How can we, as an industry, do more with less? That’s a challenge more and more companies are facing nowadays. It’s also a conundrum posed by frugal innovation which seeks to deliver products and services that are not only affordable but also sustainable.
Frugal Innovation - or Jugaad: how to do more with less
In a recent keynote address to Ecole hôteliere de Lausanne’s prestigious international advisory board, innovation advocate and author Navi Radjou outlined the principles of frugal business models. These go beyond creating a new product for emerging markets – be it a fridge that doesn’t use electricity or an affordable portable infant warmer designed like a mini sleeping bag that has saved the lives of hundreds of thousands of premature babies – but rather they create new product lines or business units.
Radjou cited the example of Renault-Nissan which had launched a low-cost car, the Logan, in India with Mahindra. Those vehicles used traditional combustion engines. The ‘next disruption’, as Radjou put it, was to develop more sustainable transportation such as an $8,000 electric vehicle for the China market.
Radjou argued that as consumers become more environmentally conscious, it will be important for companies to seek a competitive advantage by ensuring that products and services are sustainable.
They may also need to consider frugal mental models or mindsets.
Today we think about selling products and services to customers. But what if the next generation of consumers says ‘I create, therefore I am’ - and want to make their own products using 3D printers and industrial tools which were previously only available to high-end manufacturers?
Embracing the sharing and circular economies
As for the hospitality industry, he says, it should look to embrace two major paradigms that are emerging: the sharing and circular economies.
In terms of the sharing economy, we’ve seen the emergence of companies like Airbnb and Uber, but Radjou believes the business-to-business (B2B) sharing economy will be “far bigger” than the business-to consumer (B2C) sharing economy which he puts at 350 billion dollars. He cites as an example of a B2B company Floow2 in the Netherlands which enables firms to share assets and resources, such as construction or hospital equipment.
“So that’s something to think about: how can you also be the pioneer? Maybe Airbnb will be disrupting you on the B2C side. Maybe there’s an opportunity for you to be a pioneer in the B2B sharing economy.”
As for the circular economy, there will be increasing demand for resources so recycling will be critical as companies look to re-use waste in “very creative ways,” whether it be jeans made out of recycled plastic bottles or cosmetics and other products made from coffee waste.
Pushing the envelope on sustainability
In his keynote, Radjou also highlighted the International Tourism Partnership’sHotel Global Decarbonisation Report, which calls for hotels to reduce their greenhouse gas (GHG) emissions by 66 percent by 2030 and by 90 percent by 2050. Although the study was ‘fascinating’, Radjou didn’t think it would be enough for the hospitality industry to reduce its carbon footprint. Instead, it should focus on creating a more positive impact instead of doing less harm.
"What if hotels were to become self-sufficient units which are able to produce their goods and services within the hotel itself?”
He points to a service sector company in Tokyo which grows its own rice and vegetables for its canteen. Hotels, he adds, are also creating urban gardens on their rooftops.
Another example of “how we can push the envelope on sustainability,” he says, is the factory or hotel as a forest. “What if business becomes nature?”
While that may seem a little far-fetched, a mountain forest hotel is being built in Guizhou in China as a way not only to reduce pollution but also improve air quality. For Radjou, the project sends a clear message that “the hospitality sector can be a kind of global leader in setting new standards in terms of ecological innovation.” However, it will require strong leadership to make it happen.Guizhou – mountain forest hotel - Picture credits: www.stefanoboeriarchitetti.net
As he points out in an interview with Hospitality Insights, “what is important is that the hotel industry has to adopt frugal innovation not only because it’s going to help them save money and maybe create new revenues.”
Frugal innovation is also needed because the next generations of consumers – Gen Y millennials and Generation Z – are going to be looking for brands to be socially and environmentally responsible, and will start disrupting the hospitality sector by ‘voting’ with their wallets.
“Frugal innovation is a fantastic lever,” he says, to deliver services “faster, better, cheaper. Frugal innovation also a great way for an entrepreneur to create a whole new economic model that provides an alternative to the very resource-intensive way we have built the capitalistic society so far.”
Accor: ‘A great case study of frugal innovation’
The Accor group, which has appointed a senior vice president for entrepreneurship advocacy, is connecting with ‘nimble start-ups’ who may be able to help the hotel chain deliver a better guest experience or source new building materials that are sustainable.
“They have essentially created a whole new governance model at Accor group to practice what we call ‘open innovation’ which is to go outside their company and team up with agile start-ups who can help them not only innovate faster and better, but in a more sustainable way,” Radjou told Hospitality Insights.