The Importance of Frugal Engineering

strategy + business (Sehgal, Dehoff, and Panneer) - Providing new goods and services to “bottom of the pyramid” customers requires a radical rethinking of product development.

A cell phone that makes phone calls — and does little else; a portable refrigerator the size of a small cooler; a car that sells for about US$2,200 (100,000 rupees). These are some of the results of “frugal engineering,” a powerful and ultimately essential approach to developing products and services in emerging markets.

To get a handle on what frugal engineering is, it helps to understand what it is not. Frugal engineering is not simply low-cost engineering. It is not a scheme to boost profit margins by squeezing the marrow out of suppliers’ bones. It is not simply the latest take on the decades-long focus on cost cutting.

Instead, frugal engineering is an overarching philosophy that enables a true “clean sheet” approach to product development. Cost discipline is an intrinsic part of the process, but rather than simply cutting existing costs, frugal engineering seeks to avoid needless costs in the first place. It recognizes that merely removing features from existing products to sell them cheaper in emerging markets is a losing game. That’s because emerging-market customers have unique needs that usually aren’t addressed by mature-market products, and because the cost base of developed world products, even when stripped down, remains too high to allow competitive prices and reasonable profits in the developing world. Read More