Personal Finance

The power of innovating by being frugal


I think frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out,” said Jeff Bezos, who just stepped down as CEO of online retailer Amazon.

In 2020, Amazon’s annual revenues topped $386 billion, for a company that started selling books online in 1994, and then pivoted into a platform business model, selling just about everything, for other retailers. “Amazon is what it is because of invention,” said the departing CEO.

Was Amazon a success thanks to its access to resources, or by being resourceful and inventive? Unless you’re an online retailer, selling ‘hot off the shelf’, in demand products, in these days of the invisible infectious microbe, you are likely struggling.

Business in a time of corona’s third wave forces us to be frugal, there is no choice, we don’t get to vote on it. The Economist refers to frugality as one of the three principles of good management, whether in the best of times or the worst.

Frugal doesn’t mean cheap, it means being economical with resources. Stretching what little assets you have, and coming up with an imaginative solution to a business problem. Yes, easier said, than done.

Take the case of entrepreneurial bright eyed Sheila, who has a great business idea that she has been thinking about for the last two years. What’s stopping her making it happen ? “No money, no capital” she says. But is the essence of the problem really money ? Why not start very small, apply Silicon Valley and Toyota lean start-up ideas, create the test product or service, MVP, ‘minimal viable product’ in lean start-up lingo, test it with the customers, continually adapting, evolving to meet market demand.

Constantly adjusting the product offering based on what customers really want, not what Sheila imagines they want. If Sheila can create value for her client base, she will gradually grow her savings. Amazon was started in the garage of a rented house, just outside Seattle, Washington. Apple was started is the garage of Steve Job’s parent’s house. From humble beginnings, there is no reason why Sheila with a dose of drive and invention can’t do the same. A world class business education in lean start-up thinking [and every other business subject] is available on YouTube, with the cost of tuition, being the price of a few data bundles.

Academics have a term for Sheila’s suggested approach to business: frugal innovation. “Simply put, it is about applying human ingenuity to create faster, better and cheaper solutions for more people in core areas such as financial services, health, education and energy. We can call it “frugal” because this is not about massive state-level or corporate investment, but it is about developing and delivering affordable technologies and ideas to meet basic needs at scale” explains Jaideep Prabhu of Judge Business School at the University of Cambridge in the UK.

Frugal innovation applies both in large Western economies, China, and in emerging markets like Kenya, creating high value products and services, generating employment, and in the process, raising household incomes.

“Big corporations are increasingly lean and no longer hire the large numbers of people like they did in the past. And so, entrepreneurship is more than ever a key driver of growth, both in terms of output as well as in generating employment. Young people entering the workforce can no longer expect to be job takers; increasingly, they are expected to be job makers. Luckily, they are now more empowered to do so: small teams of people can set up new companies and achieve scale in ways that weren’t possible before. Technologies such as cheap computers, sensors, smart phones, and 3D printers are enabling such teams to invent and prototype in ways that were only available to large corporations or government labs in the past” notes the Professor Prabhu.

Looking at the bigger economic landscape -- what happens at the level of small business often applies to nation states. One of the country’s most associated with a ‘frugal mindset’ is the Netherlands, a tiny country, roughly 7 per cent of the size of Kenya, much of it reclaimed from the sea, with a third of the land below sea level.

With a population of 17 million, the densely populated European country, has more than 1,300 inhabitants per square mile. [Kenya has roughly 245 people per square mile.] It lacks just about every resource associated with large-scale agriculture. Thanks in part to being frugal, the Netherlands is the globe’s number two exporter of food as measured by value, second only to the United States, which has 270 times its landmass. Realising the importance of sustainable agriculture, reducing a dependence on chemical pesticides on plants in greenhouses, the Dutch call to action was “Twice as much food using half as many resources.”

Yes, in many ways, it is unfair to make comparisons, each country has it genesis, resulting from an array of social, political and economic factors. But it is amazing what the frugal, bicycle riding ‘let’s go Dutch’ have been able to achieve. Hot bed of frugal innovation in Kenya is the inventive jua kali sector, which some reports suggest, is responsible for up to 90 percent of all jobs created in the economy.


Ever have a problem that you were trying to solve, and you just can’t figure it out ? Perhaps something on your laptop, or trying to put a piece of a puzzle of a business problem together that just doesn’t fit ? Then voila, the answer comes to you, the solution was in front of you all the time. You were able to connect the dots. Perhaps it was just pushing the right computer keys, or reconfiguring a part. PAT – ‘probably already there’ applies in coming up with the solution to many business problems. Often the issue is not about access to [more and better] resources, but more about being resourceful with what’s on hand. In a word: frugal.

Will Sheila’s attempt at frugal innovation fail at times ? Yes, probably, but as Bezo’s said “I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.”

Sarah Blakely, the founder of Spanx, started a little more than 20 years ago, now with annual revenues of $400 million remarked: “I always feel that failure is nothing more than life’s way of nudging you and letting you know you’re off course”.