Renault’s $6,000 no-frills Logan shows shift toward frugal innovation

On a visit to Russia in 1997, Renault’s then chief executive, Louis Schweitzer, was dismayed to discover that the locally made, $6,000 Lada was outselling his company’s more showy, expensive cars by a considerable margin.

Five years later, Renault unveiled its $6,000 no-frills Logan. Designed though it was for emerging markets, the Logan sold so well in prosperous Western Europe that Renault launched a line of low-cost vehicles. Today, that constitutes nearly half its global sales.

Business school academics Navi Radjou and Jaideep Prabhu tell this story in their new book, “Frugal Innovation: How to Do More With Less,” published by Economist Books.

In it, they hail Renault as a pioneer of the frugal innovation that they say will increasingly characterize the way Western companies operate.

Developing the Logan prompted a shift among Renault’s engineers, away from apparently plentiful resources and a rich market to constrained resources and value-hungry consumers.

It is a change that is coming to all businesses, the authors warn.

Their first book together, “Jugaad Innovation” (the title uses a Hindi word meaning, roughly, “cobbled together”), described the innovative brilliance of Indian entrepreneurs with limited means.

Their new book argues persuasively that companies in mature markets have no choice but to adopt a similar approach.

Income stagnation has made middle-class consumers hungry for cheaper products and better value; adapting to that demand will make companies better able to meet the untapped needs of those with low incomes.

Environmental degradation and depletion, meanwhile, will remove any choice over the matter. “If necessity is the mother of invention, scarcity is its grandmother,” the authors write.

The book sets out to show how to innovate frugally in every aspect of business. It talks about revolutionizing supply chains, such as companies in Africa that piggyback on Coca-Cola’s supply networks to preserve life-saving medicines on their way to remote villages. And it discusses overhauling research and development departments.

The authors have particular disdain for engineers who “view complexity as progress” and innovate by adding more features, rather than focusing on the purpose of their products.

Though a litany of bullet points, the book is enlivened by fascinating case studies. It mentions, for instance, how UC Berkeley spin-off CellScope developed an optical attachment that converts a smartphone into a device that parents can use to photograph their children’s ears and email the images to a doctor to diagnose whether they have an ear infection.

Although the authors are eager to impress how long and bumpy the road to frugal innovation can be, at times they can sound a little starry-eyed.

The book ends with an assurance that far from newfangled and faddish, frugal innovation is a return to the principles of the industrial revolution.

It quotes Benjamin Franklin’s exhortation to create wealth by focusing on industry and frugality: “That is, waste neither time nor money, but make the best use of both. Without industry and frugality nothing will do, and with them everything.”

Ridge is an editor at the Financial Times of London, in which this review was first published.