Jaideep Prabhu. Professor of Marketing at Cambridge Judge Business School
It’s a global movement that democratises innovation, with implications for policymakers and companies of every size and shape
What is frugal innovation?
Frugal innovation is the creation of faster, better and cheaper solutions that employ minimal ubiquitous resources. For long, this approach was the preserve of NGOs, entrepreneurs and companies in the developing world, who overcame resource constraints to create highly affordable products and services for large numbers of low-income consumers in sectors as diverse as food, health, education, financial services and energy. In recent years, however, the West has caught up with its own version of the phenomenon. For one thing, Western consumers are now not only value conscious, they also care about the environment and social problems such as poverty and inequality. Moreover, thanks to resources like smartphones, cloud computing, 3D printers, crowdfunding, and social media, small teams of Western entrepreneurs are now able to do with limited resources what only large firms or the government could do in the past. As such, frugal innovation is now a global phenomenon with implications for firms and governments alike.
What is the link between frugal innovation and digital manufacturing?
A key driver of frugal innovation has been the democratisation of the means to innovate, from getting ideas, to prototyping, making and selling them. This has been the case with software solutions for some time now (WhatsApp, for instance, was developed by four people in a little over six months with minimal funding). But increasingly this is also true of physical products. Much of this is down to the democratisation of manufacturing tools and resources. Thanks to Fablabs and Maker Spaces, digital manufacturing tools such as 3D printers and laser cutters are now available to communities around the world. At such spaces, for a monthly fee, “makers” get access, not only to tools, but also to like-minded tinkerers and makers they can bounce ideas off and get help from. This means that it is now possible for small teams to engage in the entire innovation process – from developing and prototyping ideas, to manufacturing solutions and even distributing and selling them – without investing huge amounts
of capital in personnel, land or equipment. Such frugal innovation in manufacturing has the potential to revolutionise how industry is organised. Small local teams can now manufacture (at least) small devices and products for local consumption. The micro factories they work in may not be able to make the whole car, for example, but they can make the spare parts that go into cars, thus generating local employment and saving on transportation costs and time. Such local, frugal manufacturing can also revitalise inner cities by replacing an old 20th century industrial approach and infrastructure with a more environmentally friendly, higher-value-adding type of manufacturing that is also innovative.
What is the need and opportunity for digital manufacturing?
As customers get more demanding and once monolithic market segments start to fragment, products and services will increasingly need to be customised and personalised for (almost) individual-specific needs. Digital manufacturing enables such extreme personalisation without a commensurate increase in cost. With digital manufacturing tools in place, the same assembly line can now potentially turn out many different types of mobile phones or even automobiles. Consumers enter their preferences through a website they can access on their smart phones; these preferences are fed through a computer-aided assembly line; and the same infrastructure manufactures a product that has precisely the features that the consumer wants through a modular design. Such digital manufacturing processes help on the supply side by reducing time, energy, environmental waste and cost more generally, while on the demand side giving customers more or less exactly what they want at an affordable price.
A further need and opportunity for digital manufacturing comes from the changing nature of work and employment. The 20th Century model of large firms being the biggest employers, providing the vast majority of the population with a job for life, is rapidly eroding. Increasingly, we see the rise of a gig economy where people work part time on multiple jobs for multiple employers, some of which are digital start-ups that weren’t around 10 years ago and might not be around in another five. More and more, even white-collar workers change jobs and sectors every so often. Even if they were to work in the same sector, the nature of the skills they need to succeed and thrive are constantly changing. In this context, there has been a rise in self-employment around the world, with a concomitant rise in the interest in entrepreneurship. When more and more people are self-employed or seek such forms of employment, digital manufacturing and high-value-adding mini factories in cities could be a valuable and popular source of high value adding employment.
How can large and small companies tap into the frugal innovation/digital manufacturing revolution?
Thanks to digital manufacturing (and frugal innovation more generally), many small companies are now able to survive and prosper not only in software and small-scale hardware but also in traditional heavy industrial categories such as automotive. Take the case of Local Motors, the American manufacturing company which focuses on the low-volume manufacturing of open-source vehicles using a chain of microfactories. Founded in 2007 in Phoenix, Arizona, the company manufactures vehicles using 3D printing and vehicle designs developed by its online community.
Falling barriers to scale and the rise of such start-ups is likely to challenge large companies to follow suit. Indeed, General Electric has begun to develop its own chain of microfactories that use small-batch manufacturing to focus on product development and innovation. In collaboration with Local Motors, the behemoth intends to develop several such “small factories” to do rapid prototyping and small-batch manufacturing in partnership with its engineers as well as its customers, entrepreneurs and students.
What are the implications for policy makers and governments?
The linked phenomena of frugal innovation and digital manufacturing pose several challenges for governments even as they offer many new opportunities. First, governments can celebrate and help spread information and awareness about grassroots trends such as the maker movement. A case in point is Barack Obama hosting a Maker Faire in the White House in 2014 that showcased the achievements of makers across the USA, many of whom had produced interesting products and services such as affordable incubators using digital labs and maker spaces. Second, governments, especially at the city level, can do more to make land and facilities available for maker spaces. The city of Barcelona is a case in point. Over the last five years the mayor has facilitated the growth of a network of Fab Labs in the city that engaged local communities and focus on different sectors including automotive, construction and architecture, and household appliances. Finally, governments can create a regulatory framework and procurement regime that enables small groups of people to compete against large conglomerates that might otherwise use their greater resources and lobbying power to dominate what is now being called the 4th industrial revolution.