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An Update on Jugaad

September 15, 2010


“Jugaad” (pronounced jewgard) is an Indian term used to describe a unique innovation process. Literally, “jugaad” means ” somehow get it done.” In the U.S., we might use the term “jury-rigged” in much the same way. Unlike “jury-rigged,” however, “jugaad” is overcoming its pejorative past and is a process now being taught around the world. I first discussed this process in a post entitled Innovation, Development, and India. As I noted in that post, jugaad is an improvisational style of innovation that was developed primarily because Indian inventors wanted to address pressing needs of those around them but had few resources upon which to draw. Peter Cappelli, Harbir Singh, Jitendra Singh and Mike Useem, professors of management at the Wharton School of the University of Pennsylvania and co-authors of The India Way: How India’s Top Business Leaders Are Revolutionizing Management (Harvard Business Press, 2010), recently wrote an article on the subject [“Jugaad on the Road to Success,” Wall Street Journal, 31 August 2010]. They begin:

“Of late, the concept of jugaad has taken root in Indian business practice. We know there are negative connotations to the word – temporary, unstable, quick-fix – aptly applied to the jugaad vehicles found in rural India. But jugaad as a concept has a legitimate place in management thinking. In fact jugaad as a concept has a place in management practice. Jugaad points to the capacity of Indian firms to adapt quickly and improvise creatively to deal with limited resources. It is the creative arrangement or workaround that people use. In the course of our research for ‘The India Way’, we have seen time and again how the skill for improvisation and adaptability as embodied by jugaad has given Indian companies a major competitive advantage first in India and then overseas.”

Not just Indian companies are benefitting from jugaad. In my post noted above, I cited an article written by Reena Jana. In that article, Jana notes that “companies as varied as Best Buy, Cisco Systems, and Oracle are employing jugaad as they create products and services that are more economical both for supplier and consumer.” Cappelli, Singh, Singh and Useem continue:

“There are several challenges to doing business in India. A large portion of its citizens live in rural areas where they are physically separated from urban centers and lack basic forms of communication such as newspapers, the Internet, and phone lines. The reforms of 1991 opened India’s economy to the rest of the world and added another layer of difficulty, competition from multinational corporations with more resources. And yet Indian economic expansion has accelerated to one of the highest rates in the world recently. Applying the concept of jugaad to deal with limited resources and weak infrastructure has obviously allowed Indian companies to accomplish more with less.”

Although the authors indicate that India’s economy has been opened to the rest of the world, as I’ve noted in past posts on India, companies like Walmart and Carrefour still find it difficult to operate there. Basically, they have to work through local surrogates. Few things are straight forward in India. That’s another reason that finding work-arounds is so important. Cappelli et al. continue:

“A case in point is Bharti Airtel. Bharti is the country’s largest telecommunications services provider with 184 million customers. As the company grew, it found itself unable to develop its facilities and personnel to accommodate its rapid growth. Founder Sunil Bharti Mittal made a radical decision: outsource its services. Ericsson, Siemens and Nokia made a deal whereby Bharti pays them a lump sum each year depending on both the amount of traffic their networks receive from Bharti and the quality of services the other companies provide. Rather than spending massive amounts of capital on infrastructure to keep up with its growth, Bharti took advantage of the existing structures in its business environment. In order to meet its needs, Bharti partnered with companies that have been around longer and have more resources to handle the requirements of a quickly growing market. Faced with a crisis triggered by the very low price point being offered by competitor Reliance Communications, Bharti Airtel came up with an improvised, innovative strategic architecture. Critics said the idea would never work; that was several years ago. The idea has worked well and can still be scaled further.”

As the President and CEO of a mid-sized firm, I understand how important it is to be able to partner with other companies so that together we can take advantage of emerging opportunities. Although partnering may not exactly fit the definition of jugaad, it certainly is line with the philosophy behind it. There are risks associated with partnering, but that is the topic of a future post. The authors continue:

“Another example of jugaad in practice comes from Hindustan Unilever (HUL). The company wanted to reach consumers in rural areas that were separated from the country’s urban centers. Rather than spending millions of dollars on advertising, the company decided to create its own sales force by utilizing the native population. Through what it dubbed ‘Project Shakti’, HUL turned to women’s self-help groups that already existed in rural areas. These women regularly met to pool their money to finance projects that benefited the community. In Project Shakti, individuals borrowed money from this pool, used it to purchase HUL products, and then resold those products within their communities. HUL took what was originally a problem, a country full of fragmented markets with little communication between them, and found a way to use it to benefit all parties involved. HUL gained access to previously untapped markets while community members gained entrepreneurial experience and were able to purchase products they may not have had access to otherwise.”

One seldom thinks of a company as large as Unilever being concerned about selling to a small group of women in a rural environment. As the late Professor C.K. Prahalad argued, however, there are profits to be made from selling to the world’s poorest populations. I agree that HUL’s innovative solution for doing that fits nicely into the jugaad framework.

“One more example comes from ICICI Bank. As India’s largest privately-owned commercial bank, investment bank and insurance provider, it faced many challenges when expanding its commercial banking business. The company faced the same problem HUL did: establishing a relationship with the country’s rural citizens. Building new bank branches would be too expensive as the average deposit in rural areas would not be high enough to cover the cost of operating a branch. Rather than opening branches, ICICI decided to use existing channels such as microfinance organizations and local fertilizer distributors. ICICI had these organizations carry out some of the activities a bank branch would, thereby giving it access to a larger customer base. By supplementing an existing structure from other organizations, ICICI was able to provide its services to a much larger market.”

What I like most about the latter two examples is that the companies involved not only provided goods and services they opened up opportunities for they serve. They were able to create markets for their products and enrich the lives of some of the world’s most impoverished people. Win-win scenarios are also the most sustainable. Cappelli, Singh, Singh and Useem conclude:

“Indian culture is full of instances of people using the modest resources at their disposal to solve problems and find ways around seemingly impossible situations. Of course there are also some negatives associated with jugaad. One of them is a lack of consistency and discipline that can emerge from such informal improvisations. On the other hand, Indian people have developed the skill of finding innovative solutions wherever they can and this skill has inevitably found its way into Indian business practice. If there is one thing managers can learn from the examples of jugaad, it is that traditional methods of doing business do not work all the time. No environment is static; and the ability to adjust to changes and improvise is a valuable skill for any manager to learn.”

In yesterday’s post entitled The End of Management, I discussed an article by Alan Murray in which he argues that methods that have served corporate America well for the past hundred years are quickly becoming obsolete. I believe that Professors Cappelli, Singh, Singh and Useem are arguing the same thing. They foresee a future where organizational hierarchies drain corporate resources rather than encourage their most efficient use. I agree that “the ability to adjust to changes and improvise is a valuable skill for any [leader] to learn.”

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