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 Mansukh Prajapati,
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 bicycles.

And since we are in South America,

let's go to Lima in Peru,

a region with high humidity

that receives only one inch
of rainfall each year.

An engineering 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 and energy,

and basic services
like healthcare and 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 born 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 healthcare
and 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
I.T. service provider, Neusoft,

has developed a telemedicine solution

to help doctors in cities
remotely treat old and 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, a 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 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 in 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 of 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.

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 postmodern 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 manual processes in order
to generate jobs for local communities.

Danone was so inspired by this model

that combines economic efficiency
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 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 C.T. 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 startups

that personally inspire me.

The first one happens to be launched
by my neighbor in Silicon Valley.

It's called gThrive.

They make 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,
which 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 in no-bandwidth areas
where there's no wi-fi or 3G or 4G.

How do they do that?

They simply use SMS, a basic technology,
but that 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 the 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 thought, "Holy cow."

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

To ease the situation,

the engineers at the IBM lab in Kenya
are piloting a solution called Megaffic,

which initially was designed
by the Japanese engineers.

Unlike in the West, Megaffic
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, Megaffic 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 healthcare
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 cocreate affordable healthcare
solutions for all of 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?

Well, I gleaned out three principles
from frugal innovators around the world

that I want to share with you

that you can apply
in your own organization

to do more with less.

The first principle is: Keep it simple.

Don't create solutions
to impress customers.

Make them easy enough to use
and widely accessible,

like the C.T. scanner we saw in China.

Second principle:
Do not reinvent the wheel.

Try to leverage existing resources
and assets that are widely available,

like using mobile telephony
to offer clean energy

or Mom and Pop stores
to offer banking services.

Third principle is:
Think and act horizontally.

Companies tend to scale up vertically

by centralizing operations
in big factories and warehouses,

but if you want to be agile and deal
with immense customer diversity,

you need to scale out horizontally
using a distributed supply chain

with smaller manufacturing
and distribution units,

like Grameen Bank has shown.

The South pioneered frugal innovation
out of sheer necessity.

The North is now learning to do
more and better with less

as it faces resource constraints.

As an Indian-born French national
who lives in the United States,

my hope is that we transcend
this artificial North-South divide

so that we can harness
the collective ingenuity

of innovators from around the world

to cocreate frugal solutions

that will improve the quality of life
of everyone in the world,

while preserving our precious planet.

Thank you very much.

(Applause)