Innovation Knows No Bounds | Frugal Innovation Author Navi Radjou

So going back to my own kind of— thank you very much. My own kind of background connects in a way with the origins of this concept of frugal innovation that we're talking about today. So frugal innovation in a nutshell is about finding new ways to innovate with very limited resources. You as entrepreneurs, you are used to doing it, but in large companies that I consult, this is very much an alien concept because large companies have a lot of resources, and for them, doing more with less doesn't come naturally. But in my case, I discovered that in a way, the hard way, when I grew up in Pondicherry, which is a very, you know, kind of tropical part of India in southern India, because we had the same problem that interestingly California is having today, which is water shortage. We had water rationed. It came between 6 AM and 8 AM. So you have to go and, you know, collect this water in big buckets. And we used to take what we call a one-bucket shower, which is essentially twice a week. You have one bucket like this filled with water that you use to take a shower. I also experienced something interesting growing up in India is that nothing is wasted. Everything is reused. As a matter of fact, next to my house in Pondicherry was this old man who used to collect old magazines and books in English. And he would rent them to me for about a few cents. And I used to go to a French high school, so I actually was able to read very voraciously all these books, old books and magazines in English, and was able to kind of learn English in a very frugal way. And then after spending the half, you know, first half of my life in southern India, I went to study in France and then came to this country in 1999. And essentially, this is the land of, you know, abundance, right? Land of plenty. So I ended up consulting large companies on how to innovate. And for a lot of large companies, innovation is associated with R&D. And many companies have big R&D departments where they spend billions of dollars trying to kind of, you know, come up with the next big thing. So you see this kind of arms race across regions, like, you know, US and Europe have been the first to lead this race, but you can see China particularly is leading Asia as well. in this race to, you know, outspend each other in R&D. And it is estimated that in 2014 alone, large companies spent about, you know, $650 billion in R&D. There's nothing wrong with R&D. It's just that when you spend so much money, you ask yourself, what is the return on investment? And there we have some challenges because the return is not that clear in terms of what you get in exchange for spending so much money. And the reason is because a lot of the companies end up reinventing the wheel. So they spend a lot of money, but actually they don't come up with something really disruptive, rather like, you know, what we call a me-too product, which is an imitation, a better imitation of an existing product. So there's nothing really new under the sun, so to speak. And to give you statistics which is very kind of convincing, 85% of new consumer products sold in the marketplace fail within the first 12 months because there's nothing that in the product actually addresses, you know, real needs of the customers. So this is a very kind of interesting challenge that companies are facing. On the one hand, they think they're getting innovation by spending a lot of money in R&D, but the reality is that they end up just reinventing the wheel and really not producing something which is really relevant, you know, for customers. So with that being the situation in the developed countries where we end up spending more money to come up with more sophisticated solutions that actually nobody really needs, I decided to maybe go back to my roots. And understand how people in the South, that means developing countries, innovate. And in that region, I knew intuitively people have to innovate more with less because living with less is a way, normal life, way of life for people there. So I spent a lot of time, about 10 years, really trying to understand what is the mindset of entrepreneurs and innovators in emerging markets like, you know, India, Africa, and Southern America. And so I thought this kind of illustrates the difference between how we innovate in Silicon Valley and how we innovate in emerging markets. In Silicon Valley, we might think about finding a system, an application that can connect the fridge to a smartphone so that if I run out of milk, I could get a gallon of milk on the way back home. Because everybody in the West has a smartphone, we all have a fridge, so it makes sense to connect both devices. Somebody in India asked himself a more fundamental question, which is, what if I can invent a fridge that does not consume electricity? That's a more fundamental question because 700 million people in India do not have access to electricity. So if you cannot operate your fridge with electricity, who cares how sophisticated it is? And this question, interestingly, was not asked by someone who has a PhD or an MBA, somebody who actually didn't even finish his high school. His name is Mansukh Prajapati. He's a potter by training who actually developed this thing called Mithi Cool on the right-hand side, which is a fridge made entirely of clay that is 100% biodegradable. It doesn't use any electricity, and it can keep fruits and vegetables fresh for 5 days. It simply uses the principle of evaporation to retain the humidity inside, you know, the lower chambers and keep the fruits and vegetables fresh. And so the first lesson we learned from emerging markets is that these resource constraints, like lack of electricity, is not an impediment, is not an obstacle. Actually, that becomes the kind of, you know, inspiration for innovation. And you see this kind of mindset in other emerging markets, like in Peru, a country that suffers from 95% humidity and only receives 1 inch of rainfall. And a local engineering college in Lima, the capital, developed this giant advertising billboard that simply uses the sheer surface of the billboard to absorb the humidity in the air and then condenses it, purifies it, and generates over 90 liters of drinkable water every day. Okay? Literally, like, you know, create water out of thin air. And this is an example in China. China has a big problem, which is its rapidly aging population. China will be home to 500 million people above 60 years old by 2040. And the problem is that many of these elderly people live in rural areas where they don't have hospitals and doctors. So instead of setting up these hospitals and doctors, the idea would be to say, what if we can use telemedicine solutions so that a local nurse or technician in the community can actually collect biodata from these elderly people and then send it to the cloud? And using algorithms, you can start detecting if there is some, you know, anomaly, and then if there's something worrisome, then they can connect with a doctor who may be remotely in a city and look at the data and offer a diagnosis. But it's not just about a diagnosis. The problem with India and China is that they're going to become the world capitals for what we call chronic diseases like diabetes. For chronic diseases, it's not about being— giving diagnosis, oh, I have diabetes. You need to have follow-up, follow-through. So the idea is also to empower local citizens to actually take care of their own health within a community setting. Okay? So this is a very interesting application that may not be super high-tech, but actually in a way low-tech because it uses local people to compensate for the lack of, you know, hospitals and doctors. But of course, the continent that I think is going to teach us a lot about doing more with less is going to be Africa simply because, you know, it comes from a, you know, scarce resource kind of setting. 80% Africans in most part of Africa do not have electricity and 80% of them do not have a bank account. But 80% of them do have actually a mobile phone. So the idea is essentially, what if you can use what is abundant to address what is scarce? So that is really what's happening with the solution like M-Pesa in Kenya, which enables half the population to send and receive money using their mobile phone without having a bank account. So today, you know, nearly half the country's GDP is transacted through the system, right? And they don't stop here. The next kind of application out of this would be to say, once you have this electronic money, what else you can buy and sell? You can start buying not some fancy gadgets, but actually basic services like solar electricity. So this is a system called the M-KOPA, which enables Kenyans— essentially, it's a home solar system. that you can install yourself. And you basically make a down payment of $40. You take home this kit. And then every day, you make a micropayment of 40 cents using your mobile device. And once you make 365 micropayments, the system is unlocked and you start receiving clean, free electricity. Okay? So the government of Tanzania wants to implement this system in 1 million households by 2017. Thank you. So Africa is telling us how to leapfrog from no banking to mobile banking, from candlelight to solar light, okay? So, and do that in a very kind of, you know, frugal, affordable way as well.