Frugality:the missing piece ininnovation at the bottom of the pyramid jigsaw puzzle

Abstract

Given, the changing business landscape globally, innovation is increasingly getting focus as a panacea for economic downturn. However, innovationcannot be a one size fitsall solutionacross the globe since different economies operate at different levels. To achieve economic development, innovation must take into account the constraints within which thisstrategyispursued.Thebottomofthepyramidconsistsofpeoplewholiveonlessthan$2/daywhoarecrosscutting intermsofcultures,literacy,capabilitiesandneedsandtoprofitfromthesemarkets,focusmustbeplacedontotalvalue delivery. This creates an innovation opportunitythat requires reframing the ‘normal’ rules of the game and challenging coreassumptions.Innovationatthebottomofthepyramid requirescommitmentto awareness,access,affordabilityand availability as fundamental constraints for creating business models. Specifically, business models in these markets capture total value through high volumes and low margins unlike those higher up the pyramid. This article presents a conceptual discussion on how firms at the bottomof the pyramid economies can exploit frugal innovation to overcome constraints withinthese economies. Throughanalysisofliterature, the article argues that the scarcityofresources at the bottom of the pyramid can confer frugality advantages. To capture value from frugal innovation, firms must take into account the specific constraints facing the firm and the market. This requires recognizing that bottom of the pyramid markets are dissimilar with different challenges and so frugal innovation must be tailored to the challenges they intend tosolveinordertobesustainable.Thisarticleisinformativetomanagersandpolicymakerspursuinginnovationinthese markets.Italsoprovidesafoundationtostrategyandentrepreneurshipscholarsinreviewingtheconditionswithinwhich innovation captures value especially in the bottom of the pyramid markets