Frugal Innovation – Affordable Excellence

Core quality for customers I Functional & Robust I
Creative cost-optimized I User Centered Design

European companies are increasingly facing competition from Asia. Many Asian companies offer affordable excellence products and thereby secure large market shares in their markets. With Frugal Innovation, European companies can innovate products and services that are functional, robust, cost-effective and customer-focused.

Many German companies are increasingly pushing themselves into the forefront of the technology pyramid, according to former VMDA President Reinhold Festge. There, the markets are small and thus the sales prospects are comparatively low. For example, German carmakers hold more than 85% of the premium segment in India, but this represents only 1% of the total market in India.

Other nations are pushing cheaper products of acceptable quality into the globalized markets and generating huge sales. According to Festge, German companies are well advised to secure larger market shares through a top-down strategy. Companies like Siemens or Claas have already rolled out successfully that strategy. They used their know-how to develop Frugal Innovations. Siemens develops so-called SMART products: Simple, Maintenance-friendly, Affordable, Robust, Timely to market. Claas offers a harvester in India from for 23,000 euros.

What makes Frugal Innovations so successful?

• Affordable Excellence: Frugal Innovations offer the customer great value at a low price. In addition, services are often offered in addition to the products or products are replaced by services.
• User Centered Design: In order to offer customers the highest possible benefit at the lowest possible price, products and services are developed in a customer-centered manner.

European companies are actually in a very good position:

• They are often technology leaders
• Have a mature product and technology portfolio
• Know the market very well and for a very long time

The difficulties are often hidden: corporate culture (better, higher, further) can often lead to ignore solutions that are simple and less expensive than to be curious about new sales potential.

How do you succeed?

Awareness

First of all, it is very helpful to recognize that the previous corporate culture was useful in the past and is mostly still valid. Facing emerging market competitors AND being aware of the potential these markets bring to the companies, it makes sense to develop affordable excellence products and services for these markets. In most cases there are not economical reasons that stand behind a negative development attitude but more deep rooted habits in a company.

Curiosity

Products for Affordable Excellence also present interesting challenges from product development to new services and marketing. If you manage to arouse your curiosity, you will quickly generate promising ideas throughout the value creation process.

Free space for frugal innovation

It is important that the start for Frugal Innovations succeeds. According to the wisdom: “Everything is in the beginning” you should take enough time and free yourself from daily business. An initial workshop is usually sufficient to identify fields of action and to develop the first successful concepts.

Right approach

The described challenges are usually quite similar. Special features are in the respective industry and the corporate culture. Depending on your company, Frugal Innovations can be innovated by design thinking but also step by step in a more traditional way.