Abstract
The severe resource constraints that characterize markets at the bottom of the world's economic pyramid have forced firms to innovate both their products and processes. However, discourse in frugal innovation literature on how firms can design frugal processes in response to the resource constraints they face remains relatively sparse. Based on a systematic literature review, in this article we consolidate existing work on the process echelon of frugal innovation. We outline three ways frugal processes that have been conceptualized in the literature thus far, and distill their key characteristics. Based on an exploration of the supply chains of 87 small- and medium-sized enterprises, we show how firms configure these characteristics to overcome resource constraints at each stage of their supply chain. Ultimately, we propose three archetypes of a frugal supply chain that firms can strategically adopt. Firms with the primary goal of increasing consumer access to affordable products opt for a supply-chain structure that favors traditional economies of scale, and postpone any decentralization as further downstream as possible. In contrast, firms aiming to provide consumers with greener alternatives can adopt a hyperdecentralized structure throughout their supply-chain, which is made economically viable through low-cost approaches to distributed manufacturing. Firms interested in empowering local communities should consider hybrid structures that balance the high costs of investments in local capabilities.
Highlights
F RUGAL innovation emerged from highly practice-oriented origins, as an approach by companies trying to achieve the price and functionality requirements of their customers at the bottom of the world economic pyramid, who, at times, earn as little as two United States Dollar (USD) a day [58]
We identify nine different process characteristics synthesized from frugal innovation literature, and show how they can be adopted at the bottom of the pyramid by firms with different primary goals
The bulk of previous research on frugal innovation focused on the unique characteristics of frugal products, their relevance in bottom of the pyramid markets, or in a global setting, regardless of context
Summary
F RUGAL innovation emerged from highly practice-oriented origins, as an approach by companies trying to achieve the price and functionality requirements of their customers at the bottom of the world economic pyramid, who, at times, earn as little as two United States Dollar (USD) a day [58]. Companies operating in bottom of the pyramid markets frequently face constraints such as limited material resources, limited financial resources, as well as limited institutional or infrastructural. Manuscript received October 31, 2019; revised May 3, 2020 and July 16, 2020; accepted July 27, 2020. Review of this manuscript was arranged by Department Editor R. The ability to overcome these constraints is key to frugal innovation [95]. Implementing frugal innovation entails both an understanding of the frugal products themselves, and how they can be designed, produced, and successfully delivered under severe resource constraints [24]
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