Frugal innovation

Frugal innovation or frugal engineering is the process of reducing the complexity and cost of a good and its production. Usually this refers to removing nonessential features from a durable good, such as a car or telephone, in order to sell it in developing countries. Designing products for such countries may also call for an increase in durability and, when selling the products, reliance on unconventional distribution channels. When trying to sell to so-called "overlooked consumers", firms hope volume will offset razor-thin profit margins. Globalization and rising incomes in developing countries may also drive frugal innovation. Such services and products need not be of inferior quality but must be provided cheaply. While frugal innovation has been associated with good-enough performance, in some sectors such as in healthcare, frugal innovation must offer maximum performance without compromising on quality. Three defining criteria have been proposed to distinguish frugal innovation from other types of innovation: substantial cost reduction, concentration on core functionalities, and an optimised performance level. Rather than simply offering cheaper products, frugal innovations achieve significant cost savings by focusing on essential features while ensuring that the resulting performance level is carefully tailored to the specific needs of the target market.

In May 2012 The Financial Times newspaper called the concept "increasingly fashionable".

Several US universities have programs that develop frugal solutions. Such efforts include the Frugal Innovation Lab at Santa Clara University and a two quarter project course at Stanford University, the Entrepreneurial Design for Extreme Affordability program. Research has also addressed how frugal innovations can be developed systematically; the objective–conflict–resolution (OCR) approach, for instance, supports this process through the structured resolution of conflicting objectives in the product development process.