Why frugality eventually leads to creativity and innovation

Have you heard of the concept of frugal innovation? Wikipedia describes frugal innovation as the process of reducing the cost of the product by removing non essential features and making it affordable.  I find this concept quite interesting. In fact, most profit making organizations apply frugal innovation in one way or another. All businesses aim to incrementally reduce the cost of production while improving the quality of the product. 

For instance, manufacturing companies work on lean production which is an approach to cut the waste whilst ensuring quality. For that matter, even a service based firm consistently tries to reduce expenses. This is a standard way of growing profit margins. 

As a business owner I firmly believe in being frugal and have imbibed it in the core principals of my company, Ergode. In many cultures, frugality is given a negative connotation. Is frugality a bad thing? No. Frugality means to spend wisely on things that matter and save up on unnecessary expenses. Being frugal means making smart financial decisions – A vital skill for business owners. 

How frugality promotes innovation?

Frugality is the mother of invention – You must have heard of necessity being the mother of invention but frugality is equally responsible for inventing. When you have strict rules against necessary spending, then you are driving you and your team against a wall. Frugality becomes a driving factor to come up with an innovative solution. 

Checks unnecessary expenditure – Spending money on resources is the easiest thing to do. You want to promote your product, you can spend crores of money over advertising and promotional activities. Or you can find a way of promoting your product without spending as much. One can run successful marketing online campaigns through meaningful engagement with the target audience. 

Pushes you to acquire knowledge – When you are left with minimum resources then you are forced to find out new ways of doing things. An easy to understand example would be cooking. If you have less supplies, you will spend more time finding out how you can make the best use of the ingredients at hand. In the process, you will learn something new. You might end up researching more about the topic in order to find the alternative.

Curtails distraction – The biggest enemy of innovation is distraction. No genius can invent something when he is distracted. Having too many resources can be distracting sometimes. Imagine designing your office and spending way too much money on a lamp shade. Having a well-lit space to work is necessary but that is not the core of your business. One of the great examples of frugality in business comes from Amazon. In their initial days, they used an old door to make desks. It was not because they didn’t have the money but it was more about being economical. 

Frugality is essential but an entrepreneur should be mindful of discerning between wise financial decisions and cost-cutting. Blanket cost-cutting without careful consideration can be detrimental to a company. A business grows by increasing sales and not cutting costs. An organization that cuts expenses to increase profit will suffer from employee attrition and bad quality of service and product in the long run. So, Being frugal is important but it should not deprive the company of essentials.