Creative problem-solving in the face of extreme limits

When you grow up in a developing country

like India, as I did,

you instantly learn to get more value

from limited resources

and find creative ways to reuse

what you already have.

Take Mansou Prajipati[??],

a potter in India.

He has created a fridge
made entirely of clay

that consumes no electricity.

He can keep fruits and vegetables
fresh for many days.

That's a cool invention, literally.

In Africa, if you run out of
your cell phone battery, don't panic.

You will find some
resourceful entrepreneurs

who can recharge your cell phone
using the bicycles.

And since we are in South America,

let's go to Lima in Peru,

a region with high humidity

and receives only one inch
of rainfall each year.

An engineer in college in Lima

designed a giant advertising billboard

that absorbs air humidity

and converts it into purified water,

generating over 90 liters
of water every day.

The Peruvians are amazing.

They can literally create
water out of thin air.

For the past seven years,

I have met and studied
hundreds of entrepreneurs

in India, China, Africa,
and South America,

and they keep amazing me.

Many of them did not go to school.

They don't invent stuff
in big R&D labs.

The street is the lab.

Why do they do that?

Because they don't have the kind
of basic resources we take for granted,

like capital, energy,

and basic services,
like health care, education,

are also scarce in those regions.

When external resources are scarce,

you have to go within yourself

to tap the most abundant resource,

human ingenuity, and use that ingenuity

to find clever ways to solve problems

with limited resources.

In India, we call it Jugaad.

Jugaad is a Hindi word

that means an improvised fix,
a clever solution borne in adversity.

Jugaad solutions are not
sophisticated or perfect,

but they create more value at lower cost.

For me, the entrepreneurs
who will create Jugaad solutions

are like alchemists.

They can magically transform
adversity into opportunity,

and turn something of less value

into something of high value.

In other words, they mastered the art
of doing more with less,

which is the essence of frugal innovation.

Frugal innovation is the ability

to create more economic and social value

using fewer resources.

Frugal innovation is not about making do:

it's about making things better.

Now, I want to show you how,
across emerging markets,

entrepreneurs and companies

are adopting frugal innovation
on a larger scale

to cost-effectively deliver
health care, energy,

to billions of people
who may have little income

but very high aspirations.

Let's first go to China,

where the country's largest
IEP service provider, NewSoft,

has developed a telemedicine solution

to help doctors in cities
remotely treat old an poor patients

in Chinese villages.

This solution is based on
simple-to-use medical devices

that less-qualified health workers
like nurses can use in rural clinics.

China desperately needs
these frugal medical solutions,

because by 2050, it will be home
to over half a billion senior citizens.

Now, let's go to Kenya,

a country where half the population
uses M-PESA, the mobile payment solution.

This is a great solution
for the African continent,

because 80 percent of Africans
don't have a bank account,

but what is exciting is that M-PESA

is now becoming the source
of other disruptive business models

in sectors like energy.

Take M-KOPA, the home solar solution

that comes literally in a box

that has a solar rooftop panel,

three LED lights,

a solar radio, and a cell phone charger.

The whole kit, though, costs 200 dollars,

which is too expensive for most Kenyans,

and this is where mobile telephony

can make the solution more affordable.

Today, you can buy this kit by making
an initial deposit of just 35 dollars,

and then pay off the rest by making
a daily micro-payment of 45 cents

using your mobile phone.

Once you've made 365 micro-payments,

the system is unlocked,

and you own the product

and you start receiving
clean, free electricity.

This is an amazing solution for Kenya,

where 70 percent of the people
live off the grid.

This shows that, with frugal innovation,

what matters is that you take what is
most abundant, mobile connectivity,

to deal with what is scarce,
which is energy.

With frugal innovation, the Global South
is actually catching up and some cases

even leap-frogging the North.

Instead of building expensive hospitals,

China is using telemedicine

to cost-effectively treat
millions of patients,

and Africa, instead of building
banks and electricity grids,

is going straight to mobile payments
and distributed clean energy.

Frugal innovation is diametrically opposed

to the way we innovate in the North.

I live in Silicon Valley,

where we keep chasing
the next big technology thing.

Think of the iPhone 5, 6, then 7, 8.

Companies in the West spend
billions of dollars investing in R&D,

and use tons of natural resources
to create ever more complex products,

to differentiate their brands
from competition,

and they charge customers
more money for new features.

So the conventional
business model in the West

is more for more,

but sadly, this more for more model

is running out of gas, for three reasons.

First, a big portion
of customers in the West

because of the diminishing
purchasing power,

can no longer afford
these expensive products.

Second, we are running out of
natural water and oil.

In California, where I live,
water scarcity is becoming a big problem.

And third, most importantly,

because the growing income disparity

between the rich and the middle class

in the West,

there is a big disconnect
between existing products and services

and basic needs of customers.

Do you know that today,

there are over 70 million Americans

today who are underbanked,

because existing banking services

are not designed to address
their basic needs.

So the prolonged economic crisis
in the West is making people think

that they are about to lose
the high standard of living

and face deprivation.

I believe that the only way we can sustain
growth and prosperity in the West

is if we learn to do more with less.

The good news is,
that's starting to happen.

Several Western companies
are now adopting frugal innovation

to create affordable products
for Western consumers.

Let me give you two examples.

When I first saw this building,

I told myself it's some kind
of post-modern house.

Actually, it's a small manufacturing plant

set up by Grameen Danone, a joint venture

between Grameen Bank of Muhammad Yunus

and the food multinational Danone

to make high quality yogurt in Bangladesh.

This factory is 10 percent the size

of existing Danone factories

and cost much less to build.

I guess you can call it
a low fat factory.

Now this factory, unlike Western factories
that are highly automated,

relies a lot on mannered processes

in order to generate jobs
for local communities.

Danone was so inspired by this model

that combines economic sufficiency
and social sustainability,

they are planning to roll it out

in other parts of the world as well.

Now, when you see this example,

you might be thinking, "Well,
frugal innovation is like low tech."

Actually, no.

Frugal innovation is also
about making high tech

more affordable and more
accessible to more people.

Let me give you an example.

In China, the R&D engineers
of Siemens Healthcare

have designed a CT scanner

that is easy enough to be used

by less qualified health workers,
like nurses and technicians.

This device can scan
more patients on a daily basis,

and yet consumes less energy,

which is great for hospitals,

but it's also great for patients

because it reduces the cost
of treatment by 30 percent

and radiation dosage by up to 60 percent.

This solution was initially designed
for the Chinese market,

but now it's selling like hotcakes
in the U.S. and Europe,

where hospitals are pressured
to deliver quality care at lower cost.

But the frugal innovation revolution

in the West is actually led
by creative entrepreneurs

who are coming up with amazing solutions

to address basic needs
in the U.S. and Europe.

Let me quickly give you
three examples of start-ups

that personally inspire me.

The first one happens to be launched

by my neighbor in Silicon Valley.

It's called G-Drive.

They make actually these wireless sensors
designed like plastic rulers

that farmers can stick
in different parts of the field

and start collecting detailed
information like soil conditions.

This dynamic data allows farmers
to optimize use of water energy

while improving quality
of the products and the yields,

which is a great solution for California,

that faces major water shortage.

It pays for itself within one year.

Second example is Be-Bound,
also in Silicon Valley,

that enables you
to connect to the Internet

even if no-bandwidth areas
where there's no Wifi or 3G or 4G.

How do they do that?

They simply use SMS, a basic technology,

but it happens to be the most reliable

and most widely available
around the world.

Three billion people today
with cell phones

can't access the Internet.

This solution can connect them
to the Internet in a frugal way.

And in France, there is
a startup calle Compte Nickel

which is revolutionizing
the banking sector.

It allows thousands of people
to walk into a mom-and-pop store

and in just five minutes activate
the service that gives them two products:

an international bank account number
and an international debit card.

They charge a flat annual maintenance fee

of just 20 Euros.

That means you can do
all banking transactions

-- send and receive money,
pay with your debit card --

all with no additional charge.

This is what I call low-cost banking
without the bank.

Amazingly, 75 percent of the customers
using this service are middle class French

who can't afford high banking fees.

Now, I talked about frugal innovation,
initially pioneered in the South,

now being adopted in the North.

Ultimately, we would like to see

developed countries
and developing countries

come together and co-create
frugal solutions

that benefit the entire humanity.

The exciting news is
that's starting to happen.

Let's go to Nairobi to find that out.

Nairobi has horrendous traffic jams.

When I first saw them, I told myself,

"Holy cow."

Literally, because you have to dodge cows
as well when you drive in Nairobi.

To ease the situation,

the engineers at IBM Lab in Kenya

are piloting a solution called Megafig,

which initially was designed
by the Japanese engineers.

Unlike in the West, Megafig
doesn't rely on roadside sensors,

which are very expensive
to install in Nairobi.

Instead they process images, traffic data,

collected from a small number

of low-resolution webcams
in Nairobi streets,

and then they use analytic software
to predict congestion points,

and they can SMS drivers
alternate routes to take.

Granted, Megafig is not
as sexy as self-driving cars,

but it promises to take Nairobi drivers

from point A to point B
at least 20 percent faster.

And earlier this year, UCLA Health
launched its Global Lab for Innovation,

which seeks to identify
frugal health care solutions

anywhere in the world

that will be at least 20 percent cheaper
than existing solutions in the U.S.

and yet more effective.

It also tries to bring together
innovators from North and South

to co-create affordable
health care solutions

for the entire humanity.

I gave tons of examples of frugal
innovators from around the world,

but the question is, how do you go about
adopting frugal innovation?