This report looks at the potential of frugal innovation for Nordic companies operating in emerging markets.
High-Tech Low-Cost Solutions. Perspectives for Nordic Companies
Nordic companies often produce high-value products with a focus on design and technology. While attractive and often innovative, they are also expensive and tend to target the needs and resources of the wealthy. In a global economy where emerging markets are of growing importance, Nordic companies frequently struggle to adjust products and services to the growing middle- and low-income markets. Meeting theneeds and aspirations of these segments calls for frugal solutions. In other words, solutions that focus more on ‘need to have’ as opposed to ‘nice to have’ — and with target price points and features that match middle- and low-income customers.
Frugal products are often associated with simple and low-tech solutions. This, however, is not always the case. In fact, some of the most advanced services in the world — such as Google search or GPS navigation — cost little or nothing if you, like billions of people from Mumbai to Nairobi do, have a smartphone and access to the Internet. Not only are services such as Skype free, but they also enable other services to bedelivered in much more advanced ways. In this way, technology such as the mobile Internet breaks the conventional link between high cost and high value to end users.
New technologies normally start out expensive, and then they reach a stage at which they rapidly drop in price and become widespread. Inexpensive mobile handsets and cellular data connections are still just beginning to demonstrate what is possible. Many other technologically led breakthroughs in price can be expected in the coming years. Solar energy, biotech food and medicine, new materials and 3D printing for local manufacturing are sectors in which high-tech innovations are rapidly maturing and spreading. The development of these technologies enable new products and services that have the potential to reach many new costumers, but they usually demand new business models and tend to cause a shift among the companies that succeed in the market.
For the most part, Nordic companies cannot compete with low-cost, low-tech products. However, they could compete with high-tech-low-cost solutions (HT–LC). Nordic companies can draw on deep insights and advanced scientific knowledge based on years of experience. Playing off technical trajectories and new infrastructures, Nordic companies are in a unique position to create solutions that are highly sophisticated and offer high utility to the end consumer at much lower prices than what has conventionally been possible. This report will look at what it takes to make this possible.