We recently attended the World Economic Forum's India Economic Summit 2011 in Mumbai, where we moderated several panels and workshops on the topic of innovation. The experience gave us some insights into a unique approach to innovation called jugaad, which entrepreneurs and enterprises are practicing in complex emerging markets like India.
Jugaad is a Hindi word that loosely translates as "the gutsy art of overcoming harsh constraints by improvising an effective solution using limited resources." Jugaad is an antidote to the complexity of India: a country of mind-blogging diversity; pervasive scarcity of all kinds; and exploding interconnectivity (India is adding 10 million cellphone subscribers every month).
This highly resource-constrained and chaotic environment inspires jugaad innovators — i.e., the Indian entrepreneurs and corporations who practice jugaad to develop market-relevant products and services that are inherently affordable and sustainable. Jugaad innovators are modern-day alchemists who transmute adversity into opportunity, and in so doing create value for their organizations and communities. And while we first learned about jugaad while conducting field research in India over the past several years, we've found that jugaad innovators exist around the world, including right here in the U.S.
There are three aspects of jugaad that make it particularly effective. Specifically:
Jugaad innovators innovate faster: Jugaad innovators don't use linear, pre-planned, time-consuming R&D processes. Rather, they rely heavily on rapid prototyping techniques — i.e., they collaborate intimately with customers and use their constant feedback to zero in on the most relevant product features. For instance, Jane Chen and Rahul Panicker, Stanford graduates and co-founders of Embrace, worked closely with village pediatricians and patients in rural India to iteratively optimize the design of their breakthrough portable infant warmer — which costs less than 5% of incubators sold in the West (which are typically priced around $20,000).
Jugaad innovators innovate cheaper: Jugaad innovators are very frugal. Rather than reinventing the wheel or splurging on expensive R&D projects, they develop new solutions by building upon existing infrastructure and assets, as well as by recombining existing solutions. In doing so, they can pass the cost savings on to their customers. For instance, YES Bank, one of India's leading private banks, has deployed a mobile payment solution that enables money transfer via cellphones without the need for a bank account. This solution piggybacks on India's existing robust mobile telephony infrastructure that extends to the remotest of villages in India (a country where nearly 870 million people have cellphones, but 600 million or so do not have a bank account).
Jugaad innovators innovate better: Jugaad innovators recognize that consumers in emerging markets are low earners, but high yearners. As such, jugaad innovators attempt to meet customers' high aspirations by developing solutions that are not only affordable, but that also deliver superior value. In sum, they strive to deliver more (value) for less (cost). Take, for instance, SELCO, an Indian renewable energy firm founded by the U.S.-educated Harish Hande. Recognizing the diverse needs of the Indian rural population, SELCO set out to personalize the value proposition of its solar lanterns to individual customers — be they a village midwife who doesn't want the toxic fumes of a kerosene lamp polluting her patient's environment; a rosebud collector looking for a modular lighting solution that can be repaired quickly in a remote location; or a vegetable seller who doesn't want to contend with the electrical outages that are typical across India. As a result, more than 115,000 rural customers now use SELCO's solar lanterns — not only because they are affordable, but because they deliver superior value by addressing customers' unique needs.
What makes jugaad innovators so adept at innovating faster, cheaper, and better? The answer lies in their unique mindset — characterized by two key attributes: adaptability and inclusivity.
Jugaad innovators are highly adaptable: Indian entrepreneurs who practice jugaad are a resilient bunch: they continually find ways to bounce back from the adversity that permeates every aspect of their lives. Jugaad innovators sense and respond to rapid changes in their environment by dynamically reinventing their business models. For instance, Chen and Panicker, co-founders of Embrace, initially set out to design a fixed incubator at a low-cost — but once they discovered that Indian village women preferred to hold their newborn babies close to their bodies, they quickly adapted their business model around a portable infant warmer.
Jugaad innovators are inclusive: In India, more than 800 million citizens lack access to healthcare, 600 million are unbanked, and 400 million live off the electricity grid. While most corporations view these marginal segments as being unprofitable, jugaad innovators like YES Bank's Rana Kapoor and SELCO's Harish Hande have invented inclusive business models for profitably serving the millions who live on the margins of society. For these entrepreneurs, including the margin not only provides for greater social good, it also makes great business sense.
Interestingly, we have noticed that jugaad is practiced not only by Indian entrepreneurs and corporations, but also by some pioneering multinationals in India. Take GE Healthcare, for instance,which used the flexible jugaad mindset to make high-quality cancer diagnosis and treatment accessible to underdeveloped communities across India. Until recently, India had been importing the radioisotopes required for nuclear imaging such as PET/CT scans. This was not only unaffordable for many rural hospitals, it was ineffective because the radioisotopes decay over time (in hours or even minutes), so they need to be administered to the patient soon after they're produced. GE Healthcare partnered with private diagnostic centers and airline companies to locally produce radioisotopes — and make deliveries on a just-in-time basis to small-town hospitals around the country. Now, with GE Healthcare's frugal "pay-per-use" pricing model and just-in-time delivery mechanism, the supply of radioisotopes has become affordable and dependable for many rural hospitals.
The jugaad mindset — and its associated principles and practices — is increasingly relevant for companies worldwide who are seeking to grow in an increasingly complex and resource-constrained business environment. Unlike traditional, structured innovation methods that rely on time-consuming and expensive R&D processes, the more fluid jugaad approach delivers speed, agility, and cost efficiencies. Jugaad is a "bottom up" innovation approach that provides organizations in both emerging and developed economies the key capabilities they need to succeed in a hypercompetitive and fast-moving world: frugality, inclusivity, collaboration, and adaptability.