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Jugaad is very active in many emerging markets

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

Entrepreneur

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.

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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.

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