Vijay Govindarajan: Jugaad - A Model for Innovation
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This expert on strategy and innovation, is Earl C. Daum professor of international business and the founding director of Tuck’s Center for Global Leadership. He was the first professor-in-residence and chief innovation consultant at General Electric. His latest mission is to design a simple dwelling that keeps a family safe, allows it to sleep at night and gives it a home and sense of dignity and can be constructed for less than $300. The social co-creation project is a contest open to architects, engineers, designers, students and professionals
There is always a danger when you come up with concepts like Jugaad. It could be mistaken as chalta hai or ‘everything goes’. But Jugaad, at the heart, is about a new model of innovation, which is based on constraints.
Historically, we viewed innovation as a process where you spend a lot of money and innovate. That is the US model, that’s the model in rich countries. Because we are rich, we can afford to spend money. So, if it’s healthcare, we want to really push the limits of medical technology and medical science and find a cure for the most complicated disease. This essentially means you innovate by spending more money on the problem.
But, in Jugaad, you ask, ‘How do I innovate by spending less money?’ Jugaad really means solving a customer problem in the most innovative way when your resources are constrained.
There are examples of companies that have done constraint-based innovations correctly (that is without resorting to shortcuts). Two examples of Jugaad: Aravind Eye Care and GE’s ECG machine.
Now, blindness is a big problem in India. It is needless blindness, which can be corrected through a surgery. There are millions of people like that and there are very few eye surgeons. This is a classic problem of innovation under constraint. You cannot relax the constraint, because even if you open medical schools to produce thousands of eye surgeons, it will take many decades to produce them. What do you do with the blind people in the meanwhile? Aravind Eye Care took a page out of McDonalds.
If you look at it, for McDonalds, it’s the same problem. They serve millions of hamburgers with very few people. So, like McDonalds, Aravind followed the principles of standardisation, economies of scale, volume and yet maintained consistent quality. That’s important because you can’t sacrifice quality. In the US, a surgeon wastes a lot of time moving between his office and operating theatres between two surgeries. In Aravind, there are two beds in the surgery room. While one operation is on, the nurse prepares the other patient, and very little time is wasted.
Take another problem: Heart attacks, which are the biggest cause of death in India. An ECG is the first point of diagnosis. The ECG machines that GE sells in the US cost $10,000. Those machines are also very big, so typically they sit in a hospital, and the patient goes to the hospital. Whereas 70 percent of India is in rural areas, where there are no hospitals. So GE decided to innovate: In GE’s $10,000 machine, ECG is printed on a specialised paper. So here, they looked at bus conductors printing tickets and asked, ‘Why can’t we use the same technique?’ Of course, they had to make it work with the hardware platform for ECG machines and that required certain skills. Using that technique is not a chalta hai attitude.
There are three keys to Jugaad: One, for Jugaad to really work, start by understanding the customer problem. Talk to customers, understand what they really want. Two, for a zero-based solution approach, forget about the refrigerator or a house as it exists now. Take a clean sheet of paper; start with the customer’s problem, and ask, ‘How do I solve it?’ Three, focus on execution. Innovation is not creativity. Creativity is about the big idea. Innovation is about executing it, and making money out of your idea. It’s about making the right resource allocations, building the right team, and getting the product to the market.
The key to Jugaad is clearly understanding the customer problem. Always start with the customer problem, and then go back for the solution. For example, Godrej wanted to come up with a refrigerator. Now, the refrigerator is an American innovation, and it costs hundreds of dollars. It is based on compressor technology. It’s the compressor that cools the thing down, and makes ice. In India, you want a machine for $50 or $75. How do you make it? You don’t start it with the refrigerator. You start with the customer’s problem.
When Godrej and Boyce talked to villagers, they found a couple of interesting things. First, villagers don’t want ice. American customers needed a freezer, as they use frozen food; they keep their food for a long time. Poor people in India don’t eat frozen food. They cook everyday. They want to store leftovers for maybe two meals, one day.
Once Godrej and Boyce got this insight, they started looking for solutions. They found computers used a certain chip for cooling. Such chips are used in millions of computers so the price was very low. So, Godrej and Boyce used that in their refrigerator. It doesn’t operate with a compressor, but it operates with good insulation — cools it down to ambient temperature, using a chip. This is what constraint-based innovation is about.
It’s not just in India. These innovations are happening in other emerging markets as well. They may use a different word, but the concept is no different. So, you call it ‘frugal engineering’, ‘rural innovation’, Jugaad — I call it reverse innovation.
Another key to Jugaad is a beyond-reach kind of target. What a target like a $2,000 car, or a $300 home does is that it creates a tremendous level of excitement, motivation, energy, inspiration and imagination. When you set such a target, you increase the effort level in the organisation.
If you want to take a refrigerator that costs $1,000 and make it for $75, you can’t just take the compressor and improve its efficiency. If you want to take a $10,000 ECG machine and make it into a $500 machine, you can’t just tweak some parts. You have to think about doing something radical. If you cut corners, you are not going to solve customers’ problems. You are going to make money only when customers buy the product. If you build crappy products, the customer is not going to buy it. Poor people understand value. I have not seen poor people wait in line and buy a black-and-white TV. You can’t give yesterday’s product or yesterday’s technology. They want quality products at different price points.
Collaboration: A New Way to Solve Problems
I did my charted accountancy in India. And from my uncle’s house in Chennai, where I was staying, I had to walk to a bus stop every day for three years. On the way, there was a slum. I was always bothered by the conditions in which the people lived. Because they did not have a proper house, if there were rains, people got wet, and the children in particular, fell sick. There was no proper sanitation, so there was disease.
So, we [V.G. and Christian Sarkar, a marketing consultant] created a blog entry asking, “why can’t we create a $300 house?” We created a lot of noise. It got a lot of attention, and then we created a Web site, 300house.com. Five hundred people have signed up on the Web site — architects, engineers. We have created a global design challenge, the winning entry will get a $25,000 prize.
Now I know nothing about building a house. So, we have created a collaborative, open innovation platform on which a lot of people are jumping in and contributing. I feel, five years from now we will find a solution to it. I am trying to write a book on the $300 house. My feeling is that at some stage a company will say this is a great opportunity.
In fact, I would say all social problems can be solved this way. No single person or entity can solve these problems — be it health, education, energy or transportation — by themselves. What we need is a hybrid value chain.
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