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.