Frugal Innovation Concept
According to the definition given by Harvard Business Review, “Frugal Innovation is more than a strategy”. (HBR, 2014). Frugal innovation is defined as companies which “do not seek to ‘Wow’ customers with technically sophisticated products but, instead, strive to create good-quality solutions (in order) to deliver great value to customers, at the lowest cost”. Recently, scholars have shown the relevance of the approach to address an increasing number of entrepreneurship issues in contemporary business systems” (Schanz, C., S. Hüsig, M. Dowling, and A. Gerybadze, 2011,Tiwari, R. 2017).
Navi Radjou, an author and TED speaker on this subject, describes Frugal Innovation as the use of geniality to find clever ways to solve problems with limited resources, to find clever solutions by converting adversity into opportunities, not necessarily sophisticated or perfect, but able to create more value at lower cost. Basically, entrepreneurs doing better with less – which is the essence of frugal innovation-creating more economic and social value using limited resources (Navi Radjou TEDGLOBAL 2014). This ability to do more with less is considered a high-level art, a culture and a mindset
Jugaad innovation is described as one of the many elements of frugal innovation. It is defined as an innovative fix; an improvised solution born from ingenuity and cleverness (Cambridge.org, 6.5 chapter). Jugaad has the negative connotation of compromising on quality (Cambridge.org), it can be viewed as a quick and temporary fix. However Jugaad can be a first stage of Frugal Innovation, before ‘moving away from the shortcutting, improvising or even compromising approach to come up with a solution that upholds quality standards to meet customer and regulatory expectations’ (Cambridge.org, 6.5 chapter).
There are several keywords related with frugal innovation, such as low-cost innovation, good-enough innovation, resource-constrained innovation.
Taking all these definitions and applying them to the Small Medium Sized Enterprises (SME’s) in Italy, a market which is comprised of 97% SME’s, is therefore a completely different arena from where Frugal innovation has originated (developing countries), has been a challenging yet very interesting concept and the basis on which BOTTA Packaging, an Italian SME, has decided to investigate and build on.
The constraints of SME’s in the innovation realm, primarily R&D budget, human resources excellence and availability, and numerous other constraints when compared to larger enterprises, have already been described however the Frugal innovation point of view shows how SME’s can overcome those same constraints at their own advantage. Smaller companies “with comparatively tiny budgets often manage to out-innovate the bigger, established competitors” (Source)
The advantages of being smaller, less bureaucratized and structured companies makes it faster to take decisions and try out innovations before deciding to heavily invest in them. Working on these advantages with an eye on Frugal Innovation has been the turning point of BOTTA Packaging’s strategy.
BOTTA Packaging Example – How BOTTA Packaging Applied and expanded on Frugal Innovation to make its own pioneer model in the Packaging business-to-business sector
BOTTA Packaging has been facing the difficulties of all SME’s to step up and expand its market share in a global and increasingly competitive context. The digital transformation that is entering all industrial sectors and with which all companies have to get to terms with implies expensive investment costs and high risks that can be a real challenge for SME’s. In addition, the restricted specialized human resources together with financial limitations create a barrier to innovation and its implementation.
BOTTA Packaging has been redefining frugal innovation in its restructuring of the digitalization process in order to optimize it and cut out inefficient and unnecessary costs, as well as innovating the offering and the business model. Coming from a manufacturing background, BOTTA Packaging has learned to combine tradition with innovation. However, as for the majority of SME’s, BOTTA Packaging has had to deal with resource constraints, and be able to turn these into opportunities, in perfect frugal innovation mode.
The way in which BOTTA Packaging has decided to go about it has a lot to do with Frugal innovation. The concept of ‘make do with what you have’ has been taken as a basis, together with finding the best opportunities the market, the universities and the literature could provide. In addition, the concept of ‘done is better than perfect’ has also been taken as a key element to innovation and growth. As an SME with scarce resources, time is an important factor and one that can outgrow the element of perfection for the customers. Making sure the minimum viable product /service was on offer as soon as possible gave BOTTA Packaging the possibility of being on the market sooner (and possibly before competitors) as well as being able to test the market before investing more time and money on an innovative project.
Frugal Innovation in BOTTA Packaging has combined scientific research, technological capabilities and an open marketplace in order to turn the constraints into resources and the challenges into competitive advantage. The result has been the elaboration of a distinct model, which in itself is a pioneer in the Italian packaging sector, towards the race to 4.0.
The BOTTA Packaging team is the perfect example of how diversity and cooperation can lead to create frugal solutions, doing more with less. The open mindset of BOTTA Packaging allowed to find solutions without reinventing anything, but optimizing what was already available in terms of know-how and human resources.
BOTTA Packaging has seized the opportunity to be a part of Invest Your Talent (IYT) in Italy program to collaborate with selected talented students from all over the world. IYT is a program promoted by the Italian Ministry of Foreign Affairs and International Cooperation, IT-Italian Trade Agency, Uni- Italia, Unioncamere (Italian Chambers of Commerce), Confindustria (Confederation of Italian Industries), Universities abroad and Companies in Italy. The objective of this partnership was to develop Innovation and Sustainability in the context of Industry 4.0 and toward the UN Sustainable Development Goals.
Furthermore, in an open innovation perspective, BOTTA Packaging has also supported the Erasmus + program, which is the EU program to support education, training, youth and sport in Europe. Erasmus+ also aims to promote the sustainable development of its partners in the field of higher education, and contribute to achieving the objectives of the EU Youth Strategy. Innovation would become affordable, especially for small and medium sized company (SMEs), if they manage to adopt a frugal innovation mindset, a new integrated management philosophy to tackle the issues in financial constraints and scarcity of human resources for SMEs.
Knowledge Contamination leading to Frugal Innovation and Growth
Frugal innovation in BOTTA Packaging is demonstrated through the combination of Market Knowledge, Academic knowledge and Research & Development (R&D) cooperation programs.
R&D cooperation using IYT and Erasmus+ programs, gave opportunities to talented students, as well as companies, to transform and commercialize business ideas in a win-win perspective. The diversity in nationality, university, faculty, mindset, background and gender within team members enabled knowledge contamination and overflow which led to innovation and growth. In the challenging business context, the project drove members with dynamic knowledge absorption capabilities to accumulate and explore ‘knowledge potentials’.
In the business to Business (B2B) arena, purchasing online is a recognized potential, valuable market however not yet mature, especially in Italy.
To bridge the gap, the solution has been the creation of a technologically advanced drop-shipping e-commerce called Instapack.me, together with a new Eco-Packaging specialization. These visions and implementations are the result of IYT and Erasmus+ lab contamination with BOTTA Packaging’s traditional side and know-how.
Instapack.me is an innovative virtual warehouse, as well as a Web2pack source, that allows customers to buy primary and secondary boxes in small quantities and customized, in just one click and with a fast delivery in 24/48 hours compared to traditional manufacturing lead times which take around 2 weeks. Machine learning is applied in the background to automate daily price updating from all warehouses across Italy and beyond.
The Web2pack section within Instapack.me is an interactive platform where customers can enter their required dimensions, define the flat cardboard’s thickness, personalize and apply their graphics on the boxes all online. Furthermore, customers can also choose the preferred price depending on the delivery time selected.
These technological innovations have arisen through the contamination of minds and human resources from different countries and backgrounds, as well as technical specialties and competences. Thanks to this Open Innovation, BOTTA Packaging’s innovative technology within a mature sector has been listed as a European Digital Champion in the Financial Times.
The innovative Eco-packaging products are in line with BOTTA Packaging’s Sustainable Development vision and mission to become the main point of reference for Sustainable Packaging Solutions, entering a new section of the market and satisfying the increasing customer request for a zero waste environment. According to the All4pack conference in Paris in 2018, the worldwide packaging market value is heading for 1000 billion dollars in 2023 with annual growth of 2.9%. Within which, cardboard takes into account 35.7% of the value. In 2017, worldwide demand for corrugated cardboard packaging generated 245 billion US dollars.
Furthermore, BOTTA Packaging launched the Pallet Optimisation Online Calculator project in December 2019. This is the first online service of its kind in Italy, with responsive 3D visualization. It generates the optimal configuration of box display on a pallet and it relies on a significant algorithm on the background, which is an asset for the entire industrial sector.
Conclusion: Frugal Innovation Laboratory Results
The project has given evidence that digital transformation remains unavoidable but can be affordable.
BOTTA Packaging’s Frugal Innovation project is a pioneer in the B2B Packaging sector in Italy. It implements “Shorter run, Faster to shelf” strategies together with technological advances through interactive visualizations of the products and customer personalisation in the packaging world.
BOTTA Packaging’s Frugal innovation model is an optimal strategic solution that can be applied to the whole SMEs sector. It is a new mindset that is required in the current industrial fast and competitive context.
In addition, the project develops and expands the business not only in the local market but also increases shares in the international market from the North to South, and East to West. The projects implemented allow for cross-selling, upselling and Unique Selling Points in the Packaging sector through the packaging innovations and services offered.
To find out more about the decisive factors that lead to successful frugal innovation, check out our team members: