Jugaad – A new discipline for the economy of the future
Traditionally, Jugaad are locally-made small trucks that provide low-cost transportation for people and goods in rural India. These small trucks, equipped with an engine derived from an irrigation pump, typically cost less than $2,000. Recently, the use of the term Jugaad has been extended to describe an improvised arrangement or work-around, which has to be used because of lack of resources or excessive constraints.
Looking at the picture above, it would be easy to dismiss Jugaad innovation as something that cannot take hold in rich markets. But impressive sales in America of China’s Haier low-cost appliances and India’s Mahindra & Mahindra low-cost small tractors have shaken well-established competitors and demonstrated the potential of Jugaad in the West. Western companies have taken notice too, now designing new ultra-low-cost products, not only for BRIC markets but also for mature Western markets, in what has been called ‘reverse innovation’.
Of course, it is unlikely that we will see the exact same Jugaad trucks driven by American or European farmers. But they perfectly illustrate one point about low-cost innovation that we will see becoming increasingly successful in so-called ‘sophisticated’ markets: the need to design – or redesign - from scratch. These trucks are not the result of a simplification process of existing vehicles; they have been designed from scratch to meet a specific transportation purpose at the lowest possible cost. They may use existing automotive components (such as the wheels) where these are the cheapest way of meeting the intended purpose, or non-automotive components (such as the irrigation pump engine or the wooden plank fenders) or no component at all (where are the windscreen, the doors, the bonnet?) But these components have been selected and put together by design.
This is nothing less than a peculiar case of Design Thinking, that IDEO’s Tim Brown defines as “a discipline that uses the designer’s sensibility and methods to match people’s need with what is technologically feasible AND economically viable”. Even if the term ‘Design Thinking’ is usually applied to fancier products such as iPads, there is nothing in its definition that requires the product to be fancy! Actually, the iPad and the Jugaad truck have got this in common: they’ve been designed from scratch. The Jugaad truck is not a simplified truck any more than the iPad is a simplified computer. Both are products of Design Thinking in their own rights. In that sense, both are examples of disruptive – as opposed to incremental - innovation.
With natural resources increasingly difficult to exploit, with mature economies in the grip of long-term financial and demographic constraints, with BRIC economies having to service a large base of still-poor population, Jugaad innovation will become an increasingly necessary and successful discipline. Those who master the art of designing products and services from scratch to meet disruptive cost targets (as opposed to pressurizing suppliers for incremental price concessions and sweating assets for marginal productivity) will create a the economy of the future.