Meet the new generation of frugal innovators

In recent years we’ve seen a number of high profile innovations that target middle- and lower-income customers in rapid-growth markets. Known as “frugal innovation,” this model casts a more local-focused eye on the market. In fact, the companies that are developing these lower-cost, high-profile products are, for the most part, actually headquartered in the markets they serve.

The Tata Nano car is probably the best-known example. Launched in 2009, Tata’s goal was to create a car that would sell for INR100,000, or around US$2,500, which is much cheaper than any other production car in the world. To bring down costs, Tata reengineered parts to save weight, reconfigured assembly methods and developed a complex network of third-party suppliers to increase efficiency. Although there have been teething problems with the Nano since it was launched, there is no doubt that this was a breakthrough innovation.

Innovating for the next three billion, EY’s report on the rise of the global middle class, reflects the increasingly dominant role of markets in Africa, Asia, Latin America and the Middle East. Many of these economies are becoming major hubs of entrepreneurship. Take a look at more examples of low-cost innovation for middle- and lower-income customers.