Demystifying Frugality: Looking beyond simply cutting costs

I have been following John G. Singer since my doctoral student days and his analyses and insights on healthcare and innovation issues are always wonderful to learn from. I have been an ardent follower of his posts and admire his articulate messaging.

He recently wrote a brilliant post about the need to think out-of-the-box and with purpose to drive innovation in healthcare raising important issues regarding the shortfalls in healthcare innovation and the abysmal state of healthcare despite heavy investments on the supply-side and high costs on the demand side.

I agree with 99% of what he has said about the need to comprehensively understand the supply side with the demand side, address systemic problems, create the right metrics, etc. The only thing I would like to clarify a bit is?the statement that "frugality isn't strategy".

In other words, "frugality" isn't strategy.

Another 50 years of pursuing "cost-reducing innovation" is unlikely to break the massive flywheel keeping a $4 trillion health economy locked in the past.        

This limited view that frugality is only related to cost-cutting and low-cost/cheap production has evolved quite a bit in recent years. Research shows that the concept of frugality or frugal innovation (which is based on innovating with frugality its core) has multiple dimensions including important ones such as price-market-product-features fit, which is critical for solving systemic problems, such as those in healthcare. Further, frugal innovation is rooted contextually in resource-constrained environments, which is why we saw it applied with tremendous success during the pandemic, from 3D printing ventilator parts and a million face shields for less than a dollar each in maker spaces to giving school lessons to rural students via payphones .

In essence, frugality has moved beyond just being a cost-cutting concept, to a more comprehensive concept, that aims to strip out unnecessary features and remove excesses to focus on what is absolutely essential to provide the customer with an affordable, accessible, and simpler solution than what is available in the market. Thus, frugality is moving from the bottom-of-the-pyramid to middle-of-the-pyramid . It focuses on affordability instead of blindly cutting costs. Remember, Walmart and SouthWest Airlines were once pioneers in frugal innovation, but excessive focus on cost-cutting and efficiency led them in a different direction, ignoring the other vital dimensions that frugal innovation has to offer. They also pioneered frugality as a strategy and were quite successful. More recently, new venture firms such as Nuivio Ventures and the French national research institute for digital science and technology have based their strategy on the powerful combination of frugal innovation, ecosystem thinking, and digitalization.

From a strategy perspective, the true power of frugal innovation can be unleashed in the healthcare domain, when frugality is embedded in the right context to create a solution driven by purpose and not simply by costs. Its success is dependent on metrics that are defined more broadly than just profitability or economic success (e.g., social impact and ecological impact). For instance, the concept of responsible innovation in health systems by In Fieri (a healthcare innovation initiative that follows a systemic approach) is centered on value creation for all stakeholders involved and has frugality embedded as an economic consideration. Yet, frugality works works hand-in-glove with other aspects such as business model, ecological impact, and population health, that inter-relate to provide the right product-process-organization fit for responsible health outcomes. Furthermore, going back to another core essence of frugality - to use available limited resources more efficiently and repurpose resources when possible - we see that there are plenty of applications of these in healthcare as long as we are able to reuse, repurpose, recombine resources with rapidity . Whether we follow these principles as strategy directives or tactical moves, is a decision best left to organizational and governance decision-makers.

Strategic frugality gained significant momentum during the pandemic. In fact, the pandemic helped uncover a rising frugal economy that was unseen and unheard so far. Elsewhere in the world, frugal economy is the economy. In parts of the world where healthcare resources are limited, several grassroots initiatives and startups work within constraints to innovate to provide healthcare services at affordable costs. Their entire strategy is based on providing healthcare services at affordable prices and they create frugal mechanisms both on the demand side and the supply side to offer solutions that combine digital technologies, social capital, and physical access. It is time we learn from these initiatives. Sometimes, throwing resources at a problem makes it worse and new thinking is required to break the shackles!

For more insights: