On a visit to Russia in 1997, Renault’s then chief executive, Louis Schweitzer, was discomfited 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 that today constitutes nearly half its global sales.
Business school academics Navi Radjou and Jaideep Prabhu tell this story in their new book, and hail Renault as a pioneer of the frugal innovation that they say will increasingly characterise 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, they warn.
The authors’ first joint book, 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.