How Innovation Solves Problems

Serve client needs in unprecedented times with frugal innovation and become a winner of the crisis

Responding to trends and unprecedented events like COVID-19 and in order to exploit the potential of digital innovations, current customer needs must be met accurately. New business models call for customer orientation, entrepreneurial flexibility, and agile innovation management.

Technology forms the backbone of the current innovation cycle, precisely the digital transformation. However, a technological solution only becomes an innovation when it generates concrete added value for the user. Activism to digitize everything that can be digitized is not conducive to achieving the overall goals of a business. Thus, the primary purpose is profitable growth while maintaining corporate social responsibility. Firms can only realize sustainable growth if they systematically use technologies for innovation to support the customer journey. To meet customer expectations and to capture new markets, we need more than just digital innovations.

The happiness index

Gross domestic product and income growth are essential for economic development. However, what drives human motivation is the quality of life, well-being, self-actualization, or happiness. The World Happiness Report has measured the happiness of an economy since 2011. From a sociological point of view, the overall goal is to have all the things that are essential for a better life, such as health care, security, education, or nutrition. To achieve this, economic growth must be generated, and this requires innovation. Be it happiness or innovation, Switzerland has been at the top of these rankings for years. The Global Innovation Index Report 2020 asked the question “Who Will Finance Innovation?” And that is the crucial point! Financial resources are needed to promote technologies that support innovation and in turn, make people happy.

Management theory from the 1980s has led us to the maximum principle: ever more value, money, power, prosperity. Our traditional understanding of innovation is that we bring as many and better, sometimes useless products to the market as possible. The Japanese toy “Tamagotchi” from the 1990s was introduced to the market, only to suggest to the user that he or she has to take care of a virtual chick. Nobody would have thought that a need could be created for this product. However, innovation should solve a problem, not create a need.

“An innovation should solve a problem and not create a need”

New ways of thinking

People’s situations change regularly and often at short intervals. By observing customer behaviour during the corona lockdown, we found that demand does not correspond to the supply. Uncertainty and fear have led to people behaving passively ever since, hardly making any decisions and focusing on existential matters. Luxury products and premium services are hardly in demand anymore. Companies that cannot improvise and quickly adapt their offerings to a new situation will lose customers. This resilience is an essential prerequisite for anti-cyclical investments in innovation, especially in exceptional situations. The time to react and change the offering to new client demands is vital. If entrepreneurs are waiting for the next innovation cycle to begin, they have already missed it.

In contrast to a traditional innovation process, where planning is based on a rigid long-term strategy, agile methods such as Lean Startup or Lean Innovation help us to find our way in a volatile, uncertain and complex world. Through continuous development, testing and optimization, the risk and marketability of a product or service can be assessed quickly and cost-effectively. In three iterative process steps, we see whether a relevant problem of the customer is solved (problem-solving fit), whether a real market for the innovation exists (product-market fit) and whether the business can grow profitably (scaling).

“If you wait for the next innovation cycle, you already missed it”

Filter information from the noise

The growing data volume with simultaneously decreasing marginal and transaction costs makes it difficult to separate noise from relevant information. We also see this excessive demand and incomprehensibility in machine learning and artificial intelligence. Humans are less and less able to explain how an algorithm reaches a conclusion or decision. In addition to agile methods, chaotic, unpredictable, and incomprehensible situations require a new meaningful conceptional framework. In 2018, the futurologist Jamais Cascio introduced the acronym BANI for this new situation. BANI stands for brittle, anxious, non-linear and incomprehensible. It describes the current state of the world better and explains sensitivities and interrelationships. The current situation needs a new way of thinking, which promotes resilience, empathy, flexibility, and openness.

“Frugal innovation offer new vistas that promote resilience, empathy, flexibility, and openness”

Chaos instead of failsafe systems

In a global business world, a cascade of failures can lead to a catastrophic collapse. Once more, COVID-19 showed that an unpredictable event in one country could trigger a global crisis. As a result, a brittle system does not fail but breaks down, and chaos follows. As a result, people’s fear and anxiety increases, even to the point of paralysis of the global economy, partly because cause and effect are decoupled and disproportionate. Non-linearity is a fact for the incidence rate of the pandemic but also drives business networks and social media interactions. A range of factors that seem to be irrational, illogical and senseless contribute to our feeling of losing control.

“Frugal innovation exhibits non-linear customer journeys”

Learning from Asia: Frugal innovations

With the lean method, all unnecessary steps in the innovation process can be eliminated, and risks in development and investments in marketing can be optimized. The market is increasingly demanding, simpler, and cheaper solutions that are practical and tailored to the customer’s circumstances. Nowadays, these solutions must be quickly accessible via digital platforms. The complete focus on the customer’s needs can be achieved with the concept of frugal innovation. This unique innovation approach, which is still relatively unknown in the Western world, has its origins in India, where Jugaad means an emergency or transitional solution. Most emerging markets do not allow complicated and expensive products. Like Lean Startup, where the goal is to determine whether money can be made with a minimally viable product (MVP), frugal innovation focuses on core functionality while reducing complexity and removing nonessential features. Prototyping and iterative customer interactions accelerate the learning process, and the core benefit of a solution is tested quickly and in a resource-efficient manner.

With frugal innovations, the customer’s view, type of application and application environment are moved into the centre of the innovation process. It is only applied where it makes sense from the customer’s perspective. This open, accessible approach reconfigures value chains and redesigns products to serve users in a particular situation. It generates value with few resources and can translate challenges into opportunities. Embracing open innovation concepts for development and commercialization boosts frugal innovations because value-added can be created effectively within a network of diverse actors.

Conclusion

The quest for simplicity also reflects trends like minimalism, which includes the appreciation of a simple, sustainable lifestyle and the conscious reduction of material goods (sharing economy). For companies, this means a change from conventional innovation strategy with ever new technical features, functions, and high-quality services. The new mindset includes a sustainable strategy that deals with sudden changes and supports agile methods, with which frugal innovations can be developed and brought to new markets. To do so, we need to put ourselves in our customers’ shoes and see where they run and where the shoe pinches.