There are many definitions of Frugal Innovation. Some view Frugal Innovation as a sub-category of Resource-Constrained Innovation, while others simply use the overiding term Frugal Innovation for the various categories shown below.  

Resource-constrained Innovation (RCI) consists of three types that are structurally different from each other with respect to their original motivation, value proposition, and value creation mechanisms (Zeschky et al., 2014).


These types have in common the fact that they originate from the concerted efforts of developed market firms (DMFs) or emerging market firms (EMFs) in developing products and services to meet the needs of consumers at the base-of-the pyramid (BoP) in emerging and industrialised markets.

The three types of RCI

1. Cost Innovation: Same functionality at a lower cost 
Cost innovations are solutions that offer similar functionalities to Western products at lower costs for resource-constrained customers.

2. Good-Enough Innovation: Tailored functionality at a lower cost
Good-enough innovations are solutions that include functionalities and features designed to meet a range of resource constraints beyond capital constraints. 

3. Frugal Innovation: New functionality at a lower cost
The term “frugal innovation” has been used to denote innovations specifically developed for resource-constrained customers in emerging markets.

Necessity Innovation

Necessity innovation is a special case of RCI where resource-constrained consumers in the developing world innovate to fulfil their own unmet needs. Necessity innovators do not necessarily build businesses around their innovations in order to benefit from it on a commercial basis. But when they do, they become necessity entrepreneurs.

There are two types of necessity innovation:

1. Jugaad innovation is an improvisational approach by individuals to solve their own or others' problems in a creative way.

2. Grassroots innovation, which is similar to Jugaad, but community-led, socially motivated innovations for sustainability.

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