When Nokia recently presented its Asha 105 mobile phone, André Leliveld recognised a great example of ‘frugal innovation’. The € 15 mobile phone that billions of people all over the world can afford can mean a lot to Africa. Leliveld, a development economist at the African Studies Centre in the Netherlands, is setting up a scientific study on frugal innovation in Africa, together with researchers from Delft and Erasmus University and African science partners.
Frugal innovation is much more than a buzzword. In short, it is a new way of looking at a company’s business case that may lead to products that anyone can afford. With ‘low value, high output’ products, a business can reach the bottom of the economic pyramid, where billions of potential customers await.
Large corporations are already adopting frugal innovation. Unilever has introduced frugal products, like detergent in smaller packs for five washes only, in some European and in African countries. Nokia has recently launched its Asha 105 cell phone for the huge market of 2.7 billion world citizens that do not yet own such a device. The phone offers only the basic features of its smart predecessors, but it may sell well because it is cheap. The same goes for Tata’s small $ 3,000 car, that may have a great future in Africa.
People that live on € 2 a day
“To businesses, the big question is how frugal innovation can help reach the billions of people in the world that live on € 2 a day. At the African Studies Centre we would like to add a few words to that: ‘and how can Africans also benefit economically from frugal innovation’”, Leliveld explains. His new research project that he is currently setting up, revolves around this central question: how can the involvement of African entrepreneurs in frugal innovation contribute to economic growth and development in Africa?
Simplifying current products
In many cases, frugal innovation involves simplifying current products or developing low-cost versions by using cheaper resources. “This may raise questions as to how far you can go. As we learned in discussions with Unilever, cheap ingredients that clean well, may cause skin problems. Enterprises are very aware of their vulnerability to bad press and of their responsibilities. Frugal innovation needs to follow standards for sustainability, environmental and social impact. You can make cheap and affordable products for Africa, for example by involving cheap labour. But where does exploitation start?”
€ 9 water purifying device
Leliveld found more examples of how frugal innovation results in products that can make a change, like a simple and cheap (€ 9) but effective water purifying device that Tata has introduced. “Wouldn’t it be great if African manufacturers could be production partners for this type of products? The biggest bottleneck we see for African entrepreneurs is that they have no access to internationally operating innovation networks. It would be great if Africans could be part of polycentric R&D platforms – like Nokia has introduced – in which they can offer their knowledge of local African markets. We hope to find out how this idea can become reality.”
How can frugal innovation support Africa’s economic development?