To reduce costly research and development (R&D) projects and to conduct risky innovationresearch at low costs, open innovation can be used for low-cost product development inemerging markets. Open innovation has been cultivated through online platforms for manywestern companies to find ideas from innovative people in emerging markets. It bringsinnovation from new locations at a very low cost. To illustrate the importance of open innovationto drive frugal innovations and reverse innovations, each concept is briefly discussed in thefollowing sections. It expounds how open innovation can be used more rigorously to stimulatefrugal innovation and reverse innovation. Implication of this study is drawn in the final section.
Movements of companies for frugal innovation
Companies confront various challenges to serve the increasing number of low-income consumerswho clamor for affordable solution that is sufficient enough to meet their needs. Frugalinnovation is an innovation with low-cost, simple usability, efficient and aims at large low-income customers (Soman et al., 2012). In Hindi, a word named
is also used to expressfrugal innovation (See,Radjou et al., 2012a).
The traditional business culture is based on highly affordable customers and it neglects the ideato serve more with less. This culture is losing its lustre. Orientation towards frugal innovationhas become an important agenda for many western companies. Frugal innovation is aninnovation which is mainly based on extreme resource constraints to meet the needs of low-income customers who otherwise remain un-served. Renault-Nissan led by Carlos Ghosn, for example, has taken very active steps for frugal innovation to innovate faster and cheaper aimingat unmet customers. In the same vein, large companies such as GE, Procter & Gamble, PepsiCo,and Siemens are also heavily involved with frugal innovation for their sustainable growth(Radjou et al., 2012b). These companies are changing their business strategies and restructuringtheir business models. For long-run success, companies need to develop affordable products withcost-constraints and achieve sustainable growth.German giant Siemens is heavily involving R&D teams of India and China for affordablesolutions to meet low-income customers. Its SMART (simple, maintenance-friendly, affordable,reliable, and timely-to-market) product portfolio aims to innovate devices at a cost of 40-60%
cheaper than the cost of usual available devices in the market. Siemens’ medical device named
Fetal Heart Monitor (FHM) is developed with cheap microphone technology instead of costlyultrasound technology. FHM provides affordable health care initially in developing countries andsubsequently in developed countries. Siemens SMART product portfolio claims to have over 160 products and product families for emerging markets (Siemens, 2011)
. Renault’s affordable
vehicles are sold for about $10,000. It has low-price pickup and van in the market, too. Thesevehicles are sold under the Dacia brand. However, Renaults has not exposed its idea of low-costvehicles to its customers. Rather, it has positioned these vehicles as more value at less cost withfeaturing as stylish, comfortable, dependable and affordable (Radjou et al., 2012b).Gérard