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Innovate by using ‘frugal engineering’

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in Best-Practices Leadership,Leaders & Managers

To create a refrigerator for rural residents in India, Godrej Appliances started by observing people in their huts. People were going to the grocery every day, not buying in bulk. Blackouts were a regular occurrence. Families moved frequently.

The company responded with a product called ChotuKool, a small fridge that looks like a portable cooler. It keeps food cold with a cooling chip and fan system, similar to the way a computer avoids overheating.

The approach is called “frugal engineering,” coined by Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance, to describe the way Indian engineers innovate under resource constraints.

Renault-Nissan has embraced frugal engineering to become a top producer of electric and low-cost cars. How any firm can do more with less:

1. Create “good enough” products vs. overengineered products. Example: Renault launched a small, no-frills car in 2004, called Logan. It’s priced at $10,000 but is reliable and energy efficient, and just right for recession-weary Europeans.

2. Introduce artificial constraints to global R&D teams to lead them toward frugal engineering. Example: Ghosn once asked three different R&D teams—from Japan, France and India—to engineer a solution to a technical problem. Each team produced quality answers, but the Indian engineers’ solution cost one-fifth of what the others’ did.

3. Cultivate a frugal mindset. This can be hard for resource-rich executives. Example: When tasking executive Gerard Detourbet to develop a “global small car,” Ghosn sent the executive to India.

Says Ghosn, “We don’t go to emerging markets to just bring back a product, but to learn something—like new processes or a whole new mindset.”

— Adapted from “The Importance of Frugal Engineering”; Vikas Sehgal, Kevin Dehoff and Ganesh Panneer; Strategy+Business; and “Frugal Innovation: Lessons from Carlos Ghosn, CEO, Renault-Nissan”; Navi Radjou, Jaideep Prabhu, and Simone Ahuja; Harvard Business Review blog.

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