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 / Spring 2013 / Issue 70(originally published by Booz & Company)


What the West Can Learn from Jugaad

The size of their R&D investments caused many Western firms to become risk averse, and led them to implement standardized business processes such as Six Sigma and stage-gate analysis to manage their innovation projects. These structured processes were expected to drastically reduce uncertainty and the risk of failure. And they do have several well-documented benefits, including delivering volume-oriented economies of scale for standardized products and services, providing for the capital-intense needs of “big risk, big reward’’ R&D projects, and enabling more effective and efficient execution of innovation projects in stable environments. Yet structured processes can’t deliver the agility and differentiation that enterprises need in a fast-paced and volatile world. Six Sigma, for example, works marvelously when you are seeking to institutionalize “sameness.” But it can also be like a straitjacket: Once you get in, you are stuck, and when things start to change, you can’t move. Worse, the orthodox Six Sigma culture weeds out positive deviance—the unconventional and counterintuitive strategies used by pioneering employees to solve vexing business problems that can’t be addressed with traditional approaches.

The top-down R&D systems common in the West are also often unable to open up and integrate bottom-up input from employees and customers. But in today’s interconnected world, finding, sharing, and integrating knowledge from across the spectrum is essential. It’s clear that companies competing in this business environment need a new approach to innovation and growth —one that, like jugaad, is frugal, flexible, and participative.

Jugaad Regained

Instead of always using a hammer to deal with their problems, companies might find it helpful to use a screwdriver from time to time. In other words, we are not proposing that companies abandon their traditional structures and processes for innovation. Rather, they should expand their innovation tool kit.

Jugaad can bring value to conventional companies in a number of ways. They deliver economies of scope when companies need to tailor solutions to the specific needs of multiple customer segments in heterogeneous markets. They provide “soft” capital by unleashing the passion of employees, business partners, and existing and potential customers. And they enhance flexibility to better manage unexpected challenges and harsh constraints through the improvisational use of limited resources. For companies attempting to combine a jugaad-like approach with their existing R&D systems, we offer two suggestions.

1. Prioritize the principles. At the corporate level, let industry dynamics and your company’s strategic requirements determine which jugaad principles are most critical for your business success. For instance, if you are a premium retailer that sells luxury items, “do more with less” and “tap the margins of society” may not be of critical relevance; however, “keep it simple” may be crucial to streamlining the service experience for high-end customers. If you are a consumer products manufacturer like Procter & Gamble or Whirlpool, you may choose to “do more with less” by creating new frugal products for buyers whose purchasing power is waning. Similarly, Western companies in industries undergoing major turmoil, such as pharmaceuticals and automotive, would be wise to “seek opportunity in adversity” and “think and act flexibly.”

2. Aim for the low-hanging fruit. Once you have decided which principles are of strategic importance to you, adopt them in small, manageable stages. If “keep it simple” has appeal, begin by simplifying the design of your products and making them easier to use and maintain. Likewise, if you are attempting to “do more with less,” you can demonstrate frugality by first reusing components across existing product lines. Later, you can develop your frugal mind-set by designing entirely new, very affordable, high-quality products. Finally, if you are an enlightened bank that wants to “tap the margins of society”—that is, the 60 million Americans who are “unbanked” or “under-banked”—you can first partner with an organization like the Center for Financial Services Innovation and pilot financial inclusion solutions in a few U.S. cities before scaling them up nationally. (But you’d better hurry, because nimble startups and established companies like Walmart are already offering basic banking services to underserved communities.)

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