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Smartphones and jugaad innovation: Inclusive growth in the palm of our hands

In recent years, large firms and smaller social enterprises have begun to see the next 3 billion as an enormous opportunity to be reached through market-based solutions.

Written by Jaideep Prabhu |
Updated: March 1, 2016 2:01:43 pm
smartphoneapp Perhaps the most remarkable breakthroughs in frugal innovation in India have been in the area of telecommunications.

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Last week saw the launch in Delhi of the Ringing Bells Freedom 251, a 3G smartphone with 8GB storage and cameras in the front and back. Priced at Rs 251 (less than $5), this is easily the world’s cheapest smartphone and a lot cheaper than similar devices that retail for at least Rs 4,000. If Ringing Bells can deliver on its promise, this will not only be remarkable for its own sake (imagine a device that’s cheaper than a coffee at Starbucks), it will also signal a larger “frugal innovation” revolution that has huge implications for India’s continued growth for years to come.

India is rightly celebrated around the world as the home of jugaad or frugal innovation. Companies and policy makers in North America, Europe and Japan, alongside their counterparts in the emerging countries of Latin America, Africa and Asia, all want to learn about the Indian ability to do more with less. In healthcare, Devi Shetty’s $1500 cardiac surgery and the Aravind Eye Hospital’s $40 cataract operations are the envy of doctors and public health officials in both the West (where spiralling costs threaten to bankrupt governments and households) and the South where large numbers of people lack such quality, affordable care.

Automotive giants like Renault, inspired by Tata Motors’ ability to deliver a world class car for $2500, are now making $4000 SUVs in Chennai. And industrial behemoths like GE and Siemens are developing new generations of highly affordable, simple and reliable medical devices and industrial products in their R&D centres in Bangalore. Importantly, these products are not just meant for Indian consumption but also for other emerging markets and the West.

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Perhaps the most remarkable breakthroughs in frugal innovation in India have been in the area of telecommunications. From the Nokia 1100 handset to Bharti Airtel’s Rs 5 scratch card for 1 cent a minute calls: India has set the standard for value for money in this sector for over a decade.

Now even those high standards seem to have been surpassed by the Ringing Bells smartphone. This smartphone (and devices like it) not only promise to drive further innovations in telecoms, they herald a wider frugal revolution in India with huge implications for inclusive growth here and in many parts of Asia, Africa and Latin America as well.

Over 3 billion people around the world live outside the formal economy and face significant unmet needs in health, education, energy, food, and financial services.

Perhaps the largest concentration of these people live in India. For years this large population has either been the target of aid or has been left to the mercy of overstretched governments. In recent years, however, large firms and smaller social enterprises have begun to see the next 3 billion as an enormous opportunity to be reached through market-based solutions. These solutions must, however, be highly affordable and flexible in nature, and typically include previously excluded groups both as consumers and producers. Bringing the next 3 billion into the formal economy through frugal innovation has already begun to unleash growth and create unprecedented wealth in Asia, Africa and Latin America.

For instance, basic, text-enabled phones have brought massive productivity gains to farmers and small businesses in India and elsewhere. In addition to creating new sources of employment, these phones have also enabled the roll out of educational, healthcare and financial services, affordably and at scale. Consider Safaricom, Vodafone’s subsidiary in Kenya. In 2007 the company introduced M-Pesa, a service that allows anyone with an SMS-enabled phone to send and receive money as e-float which can be cashed in a kirana shop acting as an M-Pesa agent. Such person-to-person transfers of small amounts of money between people who are outside the banking system has enabled financial inclusion in Kenya in a rapid and highly affordable way. Over 20 million Kenyans now use M-Pesa and the volume of transactions on the system at $25 billion is more than half the country’s GDP. M-Pesa (and services like it) enable people who are unbanked to send, save and receive small amounts of money in a cheap and reliable way. And once people are empowered financially in this way, they can do other things including manage and grow their small businesses more efficiently.

If basic, text-based phones have been able to achieve so much, imagine how much more a nation of 1 billion people connected to each other (and the internet) through smartphones could do. When all Indians, regardless of where they are, can access information from anywhere and trade directly with each other on their smartphones, we would truly have unleashed the full economic and social potential of our creative, jugaadu people. Provided that support services, such as the quality of airtime, keep pace, we are on the cusp of fully tapping into our demographic dividend and driving inclusive growth for many years to come.

Jaideep Prabhu is Nehru Professor of Indian Business at the University of Cambridge and co-author of Jugaad Innovation: A Frugal and Flexible Approach to Innovation for the 21st Century. Views expressed are personal.

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