The way how economists think about economic progress, growth and innovation

has been pioneered by the Austrian-American economist Joseph Schumpeter

(1883-1950). Academic research has led to a myriad of conceptual definitions (by
linking innovation, for example, to product, process, incremental, architectural,
radical, market, disruptive, organizational, complementary, social and numerous
other features and characteristics) that all try to shed some light on the process of
Creative Destruction which Schumpeter described as:
the opening up of new markets, foreign or domestic, and the organizational
development from the craft shop to such concerns as U.S. Steel illustrate the same
process of industrial mutationif I may use that biological termthat incessantly
revolutionizes the economic structure from within, incessantly destroying the old
one, incessantly creating a new one. This process of Creative Destruction is the
essential fact about capitalism [1].
It was Schumpeters [1] strong belief that a capitalist system best fulfills the
necessary conditions to reach the ultimate goal of any nation (be it a developed or
an emerging or under-developed country), that is, enabling its people to lead a
better life and to reach a higher standard of living for everyone in the society.
Recognizing that scarcity rules our lives and that we all are constrained by time
and money, free enterprise businesses and firms (whether they are small, mediumsized or large) as well as managers (employed or self-employed) are the actors that
have to make the choices which ultimately guarantee economic survival. As there
is no such thing as a free lunch, when making choices then one faces trade-offs
which means that one incurs an opportunity cost that arises from foregoing the next
best alternative course of action (which is the activity not chosen). Those actors
with the lowest opportunity costs will come out as the winner in the competitive
race for economic profits that takes place in highly competitive markets. Making
better choices than your competitors requires a better strategy that then (hopefully)
results in a sustainable competitive advantage over the rivals. But what is a good
strategy? [2,3]. On the one hand, strategy has to do with making good economic
choices of what to produce. You have to produce and offer something unique, a
good or service that is valuable in the eyes of the consumer (who then would be
willing to spend his/her hard-earned money for your good or service). On the other
hand, you have to decide about the way how to produce. Being under the constant
pressure to improve productivity, this requires cost efficiency, that is, you have to

produce the good or service at lowest cost in order to make the profit as high as
possible.
This is where the Jugaad mind set comes into play! Jugaad (a word taken from
Hindi which captures the meaning of finding a low-cost solution to any problem in
an intelligent way) is a new way to think constructively different about innovation
and strategy. It has a long-lasting tradition in India but is also widely spread in the
rest of the BRIC countries and numerous other emerging economies. Jugaad is
about extending our (Western) understanding of entrepreneurial spirit (in the
traditional Schumpeterian style). Jugaad means thinking in a frugal way and being
flexible, which, in turn, requires to adapt quickly to (often unforeseen) situations
and uncertain circumstances
in an intelligent way; intelligence in this context isnt about seeking sophistication
or perfection by over-engineering products, but rather about developing a goodenough solution that gets the job done [4]. This very pragmatic approach is
definitely different from the extreme pressure that highly sophisticated production
processes impose on managers who are faced with the expectation to deliver
dramatic operational improvements all the time. In order to overcome this problem,
Jugaad names the following six guiding principles [4]: Seek opportunity in
diversity; do more with less; think and act flexibly; keep it simple; include the
margin; follow your heart. As these principles carry some universal truth they can
be applied in any (developed or emerging) competitive environment!
The best known practical example of Jugaad Innovation in Asia is certainly Tata
Motors. It is Indias largest car manufacturer who (since March 2009) is able to
offer the standard version of the Nano Model for less than US $2.100 [5].
Implementation of Jugaad Six - Principles
1

Prioritize the principles, most relevant to your company, your need to adopt.

Aim first for the low hanging fruits.

During Jugaad adaptation

Do celebrate your existing Jugaad Innovators

Do persuade skeptical employees by creating a sense of urgency

Have cross- pollinate and synergize Jugaad Ideas.

Outline a bold vision for the companys future & then employees will come
up with appropriate strategy for realizing the vision. (Vision of Rs. 1 lakh
car by Tata Motors)

Brainstorming through grassroots collaboration can help identifying

challenging problems & generating counter-intuitive solutions.

Bold and creative leadership is vital for successful adoption.

The six principles of Jugaad:

1. Seek opportunity in adversity
2. Do more with less
3. Think & act flexibly - Dont just think outside the box, they create whole
new boxes.
- Question the status quo.
4. Keep it simple
- Shift over engineering to good enough solution.
5. Include the margin Include to serve marginal segments of un-served and
undeserved consumers
6. Follow your heart Employ intitution, empathy & passion.
Deliver more value to customers at less cost.
Develop high quality products at low cost.
--------------------------------------------------------------------------------------------------------------------------1. Seek opportunity in adversity:
Harsh environment nurtures resilience.
- Suzlon wind Wind air to generate electricity for his Textile Mill, Worlds 5 th
largest wind energy solution
provider, employs more than 13,000 people, Serves in 30 countries on 6
Continents.
- Mr. Kanak Das of Assam provided in his bicycle a shock absorber, which
compresses & releases energy to
the rear wheel. Now cycle runs faster on bumpy roads.
Recognize that the glass is always half full not half empty.
- Reframe challenges as opportunities and constraint as a spur to innovate.
- Leaders must have realistic optimism.
Realize extreme conditions are fertile soil for extreme innovation.

Build Psychological (Human) capital to boost confident Resilience

- Create motivation, engagement, confidence, resiliency, hope & optimism
amongst employees by

empowering employees at every level to think & act like Jugaad innovators
(SGAs & QITs).
--------------------------------------------------------------------------------------------------------------------------------

Riboud, CEO of Danone Our future hinges on our ability to explore & invent new business models &
new types of business
corporations.
Addressing local challenges & opportunities by sharing ideas through peerto-peer knowledge networks.
Decentralize decision making and R&D operations.
Reduce operating cost without compromising quality.

Approach big challenges with a growth mindset.

Tap the power of networks to tackle big market threats.

3M:
15% of paid up work time to pursue their dream projects.
30% of its total revenues from new products, introduced in preceding 5years.

-------------------------------------------------------------------------------------------------------------------

2. Do more with less:

Argentinean farmer Gustavo Grovocopatel

Problem
Land scarcity
Scarcity of Labour

Solution
Leasing rather than acquiring
Subcontracting every aspect of farm
work
Hire labourers only when needed
from service providers network

Lack of capital for

Renting equipments
owning equipments
----------------------------------------------------------------------------------------------------------------------------------------

Scarcity is the mother of invention.

Being resourceful in a resource-scare environment.

- Apply frugality in every activity at every step along the value chain.

Reuse & recombine.

X-ray machine chest X-ray machine - cost `10 Lakhs against `75
Lakhs.

Remain asset - light.

Leverage existing networks for distribution.

Theodre Roosevelt, All the resources we need are in the mind.
-----------------------------------------------------------------------------------------------------------------------------------------1. Think & act flexibly:
One cant alter a condition with the same mindset that created it in the first
place
Albert Einstein.

Think the unthinkable

- Dr. Mohan in Chennai - mobile tele-medicine clinic in remotest villages.
- Mr. Hande, solar electric light company (SELCO) Solar light in villages.

Dont plan They Improvise

Murphys Law Anything that can go wrong will go wrong.
Tata Motorss Nano Car got shifted from Singur to Sanand.

Act with speed & agility

Chinese company Haier
- 4000 self managed, cross functional units (Including R&D, supply
chain, sales & marketing)
- Making a big company small
(Bottom-up, customer centric organizational structure)

--------------------------------------------------------------------------------------------------------------------

What makes large firms so inflexible?

a. Complacency
Past successes can breed complacency & sow the seeds of failure.
Every challenge is unique & requires a different approach for
successes.
b. Risk aversion
Tenure of CEO is shrinking, forcing them to deliver short term results
rather than drive long-term transformational changes.
c. Disengaged Employees

Employees grow cynical or fearful. They play safe.

Employees feel that their inputs are not appreciated.
In India, only 37% feel engaged at work.
Rigid, time consuming product development processes.
-------------------------------------------------------------------------------------------------------------------------------------

Learn to Improvise
a. Break rules & shift values when necessary.
- Breakthrough innovation occurs when commonly held values &
beliefs are challenged, not
reinforced.
b. Create time & space for Employees to improvise & experiment.
Google has 70/20/10 model for organizing work.
70% on core business tasks.
20% related projects.
10% projects unrelated to their core work.
c. Get outside your comfort zone to gain new perspectives
Visit to rural market.
Enroll to a theatre to improve communication skill.
d. Break down organizational silos to gain speed

- Flat organizational structure.

- Set bolder targets.

--------------------------------------------------------------------------------------------------------2. Keep it simple:

Leonard da Vinci:
Simplicity is the ultimate sophistication.
- Advantages
a. Cheaper to make, hence more affordable.
b. Easier to install & maintain.
c. Can satisfy large customers.
- The art of simplicity:
a. Focus more on customers needs than their desires.
b. Employ a functional approach to product & service.
c. Develop practical solutions to address needs.
--------------------------------------------------------------------------------------------------------------------- To light in Filipino Slums, a solar bottle bulb (SLB) was used.
A recycled plastic bottle filled with bleach-treated water that is fitted into a
hole in the corrugated roof of
homes. The water in the bottle refracts the Suns rays, producing
equivalent to a 55 watt light bulb.
- Nokia 1100 - a rugged cell phone with a flash light became very popular &
sold 25 corer units around the
world.
- Indian govt. launched Rs.3000 tablet, cheapest in the world.
- Simplify products & organization to serve customers better

Marry the ingenuity and the process focus, and you have the best of both
worlds.
Dr. Wido Menhardt,

Head of Philips at Bangalore

- Keep improving the user experience without sacrificing simplicity.

- Simplify product architectures & Reuse Platforms across products (Cars).
------------------------------------------------------------------------------------------------------------------------------

5. Include the Margin :

Inclusive model: Yes Bank - 46% loans to underserved segments still making
profits and improving peoples lives.
--------------------------------------------------------------------------------------------------------------------------------------6. Follow your Heart :
Unleashing the passion of individual employees & channeling it into innovative
pursuits that serve a larger
purpose.
Kishore Biyani, owner of Big Bazar, set up the layout & displays of products,
including salesmens uniform to give
an experience of real Indian bazaar to Indian customers, and not following the
western system.
Your heart knows what your mind does not:
-

Extreme conditions arouse the empathy of Jugaad entrepreneurs.

Mahatma Gandhi said,

Happiness is when what you think, what you say, and what you do are in
harmony.
-

By aligning thoughts, words and actions with heart and spirit, Jugaad
entrepreneurs derive a sense of fulfillment by serving a larger cause. This is
the secret of their undying passion.

Dr. Devi Shetty - founded Narayan Hrudayalaya, Bangalore, where hundreds

of low income people receive heart surgery every week.

The world is too complex for the Mind alone to grasp:

Pure logic will not suffice.

Jack Welch called Gut Intelligence--- a creative intuition honed by years of
experience.

Customers yearn for authentic relationships. As per research, only 5% agree

with advertising claims, and word of mouth is more effective. Customers are
more likely to purchase from company that listens to and acts on their
advice.

Companies should give employees the space & time to pursue their passion
in a constructive manner.

Engage your customers in a heart to heart conversation.

------------------------------------------------------------------------------------------------------------------------------------Integrating Jugaad into your Organization

Never try to change company culture. Try, instead, to work with what you have
got
- Peter Drucker.
Jugaad innovation delivers the most when it is practised in complex & volatile
environments with following characteristics:

Rapid changes - requires flexible thinking & rapid fire actions.

Resource scarcity - revamping supply chains to do more with less.

Frugal & diverse customers - cost conscious customers & seeking affordable
products tailored to particular needs.

Industry immaturity - are still nascent.

Exploding interconnectivity -

Business Environment
Unprecedented Challenges:

Resource constraint
Volatile market condition

cell phones, banks, etc.

Complex & unpredictable business environment

Innovation will be the key differentiator between the winners & the also-rans.

Difference between innovation and jugaad:

Innovation
Is done in structured R&D
depts.
Expensive
(Capital
Intensive)
Top down approach

Jugaad
Flexible,
driven

Instinct

Frugal (Economic)
Bottom-up
approach

We need a dynamic balance between innovation & Jugaad by integrating structured

R&D model of innovation with a Jugaad mindset for growth & competitive advantage
ensuring sustainable & inclusive development. It should be an affordable solutions,
innovative business model or process, looking beyond the conventional way of
doing things, which ease delivering of desired results.
It is quite simple, a unique way of thinking & acting in response to challenges; it is
spotting opportunities in the adverse circumstances & improvising solutions using
simple means, it is about doing more with less.

We need to:
Nurture Jugaad mindset by unleashing & harnessing grass root employees led
creativity.
Right balance between top-down R&D strategies while supporting bottom-up
Jugaad innovation.

Finding, sharing & integrating the dispersed knowledge among all levels of
employees is equally important for generating ideas.
Culture that promotes openness & adaptability; harnessing the creativity of
employees, customers & suppliers