simplicity From Emerging Markets

June 7, 2012 by jugaad_innovation in blog page with 0 Comments

Fast Co Exist

WRITTEN BY: Simone Ahuja, Jaideep Prabhu, and Navi Radjou

“Good enough” products and services may sound like substandard offerings to many consumers in developed economies, but in emerging markets–and increasingly in developed economies–they embody simplicity and focused design.

We began exploring the concept of “good enough” in product and service development while conducting field research on grassroots entrepreneurs and innovative enterprises in emerging markets like India a few years ago. We found that innovators in these markets use a unique approach to innovation that starts by upending assumptions and asking fundamental, rather than incremental “what if” questions when developing a new product, service, or business model. Asking these fundamental questions, we learned, often leads to simple and focused design of a “good enough” solution–an affordable product or service that effectively meets the basic needs of hundreds of thousands of customers in emerging markets.

Many of these resourceful innovators use jugaad, a Hindi word that roughly translates as “an improvised solution borne from ingenuity that addresses a pressing socio-economic problem.” This frugal and flexible approach to innovation allows them to provide quick and effective solutions to consumers grappling with complex issues in their daily lives. More importantly, jugaad is an approach that is also increasingly critical to driving innovation in developed countries that now face more scarcity and instability than ever before.

Good enough products are of high value to innovators as well as to customers in emerging markets for three reasons:

1. They are cheaper to make, more affordable and more accessible
2. They are easier to use and maintain
3. They satisfy a broader audience

For example, Mansukh Prajapati is an entrepreneur we met in the remote deserts of western India who asked himself a bold question, “What if I can make a refrigerator that does not require electricity?” This is a critical question in a region where delivery of vegetables and dairy is erratic and access to electricity is patchy. Mansukh didn’t even finish high school, but he came from a long line of potters and so had a deep knowledge of clay. To answer his own question, he went back to the basics to consider the natural cooling properties of clay and used this knowledge to make an off-the-grid terra cotta fridge.

Named Mitticool (“mitti” means earth in Hindi), the fridge works as follows: Water is stored in an upper chamber and seeps down the sidewalls of a lower chamber, where evaporation cools the food that is stored there. It requires no electricity and is 100% biodegradable. Here, simplicity also leads to sustainability. While Mitticool keeps water, vegetables, and dairy cool in the heat of the desert, it also keeps the food hydrated, so it actually tastes better than it would in a conventional fridge. This simple fridge is not simplistic or unrefined, but rather smart and innovative. It uses an inexpensive, widely available material (clay) and traditional knowledge (pottery) in an entirely new application at a price (about $40) that makes it highly affordable.

In developed economies, the “bigger is better” approach to innovation has dominated for years. But a series of changes is occurring that is driving demand for “good enough” products and services even in the West:

1. A shrinking middle class that is demanding more value for money
2. Consumers who prefer usability to complex, over-engineered products and services, and
3. A willingness to trade off additional or more refined features for time saving

Like innovators in emerging markets, companies across the rest of the globe, including in the U.S., are focusing more and more on consumer needs rather than desires, and are responding to consumer demand for simpler products over complex ones, even when a trade-off in quality must be made.

As Carlos Teixeira, an assistant professor at the School of Design Strategies at Parsons, told us, “Good enough is a trade-off, but with good design, the user experience doesn’t feel compromised.” Good enough design, he said, requires going beyond consumption and production to having a deep understanding of the ecosystem–from consumer needs to distribution–like many of the innovators we met in emerging markets.

Case in point, while music lovers can hear the difference between uncompressed music formats such as CDs, and highly compressed MP3s, the overwhelming preference is for MP3s because the intuitive platforms on which these compressed files operate (iTunes, MP3 players) are simple and user friendly. Specifically, they make it easier to listen to more music and share this music with others. The listener’s choice, as a result, becomes less about quality and more about usability and simplicity.

Good-enough products deliver higher value because they are designed to do one thing exceptionally well (functional specialization), rather than handling multiple things in a mediocre fashion, which can leave users frustrated and confused. Take GE’s Mac 400, a low-cost, portable ECG (heart monitor) developed in India that costs a fraction of what a typical ECG unit costs in the West and is one fifth the weight. The portability increases accessibility–it allows rural physicians to carry it to remote villages–while the low cost provides greater affordability. Reusability of pre-existing components, such as the printers used in Indian bus stations, which can withstand dust and monsoon rains, increases functionality, and further decreases the cost of this remarkable device. This simple ECG unit has also received FDA approval in the U.S., where it will have a great impact on our highly strained health care system by adding portability and significantly lowering the cost of ECG testing.

John Maeda, president of the Rhode Island School of Design, calls this kind of real-world design “radical incrementalism”–the art of delivering much more value without adding more bells and whistles in products. As Maeda points out: “It’s not necessarily beneficial to add more technology features just because we can. R&D engineers must make frugal simplicity the core tenet of their design philosophy.”

Many good-enough products have benefits that override the desire for over-featured products of the highest quality–whose incremental benefits do not justify their complexity and increased cost. The lessons of jugaad and “good enough” from emerging economies can help emerged economies drive more innovation at a lower cost for more people. Learning them quickly will prevent alienating the growing numbers of Western consumers seeking to simplify their lives.

ChangeThis Manifesto: Rebooting America’s Innovation Engine

May 29, 2012 by jugaad_innovation in blog page with 0 Comments

ChangeThis_JugaadInnovation

By Navi Radjou

“The motto ‘innovate or die’ held true for American firms in the 20th century. In the 21st century, ‘innovate faster, better, and cheaper—or die’ will be your new mantra. Indeed, in today’s hypercompetitive, über-connected, and globally integrated economy, you need to crank out new products faster than you can spell ‘R&D,’ or else your customers will switch their allegiance to more agile rivals. Plus, your products need to deliver more value to customers—value no longer being defined by the bells and whistles in your product, but by the experience customers get from using your product. Finally, given the rapidly-shrinking purchasing power of the American middle class, your products got to be affordable to meet the frugal needs of thrifty US buyers. In sum, you need to innovate faster, better, and cheaper. Sadly, Corporate America is just not equipped to do that.”

Download at ChangeThis

3 Lessons In Corporate Frugality From The Developing World

May 28, 2012 by jugaad_innovation in blog page with 0 Comments

Fast Company
By Navi Radjou, Jaideep Prabhu, & Simone Ahuja

The Goat at the Village

As the Western formula of sustained growth–think top-down management, expensive R&D, and highly structured innovation–loses touch, American leaders can learn from companies in the developing world.

Rather than caving in to Wall Street’s demand for short-term gains, CEOs of Western companies must boldly restructure their organizations to boost their long-term ability to continually design and deliver affordable and sustainable solutions to frugal consumers. Here are three suggestions for undertaking such systemic changes:

1) Tie Senior Management’s Compensation to Frugal Performance. It’s not enough for CEOs to adopt a frugal mindset and strive to do more with less. They must also encourage their senior managers to follow suit. One way to do that is by linking senior executives’ compensation to performance metrics aimed at driving frugality.

Take the case of Ramón Mendiola Sánchez, CEO of Florida Ice & Farm Co., a large food and beverage producer and distributor in Costa Rica that is deeply committed to sustainability. In 2008, Mendiola set up a balanced scorecard with a set of key performance indicators (KPIs) to track how well his companywas reducing its consumption of natural resources such as waterwhile simultaneously delivering more value to customers and other stakeholders.He linked these KPIs to his senior executives’ compensation sothey have some skin in the game: 50 percent or more of their compensationis tied to their meeting–or exceeding–these KPIs. Mendiola is leading by example–he has linked 65 percent of his own pay to the balanced scorecard that combines financial, social, and environmental KPIs to compute a ‘‘triple bottom line’’ of people, planet, and profit.

This strategy has been successful: since its implementation, Florida Ice & Farm’s senior executives have found creative ways to do more with less by motivating their employees to improve manufacturingand distribution processes and help local communities better conserve natural resources. Under Mendiola’s leadership, Florida Ice & Farm has reduced the amount of water it requires to produce a liter of beverage from 12 liters to 4.9–and aims to soon further reduce it to 3.5 liters. It has also eliminated solid waste from all its operations and is well on its way to meeting its target of becoming ‘‘water neutral’’ in 2012 and ‘‘carbon neutral’’ by 2017.

Meanwhile, the companyachieved a compound annual growth rate of 25 percent between 2006 and 2010–twice the industry average. Mendiola notes: ‘‘By using incentives, we motivate our employees at every level to get creative and invent frugal and sustainable ways to deliver significantly more value to all our stakeholders by using far fewer natural resources–while saving substantial amounts of money for our company.’’

2) Senior Management Must Challenge R&D to Do More with Less. The recession is forcing many Western CEOs to cut their R&D spending with the hope of increasing their innovation performance at lower cost. But this will happen only when engineers and scientists are offered challenging projects that give them the incentive to do more with less.

For instance, in the late 1990s, Louis Schweitzer–former CEO of the French carmaker Renault–visited Russia, where he found that low-cost domestic cars like the Lada–that cost merely 6,000 Euros ($7,800)–were outselling his company’s 12,000 Euros ($15,600) cars. Following this visit, Schweitzer challenged his R&D team to come up with a modern, reliable, and affordable car for less than 6,000 Euros. As Schweitzer recalls: ‘‘Seeing those antiquated cars, I found it unacceptable that technical progress should stop you from making a good car for 6,000 Euros. I drew up a list of specifications in three words–modern, reliable and affordable–and added that everything else was negotiable.’’

The result was the Logan, a no-frills car priced at 5,000 Euros, which, since its 2004 launch, has become Renault’s cash cow across recession-wary European markets as well as in many developing economies. Interestingly, Schweitzer’s successor Carlos Ghosn–who coined the term ‘‘frugal engineering’’ in 2006–is now pushing Renault’s R&D team in France to do even more with less to compete effectively with low-cost carmakers from emerging market such as Tata Motors (which developed the $2,000 Nano).

3) Marketing Executives Should Create Separate Brands for Their Affordable Offerings. To avoid brand dilution, Western companies need to create distinct brands for distinct segments. Given that they might already have well-established brands for higher-priced segments, they should develop distinctive new brands for their affordable segments. Doing so will reduce the problems of brand dilution while ensuring greater market coverage. For instance, the Starwood Group opened two affordable but chic hotel chains–Aloft and Element–to cater to value-conscious consumers. Similarly, in an attempt to reach mainstream consumers, high-end designer Vera Wang has recently adopted a three-tiered branding approach: the top tier includes her pricey luxury bridal wear, the middle tier is made up of her eponymous line sold at accessible prices, and the bottom tier includes casual budget-priced brands–such as Simply Vera–that are selling like hotcakes through mass-market retailers like Kohl’s.

4) Create incentive systems for salespeople to sell affordable products. Western companies must recognize that jugaad innovation (“jugaad” is a Hindi word meaning an innovative fix, or an improvised solution born from ingenuity and cleverness) isn’t just about designing affordable products. It is also about successfullyselling these products in the marketplace. But successful selling won’thappen as long as salespeople have the incentive to sell only big-ticket items. Instead, companies will have to align their sales force’s incentive systems with the corporate strategy of doing more with less. Companies can address this issue by reorganizing their sales force along brand lines,with different salespeople responsible for the low-end and high-end segments. This will also help reduce any internal resistance based on the fear of cannibalization.

Even better, healthy internal competitionbetween divisions could drive sales and marketing personnel responsible for different brands to be more innovative in how their reach and keep their respective customers. Consider that for decades Procter & Gamble maintained a homogeneous sales structure, selling premium products to mainstream middle-class consumers. But as the purchasing power of middle-class Americans declines, P&G has restructured its salesforce into two distinct groups that separately target high-income and low-income segments.

To compete in the coming age of scarcity, Western CEOs must boldly revamp their companies’ R&D approaches, business models, and incentive systems for sales and marketing–all of which were designed for success in the age of abundance. In doing so, they can create and sustain a frugal culture in their organization that espouses ‘‘doing more with less’’ as its core value.

Reprinted by permission of the publisher, John Wiley & Sons, Inc., from Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth by Navi Radjou, Jaideep Prabhu and Simone Ahuja. Copyright (c) 2012 by John Wiley & Sons, Inc. All rights reserved.

[Image: Flickr user Stuck In Customs]

 

6 Tips on Innovation from ‘Treps in Emerging Markets

May 22, 2012 by jugaad_innovation in blog page with 0 Comments

Entrepreneur dot com

BY NAVI RADJOU, SIMONE AHUJA AND JAIDEEP PRABHU

“Jugaad” is a Hindi word that loosely translates as “the gutsy art of overcoming harsh constraints by improvising an effective solution using limited resources.” It’s a unique approach to innovation and it’s how entrepreneurs are driving exponential growth in emerging markets like India, China, Brazil and Africa.

Jugaad is an antidote to the complexity that characterize emerging markets, with all their mind-blogging diversity, pervasive scarcity of all kinds, and exploding interconnectivity. Consider that India alone adds 10 million cellphone subscribers each month.

This highly resource-constrained and chaotic environment in emerging markets motivates local entrepreneurs to practice the art of jugaad to create products and services that are extremely affordable and highly sustainable.

Take Harish Hande. This U.S.-educated Indian entrepreneur founded SELCO in 1995 and debunked the myth that poor people can’t afford clean energy. Hande has used a jugaad approach to deliver highly-customized solar lighting systems to more than 115,000 rural customers in rural India. SELCO relies on hundreds of grassroots partners to sell, install, and maintain modular solar systems to underserved Indians, including rosebud collectors, midwives and vegetable sellers, who buy affordable electricity by the hour to power their day-to-day economic activity.

The jugaad mindset that Hande embodies is also becoming relevant for entrepreneurs and small businesses in Western economies striving to grow in an increasingly complex and resource-constrained business environment. Unlike the traditional innovation approach with its time-consuming and expensive research-and-development processes, the fluid jugaad approach helps you innovate faster, better and cheaper.

Jugaad can be distilled into six guiding principles, which any entrepreneur can adopt to innovate and grow in a highly volatile and hypercompetitive environment:

1. Seek opportunity in adversity. As a modern-day alchemist, learn to transform adversity into an opportunity to innovate and bring value to your organization and your communities. Hande, for instance, faced extreme adversity in the early stages of SELCO as many Indian rural customers, who earn $1 to $2 a day, couldn’t afford the up-front costs of buying and installing solar lighting systems. Undeterred, Hande improvised a new pay-per-use business model that proved to be highly successful.

2. Do more with less. Optimize the use of scarce resources while delivering high value to more of customers. Avoid reinventing the wheel and reuse existing technologies and networks. Take MicroVentures in the Philippines, cofounded by Bam Aquino. MicroVentures is making a wide range of consumer products and services accessible to consumers at the base of the socioeconomic pyramid. Rather than setting up its own distribution network — a costly and nearly impossible task in highly-fragmented underdeveloped and underserved markets — MicroVentures leverages an existing ad-hoc logistics network made up of about 800,000 mom-and-pop stores called sari-saris spread across hundreds of villages.

3. Think and act flexibly. Constantly question conventional wisdom and keep all options open so you can respond quickly to unexpected changes. Chinese appliance maker Haier found out that many farmers across China routinely use its washing machines to clean their vegetables. Sensing a big market opportunity, Haier developed a washing machine with larger pipes that could also handle vegetables. The product was a hit among farmers.

4. Keep it simple. Rather than over-engineering your products, provide customers with “good enough” solutions that are easy to use. Recognizing that physicians in emerging markets had no use for bulky, hard-to-use ultrasound machines, GE’s engineers developed Vscan, a portable ultrasound machine that is as compact and simple to use as a cellphone. Vscan has been a big success in both emerging markets and developed countries.

5. Include the margin. The U.S. middle-class, due to its dwindling purchasing power, is feeling economically marginalized. Like Hande, start creating “value for money” products that are affordable and accessible to the growing numbers of U.S. low-income consumers. For example, PayNearMe helps the 24% U.S. households who have neither a debit nor a credit card to buy on Amazon, purchase bus tickets on Greyhound’s website, or pay by cash offline at a 7-Eleven outlet. It’s worth noting that about 60 million Americans are either unbanked or “underbanked.”

6. Follow your heart. Logical thinking can only take you so far. Rely on your gut intelligence and innate empathy for customer needs to innovate breakthroughs that disrupt entire industries. For instance, Kishore Biyani, founder of Big Bazaar, one of India’s largest and most successful retail chains, did not use management consultants to validate his idea of launching retail stores that look, feel, and even smell like chaotic street bazaars. He trusted his intuition more than any analysis to conjure up an innovative retail model that is hard for rivals to replicate.

By practicing these six principles of jugaad innovation you will be able to generate breakthrough growth in today’s complex environment.

JugaadAtWork

JUGAAD INNOVATION Western corporations can no longer just rely on the old formula that sustained innovation and growth for decades: a mix of top-down strategies, expensive R&D projects and rigid, highly structured innovation processes. Jugaad Innovation argues that the West must look to places like India, China, and Africa for a new, bottom-up approach to frugal and flexible innovation.

For speaking engagements, workshops or executive education, please directly contact the coauthors: 

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