Wednesday, January 27, 2010

Jugaad: A New Growth Formula for Corporate America

Jugaad: A New Growth Formula for Corporate America

by Navi Radjou, Jaideep Prabhu, and Simone

Frugal innovation is a hot topic today as post-downturn corporate America looks for ways to do more for less, while serving broader markets. This will require practicing the gutsy art of Jugaad. The Hindi term roughly translates as "overcoming harsh constraints by improvising an effective solution using limited resources". We call it the art of creative improvisation — within a framework of deep knowledge and experience.

Practiced regularly in emerging markets such as India, Jugaad also catalyzed growth in the US during the industrial revolution. For instance, in 1831, a Virginia farmer named Cyrus McCormick addressed the problem of scarce food supply when he invented a mechanical grain reaper. McCormick also went on to innovate in credit, service and sales practices that became key components of American big business across sectors. He used local agents to educate farmers about uses for the grain reaper as well as to assess farmers' credit-worthiness. McCormick even got elected as a corresponding member of the French Academy of Sciences, "for having done more for the cause of agriculture than any other living man." Creative farmers like McCormick have historically been America's best implementers of Jugaad.

But if the Jugaad spirit seemed to have waned in America's post-industrial economy, our research shows that it is alive and kicking in fast-growing emerging economies like India, China, Brazil, and South Africa.
Over the last five years, we have studied and interacted with scores of entrepreneurs in India and beyond who practice Jugaad to understand their mindset and innovation principles. We find that Jugaad-minded entrepreneurs turn adversity — such as widespread scarcity of natural and financial resources in India — into an opportunity to innovate and create more valuable products and services at less cost for more people. That's the case, for instance, of Harish Hande, who founded SELCO in Bangalore, India in 1995.

While the Indian government is still deliberating on how to effectively deliver electricity to the 600 million Indians who live off the grid, Harish has already sold more than 100,000 modular solar lighting systems in the remotest regions of India. His firm SELCO employs an innovative business model that relies on a cost-effective grassroots distribution network to deliver affordable electricity on a pay-as you-go basis to underserved Indian shops, households, and schools to power their everyday socio-economic activity.
SELCO's frugal just-in-time energy distribution system — as opposed to the always-on but wasteful electricity grid — brings more value to more Indians at less cost, and it is both environmentally and economically sustainable. SELCO's business model is an outcome of the Jugaad mindset.

We strongly believe that entrepreneurs and corporations in the West — as they emerge from the economic recession — can also benefit from the Jugaad mindset as they seek to innovate and grow in a resource constrained business environment. How can Western organizations concretely put Jugaad in practice?

Through our research, we have identified four operating principles or innovation rules:

1. Thrift not waste. This first rule — which promotes frugality — helps tackle scarcity of all forms of resources.

2. Inclusion, not exclusion. This second rule helps entrepreneurial organizations to put inclusiveness into practice — by tightly connecting with, and harnessing, the growing diversity that permeates their communities of customers, employees, and partners.

3. Bottom-up participation, not top-down command and control. This third rule drives collaboration. CEOs who tend to act as conductors must learn to facilitate collaborative improvisation just as players in jazz bands do.

4. Flexible thinking and action, not linear planning. This fourth rule facilitates flexibility in thinking and action. Jugaad-practicing firms are highly adaptable as they aren't wedded to any single business model and pursue multiple options at any time.

We will discuss in future posts how Western corporations can effectively adopt and profit from these principles that help drive frugality, inclusiveness, collaboration, and flexibility. Meanwhile, let us know how you think your own organization can benefit from a Jugaad mindset.


Navi Radjou is Executive Director of the Centre for India & Global Business (CIGB) at Judge Business School at the University of Cambridge where Dr. Jaideep Prabhu is the Jawaharlal Nehru Professor of Indian Business and Enterprise. Dr. Simone Ahuja is the founder of Blood Orange Media and advisor to CIGB. The authors have created a new television series featuring Indian innovation and the Jugaad mindset, Indique | Big Ideas from Emerging India, with support from Best Buy Corp. The series begins airing in PBS markets in January (please check local listings).

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