Fraunhofer IAO | R&D Management
Fraunhofer IAO | R&D Management

Frugal Innovation

Traditionally, innovations are associated with an increase of technical finesse and complexity. In the case of Frugal Innovations (FI), companies follow the opposite path. Instead of offering high-price solutions exceeding their customers’ demands, they focus on the principle of “simplification” – no more functionalities than necessary but these in a good quality, combined with a smart business model.

Frugal Innovations help you to attract new, cost-sensitive customer groups in existing and new markets (e.g. in emerging countries) and support you in defending your market position against competitors from the low-price segment.

Frugal Innovations…

  • focus on a specific cost-sensitive customer group, e.g. in emerging countries,
  • need a good knowledge of the customers’ needs (way of living/working),
  • involve a lean, cost-efficient solution, realised –  among other things –  by concentrating on absolutely necessary functions (“simplification“) and by using existing and bought-in components
  • minimise costs within the whole business model, e.g. localisation of value chain, reduction of distribution channels, etc.

Prominent examples such as the successful SMART series of Siemens show that rethinking towards “Less is More” will pay off. Frugal Innovations do not offer great profit margins, but they score due to the size of the markets entered and synergy effects with the existing solution range. Companies like Bosch, Philipps and Accor have understood this long ago – now SMEs start to follow.

You will find further information on the Fraunhofer IAO Frugal Innovation approach in our whitepaper (in German) and presentation (in German) on the topic. A recent paper on Frugal Innovation was presented at last year’s ISPIM Innovation Summit in Brisbane, Australia.

Consulting formats

Fraunhofer IAO’s consulting offer includes the following formats:

  • Seminars for participants from different companies
  • Company-specific (short) projects (seminars, workshops)
  • Training of intermediaries (economic development agencies, chambers of commerce, etc.)

More details on the different formats can be given in a personal discussion.

 

Benefits

Frugal Innovations might be an important topic for your company if you’ve become aware that

  • your existing customers are interested in more cost-efficient, less complex solutions.
  • some former customers have changed to a low-prize supplier.
  • potential new customers, who might be interesting for you, refrain from your current price range.
  • the existing product range in your company’s market is very homogenous; there are no good-quality offers in a medium price segment.

Collaborating with Fraunhofer IAO will enable you to understand

  • why and how other companies have dealt with the topic Frugal Innovation,
  • what the specifics of Frugal Innovations are,
  • what you should keep in mind when developing Frugal Innovations and which methods you can use.

Fraunhofer IAO’s consulting projects provide support during the entire process, from the analysis of the customers’ needs to setting up a solution concept, embedded in a suitable business model. 

Methods

Fraunhofer IAO has compiled a toolbox for developing Frugal Innovations. It covers the following aspects:

  • Analysis of customer needs,
  • Definition of required solution features for optimum performance,
  • Optimisation of cost structures,
  • Development of appropriate business models.

Each project starts with the selection and combination of the most suitable methods for the topic at hand (e.g. Value Curves, Morphological Box, Story Trees). All participants will get a detailed introduction to and training on the methods to be used based on simple case studies, before they start working on the company-specific use case.

 

Arbeit mit Wertkurven („Value Curves“) in einer Veranstaltung des Fraunhofer IAO zum Thema Frugal Innovation

Picture 1: Value Curve elaborated in a Fraunhofer IAO Frugal Innovation seminar (click-to-zoom)

Case studies

Fraunhofer IAO’s collection of case studies contains good-practice examples related to

  • small and large companies,
  • various regions (EU, South America, USA),
  • different industrial sectors,
  • product and service innovations.

All case study documentations include the background of the solution, details on how it was realised (product/service, business model) and the insights gained (Lessons Learned). They serve to explain the concept of Frugal Innovations and to provide impulses for the creative work within the project.

 

Auszug aus der Fallstudie zur Frugal Lösung „Aerotruck“ des Unternehmens Embraco

Picture 2: Extract from the case study on Embraco’s Frugal Innovation “Aerotruck“ (click-to-zoom)

References

We already cooperated with companies from different branches and sizes, from the large Turkish domestic appliance manufacturer Arçelik to PTE Hydraulics, a small Australian producer of hydraulic cylinders.

The Fraunhofer IAO approach can be transferred to companies from various backgrounds and with different requirements without any problems. More details on our references can be given in a personal discussion.

 

FI-Workshop mit dem australischen Unternehmen PTE Hydraulics

Picture 4: FI workshop with the Australian company PTE Hydraulics (click-to-zoom)

The Fraunhofer IAO approach can be transferred to companies from various backgrounds and with different requirements without any problems. More details on our references can be given in a personal discussion.