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 / Summer 2010 / Issue 59(originally published by Booz & Company)


The Importance of Frugal Engineering

Refrigerators provide another good example. Customers at the bottom of the pyramid can’t afford traditional energy-sucking, compressor-driven refrigerators, not even the “small” floor models a Western business might have installed under the office credenza to keep drinks cold.

Rather than cut costs out of a bigger refrigerator, India’s Godrej Appliances started with a clean sheet, closely observing the occupants of village huts. Most Indians, they noted, go to the grocery every day. They don’t buy in bulk. A refrigerator that could hold just a few items would be plenty. So Godrej produced the ChotuKool, which translates into “Little Cool” in English.

The top-opening fridge measures 1.5 feet tall by 2 feet wide (roughly 46 by 61 centimeters) and has a capacity of only 1.6 gallons (6 liters). It has no compressor, instead using a cooling chip and fan similar to those that keep desktop computers from overheating. It can run on a battery during the power outages that are inevitable in rural villages. And since rural Indians change residences frequently, the ChotuKool also comes with a handle, making it easier to transport. By keeping the number of parts down to around 20 instead of the 200-plus used in conventional refrigerators, Godrej keeps the price low, too, at about $55. Spending time in people’s homes and watching how they actually use products, rather than relying on focus groups or other secondary or tertiary research, was the key to determining consumer needs.

The frugal engineering approach is not limited to consumer products. Zhongxing Medical, a small medical devices company in China, developed an X-ray machine with a price tag one-twentieth that of the typical X-ray machines made by foreign companies. To achieve this, Zhongxing, a subsidiary of Beijing Aerospace, made a trade-off: Rather than engineer the machine to accommodate the wide range of sophisticated scans common in Western hospitals, the company focused on a machine that could perform only the most routine chest scans, which represent the vast majority of scans. By understanding the fundamental needs of its target hospitals — hospitals that cannot afford a conventionally priced X-ray machine but still hope to serve a majority of patients — Zhongxing has captured about 50 percent of the Chinese X-ray market.

Bottom-up Innovation

Typically, when a well-established automaker designs and builds an inexpensive car, the company’s thinking is biased by decades of practices and procedures, and by its relationships with employees, customers, and suppliers. The approach reuses existing designs and relies on existing components. In essence, these companies start with a more expensive car and focus on ways to make it cheaper. That may count as a form of cost cutting, but it is not frugal engineering.

By contrast, when Tata Motors engineers began creating the Nano, they were inspired more by the three-wheeled vehicles known in India as auto-rickshaws than by any existing car models in Tata Motors’ lineup. Building up from the bare minimum enabled the engineers to achieve their cost (and price) targets without compromising the essential functions of the car. If instead the Tata Nano had been designed on the platform of the then cheapest Tata car, it would have been twice the price.

Consider the conventional approach: Decades’ worth of engineering value is built into even the least expensive of today’s automobiles. Components, right down to the steel used, have steadily become more sophisticated, and often more expensive. The cost base, the design thinking, the very idea of what makes an automobile — all combine into a set of structural costs that simply go unquestioned. Reversing course is difficult, and few want to try. For example, if you asked Western designers to come up with a low-cost wiper system for cars, it’s unlikely they would challenge the fundamental architecture of two wiper blades. But it would be cheaper to place one blade in the center that sweeps from end to end. India’s auto-rickshaws have a single blade. Now, so does the Nano.

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