Opinion

R&D points the way forward for China

By Anil K. Gupta and Wang Haiyan (China Daily)
Updated: 2010-08-16 11:07

Frugal Innovation

By frugal innovation, we mean innovation that strives to create products, services, processes and business models that are frugal on three counts: frugal use of raw materials, frugal impact on the environment and extremely low cost. The rapid rise of emerging markets (with China and India as the central players) is the prime mover behind the critical need for all three types of frugality.

Take resources and the environment. Two of the biggest users of raw materials as well as two of the biggest contributors to global warming are cars and buildings. As income levels in China and India rise, demand for cars, larger and newer homes and offices will grow exponentially, creating a challenge as well as an opportunity.

It is unlikely that China and India will decide to put the brakes on their own growth. Instead, what we will witness is a rapid shift from products, services and processes that are energy inefficient, raw material inefficient, and environmentally inefficient to those which are.

Note also that, over the next 20 years, the bulk of the absolute growth in market demand for most products and services will occur at the middle and low-income levels in the big emerging markets. Winning these mega-markets will require that products and services also be ultra low-cost.

A passion for frugal innovation will become increasingly essential not just for companies that sell consumer products and services (such as P&G and Unilever) but also for those which are purely in business-to-business domains (such as Nokia Siemens Networks, IBM and GE). Over the coming decade, companies will have no choice but to become ever more passionate about frugal innovation. Otherwise, the market will move to companies that are.