Jugaad Innovation: Jaideep Prabhu at TEDxUCL



morning everyone it's a great pleasure to be here my name is Jody Prabhu I am a professor of marketing at the judg Business School at the University of Cambridge and I'm here to talk about innovation in emerging markets like India for most of my career I studied innovation as it was done in the West by large corporations but in the last few years I've turned my gaze to emerging markets such as India and what I've learned from there has surprised me in contrast to Western counterparts innovators in countries like India seem to be unique on three dimensions first the innovation seemed to be extremely frugal they seemed very good at taking cost out of the entire innovation process and this may be because they are faced with extreme scarcity and constraint in their environment second their approach is extremely flexible they're very good at improvising solutions they rarely have one fixed plan that they stick to they may switch very quickly from one plan to another and perhaps this is in response to the highly unpredictable environment in which they operate and finally many of their innovations are focused on people or excluded from the formal economy and perhaps this is because very many people are excluded and they offer a huge opportunity for the innovators let me give you an example of what I'm talking about now here on the left is what we might associate with a typical innovation in a developed affluent society it is a high-end fridge that will talk to you and uh and you can talk back to for those you know for the price of about three thousand dollars it's a very expensive way to store your caviar in contrast you're more likely to see something like this in a country like India this is a thirty dollar fridge it does not need electricity it uses the cooling properties of water and clay to keep fruit and vegetable fresh for up to five days this is extremely frugal because it uses widely available resources such as clay the approach that the innovator used to come up with this both from the development and the demand factoring and sales extremely flexible and improvised and finally it's inclusive in that it targets literally hundreds of millions of people who would like to have a fridge but cannot afford one or even if they could afford one don't have electricity to run fridges on here's another example this is a mid-range incubator for babies it costs about twenty thousand dollars and may come from a company like GE I would argue that in a country like India you're more likely to see an innovation like this this is a $200 not-quite incubator but a baby warmer and it does eighty percent of the job that this incubator would do and very importantly that job is saving the lives of infants who may be born two weeks prematurely but unable to maintain that body temperature and this would help them to do it I would argue that something like this is more likely to solve the problem of infant mortality that afflicts the lives of many hundreds of millions of people around the world a third example this is a very high-end gas cooking range from a French company cost about $50,000 in an emerging markets context I would argue that something like this is more likely to be innovative this is our smokeless oven which uses biomass pellets to solve the problem that again literally hundreds of millions of people face which is they cook in open fire stoves with wood which is not only bad for their health but also very bad for the environment in the last four years or so I've talked to literally scores of innovators in India up and down the country large and small and when I asked them how they would describe this frugal flexible inclusive approach to innovation more often than not they use the Hindi word du gard to describe this and this is the word that we use in the title of our book we defined you God as the art of overcoming harsh constraints by improvising an effective good enough solution using limited resources the very interesting thing that we discovered as you're researching this book is that it isn't particularly unique to India we find this in other emerging markets such as Brazil and in Africa and China we also find counterparts in developed economies such as the US and frogs now why does a country like India need this approach well the facts are somewhat brutal upwards of 40% of Indians live outside the formal economy they don't have access to banking they're off the electricity grid and they don't have much access to good health care or education another way to think of this is that most formal solutions from the marketplace are targeted at the upper crust of people who are in the in the cities and belong to the formal economy and while they form quite a large number of people there are much larger numbers of people who are outside that formal economy in urban slums in smaller towns and in the vast countryside and those people have not typically been seen as a market but they offer now a huge opportunity for companies now India in a sense is a microcosm for the world and the world resources institute estimates that the people who are less than nine US dollars a day purchasing power parity are four billion which is more than half the world's population these are people outside the formal economy around the world and together they offer a huge market on opportunity that has been hitherto untapped together they form something like a five trillion dollar market which to give you a sense of how large that is it's about the size of the entire Chinese economy or three times the size of the Indian economy so a huge untapped market opportunity now what about the West would the affluent West benefit potentially from something like this approach well you mentioned earlier this that the figure of R&D spending which we've seen in the US and Western Europe continued to escalate over time but in fact the returns for this are increasingly diminishing not just that but we also see that household incomes have been following and and that households and increasingly government's are cash constrain in a situation like that it's possible that frugal flexible inclusive innovation coming out of emerging markets is particularly attractive let me turn to talking about some of the people behind these ideas here is the person behind that clay fridge I mentioned his name is Munson by Prajapati he's from a village in Gujarat he has a high school education and he came up with this idea actually in response to a major catastrophe in Gujarat which was earthquakes and his ambition is not only to sell this to people in India but elsewhere here's another kind of social entrepreneur in India who does this kind of innovation this is dr. Mohan he's a diabetes specialist operating out of Chennai a big city in South India he has many patients unfortunately in the city but he also recognizes there are many people who suffer from diabetes in the countryside and they do not have access to good quality healthcare these people in in the village would have to go to the city to receive health care equally his doctors from the city cannot go to the village they have many things to do in the city so he came up with this frugal flexible solution which is a mobile diabetes clinic which was donated to him by the world diabetes foundation inside this mobile van is sophisticated equipment which patients from the village will look into the image of the iris is beamed through the satellite to the doctor sitting in the city who can make an instant diagnosis which is then communicated to this person who is a health volunteer from the village and that person then takes care of the patient of following the visit of the van it's very interesting that doctor moon doesn't pay people like that he selects them and trains them but for them this is a way to improve their employability so it's a very frugal flexible and inclusive solution here is another social entrepreneur from the city of Bangalore Harish hande he studied engineering and his objective was to prove that poor people could use and maintain affordable energy solutions such as solar lighting solutions but he quickly realized that it was very expensive particularly for people in the countryside to afford the upfront costs a fruit cart vendor told him that 300 rupees a month was too much but 10 rupees a day wasn't and he realized that the poor weather urban or rural aren't and spent on a daily basis they typically bought kerosene for 15 rupees a day and he would have to offer a solution at the same price in the same way so he came up with the following business model he selects and trains people like that from the local community then he works with a bank to get people like that a bank loan because they are not backed with the bank loan this person then sets up shop gets the solar panels and batteries charges the batteries during the day and rents them out at ten rupees a pop an evening to end consumers and this is how he is reached now over 200,000 households with his solar lighting solutions now there are ingenious solutions like this that social entrepreneurs are coming up with they're often very suited to the local environment and are really meet the needs of their customers the one problem though is that they find it very hard to scale up and reach large numbers this is where large companies can come in and there are examples of large companies now entering the space domestic companies such as status this the world's cheapest car the Nano is probably an example of such a frugal innovation intended to bring onboard people who currently cannot afford a car but would like them coming out of a country like India the Tatas have stuck with this in other types of businesses that they operate in the next Nano type frugal innovation they came up with was this water filter the swatch water filter which retails for a price of one thousand rupees which is about half the price of the next cheapest unit that comes out from say a company like Unilever the Indian government isn't typically known for innovation but recently they've been backing innovation particularly in areas such as as education and this is the Minister of Education who's back this very cheap tablet $35 which they intend to roll out in schools across the country government schools where children would like to learn but often the teachers don't show up in the big problems of teacher absenteeism and they're hoping that this combined with high-speed broadband will enable kids in remote areas to learn through distance learning multinationals that have been operating in countries like India for a while of companies that set up very large R&D centers in the mid 90s onwards to tap into the large numbers of scientists and engineers there have recently turned their attention to doing this kind of innovation in she's like India ji has the largest R&D center outside the u.s. in Bangalore and in the rnd Center recently they came up with this frugal flexible innovation an ECG machine mat 400 designed to reach 70% of the population that lives outside the cities and do not have access to the current generation of very expensive large sophisticated machine machines that sit in city hospitals how do they come up with this device they copied some of their domestic Indian and Chinese competitors who would do this kind of jihad innovation they realized that they would need a bust a printer for this ECG machine so they looked around and found off-the-shelf bus ticket printers that they could use then they needed keypads and they finally could use telephone technology for that purpose so they cut and pasted existing off-the-shelf solutions applied a quality standard and produce something that was a tenth of the cost a fifth of the way it battery operated and could be taken by doctors out into the countryside this is done well in India it's done well in China it now has FDA approval and is selling well in Western Europe and North America another example of this kind of frugal innovation was introduced by Nokia Nokia's biggest markets for a long time have been in Asia Latin America and Africa where they have developed products like this for people who live in urban slums so they notice for instance that people who lived in urban slums in India would pay quite a bit for the mobile phones relative to what they earned but then would be very protected they would immediately wrap them in plastic to protect them they also noticed that these people would use the light in the phone to see their way in the dark at night so the engineer said nokia said why don't we develop an affordable robust phone that integrates these features into the phone so this thought this phone has a dust proof keypad in front face and a built in torch and these two features and the fact that's rugged and affordable has made it one of the best selling consumer electronics goods of all time now increasingly mobile phones are pervasive and companies are developing services on the mobile phone platform to reach people at the bottom of the pyramid and here's one that I'm particularly fond of it's called m-pesa it stands for mobile money was introduced by Vodafone subsidiary in Kenya and this is what you can do if you have this service you can go to a corner shop in your village hand over cash and get the equivalent texted back to you that you can then accept with a four digit PIN to sit on your phone as electronic money you can then go to another shop text ad guys solve it and get cash back so you can do cash in cash out but if you can do that you can also do person-to-person transfer if you leave your family in the village and go to work in Nairobi and there's a family crisis you can instantaneously at the speed of light and the cost of a text message send money home to your family which is much better than sending it through wire transfer and paying 15% of the the amount there are other things that you can do with it that's one of the killer applications another one is this you don't have to have a bank account but you can go to an ATM text some of the electronic cash to the to the ATM and get money back so this helps people who are unbanked and the very large numbers of people and it's done very frugally you can also do international transfers and in the time-sensitive introduced this is absolutely taken off in Kenya The Economist estimates that recently there is something like 15 million people who use the service and it's more than the number of people who have a bank account in a country like Kenya now let me end with thoughts about jugaad in the West is it possible that this is happening in Western countries here's an example of a group of people out of Northwestern University very much like people in the audience here when they graduated they said we don't need to go to Africa or Asia to solve major problems we have plenty in our own American backyard for instance they decided to look at this problem of hospital-acquired infections which affects something like 2 million people every year and 100,000 deaths in the US alone a huge cost to the economy so what did they do they went to a local Chicago hospital they observe doctors and nurses and they talked to them and they realized something very quickly doctors and nurses have every intention of being hygienic but often they cannot they do not have the time to go to a wall unit to actually wash their hands so they ask themselves what would a kid do a kid would probably wipe his hands on his trousers so why don't we actually design a dispenser that actually clips onto the scrubs of doctors and nurses they went back to that studio with basic equipment computing software and a 3d printer they came up with this device which is called swipe sense it clips onto the scrubs of doctors and nurses it also has a sensor which sends information a signal to a wall unit every time it's used and in the evening the doctor or nurse can observe their data on a screen and see how they performed and also how they perform relative to others this was done extremely frugally all aspects of innovation from doing the market research to development to marketing they don't have big advertising budgets they market it by doing TED Talks here's an example from Cambridge a student of mine Evan Upton who developed this very low-cost computer only 22 pound sterling meant for British schoolchildren but you can imagine the impact this might have in emerging markets very much like that tablet PC I mentioned earlier so there are examples of this happening here in our backyard this is another Cambridge company that's developed the solar lighting solution a bit like Harish hande solution I mentioned earlier for households in Africa they're in Kenya South Sudan and Sierra Leone so in very interesting places using technology and ideas out of the West in in other parts of the world and in an example of ideas coming from developing countries into developed countries Barclays has now introduced the equivalent of m-pesa in London called ping it so what does all this mean for you I'd argue that in conclusion that this kind of frugal flexible inclusive innovation is absolutely crucial not only for large numbers of people in the emerging world but equally in the West in the aftermath of the financial crisis I believe that entrepreneurs and companies in the UK and the West can gain a great deal by engaging with their counterparts in emerging parts of the world and people like you young people like you can come up with products and services like the swipe sets like that baby warm-up which was developed by students from Stanford and now being tested and marketed in South India I believe you can come up with these ideas not only here but also in other parts the world and by doing that together we can improve lives everywhere thank you

6 Comments

  1. Jaideep Prabhu said:

    Thanks for your kind words, Vivek.

    I don't think the Nano failed. It just didn't sell as well as Tata hoped. I have few doubts the car will sell well in the future. As such, I don't think there was a negative impact on the Tata or Indica brand.

    Nokia's focus on low-income consumers couldhave distracted it from the smartphone market. But I don't know if it actually did. I wonder if we can ask someone from Nokia!

    Targetting both high and low income consumers synergistically is tough!

    Jaideep

    May 22, 2019
    Reply
  2. Jaideep Prabhu said:

    Hi Vivek,

    Great questions! My responses:

    a) frugal means being economical with the resources needed to get, develop and market an idea. These savings can be passed on to customers as a low price.

    b) By approach and plan I mean the mindset that drives the process of getting the idea, developing and marketing it

    c) Low-price alone doesn't lead to inclusion. Jugaad means thinking about all the ways in which those outside the formal economy can adopt and use the product

    Best,
    Jaideep

    May 22, 2019
    Reply
  3. Vivek Astvansh said:

    Jaideep: a few questions on how we define jugaad.

    We define jugaad as an innovation that has three characteristics (or dimensions):

    a) frugal: you mention cost; so is frugal = low-priced?

    b) flexible: you say flexible in approach and plan; what exactly do we mean by approach and plan?

    c) inclusive: ironically for me, you define inclusion in terms of exclusion from formal economy. Did you mean inclusion of wider consumer base? If yes, doesn't low-price automatically lead to inclusion?

    May 22, 2019
    Reply
  4. Vivek Astvansh said:

    A well-balanced, informative, motivating presentation, Jaideep. Thank you. Some questions:

    Did Nano's alleged failures negatively impact Tata's brand value, particularly in Indica? Did Nokia's focus on lower-income consumers drew its limited resources away from the smartphone market?

    In summary, I am asking how firms can synergistically target both high-income and BOP consumers (in the same product category).

    May 22, 2019
    Reply
  5. Jaideep Prabhu said:

    Dear Pradeep, Thank you for your kind words about my talk. Your question is a good one. India tends to do relatively badly on traditional measures of innovation such as R&D spending and patents. However, my belief is that the ingenuity of Indians is not captured by these measures but is everywhere evident in India in the jugaad innovations that we outline in our book.

    May 22, 2019
    Reply
  6. Pradeep Kamasani said:

    Hello Jaideep, Great presentation.But do you know where is India ranking in terms of Innovation ? I really hate to see the number out there.

    May 22, 2019
    Reply

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