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Frugal Innovation Trend Meets Global South’s Innovation Culture

There is a trend occurring across the global South that some are calling the next great wave of innovation. It has different names but many are dubbing it ‘frugal innovation’. Frugal innovation is basically innovation done with limited resources and investment. In short, innovation on the cheap but packing a big punch.

The phenomenon has several strands. One involves innovators and companies from the developed world setting up in the developing world and beta testing their inventions and innovations there. Another strand involves innovators in companies and governments in the global South increasingly targeting the so-called ‘BOP’ – bottom of the pyramid – market of the poor.

Another strand is focused on capitalizing on innovations for tackling the problems of the poor that are coming from the poor. Many of these innovations are improvised solutions. They may not be slick but they solve a problem.

And finally, there are companies and entrepreneurs in the global South taking their innovations to the markets of the wealthy, developed countries and finding a welcome reception from price-savvy consumers.

In the global South, frugal innovation is transforming lives – and it is finding its way into developed, wealthy countries too. It has been celebrated in the new book Jugaad Innovation: A Frugal and Flexible Approach to Innovation for the 21st Century (http://jugaadinnovation.com/) by Navi Radjou, Jaideep Prabhu and Simone Ahuja. The authors are innovation experts with a wide mix of backgrounds, from an academic to a Silicon Valley “thought leader and strategic consultant” to the founder of a marketing and strategy consultancy specialising in emerging markets innovation.

The authors propose “jugaad innovation” as a solution to the urgent need to innovate quickly and efficiently in a fast-changing world where little can be taken for granted. This breed of frugal innovation comes from India. Jugaad is a Hindi word (http://en.wikipedia.org/wiki/Jugaad) and basically means a work-around, improvised solution to a problem because it is cheaper. This is commonly used to describe makeshift vehicles people construct in India (http://wheels.blogs.nytimes.com/2011/03/25/jugaad-cheaper-than-a-nanobut-watch-for-splinters/).

As champions of the jugaad philosophy, the authors proclaim the old innovation paradigm is obsolete. The idea that throwing more capital and more resources at a problem will boost innovation, no longer works, they contend. Better results can come from being frugal and flexible. Being more creative allows for a fluid and improvised innovation culture to develop.

“In today’s interconnected world powered by social media, top-down R&D (research and development) systems struggle to open up and integrate the bottom-up input from employees and customers,” the authors say on their website.

“Jugaad on the other hand is flexible, frugal and democratic: it is often bottomup rather than top-down and involves a much larger number of people beyond those who are typically tasked with doing innovation in corporations. The strength of jugaad innovators lies in their ability to get more from less,experiment continually, and creatively engage people who are typically left out of the innovation process.”

And they have a message for the Western, developed nations. They must look to “places like India, China, and Africa for a new, bottom-up approach to frugal and flexible innovation,” if they want to experience continuing prosperity in the 21st century.

For global South inventors, entrepreneurs and manufacturers, this will prove a great opportunity. As debt-laden Western consumers deal with their lower spending power and incomes, they will be looking for products that cost less and yet tackle problems and improve their standard of living with minimal expenditure.

The Indian company Mahindra and Mahindra (http://www.mahindra.com/What-We-Do/automotive) sells its small tractors to American hobby farmers. The Chinese company Haier (http://www.haier.net/en/about_haier/haier_global/china/) has a range of frugal products that have become popular sellers. They include air conditioners, washing machines and wine coolers. Haier is so successful with these products it has been able to capture 60 per cent of the market in these categories in the United States.

Some of the hallmarks of frugal products are their efficient production, rapid development cycle, lower price point, and appeal to poorer customers.

The book argues that adopting a “jugaad” mindset will enable people and companies to innovate “faster, better and cheaper,” “generate breakthrough growth” and “outperform competition.”

“Jugaad innovation has three major benefits. First, it is frugal: it enables innovators to get more with less. Second, it is flexible: it enables innovators to keep experimenting and rapidly change course when needed. Third: it is democratic: it can therefore tap into the wisdom of otherwise marginalized customers and employees.”

“In contrast to the traditional structured approach to innovation, jugaad is inherently more customer-centric rather than technology or product centric.

Because jugaad innovators seek to solve a customer problem first and then develop a suitable solution, jugaad is more market-based than more structured approaches (that may be driven by the motivation to develop technology for technology’s sake) are.”

There are so many of these innovations and inventions happening, a culture has emerged to gather and document them and share them with others.

A good advocate of jugaad innovators in India is the Honey Bee Network (http://www.sristi.org/hbnew/). It has been building a database of grassroots innovation and knowledge (http://www.sristi.org/hbnew/augment_innovation.php).

But this dynamic innovators culture is not limited to India. Across Africa,information technology hubs and start-ups have been sprouting up. One of the more well-known is the iHub in Nairobi, Kenya (http://ihub.co.ke/pages/home.php) but there are centres of information technology innovation in Ghana, South Africa, Uganda and Nigeria.

One of the more outstanding and pioneering chroniclers of this frugal innovation culture in Africa has been the Afrigadget website (afrigadget.com).

It is packed with home-grown inventions. These include a young Kenyan boy using a rigged network of light bulbs to ward of lions from the cattle herd, a mobile phone security system for cars, and a home-made remote control toy car for children. Another great way to see this movement in action is at the Maker Faire Africa (http://makerfaireafrica.com/) which has been bringing together every year “handcrafters from Africa’s tiniest villages to her most expansive urban burgs”.

By David South, Development Challenges, South-South Solutions

Published: May 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Turning Street Children into Entrepreneurs

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY 

The UN estimates that 500 million people around the world are homeless, and UNICEF estimates India alone has 11 million homeless children on its streets (though it is difficult to pin down the figure). In order to survive another day, these children will work in one way or another. While there are many campaigns to ban children from working, and charities dedicated to getting them off the streets and into shelter, the raw fact remains: many of these children slip through the cracks and remain vulnerable, poor and neglected.

Most street children suffer from malnutrition, hunger, health problems, and abuse. They make ends meet by working various jobs or by stealing. While they have dreams, there is no mechanism for them to save for the future. It is a live-for-now existence that, if they survive to adulthood, means they will probably remain homeless and vulnerable.

Street and working children have money: it is a natural consequence of having to be resourceful to survive. But what they don’t have is access to banking services or trustworthy financial advice that can help them to gain wealth and move out of poverty and into a brighter future.

The Children’s Development Bank in India is one initiative that seeks to turn these neglected children into the next generation of entrepreneurs. The bank works on banking and co-operative principles, where savers are members and joint owners of the bank. Any child can save money with the bank and earn interest, as well as take out loans if they are over 15 years old. It was started in 2001 and was inspired by the Youth Bank in the UK. Interest made by the bank is shared by its members, as with many co-operative banks and credit unions.

The bank is managed jointly by children and adults. The children have a say in how the bank is run and on what conditions it should lend money. They also keep an eye on borrowers to prevent them from running off without repaying loans.

For these vulnerable children, it has many advantages: they can put money aside without fear of it being stolen or lost, save for important things like clothes, or pay for their education.

A key part of the bank’s mandate is helping the children build entrepreneurial skills for business. Mentors help the children choose a business model, select an occupation with minimal risk and more benefits, get training and solve business problems.

The bank has branches in India, Afghanistan, and Sri Lanka.

Ten-year-old Deepak Prahlad, a street child in Delhi, dreams of being a doctor.

“I know what it takes to be a doctor. I need to study hard and need to save a lot of money,” he told the Hindustan Times. For now, he works as a rag picker but has started saving 30 to 40 rupees a day in the Children’s Development Bank. The bank has 1,300 members in the city. It pays 3.5 per cent interest on savings accounts.

“Some of them want to fly very high,” said Rita Panicker, who helped set up the bank in 2001. “We have been working with street children for the past two decades. Some of these children are very talented and have entrepreneur qualities. One of the biggest problems facing these children was that they did not have a safe place to keep their hard-earned money. In fact, it was the children who came up with the idea of the children’s bank. It started with 20 members in 2001 – and now it has 1,300 members in Delhi.”

Sudesh, a 15-year-old manager who looks after the bank’s current accounts, said: “We are extremely careful about whom to offer loans since we do not want to see our members’ savings lost because of bad loans. The skills I have learnt here are going to stand me in good stead in life.” Managers are chosen every six months by the children and they compete for the job.

Resources:

  • Making Cents International: “It inspires youth, practitioners, policy makers and funders to more effectively share and develop parnerships, programmes and policies that support youth entrepreneurs.”
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Southern Innovator Issue 2 focused on youth and entrepreneurship. https://g.co/kgs/6kZAg4

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ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2021

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Cuban Entrepreneurs Embracing Changes to Economy

By David South, Development Challenges, South-South Solutions

New UNOSSC banner Dev Cha 2013

SOUTH-SOUTH CASE STUDY 

The Caribbean island of Cuba has gone its own way economically and socially since its revolution in 1959. The country has seen significant gains in its human development in the decades since, and can boast impressive education levels and good public health care.

Cuba enjoys a good ranking on the Human Development Index (HDI) – 59 out of 187 countries – and it has been rising since 1980. For Latin America and the Caribbean, Cuba is above the regional average (http://hdrstats.undp.org/en/countries/profiles/CUB.html).

But the country has also had a turbulent economy with periods of severe economic contraction. This has increased poverty levels and hunger, in particular during the Special Period beginning in 1990 (http://www.historyofcuba.com/history/havana/lperez2.htm) when the significant subsidies enjoyed by the country from the Soviet Union were pulled and the country saw a steep drop in its ability to import fuel and other goods. Cuba is still trying to repair the economic damage.

In the book Cuba: Between Reform and Revolution, Louis A. Perez, Jr. explains: “The old socialist bloc Council of Mutual Economic Assistance (CMEA) had accounted for almost 85 percent of Cuban trade, transactions conducted almost entirely in nonconvertible currency. Commercial relations with the former Soviet Union declined by more than 90 percent, from $8.7 billion in 1989 to $4.5 billion in 1991 and $750 million in 1993. Trade with eastern European countries ended almost completely.

“Soviet oil imports decreased by almost 90 percent, from 13 million tons in 1989 to 1.8 million tons in 1992. Shipments of capital grade consumer goods, grains, and foodstuff declined and imports of raw materials and spare parts essential for Cuban industry ceased altogether.”

Conducting private business in Cuba was discouraged after the revolution as the state became the dominant arbiter of all economic transactions. Since the fall of the Soviet Union, Cuba has experimented at various times with moving to a mixed economy, only to pull back and return to the old ways. But now things are changing significantly after economic reforms that have accelerated since Cuban President Raul Castro took over from his brother Fidel in 2008.The reforms began in 2008 with the liberalizing of access to mobile phones, and accelerated between 2010 and 2013, when the number of people working in small businesses tripled.

Cuentapropistas – the Cuban term for entrepreneurs, named after “cuenta propria,” the ability to do business for oneself – have flocked to be officially registered as small businesses, with the number shooting up from 143,000 in 2010, to 429,000 by June 2013 (Report on Business).

Gustavo Kouri told the Report on Business magazine, “Although I enjoyed the work I was doing before – at an information centre in specialized health sciences – it wasn’t possible to earn enough to support my family.

“And then the state opened more opportunities to develop private businesses, for cuenta propia.”

He now owns the Rio Mar restaurant (https://www.facebook.com/restauranteriomar).

Artists and athletes have also been attracted to the opportunities that have opened up.

One is former volleyball Olympic gold medalist Mireya Luis (http://en.wikipedia.org/wiki/Mireya_Luis), who now owns Las Tres Medallas (http://www.alamesacuba.com/en/la-habana/restaurant/las-tres-medallas/), a pizza-and-pasta restaurant.

For Luis, becoming an entrepreneur means the chance to “realize a dream.”

“Being able to open a place – a restaurant, a bar, a cafeteria, whatever – is a good opportunity for self-development, for people to demonstrate a capacity for business, and for them to grow personally,” she said. “It’s something incredible.”

Gilberto Valladares owns a hair salon in Old Havana, Arte Corte Studio, and has been able to employ others.

“Initially, it was a dream of dignifying and recovering a certain degree of respect for the trade of hairdresser and barber,” he told the Report on Business. “As my business grew, so did the dream.” He now employs a half dozen people from the neighborhood.

Cuba is attempting to reform and modernize its economy while holding on to the things people hold dear and see as the good achievements of the revolution: free healthcare, education and other public services.

Gregory Biniowsky is a Canadian-trained lawyer and political scientist who has spent more than 15 years living and working in Cuba and works for Havanada Consulting, a firm that focuses on sustainable development projects and social enterprise initiatives. “The irony is those that will save the Revolution are the emerging small- and medium-sized private businesses,” he said. “And those that could destroy it are those elements in the bureaucracy that resist those changes.”

The entrepreneurial spirt gripping the island is infectious. At one time, much of the only reading material available in bookshops were works with a communist or socialist theme.
But Cubans now have an alternative: an English-language bookshop called Cuba Libro (https://www.facebook.com/cubalibroHAV). It is filing an urgent gap in the marketplace for English-language books and foreign works in general.

Set up by an American writer and journalist Conner Gorry (connergorry.com), who has been living in Havana, Cuba since 2002, the bookshop has become a hub for free thinking and new ideas.

“I know how hard it is to get English-language sources here,” she told The Associated Press. “So I started cooking this idea.”

Libro is the Spanish word for book and the play on words is meant to evoke a Cuba Libre, a rum-and-cola drink named for the country’s liberation from colonial Spain. The store bills itself as a “cafe, bookstore, oasis,” and  its logo features a woman reclining with a cup of coffee and a good book for reading.

The idea came about when a friend of Gorry could not find a place to unload 35 books she had. In time, Gorry amassed a collection of 300 English-language books, and this embryonic library became the book shop. The store also carries magazines, including U.S. titles The New Yorker and Rolling Stone.

So far, the store faces little competition. Government book shops feature the occasional Cuban novel translated into English or the English-language versions of state-run newspapers such as Granma (http://www.granma.cu/ingles/).

Cubans are enjoying the slow thaw and what it could bring. “It is increasing in Cuba, the possibility to have different alternatives,” said Carlos Menendez, a 77-year-old retired economist Menendez.

Cuba Libro has two licenses to operate – one for selling food and one for selling used books – and is run as a type of cooperative, a group-owned private enterprise with five Cubans.

Doing business in Cuba is not without challenges. The bookshop needs to steer a steady path and avoid selling anything that would be considered “counterrevolutionary.” Gorry also needs to avoid problems with the U.S. government, which bans Americans from any financial transactions with the Cuban government.

“I’ve had to tread extremely carefully, everything above-board and legal, because I’m an American, I’m a North American, I am beholden to U.S. laws,” she said. “And so I’m not in agreement with those laws, but I abide by them.”

The bookshop has the benefit of a well-educated pool of potential customers; the annual Havana book festival is a popular draw in the country (http://feriadellibro.cubaliteraria.cu/).
There is a strong thirst for self-improvement in Cuba, and to gain knowledge is to get a better paying job. To widen access to the shop, there will be a lending library for those who can’t afford to buy the books on offer, and there will also be English classes.

And how will the bookshop get restocked in a country that still exercises a lot of control over information?

“Getting donations is going to be another interesting piece of it, because importing books here is very difficult,” Gorry said.

Resources

1) Cuba Research Center: The Cuba Research Center is a nonprofit organization based in Alexandria, Virginia.  Founded in 2013, its purpose is to provide information about Cuba and U.S.-Cuba relations, to participate in public debate about those subjects, and to build bridges between Americans and Cubans interested in those topics. Website: http://www.us-crc.org/

2) Havanada Consulting: Havanada Consulting is a consulting firm which focuses on sustainable development projects and social enterprise initiatives in Cuba. Website: havanada.com

3) Havana Cuba Business: If you are engaged in or would like to learn more about Cuba-related business or travel activities, Havana Cuba Business offer a customized consulting service that will address your questions and concerns. Website: cuentapropistas.com

4) A business-friendly Cuba gets a hand from Canada (Report on Business). Website: http://www.theglobeandmail.com/report-on-business/rob-magazine/a-business-friendly-cuba-gets-a-hand-from-canada/article14006239/?page=all


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ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2021

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A Local Drink Beats Global Competition

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY 

For many decades, strong American and multinational food brands have penetrated markets in the South. This is a global business success story for those companies, but the downside has been the marginalizing of local alternatives. This not only reduces wealth-creating opportunities for local entrepreneurs, but also leads to products like sugary soda pops (http://tinyurl.com/yzwal98) pushing aside healthier, local alternatives like tea.

But one company in Indonesia has been pioneering a healthy local drinks empire while also seeing off aggressive foreign rivals. Teh Botol Sosro, a tea drink in Indonesia bottled by family-owned business Sosro, was not only the first bottled tea brand in the country, but also in the world, it claims. The company started bottling the jasmine-flavoured black tea drink in the 1970s.

The Indonesian company has shown that it is possible for local flavours to beat powerful international brands like Coca Cola in the battle for drinkers’ palates. While Coca Cola has tried to sell many bottled tea drinks in the Indonesian market, they have not been able to push aside the local product, The Teh Botol Sosro. Brewed by the Sinar Sosro company, it has captured 70 percent of the non-carbonated drinks market.

It is a drink of cool, black, sweetened tea with a hint of jasmine. Invented by the Indonesian family of Sosrodjojos, Sosro (http://www.sosro.com/) was founded in central Java in the 1940s.

Culturally, Indonesians have either coffee or tea with their meals. The brand’s marketing slogan plays on this: “Whatever you eat, you drink Teh Sosro.”

The company has aggressively fought off competition not only from local rivals, but also from Coca Cola’s Frestea brand and Pepsi Cola’s Tekita. The company stayed sharp in its business strategy, never letting a rival product take hold. Just as a rival would introduce a new product, Sosro would reply with a new drink attuned to Indonesian tastes. This ability to not be complacent about the company’s success, and to use its knowledge of local tastes to always outsmart foreign competition, has kept the company where it is today.

Sosro pioneered bottled drinking tea with its launch in 1970 and started with a dried tea only distributed in Central Java.

The journey to cold, bottled tea is an amusing one. The company first wanted to promote its tea in Jakarta, the capital, by having public tastings. But by brewing the tea on the spot, the too-hot tea took too long to drink for impatient Jakartens. The solution was to not brew the tea on the spot, but instead to brew it off-site and deliver to markets in big pans on trucks. But the bad roads made this a bit of a mistake as well: the tea would spill on the journey.

The ‘aha’ moment came when the idea arose to store the brewed tea in bottles. The bottles were eye-catching and have evolved in design over the years.

The drink now comes in various packages, from a returnable glass bottle (220 ml) to a Tetra Pak (1 litre, 250 ml, and 200 ml) and a 230 ml pouch.

The Botol Sosro (http://www.sosro.com/teh-botol-sosro.php) is not the company’s only product: it also brews Fruit Tea, The Botol Kotak and S-Tee. The economic benefits of these popular brands stay local, as Sosro gets the tea from PT Gunung Slamet, which operates three tea estates covering 1,587 hectares in Indonesia.

Resources

1) Just Food is a web portal packed with the latest news on the global food industry and packed with events and special briefings to fill entrepreneurs in on the difficult issues and constantly shifting market demands. Website:http://www.just-food.com

2) Brandchannel: The world’s only online exchange about branding, packed with resources, debates and contacts to help businesses intelligently build their brand. Website:http://www.brandchannel.com

3) Small businesses looking to develop their brand can find plenty of free advice and resources here. Website: http://www.brandingstrategyinsider.com

4) Growing Inclusive Markets, a web portal from UNDP packed with case studies, heat maps and strategies on how to use markets to help the poor. Website:http://www.growinginclusivemarkets.org

5) Tea Genius: A website from Taiwan packed with information on tea, its health benefits and rituals. Website: http://www.teagenius.com/

As cited in Export Now: Five Keys to Entering New Markets by Frank Lavin and Peter Cohan (Wiley).

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