Frugal products and services aim at satisfying the unsaturated demand of a large and growing middle class in many “emerging economies”. Although research has been conducted in regard to the strategic importance of frugal innovations, so far, the actual development process of such innovations has not been looked into in detail. Some examples show that inventive analogies are used to develop frugal innovations. For instance, the development of a frugal artificial heart was based on the heart structure of cockroaches, which led to a reduction of costs by 20 times. The aim of this paper is to examine the use of inventive analogies in creating frugal solutions and their impact on project results. Based on three explorative case studies from India, the authors generate preliminary evidence that analogies can make a significant impact on the successful development of innovations in environments that are characterized by severe resource constraints and high price-sensitivity. Furthermore, the inherent aim of frugal innovations to create radically new solutions with very restricted resources seems to stimulate the application of inventive analogies. The results point to some valuable learnings in regard to an effective employment of analogies. Besides, useful insights for companies that want to exploit market opportunities in the emerging economies are generated.

This study builds on our previous work, which had questioned the validity of certain assumptions of the lead market theory in the face of changing ground realities in a globalized world. Sustained economic growth and proven technological capabilities in some "emerging economies" like China and India call for a reassessment of the appropriateness of the "conventional wisdom" that had held true until recently. While our previous study had "re-built" a theoretical background of the lead market model by introducing new elements, and doing away with certain others, with the help of two in-depth case studies; the purpose of the present study is to specifically assess India's potential as a lead market for cost-effective frugal innovations. The study crystallizes the inherent characteristics of frugal innovations, their development process and market success in the domestic and overseas markets by analyzing four successful product innovations from selected industries in India. The factors identified thus are then incorporated in the theoretic model to derive propositions about India's lead market potential. Whereas affordability and economies of scale have traditionally constituted the primary concern for frugal innovations, an increasing shift towards "value proposition" is identified. Intensifying competition and growing customer aspirations are changing the nature of frugal innovations. The hitherto unserved customer demands attractive designs and modern technologies to come out of his shell of "non-consumption". Our research confirms that frugal innovations can benefit end-consumers and firms, simultaneously. Better-designed products also have positive impact on the lead market potential, creating a virtuous cycle. The study also discovered that the increasing need for sophistication coupled with continued cost pressures is shifting the product development processes into the domain of "open global innovation", which also helps reduce the negative country-of-origin effects faced by developing countries. The research would have implications for location decisions in setting up global innovation/R&D activities.

Neben der anscheinend hohen, praktischen Relevanz wird zur Zeit die Frage diskutiert, ob frugale Innovation ein eigenständiges, betriebswirtschaftliches Innovations-Konzept rechtfertigt, welches sich markant von anderen, bekannten Ansätzen bzw. einer generellen „Low cost“-Strategie eines Unternehmens unterscheiden lässt. Frugale Innovationen sind per se nicht „neu“, denkt man bspw. an der bereits seit Jahrzehnten anhaltenden Erfolg der schwedischen Möbelhauskette IKEA. Frugale Innovationsarbeit greift auch auf zahlreiche, bekannte Instrumente (z.B. Wertanalyse, Zielkostenanalyse, etc.) zurück. Neu ist allerdings die Vehemenz, mit der heute über frugale Innovation im Zusammenhang mit sehr unterschiedlichen Produkt- und Dienstleistungsinnovationen sowohl im Kontext der entwickelten Welt wie auch Entwicklungsländern im Sinne einer generellen Innovationsstrategie gesprochen wird. Dies lässt sich auf Veränderungen zurückführen, die einerseits mit dem Wachstum in Ländern wie Indien oder China und andererseits mit demographischen sowie einkommensbezogenen Entwicklungen in den USA oder Europa zusammenhängen und in beiden "Welten" Nachfrage an Produkten und Dienstleistungen auslösen, die „good enough“ und „affordable“ sind. Diese Veränderungen stellen Unternehmen zumindest in der entwickelten Welt vor große Herausforderungen, insbesondere wenn diese sich in ihrer bisherigen Strategie ausschließlich auf Premium-Segmente fokussiert haben und keine (technischen) Lösungen für mittlere oder untere („Bottom-of-the pyramid“) Marktsegmente anbieten können. Hinzukommen Werteveränderungen in der Gesellschaft, die dazu führen, dass Kunden Produkte mit weniger bzw. pointierter Funktionalität suchen, die lange halten, zeitlos im Design sind und im Sinne von „Circular Economy“ keine Probleme für Mensch und Umwelt auslösen.

India has emerged as a vibrant and versatile source for cost effective, "disruptive innovations" of various varieties. Price-sensitive consumers in a large and growing market keep inducing firms to apply "frugal engineering" for creating affordable products and services without compromising excessively on quality. Because, as The Economist asserts: "Frugal does not mean second-rate". Such innovations are characterized by high affordability, robustness, and "good enough" quality in a volume-driven market. Resource constraints motivate firms and entrepreneurs to think out-of-the-box. The trick lies in creating solutions that are able to circumvent given environmental constraints in a cost effective way. India's large and enormously young population faced with limited budgets, but well-endowed with high aspirations, provides an ideal experiment ground for many firms. Solutions created for the Indian market are often suitable for other developing countries in Asia, Africa and Latin America that frequently face similar socio-economic conditions. In some instances they succeed even in developed country markets by enabling significant cost reductions. This emergence as a hub for "frugal innovations" possibly suggests a "lead market" role for India. On the other hand, lead markets, as understood today, are characterized by high per capita income, great customer sophistication and high quality infrastructure. Such assumptions imply that lead markets, almost by default, can only exist in economically developed countries because only they can finance the development effort. Using two anchor-cases of product innovations aimed at price-sensitive segments in India we generate preliminary evidence to challenge some of the core assumptions of the "lead market" theory and propose that lead markets can emerge in developing countries too because market attractiveness (e.g. volume of demand, export possibilities) and technological capabilities are able to offset many other deficiencies. The supposed absence of customer sophistication is channelized into a challenge for supplier-side sophistication to design cost effective, "good enough" solutions ("low-cost, thin-margin") that can meet the aspirations of consumers in a highly competitive market. In order to master this challenge companies need access to a competent and sufficiently large technical base with first-hand knowledge of the ground situation of targeted customer groups ("social capital").

Use of innovative analogies is seen as a promising instrument for systematizing innovation processes in firms, for it allows transferring of existing knowledge and technologies from one knowledge/industrial domain to the other and thus helps in creating new and cost-effective solutions. Their use in developing affordable and efficiency-oriented "frugal innovations" has so far not been researched in the academic works. This conceptual paper based on three explorative case studies from India examines use of innovative analogies in creating frugal solutions and comes to the conclusion that analogies, by the virtue of reducing market and technology risks, have the potential of causing a significantly positive impact on innovations in a resource-constrained environment and targeted at price-sensitive customers. Beyond that, there seems to be a noteworthy scope for learnings in regards to effectively employing analogies that can be transferred from the frugal to the non-frugal context.

Securing access to "lead markets" is generally regarded as a key driver for the increasing globalization of innovation since these are considered to be "early indicators" for emerging customer needs. Such markets, therefore, offer a good chance of uncertainty reduction for in the innovation process of firms. Lead markets are generally defined in terms of product segments within national boundaries and are thought to exist in economies with high per capita income, highly sophisticated markets and high international visibility. We argue that there is increasing evidence of lead market tendencies in certain emerging economies, e.g. India. Both domestic and foreign-owned firms there, in recent years, have produced several internationally acclaimed “frugal innovations”, such as the Tata Nano or GE's handheld ECG machine Mac400. Using several examples we demonstrate that India seems to have emerged as a global hub for low-cost, frugal innovations. In this paper, we seek to crystallize the role of lead markets in globalization of R&D and identify the need for an update/extension to better reflect the changed ground realities. On the basis of emerging evidence we propose that sustained economic growth, voluminous markets, strong domestic technological capabilities, presence of foreign-owned R&D, and favorable government policies may be able to offset some of the disadvantages rooted in traditional deficiencies. Engaging a developing country lead market may be useful for firms in securing better access to markets at the bottom of the economic pyramid worldwide.

Recent years have seen the emergence of low-cost innovations targeted at economically weaker sections of the society, seeking to align business with social welfare. In many instances, results on the ground have been, however, rather sobering as firms have generally (probably justifiably) worried that “good quality, low price” products may cannibalize into their regular business. At the same time those very customers that were intended to benefit from the new approach have tended to shy away fearing low quality and social stigma of using cheap products. Using multiple case studies of successful affordability-driven innovations (“frugal innovations”) from India we investigate how firms can effectively reduce market and technology uncertainty of product innovations targeted at price-sensitive customers. The key criteria to success seem to lie in reducing the overall cost of ownership and enhancing customer perception of quality and image. The case studies reveal that affordability-driven innovations are especially successful when firms seek recourse to “open global innovation networks” (OGINs) for collaborative development in all phases of the innovation value chain

High-tech, German companies are facing a curious problem: their products are reportedly "too good" for the expanding global markets. So in a way they get "penalised" for offering a superlative quality. At a second glance, though, this doesn’t seem surprising. For, succeeding in the emerging markets like India or China often requires developing market-specific products and services that enable an attractive value proposition without taking recourse to (excessive) over-engineering. Furthermore, the innovations should be able to cope with, and successfully circumvent, the given infrastructural restrictions ever so present in the rural and semi-urban areas in such economies.