Applying Frugal Innovation to Serve the Bottom of the Pyramid in Germany

Sammanfattning: In times of scarce resources, frugal innovation can be a driving engine for growth and market success, as it is a practical concept established in developing countries. Nonetheless, the available literature also emphasizes a potential importance for Western countries. Accordingly, our thesis and research add to the lack of literature that connects frugal innovation to developed countries and its specific underlying conditions. The review of available literature and further discussions led to the following research questions: 1. What is the current application status of frugal innovation in Germany? 2. What characteristics should frugal innovations have to serve the BoP in the context of the German market? A preliminary theoretical framework was created from the relevant literature streams stressing the fragmented nature of frugal innovation. As the concept and research addressing this issue are in a nascent stage, one unifying definition was not found. For the course of this thesis, the definition of frugal innovation was therefore chosen to be "thrifty, modest and affordable innovations, valuable for BoP customers”. One major derivation from the literature review is that frugal innovation can be of major importance in developed countries, not only for customers for getting access to certain products, but also for companies addressing untapped markets. The empirical investigation and explorative data collection was undertaken within the market context of Germany based on eight companies from different industry backgrounds. Therefore, interviews were held with representatives of companies that offer frugal products (thereafter also including services) according to the definition from above. Within the scope of the grounded theory analyzation techniques, the interviews supported our aim to gain rich and meaningful data to extend the substantive theory about the concept of frugal innovation. Our study results (based on our eight interviews) prove the existence of frugal products in the German market, while the term and the concept have previously been unknown. Even though frugal innovations were still to be confirmed, they were not labeled as such to connect them to the concept. The study also indicates the existence of a bottom of a pyramid in Germany, despite its original connection to emerging market population. Our findings resulted in a revised framework that connects relevant fragments to a logical comprehension of the concept of frugal innovation. Finally, characteristics for frugal products and requirements could be validated and improved to be economically successful in developed market contexts. The major contribution of our thesis is its general investigation of a rather unknown concept and its presence in other markets than originally laid down. The thorough literature review, the creation and revision of the framework and our study results will serve as a fruitful ground for further exploration of this innovation type.