Companies forge lean business models to tap rural India

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India has pioneered the science of breaking up complex products or business models into their most basic forms and then rebuilding them in the most economic manner possible to tap the bottom of a market. They call it frugal engineering.

The term was coined by Carlos Ghosn, the chief executive of Renault and Nissan, to describe the automotive engineering that went into Tata Motors’ Nano, a small car that retails for just $2,000 in India.

Tata itself sometimes refers to its low-cost innovations as “Gandhian engineering” in honor of India’s independence leader Mahatma Gandhi, a renowned proponent of self-sufficiency.

Over the past few years, India has gained a reputation for creating a wide range of products sturdy enough to handle its demanding environment, easy enough for a wide range of people to use — and most importantly, affordable — from solar-powered ATM bank machines to a detergent requiring little water.

But getting these mean, lean products to consumers is not as easy as distributing them in the developed world.

Anil Gupta should know. He started the Honey Bee Network to support India’s grassroots innovators and is an advisor to the National Innovation Council. He can rattle off a list of fantastic bricolage inventions, from an amphibious bicycle to a washing-cum-exercise-machine, that had no chance in the market.

“Innovators are not necessarily good entrepreneurs,” he noted.

This is where big corporations have the advantage. Domestic and multinational companies based in India are taking that frugally motivated mindset and applying it to their entire business models.

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