Vijay Govindarajan: Jugaad - A Model for Innovation
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.