Frugal Innovation with Jugaad Mindset

Carlos Ghosn, Chairman and CEO of the Renault-Nissan Alliance, famously coined the term "frugal engineering" in 2006. He was impressed by Indian engineers' ability to innovate cost-effectively and quickly under severe resource constraints. And under Ghosn's leadership , Renault-Nissan has proactively embraced frugal engineering and become one of the world's leading producers of both electric cars as well as low-cost vehicles — two of the fastest growing and most promising market segments in the global automotive sector.
Recently, in New York, we participated in a panel discussion organized by the Asia Society called "Jugaad Innovation: Reigniting American Ingenuity" (you can watch a video here). We were honored to have Ghosn as our key panelist. During the panel discussion, Ghosn explained that Western automakers must sacrifice the "bigger is better" R&D model and adapt to frugal engineering.

In today's resource-constrained environment, Western firms are feeling the growing pressure to "do more with less" — that is, deliver more value to customers at less cost. CEOs of these firms can emulate four best practices initiated by Carlos Ghosn at Renault-Nissan:

1) Create "good enough" products that deliver high value for money: Over-engineering products is no longer sustainable — both for economical and environmental reasons. Rather, Western firms need to make simplicity a key tenet of their innovation process by developing "good enough" offerings that deliver significant value for money to cost-conscious consumers. For example, in 2004, Renault launched Logan, a small, no-frills family car. At a starting price of $10,000, the car is built with drastically simplified product architecture and minimal components. In addition to a stripped-down, modern design, Logan is reliable and energy efficient. As a result, it has become Renault's best-selling car across recession-weary European markets as well as in many emerging markets. Building on Logan's success, Renault has now developed an entire line of low-cost vehicles (under the brand Dacia) all modeled after Logan's technology platform.

2) Foster healthy rivalry among global R&D teams: CEOs may find it difficult to persuade R&D teams in the US and Europe — used to abundant resources and pushing the technology frontier for its own sake — to embrace frugal innovation. Yet engineers and scientists love challenges. Western CEOs can create challenges for global R&D teams by introducing artificial constraints that foster a sense of urgency and healthy rivalry that can lead to frugal solutions. In one instance, Ghosn requested three different R&D teams — one each from Japan, France, and India — to come up an engineering solution for the same technical problem. The teams came up with solutions of equal quality — yet the Indian engineers' solution cost only one-fifth of what the French and Japanese engineers' solutions cost.

3) Tap partners in emerging markets who excel at innovating more with less. Rather than relying exclusively on in-house R&D teams to develop frugal solutions, companies in developed economies need to connect with entrepreneurial organizations in emerging markets that have a knack for innovating on a shoestring. Recognizing that even its least-expensive pickup truck was five times costlier than the Indian market could afford, Nissan established an R&D and manufacturing joint venture with Ashok Leyland, an Indian commercial vehicle manufacturer. Ghosn recounts with humor how Dr. V. Sumantran, Non-Executive Vice-Chairman of Ashok Leyland, paid a visit to the basement of Nissan's technical center in Atsugi, Japan and pointed to a four-generation old Nissan pick-up truck. He told Nissan's baffled head of product planning: "Give us the design specs of this vehicle and our Indian engineers will use it as baseline to develop a great-looking yet affordable and robust pick-up truck fit for the tough Indian roads." And they did it. The result is DOST, an entry-level pick-up truck with a starting price of Rs 3.7 lakhs ($6,600). Since its launch in September 2011, DOST has garnered more than a third of India's hypercompetitive light commercial vehicles market. The Ashok Leyland-Nissan joint venture now plans to introduce DOST in other emerging markets in Southeast Asia and the Middle East.

4) Send your top executives to emerging markets to cultivate the jugaad mindset:
Ultimately frugal innovation is not just about doing more with less. It's about learning how to innovate under severe constraints and turn extreme adversity into an opportunity for growth. But it's hard for Western executives to cultivate this frugal, flexible and inclusive mindset — which we call jugaad — in resource-rich and relatively stable Western economies. That's why Ghosn dispatched Gérard Detourbet, a senior executive in Paris who was in charge of Renault-Nissan's entry-level cars, to India. From his new base in Chennai, Detourbet will be leading the development of a "global small car" — an entry-level car priced at around Rs 3 lakhs ($5,200) that will first be commercialized in India and then introduced in other emerging markets like Brazil, Indonesia, and South Africa. When Detourbet returns to Renault-Nissan's headquarters in Paris, he is poised to bring with him the jugaad mindset he honed in India. As Ghosn, a Brazilian-born French national of Lebanese descent, explains: "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."

To win in today's resource-constrained global economy, Western CEOs must follow Ghosn's lead in embracing frugal innovation. By inculcating the jugaad mindset within their enterprise, Western CEOs will be able to build a resilient organization that can deliver significantly more value to customers using fewer resources.

Source
Harvard Business  Review

Ten Areas to Improve to become a Super Power for India

• Religious extremism: Long term trends indicate that liberals and moderates in every religious community in India are on the defensive.

• Left wing extremism: Extremism in the form of the Naxalite movement, which is a result of geographical reasons and also social and political forces, owing to the continued dispossession and deprivation of tribal people in India

• Corruption: The corruption and corrosion of the power center in India, as a result of political parties functioning as family firms rather than open, transparent political systems.

• Decline of public institutions: This includes universities, police, civil services, the judiciary (except for higher judiciary) etc.

• Rich-poor divide: The increasing gap between the rich and the poor which is particularly manifested through farmer suicides in India, a phenomenon that has become pervasive only in the last 10-15 years, perhaps because there is now the expectation of a 'good life' that did not exist before.

• Environmental degradation: The degradation at a local level, which is impacting people's lives in very real ways, whether in the form of massive depletion of underground aquifers, chemical contamination of soil, death of rivers, loss of species etc.

• Apathy of the media: Apathy in covering issues of rising income inequality, environmental degradation.

• Dynastic Politics : Politics not based on performance ,but on Family relationships , Loyalty pushing the urgent areas to improved like Literacy, Health, Development issues to backburner
  

• Border disputes: India's unresolved border disputes, especially in Kashmir and the North East (Arunachal) which indicates that there are parts of India that are not comfortable with being part of India.

• Unstable neighbourhood: India's increasingly unstable neighbourhood is another serious impediment to our superpower ambitions.

Rural - Urban Linkages

Developing suburban areas

For the majority of the world's poorest residents, local rural-urban linkages, investment patterns and population movements are probably far more important than the much touted global linkages, foreign direct investments, and international migration.

First, rural-urban linkages are important to achieve balanced economic growth. Isolated rural settlements that cannot tap local urban markets will not benefit from expanding global markets. Small urban centres bypassed by agricultural exporters will not play a dynamic role in regional development.

Second, rural urban linkages can reduce vulnerability, and play a critical role in the livelihood strategies of the poorest groups, both rural and urban. Low income rural dwellers often rely on urban-based non-farm jobs and on remittances and other transfers from migrant relatives. Low income urban dwellers often rely on seasonal farm jobs, and on the help of rural relatives in looking after children and family property.

Third, rural-urban interactions are often critical influences on natural resource use and management, especially in the sub-urban interface. But these linkages and interactions are usually neglected by both local government (which tends to divide rural and urban responsibilities) and national government (whose ministries rarely address urban rural linkages directly).

Rural-urban interactions can be defined as linkages across space (such as flows of people, goods, money, information and wastes) and linkages between sectors (for example, between agriculture and services and manufacturing). In broad terms, they also include 'rural' activities taking place in urban centres (such as urban agriculture) and activities often classified as 'urban' (such as manufacturing and services) taking place in rural settlements.

Action areas:

improve our understanding of how changing rural-urban interactions affect the livelihoods of low-income and vulnerable groups in urban and rural settlements (including developing appropriate methodologies);
support the capacity of local institutions and government to identify the opportunities and constraints for poverty reduction and regional development provided by rural-urban linkages, and act on them;
help develop a dialogue between national and local government to ensure a better integration between national macro-economic and sectoral policies and local initiatives.
The key focus areas

governance in decentralised structures, especially in small urban centres and Sub-urban areas
the role of urban centres in the development of their surrounding rural region
income diversification and rural non-farm employment
migration and mobility
transformations in sub-urban areas
Governance in decentralised structures, especially in small urban centres and Sub-urban areas


Because of the variations in the nature and scale of rural-urban interactions between and within nations, local governments are best placed to respond to location-specific needs and priorities. Decentralisation has great potential with regard to efficiency and democratic accountability, but often carries costs and constraints (such as insufficient revenue and capacity, and weak links with national planning). Special attention is given to the identification of ways to better support local governments, particularly in improving the role of small and intermediate urban centres in the development of their surrounding regions and in Sub-urban areas.

The role of urban centres in the development of their surrounding rural region


Access to urban markets is key to increasing incomes for rural and Sub-urban producers. Crucial dimensions include: physical infrastructure (including road networks and affordable transport); the relations between producers and traders; and farmers' information on how markets operate, including price fluctuations and consumer preferences. Special attention is also given to local urban markets as links to regional, national and international markets through the analysis of commodity supply chains.

Income diversification and rural non-farm employment


There is ample evidence that most rural (and in many cases urban) households rely on the combination of farm and non-farm income sources, thereby reducing fluctuations and risk and, in some cases, increasing their asset base. Research on this theme focuses on transformations in local labour markets (often influenced by globalisation) and how they affect different groups on the basis of gender, age, migrant status, ethnicity, wealth and location. Emerging issues such as the role of clustering in the development of small-scale enterprises, and opportunities in the growing tourism industry are also explored.

Migration and mobility


With urbanization and changing employment patterns, migration and mobility (such as commuting between rural settlements and urban centres) are increasingly important. Specific areas of interest are the differences and reasons behind in the mobility of different groups (including the often unintended impact of national macro-economic and sectoral policies), and the impact of migration on households and communities in both sending and receiving settlements.

Transformations in Sub-urban areas


The immediate periphery of urban centres often undergoes processes of extremely rapid transformation. There are many opportunities, such as increasing urban demand for high value horticultural and livestock produce which often trigger agricultural intensification; and non-farm employment opportunities help households diversify their income sources. But there can also be many constraints, which can result in the marginalisation of vulnerable residents and in environmental problems. Specific areas of interest are transformations in land tenure and natural resource management (and their impact on low-income groups), and the management of different types of wastes originating from the urban centre