A Comparative Analysis Of Frugal Innovation Marketing Essay


The involvement in economical invention is increasing dramatically. However, most of the research in economical invention has concentrated on Asiatic states. Small academic attending has been paid to other emerging countries such as Africa. To turn to this spread, the present survey compares two successful instances of economical invention, one from Kenya and another one from India. Safaricom ‘s M-Pesa system is compared with airtel money developed by Bharti Airtel system. The comparing is carried out on the undermentioned standards ; service features, motive for developing service, service development and execution and success factors. The findings show that there are more commonalties than differences between the two services.

The importance of economical invention is get downing to be recognized both by practicians and faculty members. This acknowledgment has paid a batch of attending to the dashing undertaking that houses are confronting in developing goods and services that meet the demands of low and middle-income clients in emerging economic systems. So far academic attending on economical invention has been paid to states outside Africa. The reappraisal of extant literature found merely one academic paper on economical invention in Africa. Therefore, the intent of this survey was to place illustrations of successful economical invention in Africa and categorise them based on local conditions. Using a desk research exploratory method, six successful instances of economical invention were identified in different states. Economical inventions were categorized into basic demands and luxury economical solutions severally. Further from the six instances, five success factors were identified. These are ; demands conceptualisation, passion, local webs, puting in local R & A ; D and a flexible and good defined turn overing out procedure. These instances suggest that companies wishing to develop economical solutions aimed at specifically turn toing the demands of clients in Africa must be receptive to the above factors. This survey highlights the being of economical invention in Africa and the critical factors vital for making new, low-cost and robust merchandises and services for what we call unthawed markets in Africa. The survey has besides shown that despite economical invention pulling academic attending in the last decennary, it has existed in Africa for a considerable period of clip. For the hereafter, surveies should be focused on placing more instances of economical invention in Africa utilizing in-depth comparative instance analysis. We besides encourage comprehensive surveies aimed at developing new theories and proving the proposed 1s.

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Keywords: Frugal Innovation, comparative analysis, M-Pesa, Airtel money,


The on-going displacement in the planetary invention landscape has presented legion challenges ( Magnusson 2000 ; Chesbrough 2003 ) . Many states and houses are developing new ways and agencies of carry oning concern. For illustration, multinationals from developed states are progressively globalising their R & A ; D activities. Firms from emerging economic systems such as India and Brazil, which traditionally played a secondary function in planetary invention, have now begun to catch up with developing their ain advanced capablenesss ( Mathews, 2002 ) . Some of these houses have emerged as major participants in certain sectors like information engineering and nomadic communications. In this displacement, peculiar attending has been paid to emerging constructs of invention. Recent research has identified five typical but interconnected invention constructs for the old ages in front ( Eagar et al. , 2011 ) . These constructs are: customer-based invention ; proactive concern theoretical account invention ; integrated invention ; high speed/low hazard invention and economical invention. The literature on all the five constructs is light because they are in their embryologic phase. Out of these constructs frugal invention has, in the recent yesteryear, received the most attending both from faculty members and practicians ( Eagar, et al. , 2011 ) . Frugal invention refers to solutions that:

“ Seek to minimise the usage of stuff and fiscal resources in the complete value concatenation ( developing, fabrication, distribution, ingestion, and disposal ) with the aim of cut downing the cost of ownership while carry throughing or even transcending certain pre-defined standards of acceptable quality criterions ” . ( Tiwari and Herstatt, 2012a )

From the organisation ‘s point of position, a economical solution is designed, produced, delivered and maintained to accomplish the demands of underserved consumers in forced environments ( Bhatti, 2012 ) . For the consumers, economical merchandises and services extend from merely costs to working with few resources, and deficiency of necessary substructure. Examples of successful economical invention include the Tata Nano auto in India that costs less than US $ 3000, a low-priced battery powered icebox in India ( called ChotuKool ) created by Godrej & A ; Boyce Company and a mini-handheld EKG ( ECG ) machine called Mac 400 created by GE at its Bangalore research lab ( Howard, 2011 ) . Based on grounds from economical solutions in and outside Asia, it is clear that economical invention is a cutting border enterprise that has challenged conventional ways of invention direction. It is destined to turn to the demands of both the lower and in-between income groups all over the universe. Despite its importance in turn toing the demands of the low income group, recent research has chiefly concentrated on Asiatic states ( Tiwari and Herstatt 2011, 2012a, 2012b ; SAGPA 2011 ; Tood and Lawson 2003 ; Fukuda and Watanabe 2011 ; Kohlbacher and Hang 2011 ; Pinelli 2011 ; Eagar et al. , 2011 ) . Recent scholarly work, though light, has suggested grounds of economical invention in Africa ( Coetzer 2010 ; Mbiti & A ; Weil 2011 ; Wooder and Baker 2012 ) . Despite this grounds, there are no surveies carried out so far to compare Africa ‘s economical inventions with successful instances of economical inventions in emerging lead markets such as India and China.

To turn to this spread in literature on invention, the present survey will compare two economical solutions ; one from Africa and another one from India against the Zeschky et Al. ( 2011 ) standards. Specifically we compare the two solutions and analyze their features, motive for development and how they were implemented. The purpose is to place cardinal success factors, points of commonalty and diverseness between the two solutions. The survey is of import for a figure of grounds. First, there is grounds of economical invention in Africa but research workers have shown small involvement in this field. On the other manus, India is good known for economical inventions ( Bound & A ; Thornton, 2012 ) . It will be interesting to nail the beginnings of commonalty and diverseness between the two parts. As a precursor survey to compare economical invention in Africa with those from a lead state, it will indicate out of import lessons for MNCs wishing to research African ‘s mass markets. Second, the survey will set up whether the instances in Africa are sustainable or merely a good luck. Third, such a comparing may clear up beginnings of diverseness between the two parts and uncover practical deductions for farther development of economical invention peculiarly in Africa. Fourth, taking planetary houses, academic research workers and invention experts have expanded the definition of invention from merchandises to services ( Westland, 2008 ) . Although services are expected to overshadow merchandises as the chief locale for invention ( Florida, 2005b ) , fewer academic documents have been written on service invention than merchandise invention. In peculiar frugal services have non been given equal academic attending. This survey compares two frugal services and re-affirms the statement by Westland ( 2008 ) that services are now supplying primary scenes for invention in high profile engineering companies. Finally the survey will supply of import penetrations that will excite further research non merely in Africa but in other parts of the universe.

The remainder of the paper is structured as follows. Section 2 gives an overview of the construct of economical invention. Section 3 is approximately methodological issues while in subdivision 4 we present a comparative analysis on the two economical services. In subdivision 5, deductions of this analysis are given. The paper concludes in subdivision 6.


As noted in the debut, economical invention purposes at turn toing the demands of the low income consumers. It is one of the attacks that have emerged in the direction of invention. From the Tiwari and Herstatt ( 2012a ) definition the construct portions similar features with rearward invention ( Govindarajan and Ramamurti, 2011 ) and constrained-based invention ( Innovation Post, 2011 ) . Other bookmans have expanded the definition of economical invention and province that it:

“ Responds to restrictions in resources, whether fiscal, stuff or institutional, and turns these restraints into an advantage. Through minimising the usage of resources in development, production and bringing, or by leveraging them in ways, economical invention consequences in dramatically lower-cost merchandises and services. Successful economical inventions are non merely lower in cost, but outperform the option, and can be made available at big graduated table. Often, but non ever, economical inventions have an expressed societal mission ” . ( Bound and Thornton, 2012, P.14 )

From the above quotation mark it is clear that there is a specific market section that economical solutions serve. This section comprises clients that are basking their first gustatory sensation of modern prosperity and are purchasing for the rudimentss non for fancy characteristics ( Prahalad, 2005 ) . They have alone demands that are non normally addressed by mature market merchandises, chiefly due to prohibitory cost base of developed universe merchandises. In line with the Bound and Thornton ( 2012 ) definition, four characteristics of economical invention are apparent:

Better solutions, non merely inexpensive solutions.

Frugal invention extends to services, non merely merchandises.

Frugal Innovation is about remodelling, non merely de-featuring.

Low cost does non intend low or inferior engineering

2.1 Frugal Engineering

To bring forth economical goods, complex and concerted R & A ; D attempts are required ( Jagati, 2011 ) . In this respect, the field of technology has besides undergone some alterations in order to confront these challenges hence the term economical technology was coined. This construct refers to an overarching doctrine that enables a true ‘clean sheet ‘ attack to merchandise development ( Sehgal et al. , 2010 ) . Kumar and Puranam ( 2012 ) in their recent research identified the following implicit in rules on which economical technology attempts seem to rest:

Robustness – The feature of being physically strong and inured to endurance. Most of the developing states have rough environments such as utmost temperatures.

Portability – Poor roads and transit in the emerging economic systems call for the importance of goods that are easy portable. Small and lightweight merchandises become extremely desirable.

Defeaturing – This refers to have rationalisation. Normally features accumulate in merchandises over clip. Therefore there is demand to take some of them that do little to heighten the existent merchandise.

Leapfrog engineering – Leapfrogging is a procedure of doing advancement by big leaps as opposed to little increases. This may look contradictory for developing states. However, applied scientists in India and China have adopted engineerings that make dependance on bing substructure irrelevant.

Mega-scale production – It is estimated that the in-between category in Asia entirely is 525 million people, greater than the full population of the European Union ( Pinelli, 2011 ) . This monolithic population can assist houses produce on a monolithic graduated table and thrust costs down.

Service Ecosystems – By utilizing efficient service ecosystems, houses utilizing economical technology have been selling big volumes to multiple sections, each with somewhat different demands. With ecosystems low costs have been achieved.

Examples of Frugal Products and Services

In India, economical invention is known as Jugaad invention which means making the best with what one possesses ( Innovation Post 2011 ) . It merely means accomplishing more with less. There is empirical grounds bespeaking that India is going a leader in Frugal Innovation ( Bound & A ; Thornton 2012 ; Tiwari & A ; Herstatt 2012a, 2012b ) . In fact it is quickly emerging as one of the hot spots for the development of inventions tailored to the demands of lower income groups ( Kubzansky and Karamchandani, 2009 ) . As mentioned earlier, the best known illustration of a economical merchandise is likely the Tata Nano auto, which has become so popular in India and dubbed ‘the people ‘s auto ‘ ( Howard, 2011 ) . This merchandise was so successful that at the terminal of 2010, 70,000 units had been sold. In position of this land interrupting engineering, some established auto makers from advanced economic systems had seen a decrease in their gross revenues. Harmonizing to the Society of India Automobile Manufacturers, in 2011 Suzuki ‘s auto gross revenues in India dropped by 11.9 per centum for the first clip in 9 old ages ( Nagata, 2012 ) . Suzuki ‘s market portion in India which was 50 per centum in 2009 dropped to under 40 per centum in 2011. In the medical field, a alone and interesting tendency has emerged. Sometime back people seeking specialised medical intervention from developing states would go to developed states for intervention. However, because of new and low-cost medical services in India, patients from affluent states are traveling at that place for specialised intervention ( Moriyasu, 2012 ) . The comparably nice intervention is much cheaper and waiting clip is short. For case, the bosom beltway surgery which costs US $ 144,000 in the US is available for US $ 8,600 in India ( Moryyasu, 2012 ) . As a consequence, in 2009 the figure of medical tourers received by India has grown to 4.6 times the figure received in 2004 ( Peacock, 2009 ) .

Another state with successful instances of economical invention is China. For illustration, BYD in that state has developed a really low-priced method of bring forthing lithium-ion batteries whose cost has been reduced from US $ 40 to less than US $ 5 per unit ( Kharas, 2010 ) . In 1996 Haier, a place contraption company introduced a lavation machine called Mini Magical Child ( Hang et. al. , 2010 ) . The merchandise was designed for little day-to-day tonss and offered an option to big expensive lavation machines. These are all illustrations of “ good plenty ” solutions designed to carry through the basic demands at low cost thereby supplying high value.

2.3 Conceptual Framework of Frugal Innovation

From the scarce literature, three surveies that attempted to turn to economical invention theoretical issues were identified. The first one proposed a economical theoretical theoretical account on the footing of resource restraints, institutional invention and societal invention ( Bhatti, 2012 ) . Harmonizing to this theoretical account, the intersections among these three invention streams show a fertile infinite where economical invention can be located. Further, the theoretical account suggests that covering with challenges of introducing for low income clients requires taking all the three watercourses together. If each watercourse is taken individually, the invention procedure might non win. The 2nd survey presented a conceptual model for merchandise invention ( Ray and Ray, 2011 ) . As shown in Figure 1, they contended that to function the markets at the underside of the pyramid three constructs need to be harnessed ; architectural invention, modularity and collaborative partnerships. When public presentation of bing merchandise engineerings far exceeds what clients in mass markets are able to use or pay for ; pioneers need to develop simpler and cheaper merchandises. They likened this to Christensen ‘s theoretical account of riotous engineerings. In this context, architectural invention becomes the logical low cost pick, since it recombines bing constituent engineerings in new ways, to make and change price-performance bundles without farther investings in developing new nucleus engineerings. Modularity incorporated in such merchandises enables houses to better public presentation overtime to appeal to more discerning mainstream clients, finally easing a engineering to emerge. In short modularity is for customization and betterments. Furthermore, given that developing riotous engineerings is prone to high uncertainnesss and unanticipated costs, which possibly further exacerbated by institutional failings in emerging economic systems, the writers drew on the construct of collaborative partnerships. The 3rd survey focused on economical service invention in Kenya, Africa. The intent of the survey was to measure how the M-PESA solution ( which will be discussed subsequently in this paper ) was conceived, designed and delivered to the clients ( Wooder and Baker, 2012 ) . The survey proposed a service invention model consisting how to ; make, present, gaining control, defend and sustain value. Unlike the theoretical account proposed by Bhatti, the last two conceptual models have been subjected to some testing. While the three theoretical accounts are in tandem on affordability, resource restraints and internal capacities of houses, the Bhatti theoretical account appears complicated and hard to implement. To prove the intersection of societal invention, institutional invention and resource restraints is such a gigantic undertaking. The foregoing and limited literature on the topic, are declarative of the fact that economical invention is in desperate demand of theory development.

Federal bureau of prisons

DISRUPTIVE TECHNOLOGY – simpler, cheaper than mainstream merchandises

Architectural Invention


Collaborative Partnerships

Figure 1: A Conceptual Framework for merchandise invention for mass markets in emerging economic systems

Beginning: Ray and Ray ( 2011 )

In order to understand how MNCs are forming economical invention attempts in emerging markets, an in-depth survey of five houses was carried out ( Zeschky et al. , 2011 ) . Initially 13 houses, stand foring a assortment of industries, were identified. The houses were sieved and eight dropped due to deficient available informations. The staying five were found suited instance surveies. Analysis was based on three standards ; merchandise features, motive for developing merchandises and execution of merchandise development. The survey found that besides holding similar constructions sing organisation of R & A ; D, all of the five houses had a successful history of economical invention. Based on the above standards it was established that successful economical invention:

Should be aimed at run intoing the demands of resource-constrained clients at the lowest possible cost.

Require local organisational constructions and resources.

Should ensue in merchandises and services that are easy to utilize and run into minimal quality criterions.

For a figure of grounds, the above and other old surveies provide empirical grounds and a yardstick upon which future surveies can be benchmarked. First, primary information was used ; 2nd the sample was sensible and 3rd houses represented different industries.


In line with the intent of this survey, we use a comparative instance survey attack. In research, this is one of the cardinal tools of analysis. It concerns instances that portion more commonalties than differences depending on the research aims ( Collier, 1993 ) . The comparative attack is routinely used to prove hypothesis and can lend to the inductive find of new hypotheses and theory edifice ( Ragin, 1987 ) . It helps in conveying into focal point bing similarities and differences among instances. For the present survey, the two instances were chosen based on the undermentioned considerations:

They satisfied the economical invention standards in conformity with the Bound and Thornton ( 2012 ) definition.

Both are successful instances of economical invention in the country of electronic money transportation ( comparing apples with apples ) . The solutions were successfully commercialized.

Data and information on their operations was available.

They are from different geographical locations deserving a instance for comparing.

Keeping in head the standards developed by Zescky EL. Al. ( 2011 ) four key characteristics could function as a comprehensive model to compare the two instances. We believe such a model captures all the features of economical invention and is comprehensive plenty to ease an appropriate comparing. The standards are as follows ; service features, motive for developing the service, execution of the service and success factors?

The two instances are analyzed qualitatively and describing done in narrative mode. Available quantitative information was besides used in some cases to supplement qualitative informations. We accessed publically available information and old empirical research concentrating on the two houses.


We have already shown that economical invention is a cutting border enterprise which is non merely altering the lives of hapless people in developing states, but its impact is being experienced all over the universe. However most of the successful instances of economical invention have about entirely been developed in Asia. In the recent past grounds of economical invention in Africa has emerged. In South Africa, a house called Moladi took advantage of the yawning lodging market and developed an appropriate engineering for the building of low-cost and quality houses ( Coetzer, 2010 ) . Another company, Eskom, upon recognizing the demand to supply electricity to low income consumers, developed the Pre-Paid Metering ( PPM ) Technology ( Iliev, 2005 ) . In Ghana, Toyola Energy Limited produced and distributed energy efficient wood coal ranges and solar lanterns for domestic usage in both urban and rural countries ( Osei, 2010 ) . This is assisting hapless families that can non afford modern and efficient fuels. The bulk of the hapless continue to utilize fuel wood for their most intensive energy usage ; cookery. Even though the authorities has enacted policies to increase family entree to fuels such as kerosine, gas and electricity, the high costs associated with the usage of these energy types have counteracted such policies ( Heltberg, 2003 ) .

Having given the grounds of economical invention in Africa, we now present two instances of successful economical invention from Kenya and India. Both instances are economical services in the country of electronic payments system.

4.1 M-Pesa System: Safaricom Limited, Kenya

The demand to formalise domestic remittals and supply banking services to over 80 per centum of the unbanked low income populations in Kenya, made Safaricom Limited seek an appropriate solution ( Donovan, 2011 ) . In Kenya there are 750 banking mercantile establishments and 3 million bank histories countrywide against a population of more than 40 million people ( Mbugua, 2008 ) . On the other manus 55 per centum of the state ‘s population ain or has entree to a nomadic phone ( Wooder and Baker 2012 ) . Safaricom saw the connexion between phenomenal growing of cell phone usage in developing states and that phones had the possible to present money. It has been predicted that by 2020 50 ( 50 ) per centum of concern minutess will be on nomadic phones ( Visa Europe, 2012 ) . Hence M-Pesa was conceived on the premiss of doing available secure, inexpensive and dependable banking services, through nomadic phones, to the bulk of the people in Kenya who do non hold bank histories ( Karugu and Mwendwa, 2007 ) . These people have low incomes and are normally uncomfortable to interact with commercial Bankss because of their socio-economic position.

Safaricom Limited is Kenya ‘s largest Mobile phone supplier. It was incorporated on 3rd April 1997 as a private limited company and converted into a public company with limited liability on 16th May 2002 ( Safaricom 2010 ) . The company ranks among the top four in Africa in footings of growing and among the top 10 in footings of profitableness ( Morawczynski, 2009 ) . With its extended web coverage across Kenya, Safaricom was good placed to react to the challenge of widening banking services to the unbanked. Hence the company, partnered with five organisations to develop the solution ; the Department for International Development ( DFID ) , Vodafone, Microsave, Faulu Kenya and Commercial Bank of Africa. While Safaricom made available its extended local telephone web, the other organisations played different functions. Vodafone Group Plc provided US $ 1.9 million and DFID provided US $ 1.8 million to finance the pilot undertaking ( Karuga and Mwedwa, 2007 ) . The Commercial Bank of Africa provided banking services to Mpesa and Faulu Kenya made available micro-finance clients who were used to prove M-Pesa. Microsave is an NGO funded by DFID and helped in circulating information and fulfilling DFID ‘s mission of cut downing poorness in developing states. Due to Safaricom ‘s deficient proficient capacity to develop the solution, a stamp to happen a developer was floated. Many companies participated in the stamp but Sagentia, a UK based engineering and merchandise development company was selected to plan the solution ( Sagentia, 2011 ) . The company worked closely with Safaricom and Vodafone throughout the development stage of the solution. This included analysis of market demands and prototyping. Sagentia designed the M-Pesa system architecture and put the platform ( AimZine, 2012 ) . Further the company developed the attendant operational and proficient support certification. Technically, M-Pesa is an application which is secure and sits on the Subscriber Identity Module ( SIM ) card non on the nomadic phone ( Sagentia, 2011 ) . After an incubation and development stage, tests were done in concurrence with all spouse organisations. Eight agent stores and 450 clients of Faulu Kenya were involved in the tests ( Karugu and Mwendwa, 2007 ) . The tests were successful and the system was launched in March 2007.

The M-Pesa is an SMS-based money transportation system that allows persons to lodge, direct and retreat financess utilizing the cell phones ( Jack and Suri, 2011 ) . M-Pesa ( “ M ” for Mobile, “ Pesa ” the Swahili word for hard currency ) is a nomadic money transportation service invention ( Wooder and Baker, 2012 ) . Although it was launched in 2007, the system has grown quickly presently making about 38 per centum of Kenya ‘s grownup population ( Jack and Suri, 2010 ) . On mean US $ 1.96 Million is transferred through M-Pesa per twenty-four hours, largely in little sums of averaging US $ 20 per dealing ( Morawczynski, 2009 ) . It is widely viewed as a success narrative of service invention to be emulated in other developing states ( Mbiti & A ; Weil, 2011 ) . This huge success was besides mirrored in the growing of M-Pesa agents, which grew to over 18,000 locations by April 2010, from a base of about 450 in mid-2007 ( Safaricom, 2010 ) . Empirical grounds has shown that income of rural receivers has increased by 30 per centum since they started utilizing M-Pesa ( Morawczynski, 2009 ) . On the international scene, for the 2nd twelvemonth running M-Pesa was awarded the esteemed “ Best Mobile Money Service ” award in the best Mobile services class at the 2010 Global Mobile Awards in Barcelona ( Safaricom, 2010 )

In order to go a user of M-Pesa 1 has to inscribe for the service. This can be done for free at any of the registered M-Pesa agents across the state. There are three basic minutess that clients can transport out on the M-Pesa ( Mbiti and Weil 2011 ) :

The client may lodge money at any M-Pesa mercantile establishment in return for e-float which can be used elsewhere. E-float is similar currency for transporting out minutess. This procedure is called “ hard currency in ” dealing.

The client may interchange e-float for existent hard currency at any M-Pesa mercantile establishment. This is called “ hard currency out ” dealing. The phases of retreating hard currency are given in Figure 2.

The client may reassign e-float from his/her phone to another.

Figure 2: How to Withdraw Cash through M-Pesa

Confirmation of the dealing

Beginning: Karugu and Mwedwa ( 2007 )

The laterality of M-Pesa has led to the worsening of grosss for the rivals. Gikunju ( 2009 ) examined the fiscal statements of one of its rivals, the Postal Corporation of Kenya. It was found that grosss and net incomes for its money transportation service declined quickly after the debut of M-Pesa. Other competitors’such as Western Union and Money Gram besides recorded important decrease in their gross. To avoid obsolence, these companies have responded by cutting monetary values, even though they are still unable to fit M-Pesa ‘s superior convenience ( Gikunju, 2009 ) . While M-Pesa has forced rivals to take down monetary values, it has besides induced them to better their merchandises and services. In some instances rivals have partnered with Safaricom to offer incorporate services. For illustration, in December 2008 Western Union partnered with Safaricom to fly an international nomadic money transportation between the UK and Kenya. As a consequence the M-Pesa International Money Transfer ( IMT ) was launched in October 2009. The IMT allows anybody life in the UK to reassign money, through selected agents, to individuals in Kenya utilizing a nomadic phone. At the minute a sum of 19 mercantile establishments in the UK offer this service. This invention is supported by the construct of contrary invention which states that such enterprises are foremost adopted in hapless states before being adopted in rich states ( Govindarajan and Ramamurti, 2011 ) . Commercial Bankss were ab initio opposed to M-Pesa and lobbied the authorities to halt it. After these attempts failed, Bankss started partnering with M-Pesa to offer better services to clients and in some instances became M-Pesa agents ( Njiraini & A ; Anyanzwa, 2008 ) . There is besides implicative grounds that M-Pesa has increased the efficiency of the banking system ( Marawczynski, 2009 ) . The grounds shows that commercial Bankss are working toward rushing up the cheque glade procedure, which took a lower limit of three yearss.

4.2 Airtel Money: Bharti Airtel Limited, India

The population of India stands at 1.2 billion people stand foring about 17.5 of the universe population ( Prerna & A ; Preeti, 2012 ) . Simple interlingual rendition of these figures is that out of every six people in the universe, one is an Indian. Unfortunately, about 60 per centum of India ‘s population is unbanked ( Sharma & A ; Sing 2009 ) . In 2010, of the 650,000 small towns in India merely 5.2 per centum had bank subdivisions ( Shankaran & A ; Roy 2010 ) . In short the bulk of Indians are non financially included in the banking system. Fiscal inclusion is about the bringing of banking services at an low-cost cost to the bulk of disadvantaged and low income people ( Kuppan, 2012 ) . On the other manus India ‘s telecommunications industry has grown faster than many developing states. The more than 600 million Mobile endorsers have exceeded the fixed line endorsers due to a stable and dependable nomadic substructure ( Prerna & A ; Preeti, 2012 ) .

Taking advantage of this chance and recognizing that clients can interact with any fiscal establishment through a nomadic phone, Bharti Airtel Limited developed a solution called “ Airtel Money ” . Bharti Airtel is a public limited company which is listed both on Bombay Stock Exchange ( BSE ) and National Stock Exchange of India ( NSE ) . The company is the largest telecommunications supplier in India and functioning 252 million clients as of 31st March 2012 ( Bharti, 2012 ) . The company has a deep passion for invention which has enabled it to be a leader of alteration in the telecommunications infinite in India ( Bharti, 2006 ) . Some of the province of the art inventions which have distinguished it from rivals include RC 200, Airtel Live Stock Ticker, Lifetime Prepaid and Easy Music. On 8th June 2010 it connected to Africa and extended its nomadic web to 17 states on the continent ( Bharti, 2011 ) . Upon successful entry into the African market, the company Chairman, Mr. Suni Bharti Mittal recognized the importance of the Indian and African markets:

“ Our entry into Africa is absolutely aligned with the emerging planetary world, where future growing is progressively traveling to be routed in emerging and developing states. In fact Africa and India are predicted to be the fastest turning parts in the planetary economic system with mean one-year existent GDP growing estimated at 7 % and 8 % severally between 2010 and 2015 ” ( Bharti, 2011 )

The company is among the taking nomadic phone service suppliers in the universe with presence in 20 states including India, Sri Lanka, Bangladesh and 17 in Africa. Airtel money was specifically designed to accommodate the demands of the bulk of unbanked Indians and implement authorities ‘s policy on fiscal inclusion. The solution is merely an history on the nomadic phone ( Bharti, 2011 ) . It can be used to lodge money called “ burden hard currency ” and so pay for different services and merchandises. For illustration, one can utilize airtel money to reload the phone, wage for public-service corporation measures, store and direct hard currency.

The Airtel money conceived towards the terminal of 2010 and launched as a pilot plan in June 2011. It is now in over 300 towns across 20,000 retail mercantile establishments in India. Airtel money entirely funded and developed by Bharti Airtel utilizing in-house proficient, fiscal and human resources. During the development phase, the company entered into a joint venture with the State Bank of India ( SBI ) to endorse up practical histories. After transporting out a successful pilot plan, Bharti Airtel launched airtel money nationally on 23rd February 2012 ( Bharti, 2012 ) . The service is India ‘s first “ nomadic billfold ” aimed at enabling clients to utilize the nomadic platform to do payments anytime, anyplace ( CIO.ON, 2012 ) The enterprise was anchored on the push to contract the immense fiscal inclusion spread. Looking at the rapid demand of the service after the launch, it was clear that clip for airtel money was mature. A few months after it was launched, over one million clients subscribed to the service, an indicant of high demand ( CIO.ON, 2012 ) . Airtel money was besides a scheme for Bharti to spread out concern and addition gross. The board and direction at the company noticed that nomadic incursion in India was nearing impregnation ( Bharti, 2011 ) . Therefore there was demand to construct other beginnings of gross and spread out the concern. Looking at the planetary tendencies in telecommunication and client demands in India, the company resolved to plan a solution that would let clients to transport out retail payments and basic banking through their nomadic phones. From a proficient point of position, it was a daunting undertaking. Bharti had two options ; either to outsource or develop the solution in-house. Because of its huge experience, first-class IT capablenesss and equal fiscal resources, the company settled on the latter option ( CIO.ON, 2012 ) . Harmonizing to Amrita Gangotra, the Director – IT ( India and South Asia ) at Bharti Airtel, the first thing that the company did was to set up a subordinate company with the authorization to foster the thought. The new company was given the flexibleness and freedom to develop the solution within the set parametric quantities. It was besides necessary to hold a separate company from the beginning because as the solution goes through phases of development, initial demands would alter. To do those alterations in the already stable systems might be practically impossible. Therefore a new company called Airtel M Commerce Services Limited ( AMSL ) was formed and a new CEO hired. It became a entirely owned subordinate company of Bharti Airtel. The company focussed on roll uping information on the demands of the targeted market and understand how to strike a balance between banking and telecommunication demands. From a technological point of position the service could non utilize J2Me applications. Although these applications are widely used in the West, they need a information connexion. Although India has significant voice connectivity, informations incursion is low in rural India ( Roy, 2011 ) , therefore the end of making the hapless people would non be realised. Given this hurdle, the company launched the airtel money service on the Short Message System ( SMS ) and Unstructured Service Supplementary Data ( USSD ) ( CIO.ON, 2012 ) . The USSD is a protocol used by the Global System for Mobile Communication ( GSM ) cellular phones. It is critical for relaying text between the user and some given platform. After a figure of successful pilots, airtel money went unrecorded and today it is available in 300 metropoliss across India. Airtel money is the first open-wallet nomadic service in India ( Bharti, 2010 ) . The roll-out program was implemented through Bharti airtel established partnerships throughout India. These comprised common financess, public-service corporation suppliers retail merchants etc. To back up cashless payments and colony demands of assorted clients, the company partnered with Infosys WalletEdgeTM. The solution offers three histories:

Express history – For lading hard currency and paying public-service corporation measures.

Power history – For lading hard currency, paying public-service corporation measures, directing money and shopping.

Supper history – For lading hard currency, paying public-service corporation measures, directing money, shopping, retreating money and gaining involvement on nest eggs.

Initially, there were two histories on offer ‘a ‘ and ‘b ‘ above ; nevertheless on 16th May 2012 a 3rd history ‘c ‘ called “ airtel money Super Account ” was introduced ( Bharti, 2012 ) . This was done through a strategic confederation with Axis bank. Under this confederation, clients on the airtel money platform could use and upgrade to the ace history. In add-on to the usual airtel money services, clients make remittals and earn involvement. Plans are underway to offer other banking services such as micro-insurance merchandises and little loans on this platform. During the launch, the CEO for India & A ; South Asia, Bharti Airtel Sanjay Kapoor said:

“ The solution empowers clients to direct money, withdraw hard currency from the nearby designated airtel money mercantile establishments, maintain money safe and even bask involvement on nest eggs through their nomadic devise. With Axis Bank ‘s expertness in Banking and airtel ‘s extended distribution web that spans over 1.5 million mercantile establishments, together, we are confident that this association will play a transformational function in fostering economic authorization and fast-tracking India ‘s fiscal inclusion docket. ” ( Bharti, 2012 )

4.3 Comparative analysis

Having presented the two instances, a comparing against the four standards discussed under methodological analysis now follows.

4.3.1 Service features

Both the M-Pesa and airtel money are secure, convenient, low-cost and faster money SMS-based money transportation solutions. They can be used to reassign, sedimentation and withdraw hard currency. Customers can besides make the shopping and pay public-service corporation measures. Whereas clients can non gain involvement on their M-Pesa nest eggs, airtel money clients enjoy that installation on the ace history. To trip airtel money, clients need to register by naming a toll free figure. The enrollment is simple because the airtel money application is on all Bharti Airtel SIM cards. There are merely four stairss to follow ; therefore clients can register easy and rapidly. The M-Pesa enrollment procedure is different. Customers are required to see any of the M-Pesa agents and present cogent evidence of individuality before they are registered. Although this procedure has been criticised as being onerous, it has helped in set uping relationships between agents and clients. On the other manus extra characteristics offered on the airtel money to register over the air and earn involvement on nest eggs indicates the hardiness and high quality of the solution. We can non govern out that Bharti Airtel gained a batch from competitory intelligence coming gained from M-Pesa given the clip oversight in the development of the two solutions.

4.3.2 Motivation for developing the service

The two houses had similar triggers for developing the solutions. They both wanted to widen banking services to the bulk of the populations. This was done by tapping into a big market of unbanked Kenyans and Indians. Safaricom realized that there was possible in nomadic phones to present money in a secure, speedy and low cost manner. The many Kenyans who were unbanked could utilize their phones to purchase goods, send and have money safely. This would assist turn to the of all time increasing job of larceny faced by many who carry big amounts of money. The M-Pesa system was launched in 2007 while airtel money was launched in 2012. The timing of any merchandise or service is really important in respect to its commercialisation and run intoing the demands of clients. We have seen that in both states the demand to function the unbanked was pressing. But why did Bharti hold in coming up with an appropriate solution? This can partially be explained by the nomadic incursion scheme that Bharti was basking for a considerable period of clip. The grosss of the company were healthy and the demand to research other beginnings was non pressing. After 2009 when the nomadic incursion in India was nearing impregnation, grosss began to travel down and competition was acquiring stiff. Hence, the company began to seek, albeit sharply, other beginnings of gross. Since the market for nomadic money in India had ripened, airtel money was a natural pick. Safaricom on the other manus seized the chance in headlong and did n’t hold to wait for grosss to travel down. The company besides responded to the authorities ‘s policy on fiscal inclusion. As observed by the Reserve Bank of India, the state had a significantly low degree fiscal incursion in comparing to the OECD states ( Reserve Bank of India, 2010 ) . In position of this, authorities accorded high policy precedence to fiscal inclusion.

4.3.3 Development and execution of service

Despite gestating a superb thought, Safaricom did non hold the required fiscal and proficient resources to develop and turn over out the service. Hence, the company partnered with five other organisations to take advantage of synergisms. The companies, working together engaged Sagentia, a UK based company to compose the M-Pesa package. Funding for the undertaking was provided by DFID and Vodafone. On the other manus, from construct to commercialisation Bharti Airtel used its ain internal proficient, fiscal and human resources. It went to the extent of organizing a subordinate company to oversee over the new solution. In respect to execution and turn overing out both companies used their extended web of agents, media and their ain employees to market the service. Since the service involved money, agents were carefully selected in order non to lose the trust of clients. They besides used commercial Bankss to mirror the value of outstanding e-money. However the attack taken by the two companies differ somewhat. Initially, the sum of M-Pesa money in circulation was mirrored at a pooled history at the Commercial Bank of Africa. Although this confederation with one bank provided Safaricom with a strong value place in regard to monetising the e-float, there were hazards associated with that. For case some clients were exposed to the bank ‘s default hazard. To counter this, Safaricom has engaged other commercial Bankss. Recently some balances have been moved to the Standard Chartered Bank. Bharti has engaged a figure of Bankss as strategic spouses. On 12th January 2011, the company announced a joint venture with India ‘s largest commercial bank, State Bank of India ( Bharti, 2011 ) . Later, on 16th Many 2012, Bharti formalized a strategic confederation with Axis Bank ( Bharti, 2012 ) . Under the confederation, Axis Bank would endorse the airtel Super Account. The company has continued to prosecute other commercial Bankss for partnerships in order to heighten service bringing. This attack allows the spread of default hazards.

4.3.3 Success factors

The factors that made the two solutions win in economical invention were rather a figure and about similar except for a few. First, the companies understood the demands of clients in their several states. Invention is all about commercializing thoughts and doing them valuable to clients. In order to commercialize thoughts companies understood what people needed. The demand in Kenya and India was the proviso of banking services to the less privileged members of society. The demands were right conceptualized and matched with the design and development of the nomadic payment services. No Oklahoman had the services gone unrecorded than we saw endorsers registering in big Numberss. The unprecedented high demand for the service, peculiarly in Kenya, was a clear presentation of precise comprehension of people ‘s demands. Second, the two companies enjoyed the largest market portion in nomadic phone proviso. The big consumer base of their services had a immense positive impact on the acceptance of the new service. The account is simple ; it is the rule of “ the Satan you know is better than an angel you do non cognize ” . Existing clients had developed trust in companies, therefore accepting a new solution from the same companies was really easy. Customers had assurance in the repute of the companies which had been built over a long period of clip.

Third, equal resources ( human, proficient, fiscal etc ) were made available. To plan and develop an low-cost and good adequate solution nowadayss legion challenges. As observed by some research workers, in-house R & A ; D capabilities that make usage of bing engineerings in inventive ways are important for such inventions ( Ester et al. , 2010 ) . This requires immense investing in human capital and new engineering. For this ground Bharti had to put in a new subordinate company and Safaricom has to acquire external beginnings of support. In short without dedicated budgetary allotments, economical invention can ne’er be realised. Fourth, webs and confederations were instrumental in the success of the two instances. Mobile money service requires a web of agents who are able to make into the communities where clients live. In webs there is shared costs and hazards, increased graduated table and range of activities every bit good as improved competences ( Fischer 2006 ) . Agents played two functions ; to supply hard currency services within easy range of clients and to market the service. These functions could merely be performed efficaciously by people who have local capablenesss. Strategic alliances with Bankss and other organisations were important in pull offing hazards and leveraging on synergisms. Finally, the formalities to register were simplified in both instances. Normally when commercial Bankss register clients the Know Your Customer ( KYC ) demands are really stiff and clip consuming. KYC demands demand for cogent evidence of residential reference and other certification and these are normally non available in rural countries. Such demands make hapless people uncomfortable to interact with Bankss. Peoples who could non run into the KYC demands saw the M-Pesa and airtel money as good option. The enrollment procedure for airtel money follows four stairss which are do It was apparent that networking offered clip, cost and proficient know-how advantages in recognizing inventions. As for M-Pesa, all clients need is to see the nearest agent and submit cogent evidence of individuality.

The sum-up of this analysis is given in Table 1.

Table 1. Comparison of M-pesa and Airtel Money

M-Pesa System

Airtel Money

Service Features

-Mobile money transportation service.

-Simple, efficient and secure.

-Cash sedimentations, transportation and withdraw.

-Pay measures and do shopping

-Developed in partnership with 5 other houses.

-Designed by an outsourced house

-Offers one generic history.

– Registration done through the agent

– Virtual histories backed by Bankss

-Launched in 2007.

-Mobile money transportation service.

-Simple efficient and secure.

-Cash sedimentation, transportation and withdraw.

-Pay measures and do shopping.

-Conceived and designed in-house

-Offers three different histories

-Earn involvement on the ace history.

– Registration done on phone

– Virtual histories backed by Bankss

-Launched in 2012

Motivation for Developing Service

-Formalize domestic remittals.

-Provide banking services to unbanked Kenyans.

-Offer banking services to unbanked Indians.

-Implement India ‘s fiscal Inclusion Policy.

-Another beginning of gross

Development and Implementation of Service

-Initial mark market: Kenya.

-Implemented in partnership with 5 houses.

-Available throughout Kenya

-Exported to 8 African states.

-Extended to the UK.

– Partnered with Bankss and agents

-Initial mark market: India.

-Exported to African and other Asiatic states.

– Available in 300 towns in India

-Partnered with Bankss and agents

-Partnered with 1700 trade names.

Success factors

-Strong partnerships.

-Adequate external support.

-Reliable extended web.

-Comprehension of client demands.

-Strong partnerships.

-Reliable extended web.

-Adequate internal support

-Adequate internal proficient expertness

-Comprehension of client demands.


The comparative analysis of two companies on frugal services shows that there are more commonalties than differences in the conceptualisation of the solution up to commercialisation. The similarities include:

Both services are a secure, low-cost, fast and efficient system to reassign money. They were conceived out of the pressing demand to supply banking services to the bulk of the people who are unbanked. The solutions can be used to pay measures, store, purchase air clip, receive and direct money.

The selling was done through partnerships and established agents. The first-class market portion played a large function in the successful turn overing out of the services. The launching and turn overing out were really success. The two systems have grown quickly making the multitudes across the states.

Procedures to register clients are simplified.

In footings of success factors ; both companies understood the demands of big client sections, enjoyed big market portions, invested to a great extent in service development and established local webs and confederations.

The facets with regard to which the two companies differ in developing their economical inventions include:

The solution in Kenya was launched in 2007 while in India airtel money was launched in 2012. The five old ages difference has been explained in this paper, suffice to state that Bharti many have learnt many lessons from Safaricom hence came up with a superior solution.

Whereas Safaricom was funded externally, Bharti used its ain resources to develop and commercialize airtel money. This possibly reflects the status of many companies in Africa. Most of them lack fiscal resources to back up their R & A ; D programmes. A batch of superb thoughts discussed in board suites have ne’er been commercialized.

M-Pesa was developed by an outsourced company. While it is non debatable to happen a good package development company, outside houses are more focussed on doing money than supplying solutions. Systems are normally designed with no or small flexibleness for future demands. The staff turnover in outsourced companies is high and this impacts on quality of the package. There is besides the danger of acquiring “ trapped ” in the outsourced company ‘s development docket ( Turrel, 2002 ) . Developing package in-house ensures complete control over the functionality of the application both from the proficient and concern positions. The usage of internal resources by Bharti Airtel demonstrates high proficient competences of India ‘s applied scientists and house ‘s fiscal musculuss as observed by Kumar and Purumam ( 2012 ) . Indian companies ‘ proficient capablenesss and their function in exporting engineering has been greatly recognized ( ADB, 2011 ) .

The comparing of the two instances brings out two has brought out five factors that are important to the success of the economical invention in the service sector:

Comprehension of client demands.

Strong local partnerships.

Adequate resources ( fiscal, human and proficient ) .

Extensive distribution webs.

Simplicity of service offering

Frugal inventions have one characteristic in common ; they are all Borns of state of affairss of constratint and designed to run into the comparatively basic demands of low income consumers ( Zeschky et al. , 2011 ) . To win in this context, houses should clearly understand the demands low income populations and see them as possible markets for concern growing. The demand to maintain solutions simple in emerging markets is important ( Wooder & A ; Baker ) . The development procedure of the two systems identified the valuable point of simplifying things for the multitudes, most of who are non learned and experience uncomfortable traveling to the Bankss. The solutions are easy accessible on a broad scope of French telephones and do non hold sophisticated functionality. As before indicated the enrollment procedure is really simple. One of the most hard hurdlings in commercializing a new merchandise or service is happening ways and agencies of presenting to clients and acquire the feedback. In short the new service is of no value if it can non be delivered to clients. A important part to the success of airtel money and M-Pesa system was the usage of the two companies ‘ extended Mobile phone web and agents. In the instance of Safaricom, agents registered new clients and provided feedback on the public presentation of the service. The undertaking of coming up with a new merchandise and service is non lone clip devouring but dearly-won every bit good. Great solutions take a batch of clip in footings of analysis, design, prototyping and testing. Hence, immense resources and strong local partnerships are necessary for houses to win in new service development. Although the beginnings of funding varied between Safaricom and Bharti Airtel, it is clear that a batch was spent on the development procedure. It is improbable that one company will hold all the accomplishments such as design and selling to develop the new solution ; hence the demand for strong partnerships. The two houses were strong in telecommunication services but weak in banking services. For this ground they partnered with commercial Bankss and other houses such as Vodaphone to leverage from their expertness. Partnerships with Bankss and local agents built effectual capablenesss to continuously groking local demands.

As can be seen in this paper, the two solutions have been really successful. Comparing a state in Africa with India, which has taken a lead place in economical invention, reveals interesting facets. First the paper re-confirms old grounds that India is endowed with factors that make to stand out as a leader in economical invention ( Tiwari & A ; Herstatt, 2012a, 2012b ) . Second, Africa is emerging with great possible to tackle economical invention. The market is at that place, what seems to impede advancement is unequal resources and proficient expertness. Therefore company trying to encompass a economical invention scheme for Africa, particularly in the service sector, should pay attending to the five success factors identified in this paper

6. Decision

Frugal Innovation has emerged as one the constructs in invention direction. Despite its importance in turn toing the demands of the low income group, recent research has chiefly concentrated on Asiatic states. India has emerged as a lead state in economical invention. In the recent yesteryear, nevertheless, grounds of economical invention in Africa has emerged. One of the instances of succeful economical invention in Africa is M-Pesa system in Kenya. The survey compares this system which was launched in 2007 with the airtel money which was launched in 2012. The survey points out more commonalties than differences between the two solutions. The paper identified five success factors in service invention. These are ; comprehension of client demands, strong local partnerships, equal resources, extended distribution webs and simpleness of service offering. The future research docket should place more illustrations of economical invention in Africa and transport out in-depth analysis of such instances and compare them with successful instances such as the Tata Nano auto in India. Further, we call for more theory developing surveies in different houses and companies. The purpose should be to develop new theoretical theoretical accounts and prove the proposed 1s in order to set up how they can be generalized.

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